ANSWER To Accounting Question No IR 2 On Incomplete Records

September 25th, 2008 Comments off
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ANSWER To Accounting Question No IR 2 On Incomplete Records

(a) Jim’s Statement Of Affairs as at 31 st December 2006 & 2007

2006

2007

$

$

Fixed Assets

Premises

25,000

25,000

Machines(W1)

20,000

18,500

Less: Depreciation

8,000

12,000

9,250

9,250

37,000

34,250

Current Assets

Stock-Raw Materials

6,900

7,790

Work-in-progress

5,300

4,600

Finished goods

7,900

10,050

Trade Debtors

12,300

14,600

Prepayments

1,250

1,500

33,650

38,540

Less:

Current Liabilities

Creditors

4,450

4,820

Accrued Expenses

570

370

Bank Overdraft

5,040

3,270

Working Capital

23,590

30,080

Net Worth

60,590

64,330

Financed by:

Capital(closing)

60,590

63,830

Add:Loan

500

60,590

64,330

(b) Calculation of net profit for Year 2007

Net profit=(Closing Capital + Drawings)-(Opening Capital + Additional Capital)

=($63,830+$12,000)-($60,590-$10,000)

=$75,830-$70,590

=$5,240

Workings:

W1:

Year 2006:

Depreciation =$20,000 x10% x 4 = $8,000

Year 2007

Depreciation of Machines Account

2007

$

2007

$

Dec 31

Disposal A/c

600

Jan 1

Balance b/d

8,000

Balance c/d

9,250

Dec 31

Profit & Loss ($18,500 x10%)

1,850

9,850

9.850

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Financial Accounting

 
 

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