The following trial balance was extracted from the books of Al Mawaleh Traders, sole trader as...

The following trial balance was extracted from the books of Al Mawaleh Traders, sole trader as at 31 May 2018.

Trial balance as at 31 May 2018

Particulars	Debit	Credit
	$	$
Capital		51,960
Drawings	4,080
Buildings at cost	53,000
Receivables and Payables	8,600	6,000
Opening Inventory	11,300
Salaries	5,080
Freight In	2,390
Freight Out	2,140
Insurance	2,790
Purchases and sales	97,600	140,385
Returns	980	1,640
Selling Expenses	1,440
Bad debts	541
Discount Received		960
Equipment at cost	8,000
Furniture at cost	16,000
Provision for depreciation:
Equipment		800
Furniture		5,200
Cash in hand	820
Bank overdraft		7,416
Provision for doubtful debts		400
	214,761	214,761

Additional information:

(i) Closing Inventory is valued at $12,600 on 31 May 2018

(ii) Outstanding Salaries were $1,200

(iii) Prepaid Insurance was $690

(iv) The provision for doubtful debts is to be adjusted to 5% of Receivables outstanding on 31 May 2018

(v) Depreciation is to be provided as follows:

Equipment 10% per annum using the straight line method.

Furniture 20% per annum using the straight line method.

You are required to:

Prepare the Statement of Profit or Loss (Income Statement) for the year ended 31 May 2018.

Prepare the Statement of Financial Position (Balance Sheet) based on the Trial Balance in Section A

Expert Solution


Profit and Loss Account

Particulars		Debit	Particulars		Credit

Opening inventory		11,300.00	Sales	1,40,385.00
Purchase	97,600.00		Less: Returns	-980.00	1,39,405.00
Less: Returns	-1,640.00	95,960.00	Closing stock		12,600.00
Freight in		2,390.00
Gross profit		42,355.00
		1,52,005.00			1,52,005.00
			Gross profit c/d		42,355.00
Salaries	5,080.00		Discount received		960.00
Add: Outstanding salary	1,200.00	6,280.00
Freight out		2,140.00
Insurance	2,790.00
Less: Prepaid insurance	-690.00	2,100.00
Selling expense		1,440.00
Bad debts	541.00
Add: Current year provision (430-400)	30.00	571.00
Depreciation
Equipment (8000x10%)	800.00
Furniture (16000x20%)	3,200.00	4,000.00
Net profit		26,784.00
		43,315.00			43,315.00

Balance sheet

Liabilities			Assets
Capital	51,960.00		Building at cost		53,000.00
Less: drawings	-4,080.00		Equipment at cost		8,000.00
Add; net profit	26,784.00	74,664.00	Furniture at cost		16,000.00

Bank overdraft		7,416.00	Receivables	8,600.00
Payables		6,000.00	Less: Provision for bad debts @ 5%	-430.00	8,170.00
Salary outstanding		1,200.00	Cash in hand		820.00
Provision for depreciation			Closing stock		12,600.00
Equipment	800.00		Prepaid insurance		690.00
Add:current year provision	800.00
Furniture	5,200.00
Add:current year provision	3,200.00	10,000.00
		99,280.00			99,280.00

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