Question

Prepare an income statement for December 2020 and a classified statement of financial position at December 31, 2020.

On December 1, 2020, Cambridge Printers had the account balances shown below.

	Debit		Credit
Cash	£ 4,650	Accumulated Depreciation – Equipment	£ 1,500
Accounts Receivable	3,900	Accounts Payable	3,000
Inventory	1,950 (3,000 x £0.65)	Owner’s Capital	27,000
Equipment	21,000
	£ 31,500		£ 31,500

The following transactions occurred during December.

December 3: Purchased 4,000 units of inventory on account at a cost of £0.72 per unit.

December 5: Sold 4,400 units of inventory on account for £0.92 per unit. (It sold 3,000 of the £0.65 units and 1,400 of the £0.72.).

December 7: Granted the December 5 customer £184 credit for 200 units of inventory returned costing £144. These units were returned to inventory.

December 17 Purchased 2,200 units of inventory for cash at £0.78 each.

December 22 Sold 2,000 units of inventory on account for £0.95 per unit. (It sold 2,000 of the £0.72 units.)

Adjustment data: 1) Accrued salaries payable £400. 2) Depreciation £200 per month.

Answer 1

Answer

CAMBRIDGE PRINTERS

INCOME STATEMENTS

For the month of December 31,2020

Incomes
Sales Revenue	£5948
Less:Sales return	(£184)	£5764
Total Income		£5764
Expenditures
Cost of goods sold		£4398
Salary		£400
Depreciation		£200
Total Expenditures		£4998
Net Income		£766

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CAMBRIDGE PRINTERS

STATEMENT OF FINANCIAL POSITION

As at December 31,2020

ASSETS
Current Assets
Cash	£2934
Accounts Receivables	£9664
Inventory	£2148
Fixed Assets
Equipments	£21000
Total Assets	£35746
LIABILITIES AND EQUITY
Liabilities
Accounts Payables	£5880
Accumulated Depreciation	£1700
Salary Payables	£400
Equity
Owners Capital	£27000
Net income	£766
Total Liabilities and Equity	£35746

Notes:

Computation of Closing Stock

Inventory £0.78 per unit (2200×£0.78)= £1716

Add: Inventory£0.72 per unit (600×£0.72) = £432

Total inventory =£2148 (£1716+£432)

Computation of cost of goods sold

Opening stock+ purchase - closing stock

; That is .. (£1950+£4596-£2148) = £4398

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