a) Insurance premium paid on a monthly basis $400
b) Wages owing $1,100 c) Oprah took inventory amounting to $12,000 for her personal use d) Provision for doubtful debt is to be adjusted to 5% of Accounts Receivable
e) Motor Vehicle is to be depreciated at a rate of 20% per annum using the Reducing Balance method f) Fixtures and Fittings is to be depreciated at a rate of 10% per annum using the Straight Line method g) Closing inventory was $15,500 h) On 15 July 2008, Oprah rented Veronica Brown space at monthly rental of $600 Required: a) Prepare Oprah Winfrey's Income Statement for period ending 31" March 2009. (25marks) ) b)Prepare Oprah Winfrey's Balance Sheet at 315 March 2009. (15marks) c) Oprah Winfrey's has expressed that there is no reason to adjust wages for amount owed as well as provision for doubtful debt at the end of the financial period. As an accounting student explain why these adjustments are necessary in the financial statements by making references to these tw concepts: accrual concept and prudence concept. (10marks)
The following trial batince was extracted from the book of Oprah Winfrey on 31" March 2009
Dr Capital 120,000
Sales 255,000 Purchases 140,000 Inventory (1st April 2008) 14,000 Carriage inwatels 3.700 Return outwares 4.800 Corriage outwards 5.000 Drawings 24,000 Commission 4,000 Discount received 2,500 Rent 6.000 coounts Payable 30.000
Long term Loan 40,000 Accounts Receivable 75,000 Bank 35,000 Cush in hand 22,000 Return Inwards 3,600 25,000 Wages 5,200 Insurance 4,500 Bad debt 2,300 Discount allowed 7,000 Provision for doubtful debt 120,000 Motor Vehicle 90,000 Fixtures and Fittings 20,000 Provision for depreciation- Motor Vehicle 10.000 Provision for depreciation-Fixtures and Fittings 534.300 534,300 Total
