Suria is in business as a sole trader. The following balances were extracted from her books on 31 March 2016. Revenue $ 287000 Purchases 143800 Returns inwards 3150 Inventory at 1 April 2015 15340 Capital 70000 Drawings 28000 Leasehold premises at cost (25 year lease) 100000 Computers at cost 44000 Office furniture at cost 15500 Provisions for depreciation: Leasehold premises 7000 Computers 16600 Office furniture 12000 Wages and salaries 26500 Computer maintenance 12200 Commission receivable 4900 Rent and rates 10000 Provision for doubtful debts 910 6% Bank loan (repayable 30 June 2016) 40000 Bank interest paid 1500 Heat and light 7300 Advertising 12600 General expenses 8700 Cash and bank 520 Debit Trade payables 18600 Trade receivables 27900 Additional information at 31 March 2016 1 Inventory was valued at $17990. 2 Commission receivable of $1400 was outstanding. 3 Advertising included a payment of $5700 for a series of advertisements being published in the six months ending 31 July 2016. 4 General expenses accrued were $2400. 5 A computer costing $8000 had been recorded in the computer maintenance account. 6 Depreciation is to be charged on all non-current assets owned at the end of the year as follows: (i) an appropriate amount on the leasehold premises (ii) computers at the rate of 25% per annum using the diminishing (reducing) balance method (iii) office furniture at the rate of 10% per annum using the straight-line method. 7 Trade receivables of $1900 are irrecoverable. The provision for doubtful debts is to be maintained at 4%.

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

1. [24] (a) Suria Income Statement for the year ended 31 March 2016: Revenue 287000; Less Sales returns (3150); Net Revenue $283850 (1); Less Cost of Sales: Inventory 1 April 2015 $15340 (1); Purchases $143800 (1); Cost of goods available for sale $159140; Less Inventory 31 March 2016 (17990) (1); Cost of sales (141150) (1); Gross profit 142700 (1)of; Plus other receivables: Commission receivable (4900 + $1400) $6300 (1); Total $149000; Less expenses: Wages and salaries $26500 (1); Computer expenses ($12200 (1) - $8000 (1)) $4200 (2); Rent and rates $10000 (1); Bank loan interest ($1500 (1) + ($40000 x 6% x 3/12) $900 (1)) $2400 (2); Heat and light 7300 (1); Advertising (12600 (1) - ($5700 x 3/6) $3800 (1)) 8800 (2); General expenses (8700 + $2400) $11100 (1); Depreciation: Leasehold premises ($100000 / 25 years) $4000 (1); Computers (($44000 + $8000 - $16600) * 25%) $8850 (2); Office furniture ($15500 x 10%) $1550 (1); Bad debts 1900 (1); Increase in PDD (1040 (new PDD) - $910 (old PDD)) $130 (2); Total expenses ($86730); Profit for the year $62270
2. [16] (b) Suria Statement of Financial Position at 31 March 2016: Non-current assets: Cost $ | Aggregate depreciation $ | Book value $; Leasehold premises $100000 | $11000 ($7000 + $4000) | $89000 (1of); Computers $52000 ($44000 + $8000) | $25450 ($16600 + $8850) | $26550 (1of); Office furniture $15500 | $13550 ($12000 + $1550) | $1950 (1of); Total N.C.A $167500 | $50000 | $117500 (1of); Current assets: Inventory $17990 (1); Trade receivables ($27900 (1) - $1900 (1)) 26000; Less Provision for doubtful debts (1040) 24960 (3); Other receivables (1400 (1) + ($5700 x 3/6) $3800 (1)) $5200 (2); Cash and bank $520 (1); Total Current Assets $48670; Total Assets $166170; Financed by: Capital $70000; Profit for the year $62270; Subtotal 132270; Less Drawings (28000) (1); Capital at end $104270; Current liabilities: Trade payables $18600 (1); 6% Bank loan 40000 (1); Other payables (2400 (1) + ($40000 x 6% x 3/12) $900 (1of)) $3300 (2); Total Current Liabilities $61900; Total Capital and Liabilities $166170