Shava is a dealer in electrical goods, who started trading on 1 January year 2020 with $250 000 in a bank account. He has not kept proper accounting records. However, the following information is available on the dates started.

 31 Dec                         31 Dec

Year2020                     year 2021

$                                  $

Freehold premises at cost                                             300 000                       300 000

Trade receivables                                                         72 000                        102 000

Trade payables                                                            67 000                         83 000

Delivery vehicles at valuation                                      180 000                        240 000

Inventory at cost                                                          30 000                          36 000

Cash at bank                                                                90 000                         135 000

Selling and administration expenses owing                  15 600                          25 600

Selling and administration expenses prepaid                24 400                         17 400

 

Additional information

1. Shava’s record of bank transactions shows that payments to trade payables amounted to $960 000 during the year ended 31 December year 2021
2.  
3. ii. No records are available of his sales receipts but a gross profit margin of 40% has been obtained on all sales
4. iii. Shava’s cash drawings were a constant $3 600 per month throughout the two years. During the year ended 31 Dec year 2021 he took some electric fittings, which had cost $4 000, for use on his house. In addition, Shava took various other amounts from his sales receipts. No record of such drawings has been maintained
5. iv. The premises were bought on 1 July year 2020 with the aid of a bank loan of $200 000. The balance of purchase price was paid by Shava out of his private funds. Interest on the loan is payable at the rate of 15% per annum on 1 January in arrears. The payments have been made as they fell due.
6. v. Selling and administration expenses amounting to $370 000were paid during the year ended 31 December year1. These do not include bank interest
7. vi. Additional delivery vehicles costing $120 000 were bought during the year ended 31 December year 2021. No vehicles were sold
8. vii. At the end of year 2021, a customer who owned Shava $42 000 was declared bankrupt. Shava has agreed that a provision for bad and doubtful debts of 21/2% be created based on the remaining debtors

 

Required

a. Calculate Shava’s net profit for the year ended 31 December year 2020

b. Prepare an income statement for the year ended 31 December year 2021 and a a statement of financial position as at that date.