Chapter 16 Incomplete records

Q1 Seng

(a)
Statements of affairs at
1 January 2003 31 December 2003
$ $ $ $
Shop premises - 20 000
Motor van - 8 000
Shop fittings - 3 000
Stock - 4 000
Debtors - 1 000
Bank 60 000 5 000
60 000 41 000
Creditors - 6 000
Loan from brother 20 000 20 000 16 000 22 000
Capital 40 000 19 000
Add drawings 5 200
24 200
Deduct capital at 1 January 2003 (40 000)

(b) Loss for the year ended 31 December 2003 15 800

Q2 Saeed
Statements of affairs at
At 1 July 2003 At 30 June 2004
$ $
Land and buildings at cost 60 000 90 000
Fixtures and fittings 10 000 12 000
Office machinery 8 000 7 000
Stock 17 000 21 000
Trade debtors 4 000 5 000
Rent prepaid 1 000 600
Bank 14 000 16 000
114 000 151 600
Trade debtors 3000 1 600
Wages owing 2000 5 000 1 000 2 600
Capital 109 000 149 000
Deduct: revaluation of land and buildings 30 000
computer bought by Saeed 1 400 31 400
117 600
Add: Cash drawings 10 400
Goods taken for own use 2 000 12 400
130 000
Deduct capital at 1 July 2003 109 000
Profit for the year ended 30 June 2004 21 000
Q3 Ahmed

(a) Trading and Profit and Loss Account for the year ended 30 September 2004
$ $
Sales 49 800
Less cost of sales
Stock at 1 October 2003 6 250
Purchases 25 260
31 510
Stock at 30 September 2004 8 000 23 510
Gross profit 26 290
Discounts received 420
26 710
Wages 7 400
Rent 3 950
Electricity 1 920
Telephone and stationery 1 950
Bad debt written off 250
Motor van expenses 2 400
Sundry expenses 400
Depreciation: motor van 2 000
fixtures and fittings 750
Interest on loan 200 21 220
Net profit 5 490

(b) Balance Sheet at 30 September 2004

Net Book Value
$ $
Fixed assets
Premises 60 000
Motor van 6 000
Fixtures and fittings 2 250
68 250
Current assets
Stock 8 000
Debtors 1 600
Rent prepaid 450
Bank 800
Cash 50
10 900

Current liabilities
Creditors 1 300
Electricity owing 320
Loan interest 150 1 770 9 130
77 380
Long-term liability
Loan from brother 2 000
75 380

Capital at 1 October 2004 82 800

Profit for the year 5 490
88 290
 Drawings 12 910
Capital at 30 September 2004 75 380

Q4 Nurvish

Trading Account for the Year ended 30 June 2004

$ $
Sales (balancing figure) 98 000
Stock at 1 July 2003 16 000
Purchases (54 000 + 5200 3600 1300) 54 300
70 300
Stock at 30 June 2004 11 000 59 300
Gross profit 38 700*

* Gross profit: $
Cost of sales 59 300
Less damaged stock 5 000
54 300
Margin is 40% or 25 ;
Mark-up is 23
Profit on $54 300 (23 ) 36 200
Profit on damaged stock
(50% of $5000) 2 500
Gross profit 38 700

Q5 Nadia

Calculation of the value of stock on hand at cost at 31 December 2003

$
Stock at selling price before adjustment 62 040
Deduct overcharge to customer 240
61 800
Add goods sent on sale or return 2 000
63 800
Deduct profit margin 20% 12 760
Goods at cost 51 040
Deduct goods received 18 January 2004 4 400
46 640
Add cost of goods which were sold 18 January 2004 9 600
Value of stock at cost at 31 December 2003 56 240
Q6 Korn

