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CHAPTER 4 Practice Questions


Question 7 The Trial Balance of Toykiaford, Ltd, a car dealership owner, failed to agree on 31/12/2012. The difference was entered in a Suspense Account and the following Balance Sheet was prepared:


Fixed Assets Premises


Balance Sheet as at 31/12/2012 €


Motor Vehicles Furniture


Current Assets Stock


Debtors


less: Current Liabilities Creditors (including suspense) 15,000 Cash Bank


10,000


6,000 (31,000) 14,000 569,000


Financed By: Capital


add: Net Profit Drawings


Capital Employed


550,000 29,000


(10,000) 569,000


On checking the books, the following errors were discovered: (i) Motor vehicles, purchased on credit from Tyreo Ltd for €15,500 had been entered as €5,500 on the incorrect side of Tyreo Ltd account and credited as €25,500 in the motor vehicles account.


(ii) Toykiaford Ltd had cash of €10,000. This has been brought down on the incorrect side of the nominal ledger thus having been entered on the incorrect side of the Trial Balance.


(iii) A private debt of €1,500, owed by Toykiaford Ltd had been offset in full settlement against a business debt of €2,000 for sales made earlier in the year. No entry had been made in the books regarding this transaction.


(iv) Toykiaford had returned furniture previously purchased on credit for €5,500. This had been entered correctly into the books. However, a credit note was sent following the return outlining a restocking charge of €50 which was included to cover the return of the goods. No entry had been made with respect to this.


(v) Toykiaford made debit card payments of €250 for repairs to a business vehicle and €150 for repairs to a privately-owned car. These had both been entered on the credit side of the bank and motor vehicles accounts.


You are required to: (a) Journalise the necessary corrections. (b) Show the Suspense Account. (c) Prepare a Statement showing correct net profit. (d) Prepare a corrected Balance Sheet.


Use the Balance Sheet given in the question to help draft the new Balance Sheet.


4 €


500,000 25,000


30,000 555,000 35,000


10,000 45,000





47


TIP


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