Campbell runs a clothing store and has produced the

Question

Question 1

Campbell runs a clothing store and has produced the following trial balance for the year ended 31^st  March 2012. The trial balance produced does not balance and he has asked for your help.

You are required to help Campbell by:

(a) Preparing journal entries to correct the trial balance and deal with all of the year-end adjustments including the fire.

(b)  Producing an income statement for the year and a balance sheet as at 31^st March 2012.

Campbell - Trial Balance as at 31 March 2012

	£'000	£'000
Accumulated depreciation of land and buildings at 1.4.11.		600
Accumulated depreciation of shop fittings at 1.4.11		640
Bank Interest	40
Bank loan at 5%		1600
Capital		838
Carriage inwards	80
Carriage outwards	126
Cash at bank		116
Discounts allowed	124
Discounts received		58
Drawings	305
Heat and light	254
Insurance	295
Inventory as at 1.4.11	402
Land and buildings	2400
Office expenses	320
Payables (Creditors)		440
Purchases	5992
Provision for doubtful debts as at 1.4.11		32
Receivables	1216
Returns Inwards	240
Returns outwards		200
Sales		9840
Shop fittings	1240
Wages	1480
TOTALS	14514	14364

 

Adjustments:

1.    The land and buildings are shown at cost including £800,000 for the land. Buildings are depreciated on a straight line basis over 50 years

2.    Shop fittings are depreciated at 20% per annum on a reducing balance basis

3.    Campbell took goods valued at £24,000 from the shop for his own use during the year

4.    Insurance includes £36,000 for the year to December 2012

5.    An accrual for heat and light for £8000 is needed

6.    A bad debt of £16000 is to be written off and the provision for doubtful debts should be maintained at 2% of the remaining receivables

7.    Campbell sold some shop fittings on 31 March 2012 for £50,000 he has debited the cash at bank account but nothing else. The fittings cost £240,000 5 years ago.

8.    An interest payment on the bank loan is due. The loan was taken out in 2009.

9.    A payment to a supplier for £50,000 has been debited to payables and debited to the cash at bank account.

10. A payment for insurance for £50,000 has been debited to the office expenses account and credited to the cash at bank account

11. An invoice for clothing goods for £50,000 has been debited to office expenses and credited to payables

12. On 31 March 2012 there was a fire in Campbell's storeroom and all of his remaining inventory and his inventory records were destroyed. In addition to information in the trial balance you know that all sales are made based on a standard margin of 40% and that the inventory is covered by an insurance policy which covers the sales value of any inventory lost.