Accounting Business Reporting for Decision Making

CHAPTER 3 Business structures 121

commission expense $6000; advertising $4800; rent expense $2400; rates and land tax expense

$3600; stationery expense $960; fee revenue $324 000; interest paid on loan $5040; interest earned

on term deposit $1440; mobile phone expenses $1704.

3.39 Preparing a statement of profit or loss and a balance sheet  LO1, 11

The account balances, dated 30 September 2017, of sole trader Victoria Stone (Stone Bike Hire)

are shown below. Use this information to prepare a statement of profit or loss and a balance sheet

as at this date: capital (V. Stone) $108 125; hire revenue $45 000; bike maintenance $10 000;

administrative expenses $5000; rent expense $2750; wages $10 000; interest expense $22 500;

cash at bank $3750; cash on hand $1250; office equipment $17 500; bicycles $125 000; gas and

electricity expense $3500; drawings $4375; accounts payable $8750; bank loan $43 750.

3.40 Preparing a balance sheet   LO4, 11

Brendan and Paul, owners of competing businesses, agree to form a partnership on 1 July 2017.

Their individual assets and liabilities were independently valued, and it was on this basis that the

following values were assigned to the partnership.

Brendan Paul

Cash at bank

Accounts receivable

Inventory

Equipment

Land

Building

Mortgage

80 000

—

80 000

70 000

—

—

—

40 000

40 000

20 000

40 000

40 000

70 000

60 000

Required

Prepare a balance sheet for the new partnership as at 1 July 2017.

3.41 Preparing a statement of profit or loss   LO6, 11

The directors of Kent Ltd provide you with the following financial information for the period

ended 31 December 2017: selling expenses $76 050; interest expense $29 250; legal fees $4875;

administrative expense $60 450; income tax expense $31 200; cost of sales $370 500; ordinary

share capital (20 000  shares issued) $156 000; sales revenue $604 500; other revenue $146 250;

dividends declared (for current period) $15 600; retained earnings at beginning $226 200.

Required

a. Prepare a statement of profit or loss for Kent Ltd for the period ended 31 December 2017.

b. Determine the closing balance of retained earnings at 31 December 2017.

3.42 Preparing a balance sheet and calculating profit   LO4, 11

Samuel and Vinnie decided to form a partnership on 1 January 2017. They secured the services of

a solicitor to draw up their partnership agreement as follows:

a. Samuel is to contribute the following:

• his vehicle valued at $72 000


• plant and equipment valued at $168 000


• accounts receivable totalling $28 800.
  b. Vinnie is to contribute the following:


• cash totalling $48 000


• a building valued at $336 000


• a mortgage of $192 000. This was secured over the building, and the partnership agreed to
  assume this liability.
  It was also agreed that Samuel would act as manager with an annual salary of $120 000, to be
  allocated at the end of each year. Profits or losses would be divided between Samuel and Vinnie in
  the proportion 3/5 and 2/5 respectively.
  Gross profit for the year ended 31 December 2017 was $520 000, with operating expenses of
  $240 000. Samuel withdrew $24 000 and Vinnie withdrew $32 000 during the year.