Additional Lecture worked example 3, week 7 Fundamentals of Financial Reporting

The following list of balances has been prepared for the preparation of financial statements for Luiz Sole
Trader business, although you have identified additional information (referenced to the notes below):

Trial Balance as at 30th June 2016 (unless stated) £ £

Inventory Brought Forward (at 1st July 2015) 35,000
Purchases 280,000
Revenue 468,000
Interest 2,500
Salaries and Wages 16,500
Insurance 2,100
Light and Heat 6,450
Other Expenses 1,200
Bad debts 700
Premises - cost (1st July 2015) 450,000
Premises - accumulated depreciation (1st July 2015) 54,000
Motor vehicles – cost (1st July 2015) 82,000
Motor vehicles - accumulated depreciation (1st July 2015) 32,800
Motor vehicles – addition in year 6,500
Fixtures and fittings - cost (1st July 2015) 30,000
Fixtures and fittings - accumulated depreciation (1st July 2015) 13,125
Income from sale of Fixtures and Fittings 2,800
Trade Receivables 48,500
Provision for Doubtful Debts (1st July 2015) 900
Prepayments (1st July 2015) 1,200
Trade Payables 22,500
Accruals (1st July 2015) 1,800
Cash at Bank 4,500
5% Bank Loan - borrowed (1st July 2015) 100,000
Drawings in the year ended 30th June 2016 52,000
Equity (1st July 2015) 323,225
1,019,150 1,019,150
Notes
1) During the year some fixtures and fittings were disposed of. Its cost was 8,000 when originally acquired
on 1st January 2014. The receipt from the disposal of £2,800 has been posted in a separate account as
"Income from sale of Fixtures and Fittings". No other adjustments have yet been made to record this
transaction.
2) Depreciation is accounted for in accordance with the following policy:
a. The policy on all its assets is to charge a full year’s depreciation on the year of purchase and none
on the year of disposal.
b. Premises are depreciated on a 2% annual straight line basis with no residual value.
c. Motor Vehicles are depreciated on a 20% annual straight line basis with no residual value.
d. The fixtures and fittings are depreciated on a 25% reducing balance basis.
3) The brought forward accruals figure in the list of balances comprises £1,200 for Light and Heat and £600
for Salaries and Wages. Light and Heat bills are received quarterly. You can assume usage is at a steady
rate over the quarter. The latest bill received of £3,600 for the quarter ending 31 st August 2016 was
paid in full on 1st September 2016. Salaries and Wages relating to June 2015 were paid in early July
2015, amounting to £2,500.
4) The loan was issued on 1st July 2014 and is repayable in full in five years' time. Interest on the Loan is
charged at a rate of 4% per annum.
5) The brought forward prepayments figure in the list of balances relates to insurance. Insurance is paid in
one amount on 1st April every year. The business paid £2,100 in the year.
6) Aisha has reviewed the Trade Receivables and now considers £800 is a bad debt; he also considers a
general provision for doubtful debts for 3% of the remaining trade receivables is also required.
7) A stock-take at the end of the year valued Inventory at £46,500 at 30th June 2016
Required:
Additional Lecture worked example 3, week 7 Fundamentals of Financial Reporting

a) A Statement of Financial Position for Aisha as at 30th June 2016

b) An Income Statement for the year ending 30th June 2016