Question

7(a). The trial balance of Ewan as at 31 December 2010 is given (share capital; motor van at cost; provision for depreciation; sales and purchases; returns; rents and rates; insurance; general expenses; salaries and wages; interest; debtors and creditors; bad debts; provision for doubtful debts; directors' salaries; stock; profit and loss account b/f; 12% debentures; bank). Additional info: unpaid salaries/wages ₦7,000; provision for doubtful debts at 10% on debtors; rents and rates owing ₦4,000; motor van depreciation at 20% p.a. on cost; insurance prepaid ₦2,800; closing stock ₦95,000; proposed dividend ₦50,000.
Required: prepare (a) Trading, Profit and Loss Account for the year ended 31 December 2010.

Accepted Answer

Trading, Profit and Loss Account for the year ended 31st December 2010:
Stock (1/1/2010) + Purchases − Returns outwards − Closing stock (31/12/2010) = Cost of goods sold.
Sales − Returns inwards − Cost of goods sold = Gross profit = ₦157,375.
Less expenses: Depreciation on motor van (₦24,000); Rents and rates (adjusted, ₦11,500); Insurance (adjusted, ₦5,200); General expenses (₦9,000); Salaries and wages (adjusted, ₦66,628); Interest (₦6,000); Bad debts (₦1,629); Increase in provision for doubtful debts.
Net profit = ₦30,389.

WAEC Accounting 2014 Theory — Question 10

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