Viraj is a retailer. He purchases on credit and sells for cash. He also lets part of the shop to another business for $172 per month.
Viraj’s trial balance on 31 January 2025 was as follows:
Viraj
Trial balance at 31 January 2025
Debit / Credit
Revenue (Credit) $89600
Rental income (Credit) $2580
Sales returns (Debit) $2195
Inventory at 1 February 2024 $4500
Purchases $53700
Rent and insurance $8760
General expenses $2945
Wages $7350
Stationery and advertising $710
Bank charges $143
Fixtures and fittings at cost $12500
Provision for depreciation of fixtures and fittings (Credit) $3750
Trade payables (Credit) $3125
Bank overdraft (Credit) $1260
Capital (Credit) $7793
Drawings $15305
Totals $108108
Further information
1 Inventory at 31 January 2025 was valued at $5900.
2 Depreciation on fixtures and fittings is to be charged at 15% per annum using the straight-line method.
3 Rental income included the amount due for the period from 1 February 2025 to 30 April 2025.
4 At 31 January 2025, Viraj owed $282 for wages and $55 for advertising.
5 Once the trial balance had been prepared, Viraj received a bank statement showing that bank charges of $13 had been paid in January 2025.
(a)[9]
Prepare the income statement for Viraj for the year ending 31 January 2025.
(b)[4]
Prepare the current liabilities section of Viraj’s statement of financial position as at 31 January 2025.
(c)[2]
State the accounting principle that Viraj has used when he did not show a figure in his statement of financial position for (i) his inventory of price labels (ii) his skills as a salesman.
(d)[5]
Advise Viraj whether or not he should refurbish the shop. Support your answer by giving two advantages and two disadvantages of Viraj refurbishing the shop.
Worked solution & mark scheme
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