The following are ledger balances extracted from the books of Forte Enterprise at 31 December 2019.

	RM
Capital	200,000
Office furniture and equipment at cost	89,000
Provision for depreciation - office equipment	34,500
Bad debts	1,450
Purchases	480,000
Sales	645,000
Returns outwards	5,600
Return inwards	12,500
Carriage inwards	48,500
Carriage outwards	23,400
Salaries and wages	96,200
Stationery and printing	4,200
Lighting and heating charges	8,400
Telephone charges	7,200
Inventory 1 January 2019	62,000
Provision for doubtful debts - 1 January 2019	2,200
Drawings	25,000
Sales commission	12,900
Advertising charges	9,600
Office rent	33,000
Accounts receivable	72,500
Accounts payable	42,800
Bank overdraft	53,750

Additional information:

1. Inventory at 31 December 2019: RM84, 000.
2. Office furniture and equipment are to be depreciated at 10% per annum on cost.
3. A trade debtor with an outstanding balance of RM3, 500 was declared bankrupt on 31 December 2019 and the amount owed by him is to be written off. Provision for doubtful debts is to be adjusted to 2% of the accounts receivable.
4. Returns outwards amounting to RM1, 000 to a supplier was debited to his account but wrongly recorded as returns inwards by debiting his Returns account.
5. Advertising charges include RM500 paid on 31 December 2019 for advertising made on 2 January 2020.
6. Accrued expenses are:

	RM
Salaries and wages	1,250
Lighting and heating charges	600
Telephone charges	550
Office rent	3,000
Bank overdraft interest	1,850

You are required to do the following:

(a) Prepare:

(i) A statement of profit and loss for the year ending 31 December 2019                                                                   

(ii) A statement of financial position at 31 December 2019. 

 

(b) In your opinion, is the financial performance of Forte Enterprise for the year ended 31 December 2019 satisfactory? Discuss possible reasons for the figure obtained. What could have been done to improve the profitability of the business?  Your combined answer to Part (b) should be not more than 500 words.

Answer rating: 100% (QA)

The performance of the business is not at all satisfa... View the full answer