Reference no: EM133092181
Question - Razzano is the proprietor of Razzan's Motor Servicing. Razzano has begun preparing the income statement for her firm and has already estimated gross profit for the fiscal year ending 30 April 2021. The balances below have been taken from the books of account as of 30 April 2021.
MVR
Bad debts written off 456
Bank loan 25,000
Bank overdraft 3,432
Business rates 4,390
Capital 305,034
Drawings 73,930
Equipment - Cost 218,200
Equipment - Provision for depreciation at 1 May 2020 60,660
General expenses 44,310
Gross profit 367,650
Insurance 15,260
Loan interest 2,340
Property 338,220
Rent received 37,280
Servicing expenses 28,900
Trade payables 28,780
Trade receivables 26,940
Wages and salaries 65,890
Additional information
Razzan's largest credit client entered insolvency on 30 April 2021, owing MVR 11,275. This sum is to be written off.
Business rates of MVR 2,400 had been paid for the six months ending 31 August 2021.
Razzano's equipment is depreciated over a ten-year period. She predicts that when the equipment reaches the end of its economic life, it will have a residual value of MVR 16,000.
MVR 7,440 had been paid for annual property insurance on the firm for the fiscal year ending 30 June 2021.
Razzano had included personal insurance of MVR 3,234 in the business insurance account.
Razzano had incorrectly treated general expenses of MVR 5,000 as wages and salaries.
The loan interest of MVR 250 remained due but unpaid on 30 April 2021.
On 30 April 2021, Razzano transferred MVR 9,400 from her personal funds to the company bank account. This has not yet been recorded in the accounting records.
In the fiscal year ending 30 April 2022, one-quarter of the bank loan account is repayable. After that date, the remaining is required for repayment.
Closing inventories were valued at MVR 9,000 on 30 April 2021.
Required -
a) Prepare an extract from the income statement for Razzan's Motor Servicing for the year ended 30 April 2021 to show a profit for the year.
b) Prepare a Statement of Financial Position for Razzan's Motor Servicing on 30 April 2021.