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Preparing SPL: BBP 2015 exam kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Preparing SPL: BBP 2015 exam kit

  • This topic has 2 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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    Posts
  • May 11, 2017 at 8:28 pm #385889
    janelou
    Member
    • Topics: 15
    • Replies: 10
    • ☆

    I am having the most difficult time with this question! Would be great if I can get some guidance! Question is from the BBP 2015 exam kit, question 14.1

    It gives a list of items from a trial balance and asks to prepare a SPL. I have absolutely no idea how they arrived at the figure 84,561 for purchases?

    Trial balance as at 31 May 2016:
    Sales CR 138,078
    Purchases DB 82,350
    Carriage DB 5,144
    Drawings DB 7,800
    Rent and insurance DB 6,622
    Postage and stationary DB 3,001
    Advertising DB 1,330
    Salaries and wages DB 26,420
    Irrecoverable debts DB 877
    Allowance for receivables CR 130
    Receivables DB 12,120
    Payables CR 6,471
    Cash on hand DB 177
    Cash at bank DB 1,002
    Inventory as at 1 Jun 2015 DB 11,927
    Equipment at cost DB 58,000
    Accumulated depreciation CR 19,000
    Capital CR 53,091

    The following additional information as at 31 May 20X6 is available.
    1. Rent is accrued by $210
    2. Insurance has been prepaid by $880
    3. $2,211 of carriage represents carriage inwards on purchases
    4. Equipment is to be depreciated at 15% per annum using the straight-line method
    5. The allowance for receivables is to be increased by $40
    6. Inventory at the close of business has been valued at $13,551

    Prepare a statement of profit or loss for the year ended 31 May 2016.

    I understand everything except how they arrived at purchases of 84,561 in the answers. I’ve tried various combinations of what seems to be part of purchases (on credit) but nothing is adding up.

    May 11, 2017 at 8:31 pm #385890
    janelou
    Member
    • Topics: 15
    • Replies: 10
    • ☆

    Sorry, I also have another question. Why would an increase in allowance for receivables be included as an expense, but not allowance for receivables?

    May 12, 2017 at 7:02 am #385927
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    The purchases figure is the 82,350 on the trial balance, plus the carriage inwards of 2,211. (Carriage inwards is the cost of delivery of materials into the business from the supplier, and effectively increases the cost of the goods).

    The allowance for receivables appears on the SOFP as a reduction from receivables – it is only the increase that is an expense.

    I do suggest that you watch my free lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.

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