Question 1

Yugi Moto is a new business that started trading on 1st January 2017. The following is a summary of transactions that occurred during the first year of trading (2017): 

1. The owners introduced £50,000 of equity, which was paid into a bank account opened in the name of the business.

2. Premises were rented from 1st January 2017 at an annual rental of £20,000. During the year, rent of £25,000 was paid to the owner of the premises.

3. Rates (a tax on business premises) were paid during the premises as follows:

• For the period 1st January 2017 to 31st March 2017             £500

• For the period 1st April 2017 to 31st March 2018                 £1,200

4. A delivery van was bought on 1st January 2017 for £12,000. This is expected to be used in the business for four years and then to be sold for £2,000.

5. Wages totalling £33,500 were paid during the year. At the end of 2017, the business owed £630 of wages for the last week of the year.

6. Electricity bills for the first three quarters of the year were paid totalling £1,650. After 31 December 2017, but before the financial statement have been finalised for the year, the bill for the last quarter arrived showing a charge of £620.

7. Inventories totalling £143,000 were bought on credit during 2017.

8. Inventories totalling £12,000 were bought for cash during 2017.

9. Sales revenue on credit totalled £152,000 (cost of sales £74,000) during 2017.

10. Cash sales revenue totalled £35,000 (cost of sales £16,000) during 2017.

11. Receipts from trade receivables totalled £132,000 during 2017.

12. Payments to trade payables totalled £121,000 during 2017.

13. Van running expenses paid totalled £9,400 during 2017.

Required:

Prepare:

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

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