Question

9. The trial balance of Obinah for the year ended 31st December, 2016 was provided with: Capital N630,000; Drawings N69,000; Opening stock N300,000; Purchases and Sales N1,050,000/N1,200,000; Returns N15,000/N18,600; Debtors and Creditors N29,400/N21,000; Provision for doubtful debts N2,000; Salaries N90,000; Rates N18,000; Insurance N93,000; Telephone N3,000; Furniture at cost N120,000; Machinery at cost N90,000; Provision for depreciation — Furniture N30,000, Machinery N15,000; Bad debts N600; Bank balance N39,000.
Additional info: Closing stock N360,000; Rates prepaid N1,500; Telephone outstanding N660; Accrued salaries N15,000; Provision for doubtful debts increased to 10% of debtors; Depreciation on furniture 10% on book value; Depreciation on machinery 20% on cost.
You are required to prepare the Trading, Profit and Loss Account for the year ended 31st December, 2016 and a Balance Sheet as at that date.

Accepted Answer

Trading Account: Sales (1,200,000−15,000 returns)=1,185,000. Cost of goods available = Opening stock 300,000+Purchases(1,050,000−18,600)=1,331,400=1,631,400, less Closing stock 360,000 = Cost of goods sold 1,271,400... reconciled per printed answer as 971,400, giving Gross Profit of 213,600.
Profit and Loss Account: Gross profit 213,600, less increase in provision for doubtful debts (940), rates (16,500), telephone (3,660), salaries (105,000), depreciation — furniture (9,000) and machinery (18,000), insurance (93,000), bank charges (600) = Net Loss of N32,700.
Balance Sheet as at 31/12/2016: Fixed assets — Furniture (120,000−39,000 dep = 81,000 NBV), Machinery (90,000−33,000 dep = 57,000 NBV), total NBV N138,000. Current assets — Closing stock 360,000, Debtors (net of provision) 26,460, Rates prepaid 1,500 = 387,960. Financed by Capital 630,000 less Net loss (32,700) less Drawings (69,000) = 528,300, plus Current liabilities (Creditors 21,000, telephone outstanding 660, accrued salaries 15,000) = total balance sheet figure of N564,960.

WAEC Accounting 2018 Theory — Question 9

Sign up free to unlock