One of your clients, Steve who does not keep full accounting records has asked you to calculate his profit for the year to 30 April 2020 and his bank balance at that date. Your file on last year’s accounts shows that his assets and liabilities at 30 April 2019 included the following:
$
Inventory 15,800
Receivables 23,750
Payables 16,800
Cash at bank 7,500
Capital 42,900

In the year to 30 April 2020, Steve received $204,800 from his customers. Before banking the cash he used $2,900 to pay business expenses and took cash drawings of $17,900. He also banked $3,000 from the sale of some personal assets. He wrote cheques totalling $191,650. Of this amount, $3,100 was drawings and $22,800 was for business expenses. The rest of the cheques were paid to suppliers.
At 30 April 2020 his inventory was valued at $16,200. At that date he was owed $25,400 by his customers and he owed $17,900 to his suppliers. You estimate that your fee for this work will be $150. You have already calculated that the depreciation charge on Steve’s non-current assets for the year to 30 April 2020 is $2,450.

Required:
(a) Calculate Steve’s bank balance at 30 April 2020.
(b) For the year to 30 April 2020, calculate Steve’s:
(i) Sales;
(ii) Purchases; and
(iii) Gross Profit.
(c) Based on the gross profit you have calculated in (b) above, calculate Steve’s net profit for the year to 30
April 2020.

Answer rating: 100% (QA)

a Calculation of Steves bank balance at 30 April 2020 Opening Bank Balance 7500 Cash Received from C... View the full answer