QUESTION TWO Chebabwino started his business as a sole proprietor on 1 January 2017. All purchases and sales were made on credit. On 31 December 2018, a fire broke out in the warehouse. All inventory, except some goods costing Tshs. 15,000,000 was destroyed. Although many of the records were destroyed in the fire, the following information was available after investigation. (i) Information on assets and liabilities was confirmed as follows: 31.12.2017 31.12.2018 Tshs. Tshs. Motor van, net 24,000,000 ? Inventory 143,000,000 15,000,000 Trade receivables 12,100,000 13,700,000 Trade payables 149,700,000 135,000,000 Accrued sundry expenses 2,440,000 2,180,000 Cash at bank 61,800,000 ? (ii) The balances as per bank statement as at 31 December 2018 was Tshs.99, 180,000. (iii) During 2018, receipts from customers Tshs.1, 404,900,000 were banked, after payments of part time staff salaries Tshs.89, 400,000 and Chebabwino’s drawings Tshs.29, 500,000. (iv) The bank statements of 2018 showed that total payments made to trade suppliers amounted to Tshs.987, 970,000. A cheque of Tshs.1,200,000 issued in December 2018 for purchase of goods in 2018 was not presented until 10 January, 2019. (v) Sales were made at a gross profit margin of 30% in 2018, except for some outdated goods, costing Tshs.50, 000,000 which were sold at cost. (vi) A 2% term deposit was made by transferring Tshs.20, 000,000 from the cash at bank account on 1 July 2018. The term deposit will mature on 1 July 2021. (vii)The payment for rent and rates of Tshs.127, 750,000 in 2018 included a rental deposit of Tshs.8, 000,000 for a short-term tenancy agreement. (viii) During 2018, full-time staff salaries and sundry expenses of Tshs.129, 000,000 and Tshs.42, 800,000 respectively were paid. (ix) In 2018, Chebabwino injected Tshs.10,000,000 cash into the business and withdrew Tshs.70,000,000 from the bank for his personal use. (x) The motor van was brought in by Chebabwino at the commencement of the business. Depreciation is to be provided on the motor van at 20% per annum on cost. REQUIRED: (a) For Chebabwino’s business, prepare (i) an income statement for the year ended 31 December 2018, and (ii) a statement of financial position as at 31 December 2018, showing the change in capital during the year
QUESTION TWO
Chebabwino started his business as a sole proprietor on 1 January 2017. All purchases and sales
were made on credit. On 31 December 2018, a fire broke out in the warehouse. All inventory,
except some goods costing Tshs. 15,000,000 was destroyed. Although many of the records were
destroyed in the fire, the following information was available after investigation.
(i) Information on assets and liabilities was confirmed as follows:
31.12.2017
31.12.2018
Tshs.
Tshs.
Motor van, net
24,000,000
?
Inventory
143,000,000
15,000,000
Trade receivables
12,100,000
13,700,000
Trade payables
149,700,000
135,000,000
Accrued sundry expenses
2,440,000
2,180,000
Cash at bank
61,800,000
?
(ii) The balances as per bank statement as at 31 December 2018 was Tshs.99, 180,000.
(iii) During 2018, receipts from customers Tshs.1, 404,900,000 were banked, after payments of
part time staff salaries Tshs.89, 400,000 and Chebabwino’s drawings Tshs.29, 500,000.
(iv) The bank statements of 2018 showed that total payments made to trade suppliers amounted
to Tshs.987, 970,000. A cheque of Tshs.1,200,000 issued in December 2018 for purchase
of goods in 2018 was not presented until 10 January, 2019.
(v) Sales were made at a gross profit margin of 30% in 2018, except for some outdated goods,
costing Tshs.50, 000,000 which were sold at cost.
(vi) A 2% term deposit was made by transferring Tshs.20, 000,000 from the cash at bank
account on 1 July 2018. The term deposit will mature on 1 July 2021.
(vii)The payment for rent and rates of Tshs.127, 750,000 in 2018 included a rental deposit of
Tshs.8, 000,000 for a short-term tenancy agreement.
(viii) During 2018, full-time staff salaries and sundry expenses of Tshs.129, 000,000 and Tshs.42,
800,000 respectively were paid.
(ix) In 2018, Chebabwino injected Tshs.10,000,000 cash into the business and withdrew
Tshs.70,000,000 from the bank for his personal use.
(x) The motor van was brought in by Chebabwino at the commencement of the business.
REQUIRED:
(a) For Chebabwino’s business, prepare
(i) an income statement for the year ended 31 December 2018, and
(ii) a
Step by step
Solved in 2 steps
