F. Harrison is in business as a trader. A trial balance taken out as at 31 January 20X3 was as follows — The following information into account

F. Harrison is in business as a trader. A trial balance taken out as at 31 January 20X3 was as follows:

The following information is to be taken into account:

1. Included in sales are goods on sale or return that cost £240 and which have been charged out with profit added at 20 per cent of sale price.

2. Outstanding amounts not entered in the books were: rent £36, sundry expenses £90.

3. Prepayments were: rates £60, insurance £10.

4. Inventories on hand on 31 January 20X3 were valued at £15,450.

5. Provision for doubtful debts is to be £340.

6. Depreciation is to be provided for as follows: fixtures and fittings 10 per cent per annum, motor vehicles 25 per cent per annum.

Required

Prepare a statement of profit and loss for the year ended 31 January 20X3, and draw up a statement of financial position as on that date.

SOLUTION

Goods on sale or return

Selling price = 100/(100-20) x £240 = £300