Incomplete records
Question 1
On 1 April 2009 L Nyoni purchased a retail business from T. Masamba at a cost of $ 25 000 which was paid in cash, the asset acquired by L. Nyoni were as follows:
Fixtures and Fittings valued at $ 7 800
Stock valued at $ 15 000
Immediately upon acquiring the business L. Nyoni opened a business bank account, the following is a summary of the transactions in this account during the year ended 31 March 2010.
$ / $Opening Deposit / 1,710 / Purchases / 39,300
Receipts: / Credit Sales / 39,180 / Establishment and Administrative / 2,400
Cash Sales / 9,300 / Marketing and Distribution Expenses / 5,300
Legacy / J Nyoni Deceased / 11,000 / Purchase of Fixtures and Fittings / 10,000
Closing Balance / 3,810 / Drawings / 8,000
65,000 / 65,000
Additional Information
i)L Nyoni’s turnover for the year ended 31 March 2010 amounted to $ 56 100.
ii)During the year ended 31 March 2010, the stock turnover has been three.
iii)L. Nyoni has withdrawn from the business, for his own use, goods costing $ 2 000 during the year ended 31 March 2010.
iv)Creditors for purchases at 31 March 2010 amounted to $ 9 370 whilst accrued charges for establishment and administrative expenses amounted to $ 307 and amounts prepaid to marketing and distribution expenses were $ 250 at that date.
v)Depreciation on fixtures and fittings for the year ended 31 March 1990 is to be provided at the rate of 10% of the cost of fixtures and fittings held at that date.
Required
L. Nyoni’s statement of comprehensive income for the year ended 31 March 2010 and a statement of financial position as at that date.
Question 2
Johanne Dube set up in business as a retailer on 1 November 2010 with the following assets:
Fixed Assets at cost 40 000
Inventory in trade, at cost25 000
Balance at Bank90 000
Johanne did not keep a full set of accounting records, but the following balances for the year end date of 31 October 2011 were known:
Inventory in trade, at cost106 000
Trade receivables62 000
Trade allowable 24 500
Balance at bank15 000
The following additional information has been discovered for the year ended 31 October 2011:
i)There was an addition to fixed assets at a cost of $ 10 000 on 1 May 2010. Payment was made in full at the date of purchase. There have been no disposals.
ii)During the year, stock was turned over seven times. This rate of stock turnover was based on an average stock average stock figure, calculated from the available information above.
iii)The gross profit was 30% of sales.
iv)The depreciation rate for fixed assets was 10% per annum.
v)An invoice for $ 2 000 for fixed assets repairs has not yet been paid.
vi)The only other expenses $ 55 500. They were paid by cheque.
vii)All receipts and payments, including drawings, have been put through the business bank account.
Required
Johanne Dube’s statement of comprehensive income for the year ended 31 October 2011; Statement of Financial Position as at October 2011 and bank account for the year ended 31 October 2011.
Question 3
Ms. Madavo commenced in business as a retailer on 1 July 2009. She opened a business account, but she did not keep a full set of accounts. However, she has produced the following three documents:
Statement of Financial Position as at 30 June 2010.
$ / $Furniture and Fittings (Cost $ 54 000) / 38,800 / Capital / 59,350
Motor Vehicles (Cost $ 12 000) / 12,100 / Loan / 11,500
Goodwill (Cost $ 12 000) / 12,000 / Bank / 11,000
Inventory / 22,300 / Trade Allowables / 3,200
Trade Receivables / 1,000 / Accrued Expenses / 1,650
Prepaid Expenses / 500
86,700 / 86,700
Summary Bank record for year ended
Receipts / Payments$ / $
Trade Receivables / 55,200 / Cash Purchases / 8,900
Cash Sales / 34,300 / Trade Allowables / 73,200
New Loan / 15,500 / Expenses / 15,300
Motor Vehicles / 11,000
Drawings / 15,200
Loan Interest / 1,500
Additional Notes
1)Inventory at 30 June 2010 was valued at $ 25 500
2)Expenses were estimated at $ 450 accrued and $ 520 prepaid at 30 June 2010
3)Lists of trade receivables and trade allowables gave totals of $ 11 000 and $ 4 300 respectively at 30 June 2010. Credit Losses of $ 900 had been written off to arrive at the debtors total.
4)Interest of $ 1 200 on the loans and $ 3 500 on the bank overdraft was outstanding at 30 June 2010.
5)Depreciation is to be provided: 20 % on the cost of the furniture and fittings and 25 % on the cost of the motor vehicles.
6)Ms. Madavo has taken goods valued at $ 7 000 cost for her personal use during the year.
Required
The statement of comprehensive income for the year ended 30 June 2010 and statement of financial position as at 30 June 2010.
Question 4
Dzingai Gwanyanya runs a small clothes shop and makes up his accounts each year to 30 June. His summarised Statement of Comprehensive Income account for the year ended 30 June 2009 was as follows:
$ / $Sales / 860,000
Less:
Cost of Sales (after deducting cash discounts received on purchases) / 448,175
Direct Labour / 190,000 / 638,175
Gross Icome / 221,825
Less: Fixed Operating expenses / 165,000
Net Income / 56,825
On 1 January 2010 a fire seriously damaged his shop and no trading was possible until 1 April 2010, on which date half the shop was re-opened for trading. The remaining half re-opened on 1 July 2010.
His loss of profits insurance insured him against:
i) loss of gross profit (defined as sales less variable costs) excluding any cash discounts received, plus;
ii) the direct labour costs of any period during which his business was disrupted.
The insurers accepted the following points to be used in calculating the loss:
1)Turnover increases by 20% per annum.
2)Direct labour costs increased by 10% per annum
3)The period 1 December to 28 February accounts for one half of the annual turnover.
4)The reminder of the turnover arises evenly over the other nine months.
5)Direct labour costs and fixed expenses arises evenly throughout the year.
6)The rate of gross profit is constant
7)Cash discounts received on purchases can be assumed to be 1 ½ % of the cost of the sales figure.
Required
Compute the loss of profits claim to be submitted by Dzingai Gwanyanya.
In class test
Mr. Utete has not kept detailed accounts, other than the following summarised record of the bank transactions for the year ended 30 September 2007:
$ / $Balance b/d / 19,500 / Trade Allowables / 122,450
Takings (Note 1) / 152,000 / Rates / 5,100
Loan proceeds (Notes 2) / 15,000 / Loan Interest / 750
Purchase of Lease (Note 3) / 20,000
Equipment / 5,000
Balance c/d / 33,200
186,500 / 186,500
Notes
1)The takings banked were after using $ 2 450 for buying goods for resale and $ 8 000 for personal drawings.
2)The loan was raised on 1 October 2006 with interest agreed at 10% per annum.
3)The lease is for a period of twenty years from 1 April.
During the year, Mr. Utete’s premises were burgled and a week’s takings were stolen from the safe, although Mr. Utete does not know the amount. The money has not been recovered and it was not insured. Dzingai achieves a gross profit of 25% on his sales.
Additional Information
1 October 2006 / 30 September 2007$ / $
Trade receivables / 1,250 / 1,850
Trade allowables / 6,000 / 7,200
Inventory / 10,000 / 11,000
Rates Prepaid / 400 / 600
Equipment (at evaluation) / 7,800 / 10,000
Required
A statement of comprehensive income for the year ended 30 September 2007, including therein your calculation of the cash stolen. A statement of Financial position as at 30 September 2007.