No.1. Preparing end-of-year financial statements including revising the provision for doubtful debts.

Nigel Carel Wato is the owner of Palm Beach Store. The businesss trial balance on 31 May 2014 was
as follows:

Dr ($) Cr ($)
Administration expenses 8.480
Bad debts 960
Bad debts recovered 340
Cash at Bank 1.000
Bank overdraft 8.490
Discounts 350 550
Capital 567.150
Carriage inwards 1.200
Carriage onwards 4.470
Drawings 52.390
Equipment and Furnitures
Cost 140.000
Provision for depreciation at 1 June 2013 61.250
Insurance 11.820
Inventory at 1 June 2013 34.230
Premises
Cost 500.000
Provision for depreciation at 1 June 2013 45.000
Provision for doubtful debts at 01 June 2013 930
Purchases 375.300
Rent received 14.800
Returns 450 760
Revenue 502.810
Trade payables 16.660
Trade receivables 14.400
Wages 75.380
Water charges 800
1.221.230 1.218.740
Additional Information at 31 May 2014:
Inventory was valued at $ 36.200
Prepaid expenses were: administration expenses $ 340, insurance $ 770, general expenses $ 60
Expenses due but unpaid were : wages $ 1.190, water charge $ 100.
Rent received , $ 200, is due but unpaid
The policy is to maintain the provision for doubtful debts at 5 per cent of trade reveivables at the
year end
Depreciationj was charged on non current assets as follows:
a. Premises 3 per cent per annum using the straight line method

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 b. Equipment and furmiture 25 per cent per annum using the reducing balance method
Prepare the businesss income statement for the year ended 31 may 2014 and a statement of financial
position at that date.

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No.2. Preparing end-of-year financial statements including the creation of a provision for doubtful
debts.
Nigel Carel Wato owns a retail store. His businesss financial year end is 31 December. Thefollowing
trial balance was extracted from the businesss books of account on 31 December 2014.

Dr ($) Cr ($)
Bad debts 850
Bad debts recovered 190
Capital 62.210
Cash at Bank 3.890
Discounts 290 450
Drawings 31.300
Electricity 760
Equipment
Cost 35.000
Provision for depreciation at 1 January 2014 14.000
Gross profit 151.270
Insurance 2.000
Inventory at 31 December 2014 29.480
Operating expenses 57.010
Rent 23.400
Wages and Salaries 1.800
Trade payables 11.660
Trade receivables 27.000
Vehicles
Cost 45.000
Provision for depreciation at 1 January 2014 16.200

257.780 255.980

Additional information at 31 December 2014:

Prepaid expenses were: insurance $ 255, electricity $ 190
Rent $ 1.320, was prepaid
Operating expenses, $ 2.080. were due but unpaid
Expenses due but unpaid were: wages and salalries $ 660
Nigel decided to create a provision for doubtful debts of 5 per cent of trade receivables at the year
end.
Depreciation was charged on non-current assets as follows:
a. Equipment 20 per cent per annum using the straight line method
b. Vehicles 20 per cent per annum using the reducing balance method
Prepare end-of-year financial statements.

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No.3

Calculating provisions for doubtful debts.

The owner of business decided to create a provision for doubtful debtsw. It was agreed that the
provision should be maintained at 5 per cent of trade receivables at each year end.
Trade receivables at 31 December:
Year 1 $ 36.800; Year 2 $ 39.200; Year 3 $ 35.200.
Complete the following table recording information about the businesss provision for doubtful dents.

Entry i n the provi s i on for

Amount to be entered i n the
Year Provision for doubtful
i ncome s ta tement
doubtful debts a ccount; enter
debts debi t or credi t
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