Mpomwa has been trading for the last five years. He has been using the front half...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Mpomwa has been trading for the last five years. He has been using the front half of the house he has rented as a shop, with the consent of the landlord. Mpomwa maintains no formal accounting system for the purpose of recording business transactions. He, however, needs to calculate the profit earned during the year 2006 for tax purposes. The following is a summary of Mpomwa's business bank account: RECEIPTS: KO00 Cash from customers 48,120 Sales of private motor car 650 Total 48,770 PAYMENTS: Cash paid to suppliers 32,890 Rent of entire premises 2,400 Wages of part-time staff 760 New counter and shelving 800 General expenses 3,650 Drawings 5,870 Total 46,370 The following additional information is obtained: 1. The landlord considers accommodation to be divided equally between private and business use. 2. The fixtures and fittings in the shop were valued at K2,500,000 at the beginning of 2006. It is intended to depreciate fixed assets at 10% on the year-end balance. 3. It was discovered that not all the cash received was banked. Wages for part-time staff and general expenses amounting to K350,000 and K110,000 respectively were paid directly from the till. 4. Inventory was valued at K2,560,000 at 31 December 2006 and estimated at K1,950,000 at the beginning of the year. 5. From files of invoices, it was discovered that K960,000 was owed to suppliers at the beginning of the year and K1,270,000 at the end of the year. 6. Cash at bank on 1 January amounted to K620,000. 7. There are just a few families to which Mpomwa allows credit. They owed him K170,000 on 1 January 2006 and K210,000 at 21 December 2006. 8. Mpomwa took goods from the shop costing K320,000 for personal use during the year. REQUIRED: (a) A statement of affairs for the business at 1 January 2006 (b) The Income Statement for the year ended 31 December 2006 (c) The Balance Sheet as at 31 December 2006 Mpomwa has been trading for the last five years. He has been using the front half of the house he has rented as a shop, with the consent of the landlord. Mpomwa maintains no formal accounting system for the purpose of recording business transactions. He, however, needs to calculate the profit earned during the year 2006 for tax purposes. The following is a summary of Mpomwa's business bank account: RECEIPTS: KO00 Cash from customers 48,120 Sales of private motor car 650 Total 48,770 PAYMENTS: Cash paid to suppliers 32,890 Rent of entire premises 2,400 Wages of part-time staff 760 New counter and shelving 800 General expenses 3,650 Drawings 5,870 Total 46,370 The following additional information is obtained: 1. The landlord considers accommodation to be divided equally between private and business use. 2. The fixtures and fittings in the shop were valued at K2,500,000 at the beginning of 2006. It is intended to depreciate fixed assets at 10% on the year-end balance. 3. It was discovered that not all the cash received was banked. Wages for part-time staff and general expenses amounting to K350,000 and K110,000 respectively were paid directly from the till. 4. Inventory was valued at K2,560,000 at 31 December 2006 and estimated at K1,950,000 at the beginning of the year. 5. From files of invoices, it was discovered that K960,000 was owed to suppliers at the beginning of the year and K1,270,000 at the end of the year. 6. Cash at bank on 1 January amounted to K620,000. 7. There are just a few families to which Mpomwa allows credit. They owed him K170,000 on 1 January 2006 and K210,000 at 21 December 2006. 8. Mpomwa took goods from the shop costing K320,000 for personal use during the year. REQUIRED: (a) A statement of affairs for the business at 1 January 2006 (b) The Income Statement for the year ended 31 December 2006 (c) The Balance Sheet as at 31 December 2006
Expert Answer:
Answer rating: 100% (QA)
Here are the solutions to the requirements a Statement of Affairs as at 1 January 2006 Fixed Assets ... View the full answer
Related Book For
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
Posted Date:
Students also viewed these finance questions
-
You custom make trail mix that is 60.3 % peanuts, 18.8 % raisins, and 20.9 % chocolate chips. If the weight of the trail mix is 274 grams, how much do the peanuts weigh? Round your answer to the...
-
Marco facilities are located in a single warehouse and office building adjacent to a railroad siding and a major highway. Warehouse personnel simply unload rail deliveries with the forklifts and flat...
-
You have just completed your four-year degree at LLC University! Your student loans that you have accumulated while studying at LLC total $25,000. Since you have graduated, you must now begin...
-
Write an essay your comments, thoughts, and insights focusing on integrating faith into international business. Can all domestic managers be global managers? Why or why not Explain and give example...
-
Give an example of a change that has occurred or is about to occur in your neighborhood. Discuss any business opportunities this change might create.
-
Again consider the 400 parts in Table 2.2. From this table, \[ P(D \mid F)=\frac{P(D \cap F)}{P(F)}=\frac{10}{400} / \frac{40}{400}=\frac{10}{40} \] Note that in this example all four of the...
-
1. Why do you think the practices described in the case led to success for these companies? 2. How do they change the structure of projects so that the likelihood of a positive outcome increases? 3....
-
Consider the following information relating to the purchase of equipment. Purchase price before discount Freight Installation $150,000 $2,350 $8,150 Assuming a discount of $4,000, the total cost of...
-
It is false that no A are B. Therefore, some A are B. Use the modified Venn diagram technique to determine if the following immediate inference forms are valid from the Boolean standpoint,...
-
Cost of Units Completed and in Process The charges to Work in ProcessAssembly Department for a period, together with information concerning production, are as follows. All direct materials are put...
-
What is the NPV rule?
-
What is the risk-free interest rate for a five-year maturity?
-
You are evaluating the stock price of Kroger, a grocery store chain. It has forward earnings per share of \($3.\) You notice that its competitor Target has a P/E ratio of 13. What is a good estimate...
-
River Enterprises has \($500\) million in debt and 20 million shares of equity outstanding. Its excess cash reserves are \($15\) million. They are expected to generate \($200\) million in free cash...
-
A heat engine does \(85 \mathrm{~J}\) of work per cycle while expelling \(110 \mathrm{~J}\) of waste thermal energy. How much energy is transferred thermally to this engine each cycle, and what is...
-
You have just purchased an Australian Treasury Bill, which is a zero-coupon bond security with a positive yield to maturity. The yield to maturity has decreased by 0.5% immediately after your...
-
On 1 July 2021, Croydon Ltd leased ten excavators for five years from Machines4U Ltd. The excavators are expected to have an economic life of 6 years, after which time they will have an expected...
-
Which of the following is an example of data that needs to be cleaned before it can be analyzed? a. The data has dates in two different formats (MM/DD/YY and DD/MM/YY). b. The data has information...
-
Patricia Company had poor internal control over its cash transactions. Facts about its cash position at November 30, 2022, were as follows: The cash ledger showed a balance of $18,901.62, which...
-
Operational (performance) audits are useful because they: a. Include a comprehensive audit. b. Are concerned with the economy, efficiency, and effectiveness of an organizations activities. c. Involve...
-
Describe the five financial statements and how they are prepared.
-
Presented below in alphabetical order are statement of financial position items for Feagler Gardening at December 31, 2025. Prepare a statement of financial position following the format of...
-
Presented below is selected information related to Tsui Repairs at December 31, 2025. Tsui reports financial information monthly (amounts in thousands). a. Determine the total assets of Tsui Repairs...
Study smarter with the SolutionInn App