Question 7 After the first year of trading, Mr. Wong provided you the following list of le

Question 7

After the first year of trading, Mr. Wong provided you the following list of ledger balances as at 31 December 2003:

＄

Stock, 1 January 2003 3,300

Stock, 31 December 2003 25,200

Sales 160,000

Purchases 100,000

Premises 142,600

Fixtures & Fittings 45,200

Motor Vehicles 42,500

Returns Inwards 1,500

Returns Outwards 2,600

Carriage Inwards 1,000

Carriage Outwards 250

Debtors 30,500

Creditors 41,500

Wages 17,495

Rent and Rates 3,900

Lighting & Heating 18,455

Insurance 10,600

Motor Vehicle Expenses 2,400

Cash at Bank 4,700

Bank Loan 29,000

Loan Interest 2,300

Drawing 6,400

You are further given the following information:

1.Wages owing are ＄550.

2.Prepaid rent is ＄600.

3.Depreciation of Fixtures & Fittings is 10% per annum on cost.

4.Depreciation of Premises is based on a 10-year lease.

5.Depreciation of Motor Vehicles is 50% life using the reducing balance method.

6.Stock taken for Mr. Wong's own use is ＄1,100. Such a transaction has not yet been recorded.

7.It is estimated that one-third of the driving time is for private purposes.

8.5% of the outstanding accounts at the year end is thought to be uncollectible.

9.There was no error made in the recording of business transactions for the year.

Required:

(a)Prepare a Trading and Profit and Loss Account for the year ended 31 December 2003.

(b)Prepare a Balance Sheet as at 31 December 2003.

(c)Explain the meaning and the significance of Working Capital.