CHAPTER 3 Business structures 1193.28 LO11
Produce the shareholders’ equity section of the balance sheet for Geelong Davis Ltd, a public
company. Use the following information: share capital (100 000 $2 ordinary shares and 40 000
$3 preference shares, all fully paid up); profit for this period $64 000 and retained earnings from
last year $84 000; dividends paid during year $28 800.3.29 LO4,11
John and Marylynne agree to form a partnership on 16 September 2017 to supply first-aid kits to
motor vehicle dealers. They agree on the following market values given to them by an independent
valuer:- John’s contribution
- Cash $10 000
- Inventory $18 000
- Accounts receivable $7500 (less allowance for doubtful debts $1250)
- Computer table $1200
- Marylynne’s contribution
- Cash $20 000
- Inventory $2000
- Accrued expenses $800
a. Prepare the initial balance sheet for John and Marylynne as at 16 September 2017.
b. What would happen to the balance sheet if, over the following four weeks, John and Marylynne
made a cash profit of $14 000. (Note: Assume all other figures remain constant and John and
Marylynne agree to split any profit or loss 50/50.)
3.30 LO2, 11
Presented below are financial statement items for Vegas City (a sole trader) for the period ended
30 September 2017. Determine which items should appear in the statement of profit or loss and
which items should appear in the balance sheet.
a. Cash $ 99 000
b. Accounts receivable 11 000
c. Service revenue 26 400
d. Advertising expense 8 800
e. Accounts payable 6 600
f. Expenses owing 3 960
g. Rent expense 2 420
h. Internet expense 660
i. Petrol expense 6 160
j. Insurance expense 880
k. Equipment 132 0003.31 LO2, 11
Using the information shown in exercise 3.30, produce a statement of profit or loss for the period
ended 30 September 2017.
3.32 LO2, 6
Refer to the JB Hi-Fi Ltd statement of profit or loss in figure 3.2 to answer the following
questions.
a. What is the major difference between the format of this statement and that of a sole trader?
b. What do you think is the purpose of the ‘Notes’ column?
c. What do you think is the purpose of providing the different profit figures (i.e. gross profit, profit
before tax; profit for the year)?
d. The statement of profit or loss and balance sheets are consolidated statements for JB Hi-Fi Ltd.
What do you think is meant by the term ‘consolidated’?