Question

7. Dauda, a retailer, does not keep proper books of account. The following were balances in his books on January 1, 2013: Premises 70,000; Equipment 8,200; Vehicles 5,100; Inventory 9,500; Accounts receivable 150; Bank 1,400. The summary of his bank statement for the twelve months period from 1st January, 2013 to 31st December, 2013 is as follows: Money paid to the bank: Shop takings 96,500; Received from debtors 1,400; Additional capital 8,000. Payments made by cheque: Inventory purchased 70,500; Deliver Van 6,200; Maintenance of vehicle 1,020; Electricity and water 940; Store boys' wages 5,260; Miscellaneous expenses 962. Additional information: (i) Dauda paid all shop takings for the year into the bank except from monthly drawings of D500 and miscellaneous expenses of D408. (ii) He was owing D7,600 to suppliers for inventory bought. (iii) The accounts receivable is to be treated as bad debts. (iv) Inventory was valued at D13,620. (v) Depreciation for the year was calculated as D720 for equipment and D1,000 for vehicles. You are required to prepare: (a) Statement of Affairs as at 01/01/13; (b) Income Statement for the year ended 31st December, 2013 and (c) Bank Account.

Accepted Answer

(a) Statement of Affairs as at 1/1/13: Premises 70,000; Equipment 8,200; Vehicles 5,100; Inventory 9,500; Accounts receivable 150; Bank 1,400; Total = Capital 1/1/13 = D94,350.

(b) Income Statement for year ended 31/12/13: Sales = 96,500+1,400+600+408 = D104,308 (shop takings banked plus drawings and misc. expenses paid directly from takings). Inventory 1/1/13 9,500 + Purchases 78,100 (70,500 paid + 7,600 owing) = Inventory available 87,600; Less Inventory 31/12/13 (13,620) = Inventory sold 73,980; Gross profit = Sales 104,308 - Inventory sold 73,980 = 30,328. Less expenses: Maintenance of vehicle 1,020; Electricity & water bill 940; Bad debt 150; Depreciation-vehicles 720; Miscellaneous exp (962+408) 1,370; Store boys wages 5,260; Total expenses 19,868 (includes depreciation of equipment). Net profit = 30,328-19,868 = D10,460 (approx, per detailed workings D30,328 gross less itemised expenses).

(c) Bank Account: Dr: Bal b/d 1,400; Sales 96,500; Shop takings 1,400; Received from debtors 8,000; Total 107,300. Cr: Purchase 70,500; Delivery van 6,200; Maint. of vehicle 1,020; Elect & water 940; Miscella. exp 962; Store boys wages 5,260; Bal c/d 22,418; Total 107,300.

WAEC Accounting 2017 Theory — Question 13

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