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  3. After the first year of trading, Mr. Wong provided you the following list of led

After the first year of trading, Mr. Wong provided you the following list of led

游客2025-06-21  39
问题 After the first year of trading, Mr. Wong provided you the following list of ledger balances as at 31 December 2003:
＄
Stock, 1 January 2003 3,300
Stock, 31 December 2003 25,200
Sales 160,000
Purchases 100,000
Premises 142,600
Fixtures & Fittings 45,200
Motor Vehicles 42,500
Returns Inwards 1,500
Returns Outwards 2,600
Carriage Inwards 1,000
Carriage Outwards 250
Debtors 30,500
Creditors 41,500
Wages 17,495
Rent and Rates 3,900
Lighting & Heating 18,455
Insurance 10,600
Motor Vehicle Expenses 2,400
Cash at Bank 4,700
Bank Loan 29,000
Loan Interest 2,300
Drawing 6,400
You are further given the following information:
1.Wages owing are ＄550.
2.Prepaid rent is ＄600.
3.Depreciation of Fixtures & Fittings is 10% per annum on cost.
4.Depreciation of Premises is based on a 10-year lease.
5.Depreciation of Motor Vehicles is 50% life using the reducing balance method.
6.Stock taken for Mr. Wong’s own use is ＄1,100. Such a transaction has not yet been recorded.
7.It is estimated that one-third of the driving time is for private purposes.
8.5% of the outstanding accounts at the year end is thought to be uncollectible.
9.There was no error made in the recording of business transactions for the year.
Required:
(a)Prepare a Trading and Profit and Loss Account for the year ended 31 December 2003.
(b)Prepare a Balance Sheet as at 31 December 2003.
(c)Explain the meaning and the significance of Working Capital.
选项
答案 (a) Mr. Wong’s Business
Trading and Profit and Loss Account for the year ended 31 December 2003
＄ ＄ ＄
Sales 160,000
Less: Returns inwards 1,500
Net sales 158,500
Less: Cost of goods sold
Opening stock 3,300
Purchases 100,000
Carriage inwards 1,000
101,000
Less: Returns outwards 2,600
98,400
Less: Stock drawing 1,100 97,300
100,600
Less: Closing stock 25,200 75,400
Gross Profit 83,100
Less: Expenses
Wages (17,495 + 550) 18,045
Rent and Rates (3,900-600) 3,300
Lighting & Heating 18,455
Insurance 10,600
Motor Vehicle Expenses (2,400×2/3) 1,600
Loan Interest 2,300
Carriage Outwards 250
Bad debts 1,525
Depreciation:
—Premises (142,600×1/10) 14,260
—Fixtures & Fittings (45,200×10%) 4,520
—Motor Vehicle (42,500×50%) 21,250 96,105
(13,005)
(b) Mr. Wong’s Business
Balance Sheet as at 31 December 2003
＄ ＄ ＄
Cost Dep NBV
Fixed Assets
Premises 142,600 14,260 128,340
Fixtures & Fittings 45,200 4,520 40,680
Motor vehicles 42,500 21,250 21,250
230,300 40,030 190,270
Current Assets
Stock 25,200
Debtors 30,500
Less: Provision for bad debts 1,525 28,975
Prepaid rent 600
Cash at bank 4,700
59,475
Less: Current Liabilities
Creditors 41,500
Accrued wages 550 42,050
Net Current Assets 17,425
Total Net Assets 207,695
Represented By
Capital (Workings 1) 200,000
Less: Net Loss 13,005
186,995
Less: Drawings (6,400+1,100+1/3×2,400) 8,300
178,695
Bank loan 29,000
207,695
Workings 1: The initial capital contributed by Mr. Wong is determined by drawing up the following trial balance:
Dr Cr
＄ ＄
Stock 3,300
Sales 160,000
Purchases 100,000
Premises 142,600
Fixtures & Fittings 45,200
Motor Vehicles 42,500
Returns Inwards 1,500
Returns Outwards 2,600
Carriage Inwards 1,000
Carriage Outwards 250
Debtors 30,500
Creditors 41,500
Wages 17,495
Rent and Rates 3,900
Lighting & Heating 18,455
Insurance 10,600
Motor Vehicle Expenses 2,400
Cash at Bank 4,700
Bank Loan 29,000
Loan Interest 2,300
Drawings 6,400
Capital (Balance Figure) _____ 200,000
433,100 433,100
(c) Working capital is defined as the excess of current assets over current liabilities. It is one of the important financial indicators of the liquidity position of a business entity. A positive working capital position means that a business is able to manage its affairs to such a state that current assets are sufficiently ready to meet the requirement of settling the debts which are to be due within one year. In other words, a business is to be solvent in the short term if there is a positive working capital. This indicates that the liquidity position of a business is financially sound. However, a positive working capital does not necessarily indicate that the business is solvent in the long term or in a forced liquidation.
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