Chippendale is the sole proprietor of a furniture shop. On 31st December 2016, his accountant retired...
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Chippendale is the sole proprietor of a furniture shop. On 31st December 2016, his accountant retired and the accounts of the business have been subsequently kept by Chippendale's secretary. As shown in the trial balance below, the debit and credit entries made balance off. However, some of the entries made appear to be incorrect. It is also notable that some items shown in the trial balance merely reflect the opening balance of the accounts, rather than their closing balance at the end of the year. Trial balance for the year ended 31st December 2016. 2. 3. Owner's equity as at 31st December 2015 Drawings Loan at 15% interest 4. Freehold properties Disposal of PPE Vans - cost Vans - accumulated depreciation Shop fittings - cost Shop fittings - accumulated depreciation Inventory as at 31st December 2015 Trade receivables as at 31st December 2015 Trade payables as at 31st December 2015 Purchases General expenses paid Wages paid Cash sales Credit sales Provision for doubtful debts as at 31st December 2015 Bank Cash Dr € 22,600 110,000 20,800 16,300 32,832 7,817 185,298 37,146 42,183 300 475,276 Cr € 22,035 12,000 127,500 3,710 4,200 14,712 254,451 32,870 The following additional information is available: 1. When Chippendale acquired his present premise (recognised as 'Freehold properties' in the trial balance), he also purchased an identical shop next door. The two properties were acquired at the cost of €110,000 in total. The shop next door was sold for €127,500 during the year. This transaction was recorded by the secretary who was unsure about the treatment of disposal of non-current assets. 367 3,431 475,276 The secretary was also unsure about the correct treatment of trade receivables. The 'Credit sales' shown in the trial balance, in fact, represents the cash received from debtors during the year. By matching these receipts against the sales invoices, it appears that the amount due by debtors as at 31st December 2016 was €14,898. Of this total, €832 should have been written-off as bad debts and €437 of the remainder should be regarded as doubtful. Similar situation applies to the treatment of the trade payables. The 'Purchases' shown in the trial balance, in fact, represents the total amount paid to suppliers during the year. It has been identified that the total of unpaid invoices as at 31 December 2016 was €18,002. Inventory audit conducted at the end of the year valued the inventory at €49,451. Included in this figure were items of inventory which had originally cost €9,270, but which were deemed to 5. 6. 7. 8. 9. 10. have a net realisable value of €7,110. It is confirmed that the an inventory write down expense has been charged into general expense. 'Cash sales' shown in the trial balance includes €1,400 from the sale of Chippendale's private car which had been mistakenly paid into the business bank account. This amount has been taken out from the business bank account as part of 'Drawings' made during the year. No entry had been made for part-time wages amounting to €3,650. The wages were paid out from the shop takings generated through cash sales. Both wages and cash sales accounts have not been adjusted to reflect this transaction. General expenses remaining unpaid as at 31st December 2016 amounted to €4,062. The firm's bank statement as at 31st December 2016 shows an overdraft of €4,975. The discrepancy of €1,544 from the figure shown in the trial balance represents interest charge for the use of overdraft facility which has not been recorded in the firm's ledger. The interest on loan for 2016 which remains unpaid has not been recorded. Vans are to be depreciated using straight line method at 20% annual rate of depreciation, and shop fittings using reducing balance method at 10% annual rate of depreciation. Required (a) Prepare an Statement of Comprehensive Income for Chippendale's furniture shop for the year ended 31st December 2016 using the Common European Format (b) Prepare a Statement of Financial Position for Chippendale's furniture shop as at 31st December 2016 using the Common European Format Chippendale is the sole proprietor of a furniture shop. On 31st December 2016, his accountant retired and the accounts of the business have been subsequently kept by Chippendale's secretary. As shown in the trial balance below, the debit and credit entries made balance off. However, some of the entries made appear to be incorrect. It is also notable that some items shown in the trial balance merely reflect the opening balance of the accounts, rather than their closing balance at the end of the year. Trial balance for the year ended 31st December 2016. 2. 3. Owner's equity as at 31st December 2015 Drawings Loan at 15% interest 4. Freehold properties Disposal of PPE Vans - cost Vans - accumulated depreciation Shop fittings - cost Shop fittings - accumulated depreciation Inventory as at 31st December 2015 Trade receivables as at 31st December 2015 Trade payables as at 31st December 2015 Purchases General expenses paid Wages paid Cash sales Credit sales Provision for doubtful debts as at 31st December 2015 Bank Cash Dr € 22,600 110,000 20,800 16,300 32,832 7,817 185,298 37,146 42,183 300 475,276 Cr € 22,035 12,000 127,500 3,710 4,200 14,712 254,451 32,870 The following additional information is available: 1. When Chippendale acquired his present premise (recognised as 'Freehold properties' in the trial balance), he also purchased an identical shop next door. The two properties were acquired at the cost of €110,000 in total. The shop next door was sold for €127,500 during the year. This transaction was recorded by the secretary who was unsure about the treatment of disposal of non-current assets. 367 3,431 475,276 The secretary was also unsure about the correct treatment of trade receivables. The 'Credit sales' shown in the trial balance, in fact, represents the cash received from debtors during the year. By matching these receipts against the sales invoices, it appears that the amount due by debtors as at 31st December 2016 was €14,898. Of this total, €832 should have been written-off as bad debts and €437 of the remainder should be regarded as doubtful. Similar situation applies to the treatment of the trade payables. The 'Purchases' shown in the trial balance, in fact, represents the total amount paid to suppliers during the year. It has been identified that the total of unpaid invoices as at 31 December 2016 was €18,002. Inventory audit conducted at the end of the year valued the inventory at €49,451. Included in this figure were items of inventory which had originally cost €9,270, but which were deemed to 5. 6. 7. 8. 9. 10. have a net realisable value of €7,110. It is confirmed that the an inventory write down expense has been charged into general expense. 'Cash sales' shown in the trial balance includes €1,400 from the sale of Chippendale's private car which had been mistakenly paid into the business bank account. This amount has been taken out from the business bank account as part of 'Drawings' made during the year. No entry had been made for part-time wages amounting to €3,650. The wages were paid out from the shop takings generated through cash sales. Both wages and cash sales accounts have not been adjusted to reflect this transaction. General expenses remaining unpaid as at 31st December 2016 amounted to €4,062. The firm's bank statement as at 31st December 2016 shows an overdraft of €4,975. The discrepancy of €1,544 from the figure shown in the trial balance represents interest charge for the use of overdraft facility which has not been recorded in the firm's ledger. The interest on loan for 2016 which remains unpaid has not been recorded. Vans are to be depreciated using straight line method at 20% annual rate of depreciation, and shop fittings using reducing balance method at 10% annual rate of depreciation. Required (a) Prepare an Statement of Comprehensive Income for Chippendale's furniture shop for the year ended 31st December 2016 using the Common European Format (b) Prepare a Statement of Financial Position for Chippendale's furniture shop as at 31st December 2016 using the Common European Format
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a Statement of Comprehensive Income for the year ended 31st December 2016 Revenue Sales revenue 25... View the full answer
Related Book For
South Western Federal Taxation 2017 Comprehensive
ISBN: 9781305874169
40th Edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young
Posted Date:
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