Ewan began trading on 1 April 2020. A brief summary of his income statement for the year
Question:
Ewan began trading on 1 April 2020. A brief summary of his income statement for the year to 31 March 2021 (prepared on the accruals basis) is as follows: Sales Less: Cost of sales: Purchases Less: Inventoryat31March2021 Gross profit Less: Expenses Net profit for the year Notes:
1. Trade receivables on 31 March 2021 were £5,840. Trade payables were £3,650. Accrued expenses were £830 and prepaid expenses were £310.
2. The expenses include motoring costs of £3,120 and loan interest of £600. There were no accruals or prepayments in relation to either of these expenses at the year-end. Ewan drove 12,400 business miles during the year.
3. Equipment costing £4,500 (useful life five years) and a motor car costing £14,200 were bought in April 2020. Depreciation of £900 and £3,550 respectively on these items is included in expenses. Calculate Ewan's trading profit for tax purposes, on the assumption that he decides to use the cash basis and claims a fixed rate deduction in relation to his motor expenses.
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson