EL Question 3Basil BrushBasil Brush is a sole proprietor who keeps a simple set of double entry accounting records. Duringthe year ended 31st March 2016, the accounts are recorded correctly and a trial balance from theledger balances off. Basil Brush has attempted to prepare a Statement of Comprehensive Income anda Statement of Financial Position from his ledger and they are shown below. Clearly the financialstatements are not presented correctly!Statement of Comprehensive Income for the year to 31 March 2016€Inventory, 31 March 2015PurchasesRent paidNew motor vans, purchased1 January 2016 fully paid at costWagesGeneral expensesBad debts written offProvision for doubtful debts,31 March 2015CapitalRetained earnings as at31 March 2015Trade payablesBank overdraftAccumulated depreciation as at31 March 2015:1,50030,000360Furniture & fittingsMotor vans1,2002,240320420100€36,140Statement of Financial Position as at 31 March 2016€3,0003,7783,0801,870Sales revenueDiscounts allowed102120€11,950730Less Discounts received 450Loan from A. FoxNet loss for the yearFreehold propertyFurniture and fittingscost as at 31 March 2015Motor vans, cost as at31 March 2015DrawingsTrade receivables(net of bad debts)The following additional information is available:(i) Depreciation expenses for the year should be calculated as follows:€35,150280490220€36,140€5,0001,0206001,4003,350€11,370Furniture and fittings at 10% annual rate of depreciation (straight line method)Motor vans at 20% annual rate of depreciation (straight line method)(ii)It is discovered that a credit sale for €300 made in February 2016 has not been recorded in BasilBrush's books.(iii)(iv)(v)(vi)The doubtful debts provision at the end of the year to 31st March 2016 should represent 10% ofthe Trade Receivables figure.Interest on the loan from A. Fox should be charged at a rate of 10% per annum. No interest waspaid in the period under review.The closing inventory as at 31st March 2016 has been valued at €2,000.Rent paid, as recorded in the ledger, relates to only 9-month period. One quarter of rentpayment remains owed as at 31st March 2016.Requireda) Prepare a corrected Statement of Comprehensive Income for Basil Brush's business for the yearended 31st March 2016 using the Common European Formatb) Prepare a corrected Statement of Financial Position for Basil Brush's business as at 31st March2016 using the Common European Format

Statement of Comprehensive Income The term "statement of comprehensive income" pertains to the…

Answered: (vi) Rent paid, as recorded in the…

Accounting (Text Only)

26th Edition

ISBN:9781285743615

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter6: Accounting For Merchandising Businesses

Section: Chapter Questions

Problem 6.6BPR

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