Income Statement with Appropriation Account (Trading and Profit and Loss and Appropriation Account) for the year ended 31 December Year 5 and a Statement of Financial Position (Balance Sheet) as at that date

1. The following is the Trial Balance of Wilson and Ferguson, a partnership, on 31 December Year 5.
TRIAL BALANCE AS AT 31 DECEMBER YEAR 5 £000 £000
Equity (Capital) Accounts
Wilson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 200
Ferguson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 100
Drawings
Wilson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 30
Ferguson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 50
Current Accounts
Wilson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 20
Ferguson .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 30
Sales Revenue (Sales) .. .. .. .. .. .. .. .. .. .. .. .. 550
Purchases .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 180
Purchases Returns .. .. .. .. .. .. .. .. .. .. .. .. .. 3
Office Expenses .. .. .. .. .. .. .. .. .. .. .. .. .. .. 12
Salaries .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 94
Provision for Doubtful Debts at 1 January Year 5.. .. .. .. 10
Provisions for Depreciation at 1 January Year 5
Motor Vehicles .. .. .. .. .. .. .. .. .. .. .. .. .. 20
Office Equipment .. .. .. .. .. .. .. .. .. .. .. .. 30
Trade Receivables (Debtors) .. .. .. .. .. .. .. .. .. .. 140
Trade Payables (Creditors) .. .. .. .. .. .. .. .. .. .. 62
VAT .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 40
Rent .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 10
Cash and Cash Equivalents (Bank) .. .. .. .. .. .. .. .. 15
Property (Premises) .. .. .. .. .. .. .. .. .. .. .. .. 400
Motor Vehicles (at cost) .. .. .. .. .. .. .. .. .. .. .. 100
Office Equipment (at cost) .. .. .. .. .. .. .. .. .. .. 120
Inventory (Stock) at 1 January Year 5 .. .. .. .. .. .. .. 17
Loan – Ferguson .. .. .. .. .. .. .. .. .. .. .. .. .. 100
Discount Received .. .. .. .. .. .. .. .. .. .. .. .. .. 13
£1,173 £1,173

NOTES at 31 December Year 5
(1) Closing Inventory (Stock) costing £25,000 had a market value of £30,000.
(2) Office Expenses prepaid and Salaries due are £2,000 and £3,000 respectively.
(3) Rent is to be apportioned between the warehouse and the office in the ratio 7:3.
(4) The Provision for Doubtful Debts at 31 December Year 5 is to be adjusted to 5% of Trade
Receivables (Debtors).
(5) The property (premises) was professionally revalued at £450,000.
(6) Provide for depreciation for the year as follows:
(a) Motor Vehicles at 20% by the diminishing balance method.
(b) Office Equipment at 10% on cost.
(7) The loan from Ferguson was taken out on 1 July Year 5, the annual interest rate is 10%.
The Partnership Agreement states:
(a) an annual salary of £15,000 is to be paid to Wilson;
(b) interest will be charged on drawings at 10% per annum;
(c) interest will be paid on equity (capital) at 5% per annum;
(d) Residual Profits/Losses are to be shared in the ratio of equity (capital) invested.
You are required to prepare from the Trial Balance and Notes:
Income Statement with Appropriation Account (Trading and Profit and Loss and Appropriation
Account) for the year ended 31 December Year 5 and a Statement of Financial Position (Balance
Sheet) as at that date.


 

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