QUESTION 2: Financial Statement (11 marks)

Ms Leilani owns A Stretch A Day, a yoga business specialising in yoga apparel and yoga classes. She is also a good friend of Joy Spark. They often refer clients to one another. The following Trial Balance for A Stretch A Day yoga apparel shop has been prepared at year end by Ms Leilani who likes to keep a hand in the bookkeeping side of the business.

A STRETCH A DAY

TRIAL BALANCE

AS AT 30 JUNE 2020

	Debit ($)	Credit ($)
Accounts Receivable	4,837
Office Operating Expense	68,800
Inventory (1 July 2019)	41,920
Discount Received		1,600
Insurance Expense	960
Depreciation Exp Motor vehicle	1,600
Cash at Bank	154,510
Prepaid Insurance	1,860
Shop Shelving	70,700
Accumulated Depreciation Shop Shelving		23,200
Office Furniture and Fittings	25,600
Accumulated Depreciation Office F & F		7,600
Allowance for Doubtful Debts		520
Motor Vehicle	32,000
Accumulated Depreciation Motor vehicle		1,600
Sales Returns & Allowances	760
Interest Expense	4,080
Rent Expense	44,200
Depreciation Exp Shop Shelving	4,000
Accounts Payable		14,480
Accrued Rent		1,600
Discount Allowed	920
Advertising Expense	12,760
Freight Inwards Expense	3,010
Wages	210,400
Delivery Expense	1,440
Loan (repayable 1 Oct 2023)		36,800
Depreciation Exp Off. Furn. & Fittings	2,560
Leilani, Capital (1 July 2019)		175,640
Leilani, Drawings	28,800
Sales		606,797
Doubtful Debts Expense	520
Purchases	153,600
Total	869,837	869,837

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QUESTION 2: Financial Statement (continued)

Additional Information:

The stocktake performed at 30 June 2020 recorded an ending inventory balance of $38,000.

Ms Leilana has worked out that wages for the year were sales staff $115,720, bookkeeper $84,160 and the casual (Credit Controller) she employed to follow up outstanding customers with overdue accounts was paid $10,520.

Ms Leilana has a rent agreement that the shop (which is very small) is rent free but she pays rent for the office space at the back of the shop. This agreement was struck because the owner of the property lives above the shop and wanted a quiet, peaceful and clean business to operate below his home.

On enquiry Ms Leilana has instructed that she treats the insurance expense as an administrative expense.

REQUIRED:

Prepare a fully classified Income Statement for the year ending 30 June 2020.