Sole trader financial statements and year-end adjustments: Practice Questions

A sports club provided the following information regarding membership subscriptions for the year ended 31 December 2023:

Subscriptions received in advance on 1 January 2023: \(\text{£}450\)
Subscriptions in arrears on 1 January 2023: \(\text{£}600\)
Subscriptions received during 2023 (including all arrears from 2022): \(\text{£}8\,200\)
Subscriptions received in advance on 31 December 2023 for 2024: \(\text{£}350\)
Subscriptions in arrears on 31 December 2023 for 2023: \(\text{£}500\)

What is the subscription income to be credited to the Income and Expenditure Account for the year ended 31 December 2023?

A sole trader keeps incomplete records. During the year ended 31 December 2023, all sales were made at a uniform gross profit mark-up of \(25\%\) on cost. The following details are available:

Opening inventory at 1 January 2023: \(\text{£}34\,000\)
Closing inventory at 31 December 2023: \(\text{£}42\,000\)
Payments to trade payables: \(\text{£}185\,000\)
Trade payables at 1 January 2023: \(\text{£}21\,000\)
Trade payables at 31 December 2023: \(\text{£}28\,000\)

All purchases were on credit. There were no inventory losses.

What was the total revenue for the year?

Amy and Ben are in partnership sharing profits and losses in the ratio \(3:2\). On 1 January 2024, they agree to admit Chloe into the partnership for a \(1/5\) share of future profits. The new profit-sharing ratio among Amy, Ben, and Chloe is \(2:2:1\).

Goodwill of the partnership is valued at \(\text{£}60\,000\) on 1 January 2024, but the partners decide that goodwill will not be maintained in the books of account.

Chloe introduces \(\text{£}30\,000\) cash as her capital contribution.

What is the net adjustment to Ben's capital account as a result of the goodwill adjustment?

Under the Partnership Act 1890, in the absence of any partnership agreement, which of the following rules applies?

A manufacturing business provided the following information for the year ended 30 June 2023:

Raw materials inventory at 1 July 2022: \(\text{£}18\,000\)
Raw materials inventory at 30 June 2023: \(\text{£}22\,000\)
Purchases of raw materials: \(\text{£}140\,000\)
Carriage inwards on raw materials: \(\text{£}4\,000\)
Direct factory labour: \(\text{£}85\,000\)
Direct production royalties: \(\text{£}7\,000\)
Factory overheads: \(\text{£}56\,000\)
Work-in-progress at 1 July 2022: \(\text{£}12\,000\)
Work-in-progress at 30 June 2023: \(\text{£}15\,000\)

What is the Prime Cost for the year?

Under Section 24 of the Partnership Act 1890, what is the default rate of interest per annum allowed on an advance or loan made by a partner to the partnership beyond the amount of capital agreed to be subscribed?

A partnership is formed between Arthur and Beatrice on 1 January 2023. They do not have a formal partnership agreement.

During the year ended 31 December 2023, the following information is available:
- Arthur contributed \(£40\,000\) capital and advanced a loan of \(£10\,000\) to the partnership on 1 January 2023.
- Beatrice contributed \(£20\,000\) capital and worked full-time managing the business, claiming an annual salary of \(£12\,000\).
- Profit for the year before loan interest was \(£35\,500\).

According to Section 24 of the Partnership Act 1890:
(a) State the entitlement of partners regarding interest on capital, interest on loans, and partner salaries.
(b) Calculate the final share of profit for Arthur and Beatrice for the year ended 31 December 2023.

A sole trader, Clara, keeps incomplete accounting records. On 1 January 2023 and 31 December 2023, her business balances were as follows:

- Trade receivables: \(£14\,200\) (1 Jan 2023), \(£18\,600\) (31 Dec 2023)
- Inventory: \(£8\,500\) (1 Jan 2023), \(£9\,700\) (31 Dec 2023)
- Trade payables: \(£11\,400\) (1 Jan 2023), \(£13\,100\) (31 Dec 2023)

During the year ended 31 December 2023:
- Cheques received from credit customers amounted to \(£92\,400\).
- Discounts allowed were \(£1\,800\), and an irrecoverable debt of \(£600\) was written off.
- Payments made by cheque to credit suppliers totalled \(£58\,900\).
- Discounts received amounted to \(£1\,200\).
- All purchases and sales were on credit.

(a) Prepare the Trade Receivables Control Account to calculate the credit sales for the year.
(b) Prepare the Trade Payables Control Account to calculate the credit purchases for the year.
(c) Calculate the Cost of Sales and the Gross Profit for the year ended 31 December 2023.