(answered) David Denton set up in business as a plumber a

David Denton set up in business as a plumber a year ago, and he has asked you to act as his
accountant. His instructions to you are in the form of the following letter.Dear HenryI was
pleased when you agreed to act as my accountant and look forward to your first visit to check
my records.
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plumber-a
David Denton set up in business as a plumber a year ago, and he has asked you to act as his
accountant. His instructions to you are in the form of the following letter.Dear HenryI was
pleased when you agreed to act as my accountant and look forward to your first visit to check
my records. The proposed fee of £2,500 p.a. is acceptable. I regret that the paperwork for the
work done during the year is incomplete. I started my business on 1 January last, and put
£65,000 into a business bank account on that date. I brought my van into the firm at that time,
and reckon that it was worth £36,000 then. I think it will last another three years after the end of
the first year of my business use.I have drawn £900 per week from the business bank account
during the year. In my trade it is difficult to take a holiday, but my wife managed to get away for
a while. The travel agent's bill for £2,800 was paid out of the business account. I bought the
lease of the yard and office for £65,000. The lease has 10 years to run, and the rent is only
£3,000 a year payable in advance on the anniversary of the date of purchase, which was 1
April. I borrowed £40,000 on that day from Aunt Jane to help pay for the lease. I have agreed to
pay her 10 per cent interest per annum, but have been too busy to do anything about this yet.I
was lucky enough to meet Miss Prism shortly before I set up on my own, and she has worked
for me as an office organizer right from the start. She is paid a salary of £30,000 per annum. All
the bills for the year have been carefully preserved in a tool box, and we analyzed them last
week. The materials I have bought cost me £96,000, but I reckon there was £5,800's worth left
in the yard on 31 December. I have not paid for them all yet; I think we owed £7,140 to the
suppliers on 31 December. I was surprised to see that I had spent £48,000 on plumbing
equipment, but it should last me five years or so. Electricity bills received up to 30 September
came to £11,220; motor expenses were £9,120, and general expenses £13,490 for the year.
The insurance premium for the year to 31 March next was £8,000. All these have been paid by
cheque but Miss Prism has lost the rate demand. I expect the Local Authority will send a
reminder soon since I have not yet paid. I seem to remember that the rates came to £1,800 for
the year to 31 March next.Miss Prism sent out bills to my customers for work done, but some of
them are very slow to pay. Altogether the charges made were £298,630, but only £256,130 had
been received by 31 December. Miss Prism thinks that 10 per cent of the remaining bills are not
likely to be paid. Other customers for jobs too small to bill have paid £34,180 in cash for work
done, but I only managed to bank £26,000 of this money. I used £4,000 of the difference to pay
the family's grocery bills, and Miss Prism used the rest for general expenses, except for £1,230
which was left over in a drawer in the office on 31 December.Kind regards,Yours
sincerely,David.RequiredDraw up a statement of profit and loss for the year ended 31
December, and a statement of financial position as at that date?View Solution:
David Denton set up in business as a plumber a
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