Shiv trades as a trader. His financial year finishes on 31 August. He does not keep a complete set of accounting records, but he was able to supply the following details for the year ended 31 August 2021.
Total revenue $320000
Mark-up 25%
Summary of the bank account for the year ended 31 August 2021
Opening balance $49000
Cash sales $3700
Money received from trade receivables $312400
Expenses $34000
Drawings $4200
Payments to trade payables $257700
Equipment $16000
Closing balance $53200
Assets and liabilities at the start and end
1 September 2020 / 31 August 2021
Inventory at cost $23500 / ?
Trade receivables $22000 / $25900
Expenses owing $- / $400
Trade payables $32600 / $29600
Equipment at net book value $- / $12800
Premises at cost $90000 / $90000
During the year Shiv took $900 out for a family holiday, but he had recorded this within expenses.
On 31 August 2021 Shiv chose to set up a provision for doubtful debts of 3% of trade receivables.
(a)[3]
Calculate the purchases made during the year ended 31 August 2021.
(b)[11]
Prepare the income statement for the year ended 31 August 2021. The inventory on 31 August 2021 must be shown clearly within the statement.
(c)[1]
State the accounting principle Shiv should use when recording the $900 he used for a family holiday.
(d)[5]
Discuss the effects of Shiv valuing the inventory on 31 August 2021 at selling price.
Worked solution & mark scheme
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