Question 1

The following is the statement of financial position of WW Associates as at 31 December 2016:

During 2017, the following transactions took place:

1 The owners withdrew equity in the form of cash of £23,000.

2 Premises were rented at an annual rental of £20,000. During the year, rent of £25,000 was paid to the owner of the premises.

3 Rates on the premises were paid during the year for the period 1 April 2017 to 31 March 2018 and amounted to £2,000.

4 Some machinery (a non-current asset), which was bought on 1 January 2016 for £13,000, has proved to be unsatisfactory. It was part-exchanged for some new machinery on 1 January 2017 and WW Associates paid a cash amount of £6,000. The new machinery would have cost £15,000 had the business bought it without the tradein.

5 Wages totalling £23,800 were paid during the year. At the end of the year, the business owed £860 of wages.

6 Electricity bills for the four quarters of the year were paid totaling £2,700.

7 Inventories totalling £143,000 were bought on credit.

8 Inventories totalling £12,000 were bought for cash.

9 Sales revenue on credit totalled £211,000 (cost £127,000).

10 Cash sales revenue totalled £42,000 (cost £25,000).

11 Receipts from trade receivables totalled £198,000.

12 Payments to trade payables totalled £156,000.

13 Van running expenses paid totalled £17,500. 

The business uses the reducing-balance method of depreciation for non-current assets at the rate of 30% each year.

Required:

Prepare :

a) a statement of financial position as at 31 December 2017 and

 b) an income statement for the year to that date.