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 |