8 INCOMPLETE RECORDS
Question 7 On 01/01/2013, P. Madden purchased a business for €450,000 which included the following tangible assets and liabilities: premises €250,000, stock €46,000, debtors €22,200, equipment €45,000, motor vans €25,000, trade creditors €25,000, wages due €1,750, 3 months rates prepaid €250, 3% investment €70,000.
During 2013, P. Madden did not keep a full set of accounts but estimates that gross profit was 20% of sales and was able to supply the following information on 31/12/2013:
(i) Each week, P. Madden took goods from stock to the value of €40 and €110 cash for household expenses.
(ii) On 01/04/2013, P. Madden borrowed €160,000 to buy an adjoining building of €200,000. She used €40,000 from her personal funds. It was agreed that the sum borrowed would be repaid in 10 equal annual installments. The first installment is due on 01/04/2014. Interest is to be paid at the end of each month and a rate of 3% per annum applies.
(iii) During the year, P. Madden lodged to the business bank account, a grant of €8,000 and investment interest €2,000. P. Madden made the following payments from the business bank account during the year: light and heat €1,750, motor vans (01/09/2013) €25,000, interest €3,000, general expenses €55,000, annual rates €1,200. General expenses included a bill of €1,200 for Madden’s family annual health insurance.
(iv) P. Madden estimates that 20% of rates payable, light and heat used and 15% of interest payable was for personal use.
(v) During the year, bad debt provision is estimated to be 3% of debtors. Depreciation rates for motor vans and equipment are to be charged at 15% and 10% respectively as at 31/12/2013.
(vi) Included in the assets and liabilities of the business on 31/12/2013 were stock €25,000 (including heating oil €300), electricity due €450, debtors €22,000, bank overdraft €5,000 and trade creditors €19,000.
You are required to prepare, with workings, the: (a) Statement/Balance Sheet showing P. Madden’s profit or loss for the year ended 31/12/2013.
(b) Trading, Profit and Loss Account, in as much detail as possible for the year ended 31/12/2013.
Do not forget theory is examinable. See page 121.
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