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SWAC Ltd has an accounting year end of 31 October. The accountant is preparing the financial statements as at 31 October 2013 and requires your assistance. The following trial balance has been extracted from the general ledger
Account Dr Cr
$000 $000
Buildings at cost 740
Buildings accumulated depreciation, 1 November 2012 60
Plant at cost 220
Plant accumulated depreciation, 1 November 2012 110
Bank balance 70
Revenue 1,800
Net purchases 1,140
Inventory at 1 November 2012 160
Cash 20
Trade payables 250
Trade receivables 320
Administrative expenses 325
Allowance for receivables at 1 November 2012 10
Retained earnings at 1 November 2012 130
Equity shares, $1 415
Share premium account 80
–––––– ––––––
2,925 2,925
–––––– ––––––
The following additional information is also available:
– The allowance for receivables is to be increased to 5% of trade receivables. The allowance for receivables is treated as an administrative expense.
– Plant is depreciated at 20% per annum using the reducing balance method and buildings are depreciated at 5% per annum on their original cost. Depreciation is treated as a cost of sales expense.
– Closing inventory has been counted and is valued at $75,000.
– An invoice of $15,000 for energy costs relating to the quarter ended 30 November 2013 was received on 2 December 2013 Energy costs are included in administrative expenses.
Required:
Prepare the statement of profit or loss and the statement of financial position of SWAC Ltd as at 31 October 2013.I am sorry but this forum is not to expect full answers to full questions like this!!
You must have an answer in the same book in which you found the question (unless it is homework that you have been given), and you should ask about whatever in the answer you do not understand.
If it is a homework question, then we do not do homework for you – if you watch my free lectures then you will find everything you need to be able to answer this question.
If you found this question in a book but the book does not have an answer, then you are wasting your time with it. You must buy a Revision Kit from one of the ACCA approved publishers – they contain lots of exam standard questions together with answers and workings.
I assume that you are watching my free lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Hi John,
my apologies, enter bottom was pressed without notice and forgot to ask the question.
so, my question is about the following:
can you explain furthermore about this statement( The allowance for receivables is to be increased to 5% of trade receivables. The allowance for receivables is treated as an administrative expense.).
appreciate your help.
my apologies again, thanks,
Mohammed
You know what the receivables are at the end of the year, and so you can calculate the allowance required (5% of receivables).
Since there is already a balance on the allowance account, then expense is the cost of increasing it to the balance required.
I do suggest that you watch my free lectures on irrecoverable and doubtful debts.
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