Question 1:
On 1 January 2012, Rose Tremayne opens a bank account in the name of her new trading business, Rose Tremayne Trading (RTT). She puts £112,000 of her own money into the business bank account. The following is a summary of transactions during 2012:
(1) RTT takes out a short-term bank loan of £45,000 cash.
(2) RTT buys non-current assets at the start of January at a cost of £72,000 paying cash.
(3) Buys inventory of £60,000, paying cash.
(4) Inventory costing £48,000 is sold on credit for £72,000.
(5) Purchases inventory on credit for £84,000.
(6) Inventory costing £6,000 is sold for £9,000 cash.
(7) RTT purchases a 12 month insurance policy on April 1 for £4,000 providing cover until March 31 2013.
(8) RTT purchases two lots of land for £60,000 (ie £30,000 per lot). The purchase price of £60,000 is paid after RTT takes out a ten year loan of £34,000.
(9) Sells one of the lots of land for £33,000 cash.
(10) RTT pays rent of £15,000 for the first nine months of 2012 but owes rent of £5,000 on 31 December 2012.
(11) Inventory costing £69 000 is sold for £103,000 cash.
(12) Wages for the period amounting to £30,000 are paid in full.
(13) RTT pays off £15,000 of its short term bank loan.
(14) RTT pays total interest of £4,000 for the long-term bank loan for 2012.
(15) Customers pay £30,000 of cash owing.
(16) RTT pays its trade creditors £48,000.
(17) The equipment purchased for £72,000 at the start of January has an expected useful life of four years and an expected scrap value of zero. Assume straight-line depreciation is to be charged on these assets.
Instructions:
(a) Prepare a balance sheet for RTT as at 31st December 2012.
(b) Prepare an income statement for RTT for 2012 and briefly comment on RTT’s performance during 2012.
(c) Prepare a cash flow statement for RTT for 2012.
