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

 

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