Q5 Spring 2009

Sloution:
Mr.Abbasi
Trading and Profit and Loss Account
For the Year Ended December 31, 2008
Rs. Rs. Rs.
Sales (N3a) 1,600,000
Less:Cost of Goods Sold:
Opening Stock 0
Add: Purchases (N3b) 1,520,000
1,520,000
Less: Clossing Stock (N4c) 297,500
Goods Lost -N4b(i) 7,500
Goods Drawings -N4b(ii) 1,500
Goods gifted to coustomers -N4b(iii) 2,250 (308,750)
Cost of Goods Sold (1,211,250)
Gross Profit 388,750
Less: Operating Expenses:
Rent (150,000 X 12/15) 120,000
Petrol 40,000
Utilities 19,000
Others 6,000
Goods Lost -N4a(i) 7,500
Goods gifted to coustomers -N4a(ii) 2,250
Depreciation expense (N6) 65,200 (259,950)
Net Profit 128,800

Solved by Waseem Muhammad Hanif

 Mr. Abbasi
Balance Sheet
As at December 31, 2008
Rs. Rs.
Non-Current Assets:
Furniture 60,000
Less: Provision for dep. (12,000) 48,000
Equipment 56,000
Less: Provision for dep. (11200) 44,800
Van 252,000
Less: Provision for dep. (42,000) 210,000
302,800
Current Assets:
Stocks:
Jeans 142,500
T-Shirts 5,000
Calculators 150,000
Debtors 50,000
Prepaid Rent (150,000 X 3/15) 30,000
Bank (N1) 292,000
Cash (N1) 135,000
804,500
1,107,300
Equity:
Capital 600,000
Add: Net Profit 128,800
Less:Drawings (N7) (225,500)
503,300
Current Liabilities:
Creditors:
Jeans (N2b) 400,000
Calculator 200,000
Equipment 4,000
604,000
1,107,300

Solved by Waseem Muhammad Hanif

 Working Notes
N1-Cash Book
Cash Book
Cash Bank Cash Bank
(i) Capital A/c 600,000 (i) Cash Deposited 550,000
Cash Deposited 550,000 (ii) Rent 150,000
(vi) Debtors-Jeans 1,400,000 Furniture 60,000
(vii) T-Shirts 150,000 (iii) Equipment Adv. 40,000
Creditor-Equip. 12,000
(iv) Van 252,000
(vi) Creditors-Jeans 800,000
(vii) T-shirts 120,000
(ix) Petrol 40,000
Utilities 19,000
Others 6,000
(x) Drawings-Tour 80,000
Drawings-P.M (12,000 X 12) 144,000
Balance c/f 135,000 292,000

750,000 1,950,000 750,000 1950000

N2a-Debtors-Jeans
Debtors-Jeans
1,400,000
Credit Sales 1,450,000
Balance c/f 50,000
1,450,000 1,450,000

N2b-Creditors-Jeans
Creditors-Jeans
(vi) Bank 800,000 (vi) Purchases 1,200,000
Balance c/f 400,000

1,200,000 1,200,000

N3a-Total Sales
Total Sales
Sales-Jeans (N2a) 1,450,000
Sales-T-Shirts 150,000
Total sales during the year 1,600,000

N3b-Total Purchases
Total Purchases
Jeans 8000 @ 150 1,200,000
T-Shrits 1600 @ 75 120,000
Calculators 1000 @ 200 200,000
Total purchases during the year 1,520,000

Solved by Waseem Muhammad Hanif

N4a-Closing Units
Closing Units
Jeans T-Shirts Calculators
Opening Units 0 0 0
Add: Units purchased 8000 1600 1000
Less: Units Sold (7000) (1400) 0
Remaining/Closing units 1000 200 1000

N4b-Closing Stock:

N4b(i) Jeans
Closing units 1000
Less: Physical stock taking revaled (950)
Goods lost 50

Closing Stock 950 @ 150 142,500

Goods lost 50 @ 150 7,500

N4b(ii) T-Shirts
Closing Units 200
Less: Goods Drawings (20)
Goods given free of cost to customers (30)
Remaining/Adjusted closing units 150

Closing stock 150 @ 75 11,250

Goods drawings 20 @ 75 1,500
Goods given free of cost to customers 30 @75 2,250

Cost of Closing stock 11,250

Net Realisible Value 5,000
Note:
Since NRV is lower of cost therefore closing stock will be valued at NRV i.e. 5,000

N4b(iii) Calculators
Cost 200,000
NRV= Estimated Selling Price-Estimated Selling Expense

Estimated Selling Price 250,000

Less: Estimated Selling Expense (100 X 1000) 100,000
NRV 150,000

Note:
Since NRV is lower of cost therefore closing stock will be valued at NRV i.e. 150,000

Solved by Waseem Muhammad Hanif

N4c- Value of Closing Stock
Value of Closing Stock
Jeans at cost- N4b(i) 142,500
T-shrits at cost- N4b(ii) 5,000
Calculators at cost- N4b(iii) 150,000
Value of Closing Stock 297,500

N5-Cost of Equipment
Remaining amount after payment of adv. Rs. 40,000 is (40,000/25%) 16,000
Add:Advance for equipment 40,000
Total cost of equipment 56,000

General Entries
(i) Equipment 56,000
Cash 40,000
Account Payable 16,000

(ii) Account Payable 12,000

Cash 12,000

Creditors-Equipment
Bank 12,000 Equipment 16,000

Balance c/f 4,000

16,000 16,000

N6-Depreciation Expense
Equipment (56,000-0) X 20% 11,200
Furnituture (60,000 -0) X 20% 12,000
Van (252,000/6) 42,000
Depreciation Expense during the year 65,200

N7-Stantement of Drawings
Drawings-Foreign tour 80,000
Drawings-p.m (12,000 X 12) 144,000
Drawings-Goods 1,500
Total Drawings during the year 225,500

Solved by Waseem Muhammad Hanif