Required:Prepare a profit or loss statement for the year ending 31 December 20X0, taking into account the following:(a) Provision is to be made for depreciation of motor vehicles for the year at the rate of 20 per cent per annum on the cost of the vehicles.(b) The doubtful debts provision is to be adjusted to an amount equal to 5 per cent of the outstanding debtors.(c) The rates are £4,000 per annum and have been paid to 31 March 20X1 The following trial balance was drawn up from the books of A Merchant at 31 December 20X0££Capital account: A MerchantCapital account at 1 January 20X0:Introduced by A Merchant during the yearDrawings during the yearGross profit for the yearStock, 31 December 20X0Selling and distribution expensesMotor vehicles at costFreehold premises at costProvision for depreciation of motor900001,5008,00027.000123,6004,50020.00030,000vehicles at 1 January 20X0Debtors and creditorsBank balanceRates and insurancesOffice salariesOffice expensesDoubtful debts provisionBad debts written offDiscounts4,00031,10052,0008,7506,0003,0001,2502,5005001,5003,900159,110159,100

Profit & Loss statement of the business shows all income and expenses of the business and at the…

Answered: Required: Prepare a profit or loss…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required:
Prepare a profit or loss statement for the year ending 31 December 20X0, taking into account the
following:
(a) Provision is to be made for depreciation of motor vehicles for the year at the rate of 20 per cent
per annum on the cost of the vehicles.
(b) The doubtful debts provision is to be adjusted to an amount equal to 5 per cent of the outstanding debtors.
(c) The rates are £4,000 per annum and have been paid to 31 March 20X1

The following trial balance was drawn up from the books of A Merchant at 31 December 20X0
£
£
Capital account: A Merchant
Capital account at 1 January 20X0:
Introduced by A Merchant during the year
Drawings during the year
Gross profit for the year
Stock, 31 December 20X0
Selling and distribution expenses
Motor vehicles at cost
Freehold premises at cost
Provision for depreciation of motor
90000
1,500
8,000
27.0001
23,600
4,500
20.000
30,000
vehicles at 1 January 20X0
Debtors and creditors
Bank balance
Rates and insurances
Office salaries
Office expenses
Doubtful debts provision
Bad debts written off
Discounts
4,000
31,100
52,000
8,750
6,000
3,000
1,250
2,500
500
1,500
3,900
159,110
159,100

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