Prepare the Statement of Financial Position as at 31 December 2016

Prepare the Statement of Financial Position as at 31 December 2016

Question 1

Prepare the Statement of Financial Position as at 31 December 2016 in the appropriate format for Tim’s Trading (only 2016). (Max. 25 lines)

(10 marks)

Your friend Tim runs his own retail business.

At year-end, his accounting technician resigned and after you told him about the course you are doing he has asked for your help in completing his company’s financial statements for the year ended 31 December 2016.

Key information behind for you to start with:

• The business is Tim’s Trading and is a private company.
• The business’s accounting period is one year and runs from 1 January to 31 December each year.
• Tim accounts for inventory using the periodic method.
• Tim has chosen to present all non-current at net carrying value on the face of the Statement of Financial Position.
• Tim’s business prepares the Statement of Cash Flows using the direct method.
• The Statement of Cash Flows discloses Interest paid as a cash flow from financing activities.
• Assume all sales and purchases are on credit.
• In September Tim prepaid R87 000 rent.

The final post-closing trial balance for the year is as below:

		Post closing
		DEBITS	CREDITS
Balance sheet section
Fixed assets @ cost		1 200 000
Investments		300 000
Accumulated depreciation			840 000
Prepaid rent		21 000
Accounts receivable		88 000
Accrued service income		12 000
Inventory		90 000
Bank		289 480
Long term loan			250 000
SARS (Taxation liability)			92 000
Accrued expenses			4 200
Accounts payable			80 000
Share Capital			200 000
Retained income			534 280
Nominal accounts section
Telephone expense
Rent expense
Salaries expense
Depreciation expense
Interest expense
Taxation expense
Sales
Purchases
Bad debts expense
Service income
Consumables expense
		2 000 480	2 000 480

 

A small extract of the Statement of Financial Position as at 31 December 2015 is as below:

Current assets	442 380
Prepaid rent	18 000
Accounts receivable	70 000
Accrued income	15 000
Inventory	75 000
Bank	264 380
Current liabilities	192 100
SARS (Taxation liability)	107 600
Accrued expenses	8 500
Accounts payable	76 000

 

Statement of Comprehensive Income of Tim’s Trading (Pty) Ltd as at 31 December 2016:

	2016
Sales	760 000
Cost of sales	(355 000)
Beginning inventory	75 000
Purchases	370 000
Closing inventory	90 000
Gross profit	405 000
Other income	30 000
Service income	30 000
Selling, admin & general expenses	(336 000)
Salaries & wages expense	(70 000)
Rent expense	(84 000)
Consumables expense	(15 000)
Depreciation	(120 000)
Bad debts expense	(30 000)
Telephone expense	(17 000)
PBI and tax	99 000
Interest expense	(22 500)
PBT	76 500
Tax expense	(21 420)
Net profit	55 080