Reference no: EM133143536
Question - Below is the trial balance of Martina's Mechanical Services at 5 April 2021.
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£
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£
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Trading account:
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Sales
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1,370,000
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Opening inventory
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129,000
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Purchases
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902,000
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Carriage inwards
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1,630
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Other revenues and expenses:
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Income from repair services
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12,720
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Rent
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29,500
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Insurance
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4,320
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Advertising expense
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2,760
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Heating and lighting
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3,920
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Shop and office expenses
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28,500
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Salaries and wages
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43,652
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Discounts allowed
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2,950
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Carriage outwards
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3,174
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Balance sheet accounts:
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Fixtures and fittings at cost
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312,000
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Fixtures and fittings - accumulated depreciation at 6 April 2019
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70,000
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Motor vehicles at cost
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136,000
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Motor vehicles - accumulated depreciation at 6 April 2019
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53,200
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Receivables
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69,128
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Allowance for receivables (at 6 April 2019)
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2,950
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Bank
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18,650
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Payables
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41,328
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Loan
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40,000
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Capital
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130,046
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Drawings
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33,060
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1,720,244
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1,720,244
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The following information is relevant.
1. The closing inventory at 5 April 2021 is valued at £132,690.
2. On 5 February 2021 Martina sold a motor vehicle for £8,200. The customer was due to pay Martina's Mechanical Services on 5 April 2021 but only paid half of the amount due by cheque on this last day of the accounting year. Nothing regarding the disposal transaction, including any cash received, has been recorded in the accounts. This motor vehicle had been bought on 6 October 2018 for £15,400.
3. On 5 December 2020, Martina bought a new motor vehicle for £18,000 on purely credit terms. Martina mistakenly debited Fixtures and Fittings at cost.
4. Depreciation on motor vehicles is provided at 25% per annum using the reducing balance basis on a monthly pro-rata basis. Depreciation on fixtures, fittings and equipment is provided at 10% per annum on the straight line basis, assuming no residual value. There were no purchases or disposals of fixtures, fittings, and equipment during the year.
5. Martina estimates that £2,760 due from customers will be irrecoverable and must be written off.
6. The allowance for receivables is to be set at 3% of net receivables at 5 April 2021.
7. Rent includes a prepayment of £620.
8. The heating bill will arrive on 5 June 2021 and £390 is expected to relate to the period ended 5 April 2021.
9. An invoice for £870 for insurance needs to be recorded and accrued for the same period.
10. The long-term loan is repayable in 10 years' time. Interest payable on the loan is 8% and will be paid once per year.
Required -
a. Prepare the income statement for Martina's Mechanical Services for the period ended 5 April 2021.
b. Prepare the balance sheet for Martina's Mechanical Services as at 5 April 2021.
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