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The following trial balance was extracted from the books of Pierre Jean, a sole trader, as at 31 December 2020:
Dr Cr
Premises at cost 250,000
Equipment at cost 45,000
Accumulated depreciation
- Premises 37,500
- Equipment 27,000
Sales 620,000
Purchases 345,000
Inventory as at 1/1/20 19,000
Interest received 2,050
Sales returns 2,500
Purchases returns 1,850
Wages and salaries 75,000
Bad debts written off 2,500
Loan interest 6,000
Miscellaneous expenses 22,500
Legal costs 9,000
Repairs & maintenance expenses 8,500
Rent & rates expense 13,500
Trade payables 29,500
Trade receivables 36,500
Bank 16,500
Drawings 15,000
Provision for bad debts 1,200
10% Bank loan (2027) 60,000
Capital 1/1/20 54,400
Total 850,000 850,000
The following additional information is available:
1. Closing inventory at 31/12/20 has been valued at 24,000
2. Legal costs prepaid at year end: 1,000
3. Wages & salaries expenses due at 31/12/20: 6,000
4. The provision for bad debts should be adjusted to 5% of the closing trade receivables
5. Depreciation of non-current assets is to be provided for as follows:
Premises: 5% per annum on cost (Straight Line)
Equipment: 20% per annum on cost (Straight Line)
Requirement:
(a) Prepare the Income Statement for Pierre Jean for the year ending 31 December 2020. (22 marks)
(b) Prepare a Statement of Financial Position as at 31 December 2020. (12 marks) Note: Clearly show your workings.
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