Question

The following balances have been extracted from the accounting records of Tancan Ltd at 31 December...

The following balances have been extracted from the accounting records of Tancan Ltd at 31 December 2018:

€
Cash sales 1,230,000
Credit sales 2,600,000
Opening inventory 360,000
Purchases 2,124,000
Carriage inwards 119,000
Carriage outwards 227,000
Office equipment at 1 January 2018:
Cost 460,000
Accumulated depreciation 92,000
Administrative expenses 416,000

The following further information is available:

(1) Closing inventory is €450,000

(2) Some office equipment, which had cost €20,000, with accumulated depreciation at 1 January of 2018 of €14,000, was sold for €15,000 during the year.

(3) New equipment was purchased for €60,000 on 1 July 2018.

(4) The company depreciates its office equipment at 20% per year on the straight line basis, with proportionate depreciation in the year of purchase but none in the year of sale.

(5) Uncollectible debt expense is estimated to be 1% of credit sales.

(6) Accruals and prepayments on administrative expenses at 31 December 2018 are (not yet considered in the balances above):

€
Accruals 28,700
Prepayments 14,400

Required:

Complete Tancan Ltd's statement of profit or loss for the year ended 31 December 2018 by writing appropriate figures or words in the blanks (Write just the numbers, i.e. do not use brackets or a minus sign, just deduct the ones that have to be deducted in your calculations to arrive at gross profit and profit before taxation).

Statement of Profit or Loss for the year ended 31 December 2018

€
Sales revenue
Less: Cost of sales
Gross profit
Expenses:
Administrative expenses
Carriage outwards 227,000
Uncollectible debt expense
Depreciation
Profit on sale of equipment
Profit before taxation

Provide your answers within 45 minutes maximum! Thank you

Business   Accounting   
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Homework Answers

Answer #1
€
Sales revenue     3,830,000
Less: Cost of sales (360,000 + 2,124,000 + 119,000 - 450,000)     2,153,000
Gross profit     1,677,000
Expenses:
Administrative expenses (416,000 + 28,700 - 14,400)       430,300
Carriage outwards       227,000
Uncollectible debt expense (2,600,000 x 1%)         26,000
Depreciation [(460,000 - 20,000) x 20% + (60,000 x 20% x 1/2)]         94,000
Profit on sale of equipment [15,000 - (20,000 - 14,000)]         (9,000)
Profit before taxation     908,700
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