(a)
Trading and Profit and Loss Account for the year ended 30 April 2004
$ $
Sales 300 630
Less Cost of Sales
Stock at 1.4.03 22 400
Purchases 225 718
248 118
Stock at 31.3.04 16 864 231 254
Gross profit 69 376
Wages 17 000
Rent 8 200
Electricity 9 670
General expenses 5 150
Interest on loan 3 000
Loss on sale of fixed assets 1 900
Depreciation: Fixtures and fittings 4 200
Motor vehicles 8 500 57 620
Net profit 11 756

(b) Balance Sheet at 30 April 2004

$ $ $
Fixed assets
Land and buildings 70 000
Fixtures and fittings 10 000
Motor vehicles 8 000
88 000
Current assets
Stock 16 864
Trade debtors 32 000
Bank 50 142
99 006
Current liabilities
Trade creditors 6900
Interest on loan 3000
Other expense creditors 1600 11 500 87 506
175 506
Less Long-term liability: loan from brother 30 000
145 506

Capital at 1.4.03 150 700

Net profit for the year 11 756
162 456

Drawings (Cash $15 600 + goods $1350) 16 950

145 506
Workings $: $
Sales: Cash received from debtors 170 430 Purchases: Paid to creditors 227 668
Less debtors 31.4.03 ( 20 400) Less creditors 31.4.03 (7 500)
 Add debtors 31.4.04 32 000 Creditors 31.4.04 6 900
Cash sales 103 000 Goods taken by Korn (1 350)
Drawings 15 600 225 718
360 650
Stock at 31.4.04: $21 923 10/13 = $16 864
Depreciation: Fixtures and fittings $(8000 + 7000 800 ) $10 000) = $4200
Motor vehicles: $(10 000 + 10 000 3500) 8000 = $8500

(c) Stock should be valued at cost (historic cost concept).

If stock is valued at selling price, credit is taken for unrealised profit.
This contravenes the following concepts: (i) historic cost (ii) realisation (iii) prudence.

Q7 Cornelius

(a) Calculation of profit for the year ended 31 March 2003

1 April 2002 31 March 2003
$ $
Premises 80 000
Equipment 15 000 28 000
Stock 37 500 52 000
Trade debtors 22 400
Sundry expenses in advance 700
Bank 30 000 116 000
82 500 299 100
Less Trade creditors 56 000
Loan from father 20 000 20 000
Loan from bank 40 000
Interest on bank loan 1 500
Sundry expenses 20 000 2 280 119 780
Capital 62 500 179 320
Deduct capital introduced 40 000
139 320
Add Drawings (52 400) 20 800
160 120
Deduct capital at 1 April 2002 62 500
Profit for the year ended 31 March 2003 97 620

(b) Trading and Profit and Loss Account for the year ended 31 March 2004
$ $
Sales 468 650
Less Cost of Sales
Stock at 1.4.03 52 000
Purchases 382 750
434 750
Stock at 31.3.04 74 250 360 500
Gross profit (360 500 30%) 108 150
Sundry expenses 22 245
Bank interest 6 000
Interest on loan from father 1 600
Depreciation of equipment 6 100 35 945
Net profit 72 205
 (c) Balance Sheet at 31 March 2004
$ $ $
Fixed assets
Premises 80 000
Equipment 45 900
125 900
Current assets
Stock 74 250
Trade debtors 34 200
Prepaid expenses 4 050
Bank 111 110
223 610
Current liabilities
Trade creditors 67 410
Bank interest 1 500
Other expense creditors 875 69 785 153 825
279 725
Less Long-term liabilities
Bank loan 40 000
Loan from father 20 000 60 000
219 725

Capital at 1.4.04 179 320

Net profit for the year 72 205
251 525
Drawings (26 000 + 5000 + 800*) 31 800
219 725
* Unexplained cash deficiency
Workings
Purchases: $(371 340 + 67 410 56 000) = $382 750
Cost of sales: $(52 000 + 382 750 74 250) = $360 500
Sales: $360 500 1.3 = $468 650
Depreciation of equipment: $(28 000 + 24 000 45 900) = $6100