The following balances were extracted from the books of Patricia Chin on 31 March 2013. $ Premises 67000 Fixtures and fittings (cost) 20000 Motor vehicle (cost) 18000 Provisions for depreciation: Premises 2680 Fixtures and fittings 9600 Motor vehicle 11520 Revenue 119140 Purchases 60 200 Purchases returns 2900 Inventory at 1 April 2012 5430 Wages 20 960 General expenses 9100 Insurance 12600 Motor vehicle expenses 5670 Discount allowed 1428 Discount received 884 Trade receivables 7546 Trade payables 4920 Provision for doubtful debts 800 Bank overdraft 2330 7% Bank loan (repayable 30 June 2018) 30000 Capital 56000 Drawings 12840 Additional information 1 Inventory at 31 March 2013 was valued at $4200. 2 Insurance relates to a period of fourteen months to 31 May 2013. 3 A motor vehicle repair bill $225 was owing at 31 March 2013. 4 Bad debts of $246 are to be written off. 5 During the year Patricia took $800 from the bank for personal use. No record of this was made in the books. 6 A purchase of fixtures and fittings during the year, $2000, had been recorded in the general expenses account. 7 Premises are depreciated at 2% per annum on cost. Fixtures and fittings are depreciated at 8% per annum on cost. Motor vehicles are depreciated at 20% per annum using the diminishing (reducing) balance method. 8 The provision for doubtful debts is to be maintained at 6% of trade receivables. REQUIRED

Mark scheme

Marking points from the official mark scheme (May/June 2013). The mark or mark type is shown in brackets.

1. [1] Patricia Chin, Income Statement for the year ended 31 March 2013 (1) both
2. [1] Revenue $119140
3. [1] Inventory 1 April 2012 $5430
4. [1] Purchases $60200
5. [1] Purchases returns ($2900)
6. [1] Inventory 31 March 2013 ($4200)
7. [1] Cost of sales ($58530) (1) of
8. [1] Gross profit $60610 (1) of
9. [1] Discount received $884
10. [1] Decrease in provision for doubtful debts $362 (1)
11. [1] Wages $20960
12. [1] General expenses ($9100 – $2000) = $7100 (1)
13. [1] Insurance ($12600 – $1800) = $10800 (1)
14. [1] Motor expenses ($5670 + $225) = $5895 (1)
15. [1] Discount allowed $1428
16. [1] Loan interest $2100 (1)
17. [1] Bad debts $246 (1)
18. [2] Premises depreciation ($67000 × 2%) = $1340
19. [2] Fixtures and fittings depreciation (($20000 + $2000) × 8%) = $1760
20. [2] Motor vehicle depreciation ($18000 – $11520 × 20%) = $1296
21. [1] Total expenses ($52925) (1) of
22. [1] Profit for year $8931
23. [1] Patricia Chin, Balance Sheet (Statement of Financial Position) as at 31 March 2013 (1) both
24. [1] Premises NBV $62980
25. [1] Fixtures and fittings NBV $10640
26. [1] Motor vehicle NBV $5184
27. [1] Inventory $4200
28. [1] Trade receivables $7300
29. [1] Provision for doubtful debts ($438) (1) of
30. [1] Prepaid insurance $1800 (1)
31. [1] Total Current Assets $12862 (1) of
32. [1] Trade payables $4920
33. [1] Other payables (Motor expenses $225 (1) + Loan interest $2100 (1)) = $2325
34. [1] Bank overdraft $3130 (1)
35. [1] Total Current Liabilities ($10375) (1) of
36. [1] Net current assets $2487
37. [1] 7% bank loan ($30000) (1)
38. [1] Capital $56000
39. [1] Profit for the year $8931 (1) of
40. [1] Drawings ($12840 (1) + $800 (1)) = ($13640)
41. [1] Closing Capital $51291