EC3076 Assignment 1 2013
Question 1
Brown’s Grocery Store
Trial Balance as at 30 September 2012DrCrAdjustments
£’000£’0001. The building cost includes land valued at £150,000
Acc Depreciation of Building802. Depreciation is to be provided at 25% reducing balance on equipment and 2% straight line on buildings
Acc. Depreciation of Equipment803. The owner took goods, for his own use, from inventory that cost £15000 – no adjustment has been made
Bank Loan3004. Insurance includes £8000 for the year to 31 March 2012
Building3905. An accrual for heat and light for September 2012 is needed
Capital2866. Bank loan interest at 4% is to be provided for
Carriage inwards347. Inventory at 30 September 2012 is valued at cost at £120,000
Cash at bank2258. A bad debt of £5000 is to be written off and a provision set up for 2% of the remaining receivables
Discounts allowed129. The owner sold some equipment at the end of the year for £22,000 he has recorded the cash received but
Discounts received21nothing else. The equipment originally cost £50,000 4 years ago.
Drawings5010. An invoice for a customer for £10,000 as been correctly recorded in sales but credited to payables.
Equipment260
General expenses63You are required to :
Heat and Light121(a) Set up a suspense account and explain its uses
Insurance50(b) Record journal entries for all of the above adjustments and show that the suspense account is cleared
Payables60(c) Prepare an income statement and a balance sheet
Purchases300
Receivables110
Returns inwards45
Returns outwards25
Sales576
Inventory at 1 October 2011100
Wages120
16551653
Question 2
(a) On 1 January 2012 trade receivables were £15070 and on 31 December they were £40130. If £249800 has been received in the year from customers what is the value of credit sales
for the year.
(b) On 1 January 2012 trade receivables were £15070 and on 31 December they were £40130. If £249800 has been received in the year from customers after returns of £7500 and discounts
allowed of £8500 what is the value of credit sales for the year.
(c) A business achieves a constant mark-up of 25%. If Sales are £480000 and inventory has risen by £6000 what were the purchases for the period.
(d) A business achieves a constant margin of 25%. If Purchases were £480000 and Sales £560000 what has happened to inventory during the period?
(e) Grace runs a clothing store. On 1 July 2012 her inventory at cost was £8200 and she owed her suppliers £7400. In the 6 months to 31 December her sales (all for cash)were £70,000
and she applies a constant mark up of 40%. On 31 December there was a fire and all of the inventory was destroyed. Grace has paid £42000 to her suppliers since 1 July and owed
a further £9000. What was the value of the stock destroyed by the fire.
(f) In the last question how would the destroyed stock be accounted for? Give answers for with and without insurance.
Please submit a hard copy of your answers to reception before 12pm (noon) on Thursday 28th February
Your work should clearly show which seminar group you attend (eg Monday 2pm)
Feedback will be given in seminars in week 19