# 3 insurance paid in advance 1375 at the end of the

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3. Insurance paid in advance \$1,375 at the end of the year. Prepayment under Current asset 4. Accrued ( current liability) salaries and salespersons’ commission are calculated as \$1,464 and \$3,675 respectively. 5. Machinery costing \$7,000, which \$1,630 depreciation had been provided, was sold for \$4,640 in December 20x7 but the proceeds were received on 5 January 20x8. A whole year’s depreciation was charged in the year of disposal. NBV = 5370 6. Depreciation of fixed assets: Machinery – 10% p.a. on cost Office equipment – 5% p.a. on cost 7. The provision for bad debts is to be 4% p.a. of the balance of debtors at the end of the year excluding the sales proceeds of the machine sold. 8. Wing took goods which cost \$1,656 for her own use. (Drawing) Required: a) Prepare a trial balance in account format as of December 31, 2007. b) Draw the Income Statement for Wing’s Store for the year ended 31 December 20x7 and a Balance Sheet as at that date. Question 1answer (a) Workings Depreciation 20x3 20% x (\$1,000 + \$1,600) = \$520 (Van A \$200, Van B \$320) 20x4 20% x (\$1,600 + \$2,000) = \$720 5

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20x5 20% x (\$1,600 + \$2,000) = \$720 Loss on disposal of Van A 20x4 (\$1,000 – \$200) – \$750 = \$50 Accumulated depreciation 20x3 \$520 20x4 \$520 – \$200 + \$720 = \$1,040 20x5 \$1,040 + \$720 = \$1,760 Uber Income Statement for the year ended 31 December 20x3 20x4 20x5 \$ \$ \$ Depreciation on vans 520 720 720 Loss on disposal of van 50 Uber Statement of Financial Statement as at 31 December 20x3 20x4 20x5 \$ \$ \$ Fixed assets Vans at cost 2,600 3,600 3,600 Less: Accumulated depreciation 520 1,040 1,760 Net book value 2,080 2,560 1,840 Question 2 answer a) Wing’s Store: Trial Balance as at 31 December 20x7 Accounts Dr Cr Capital \$ 200,000 Stock at 1 Jan 20x7 \$20,634 Purchases 16,320 Sales 23,252 Sales returns 3,518 Purchases returns 5,095 Carriage inwards 1,483 Carriage outwards 2,310 Cash in hand 531 6
Discount allowed 2,548 Discount received 3,066 Machinery (cost) 83,300 Office equipment (cost) 67,300 Bank balance (overdraft) 10,464 Debtors 42,940 Creditors 18,102 Bad debts 6,909 Salesperson’s Commission paid 17,322 Salaries 38,082 Insurance 3,457 Rates 1,774 General expenses 3,949 Prov. For accumulated depreciation: - Machinery at 1 January 20x7 37,730 - Office equipment at 1 Jan 20x7 26,500 Bad debts recovered 524 Drawings 13,176 Provision for doubtful debts _______ 820 Total 325,553 325,553 b) Wing's Store Income Statement for the year ended 31 December 20x7 \$ \$ Sales 23,252 Less : Sales Returns 3,518 19,734 Less : Cost of Sales 7

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Stock at 31 Dec 20x6 20,634 Add : Purchases (16,320-1,656) 8 14,664
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