John, a sole trader, provided the following balances at 31 December 2022. Sales $130 000 Purchases $60 000 Returns inwards $4 000 Returns outwards $2 000 Inventory at 1 January 2022 $15 000 Inventory at 31 December 2022 $18 000 Carriage inwards $5 000 Carriage outwards $3 000 Rent $6 000 Wages and salaries $12 000 Office expenses $2 000 Provision for doubtful debts $300 Insurance $1 000 Bank loan (repayable in 2025) $20 000 Discount allowed $500 Discount received $200 Accumulated depreciation (equipment) $10 000 Equipment at cost $50 000 Cash in hand $1 000 Bank $12 000 Trade receivables $10 000 Trade payables $8 000 Capital at 1 January 2022 $60 000 Drawings $8 000

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

1. 21(a) Income Statement for the year ended 31 December 2022
2. Format of Income Statement (2 marks)
3. Revenue (Sales – Returns inwards) (130 000 – 4 000) (1) 126 000 (1)
4. Cost of sales:
5. Opening Inventory 15 000
6. Purchases (60 000 – 2 000) (1) 58 000 (1)
7. Carriage inwards 5 000 (1)
8. Cost of goods available for sale 78 000
9. Less Closing Inventory (18 000) (1)
10. Cost of sales (1) (60 000) (1)
11. Gross Profit (1) 66 000 (1)
12. Less Expenses:
13. Carriage outwards 3 000 (1)
14. Rent 6 000 (1)
15. Wages and salaries 12 000 (1)
16. Office expenses 2 000 (1)
17. Discount allowed 500 (1)
18. Insurance 1 000 (1)
19. Total expenses (1) (24 500) (1)
20. Add Other income:
21. Discount received 200 (1)
22. Net Profit (1) 41 700 (1)
23. 21(b) Statement of Financial Position at 31 December 2022
24. Format of Statement of Financial Position (2 marks)
25. Non-current assets:
26. Equipment at cost 50 000 (1)
27. Less Accumulated depreciation (10 000) (1)
28. Net book value 40 000 (1)
29. Current assets:
30. Inventory 18 000 (1)
31. Trade receivables 10 000 (1)
32. Cash in hand 1 000 (1)
33. Bank 12 000 (1)
34. Total current assets 41 000
35. Total assets 81 000
36. Capital and Liabilities:
37. Capital at 1 January 2022 60 000 (1)
38. Add Net profit 41 700 (OF) (1)
39. Less Drawings (8 000) (1)
40. Capital at 31 December 2022 93 700 (1)
41. Non-current liabilities:
42. Bank loan 20 000 (1)
43. Current liabilities:
44. Trade payables 8 000 (1)
45. Total capital and liabilities 121 700 (OF)