Rexford operates as a trader, and every sale and purchase is made on credit. He does not keep a complete set of accounting records, but he has supplied the following details.
Assets and liabilities as at 1 January 2024:
Fixtures and fittings (cost) $28 000
Accumulated depreciation on fixtures and fittings $22 400
Inventory $6000
Trade receivables $21 750
Insurance prepaid $300
Cash at bank $3425
Trade payables $5680
Bank payments made during the year to 31 December 2024:
Trade payables (after deducting cash discount of $380) $68 100
Rent and insurance $10 120
General expenses $4730
Wages $6400
Drawings $12 200
Additional information:
1 The only money received during the year to 31 December 2024 was $103 200 from trade receivables.
2 Rexford applies a mark-up of 50%.
3 Depreciation is charged at 20% using the straight-line method.
4 Inventory at 31 December 2024 was valued at $400 more than inventory at 1 January 2024.
5 The amount owed to trade payables at 31 December 2024 was 25% more than the amount owed at 1 January 2024.
(a)[4]
Prepare Rexford’s purchases ledger control account for the year ending 31 December 2024. Balance the account and carry the balance forward to 1 January 2025.
(b)[8]
Prepare Rexford’s income statement for the year ending 31 December 2024.
(c)[3]
Calculate Rexford’s trade receivables as at 31 December 2024.
(d)[5]
Advise Rexford whether he should employ a bookkeeper or not. Support your answer by giving two points in favour of and two points against employing a part-time bookkeeper.
Worked solution & mark scheme
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