Reference no: EM132602362

The books of Mr T, a trader in tea showed the following balances as at 31 March 2018:

Shs.

Opening stock of tea             100,000

Purchases - Tea                   400,000

Salaries paid                         80,000

Buildings                                95,000

Cash in hand                             2,000

Cash at bank                           135,000

Rent, rates and council taxes       15,000

Insurance premium paid                3,000

Miscellaneous receipts              10,000

Sales                                     720,000

Discounts allowed                        4,750

Bad debts                                   3,250

Building repairs                             2,900

Miscellaneous expenses                 8,700

Advertisement                            20,000

Commission to sales manager          32,400

Furniture and fittings                      35,000

Air conditioners                               30,000

Sundry debtors                             100,000

Sundry creditors                              80,000

Loan on mortgage                             70,000

Interest paid on the above                    3,000

Prepaid expenses                                   4,000

Drawings                                            18,000

Bills payable (Current liability)                  30,000

Bank charges                                        2,000

Legal charges                                         6,000

Motor vehicles                                       80,000

Travelling and conveyance                     10,000

Capital                                                280,000

The following further information was obtained :

1. Closing stock was Shs.55,000.

2. Legal charges include Shs.5,000 for the cost of stamps and registration of a new building acquired during the year.

3. Purchases include 4000 kg tea valued at Shs.20,000, which was found totally spoilt. An insurance claim of Shs.15,000 has been accepted by the insurance company.

4. Travelling and conveyancing include proprietor's personal travelling for which he is charged Shs.4, 800.

5. The sales manager is entitled to commission of 7.5% of the total sales. However any bad debts incurred during the year are deductible from such commission entitlements.

6. Debtors include:

7. Shs.10, 000 due from M & C0 (Creditors include Shs.18, 000 due to the same party).

8. Shs.5, 000 due from the sale of furniture.

9. Further bad debts of Shs.2, 000

10. Provision for bad debts is to be created at 2% of net amount outstanding from trade debtors.

11. Depreciation is chargeable as follows:

Buildings???2.5%

Furniture and Fittings ?10%

Air conditioners??15%

Motor vehicles??20%

12. Miscellaneous receipts represent sales proceeds of furniture, whose written down value was Shs.12, 000.

13. Prepaid expenses include insurance premiums for the next year.

Required:

Question 1: A trading, profit and loss account for the year ended 31st March 2018.

Question 2: Balance Sheet as at that date.