Accounting

GA ACCOUNTING COURSE ASSESSMENT
OCTOBER 2011
QUESTION 1: DREAMS LIMITED
The opening balance sheet for dreams limited for the year 2010 will be as below:
ASSETS £ LIABILITIES £
Premises=premises at cost-accumulated depreciation 50000+(4000) Share capital 60000
=46000
Fixtures and fitting=fixtures and fitting at cost-accumulated depreciation 12000+(4320) Retained profit 31700
=7680
inventories 36900 accruals 1500
Net trades receivables=trades receivables-allowances for doubtful debts 35500+(800) Trades payables 7900
34700
Cash at the bank 5220 Bank loan 30000
Prepaid insurance 600
Total Assets 131100 Total liabilities 131100

a) The closing cash balance at 31 December 2010
The cash balance is an account that represents only cash.
The below figure represents only cash transactions:
Cash sales 55900
Cash from receivables 66700
Payments to suppliers (76150)
Telephone and internet bill payment (1830)
Wages (12000)
Owner salary (14400)
Material purchase (3000)
Cash from disposal of material 1400
Bookkeeper fees 1360
Insurance payment (1200)
Interest paid (800)
subtotal 13260
Cash at beginning 5220
loan (30000)
Cash balance (11520)

b) The income statement at 31 December 2010
Revenue=cash sales + credit sales 152300
Cost of sales (74600)
Inventory change=closing inventory-damaged inventory-opening inventory (14750)
Gross profit 62950
Personal expenses=assistants salary+ owner salary (26400)
Telephone bill (1830)
Loss on disposal of material=cost of material- cash received from disposal (1600)
Depreciation and amortization= amortization of premise (on a linear basis for 25 years and a cost of 50000, the annual depreciation would be £2000)+ depreciation of fixtures( at cost of £12000 and a depreciation at 20% per annum with reducing balance method, the amortization amount for this year would be £1536) (3536)
Allowance for doubtful debts (1000)
Accruals(water bill and the telephone amount to be paid for two months of...