Campbell runs a clothing store and has produced the


Question 1

Campbell runs a clothing store and has produced the following trial balance for the year ended 31st  March 2012. The trial balance produced does not balance and he has asked for your help.

You are required to help Campbell by:

(a) Preparing journal entries to correct the trial balance and deal with all of the year-end adjustments including the fire.

(b)  Producing an income statement for the year and a balance sheet as at 31st March 2012.

Campbell - Trial Balance as at 31 March 2012

 

£'000

£'000

Accumulated depreciation of land and buildings at 1.4.11.

 

600

Accumulated depreciation of shop fittings at 1.4.11

 

640

Bank Interest

40

 

Bank loan at 5%

 

1600

Capital

 

838

Carriage inwards

80

 

Carriage outwards

126

 

Cash at bank

 

116

Discounts allowed

124

 

Discounts received

 

58

Drawings

305

 

Heat and light

254

 

Insurance

295

 

Inventory as at 1.4.11

402

 

Land and buildings

2400

 

Office expenses

320

 

Payables (Creditors)

 

440

Purchases

5992

 

Provision for doubtful debts as at 1.4.11

 

32

Receivables

1216

 

Returns Inwards

240

 

Returns outwards

 

200

Sales

 

9840

Shop fittings

1240

 

Wages

1480

 

 

 

 

 

 

 

TOTALS

14514

14364

 

Adjustments:

1.    The land and buildings are shown at cost including £800,000 for the land. Buildings are depreciated on a straight line basis over 50 years

2.    Shop fittings are depreciated at 20% per annum on a reducing balance basis

3.    Campbell took goods valued at £24,000 from the shop for his own use during the year

4.    Insurance includes £36,000 for the year to December 2012

5.    An accrual for heat and light for £8000 is needed

6.    A bad debt of £16000 is to be written off and the provision for doubtful debts should be maintained at 2% of the remaining receivables

7.    Campbell sold some shop fittings on 31 March 2012 for £50,000 he has debited the cash at bank account but nothing else. The fittings cost £240,000 5 years ago.

8.    An interest payment on the bank loan is due. The loan was taken out in 2009.

9.    A payment to a supplier for £50,000 has been debited to payables and debited to the cash at bank account.

10. A payment for insurance for £50,000 has been debited to the office expenses account and credited to the cash at bank account

11. An invoice for clothing goods for £50,000 has been debited to office expenses and credited to payables

12. On 31 March 2012 there was a fire in Campbell's storeroom and all of his remaining inventory and his inventory records were destroyed. In addition to information in the trial balance you know that all sales are made based on a standard margin of 40% and that the inventory is covered by an insurance policy which covers the sales value of any inventory lost.

 

Solution Preview :

Prepared by a verified Expert
Financial Accounting: Campbell runs a clothing store and has produced the
Reference No:- TGS0757758

Now Priced at $40 (50% Discount)

Recommended (96%)

Rated (4.8/5)