Question

7. The following balances were extracted from the books of Ogba Enterprise on December 31, 2014:
Capital N315,200; Purchases N259,800; Sales N484,700; Carriage inwards N17,410; Premises at cost N215,000; Equipment at cost N198,000; Trade debtors N76,800; Trade creditors N64,820; Cash in hand N13,400; Stock (January 1, 2014) N27,680; Salaries and wages N56,700; Provision for doubtful debts N13,000; Discount allowed N11,450; Drawings N70,000; Discount received N22,800; Electricity N29,229; General expenses N37,060; Rent N43,000; 9% Debentures N100,000; Return Inwards N24,500; Return outwards N16,000.
Additional information: (i) Stock in trade at December 31, 2014 was N29,400; (ii) Provision for doubtful debt to remain at 8% of debtors; (iii) General expenses owing totaled N12,860; (iv) Rent prepaid N19,500 (v) Depreciation is to be provided as follows: Premises 12½ on cost; Equipment 10% on cost.
You are required to prepare: (a) Trading, profit and loss Account for the year ended December 31, 2014; (b) Balance sheet as at that date.

Accepted Answer

(a) Trading, Profit and Loss Account for the Year Ended December 31, 2014:
Sales 484,700; Less returns inwards 24,500 = Net sales 460,200
Cost of goods sold: Stock 27,680 + Purchases 259,800 + Carriage inwards 17,410 = 304,890; Less returns outwards 16,000 = Cost of goods available 288,890; Less closing stock 29,400 = COGS 259,490
Gross profit = 460,200 - 259,490 = 200,710
Add discount received 22,800; less expense reduction in provision for doubtful debt 6,856 = adjusted gross figure 230,366
Less expenses: Salaries & wages 56,700; Discount allowed 11,450; Electricity 29,229; Inward expenses (37,060+12,860)=49,920; Rent(43,000-19,300)=23,500; Interest on debenture 9,000; Depreciation: Premises(12.5%×215,000)=26,875, Equipment(10%×198,000)=19,800 → total 22,674
Net profit = 3,892

(b) Balance Sheet as at December 31, 2014:
Fixed assets: Premises 215,000-26,875=188,125; Equipment 198,000-19,800=178,200 → 366,325
Current assets: Stock 29,400; Debtors 76,800 less provision for doubtful debt 6,144 =70,656; Rent prepaid 19,500; Cash in hand 13,400 → 132,956
Current liabilities: Creditors 64,820; General expenses owing 12,860; Bank overdraft 9,000 → 63,509(net figures per source); Working capital 42,000(132,956-... per source figure)
Net assets = 349,092
Financed by: Capital 315,200 + Net profit 3,892 - Drawings 7,000 = 319,092(approx) + 9% Debentures 100,000 → Total = 349,092

WAEC Accounting 2016 Theory — Question 7

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