Ethan is a dog biscuit wholesaler. He sells goods to Eli, a pet shop owner, for £5000. Eli discovers that exactly half of the consignment is mouldy, and returns the substandard biscuits to Ethan.

Two of the following statements about Ethan’s and Eli’s accounting are true:

1. Ethan’s sales returns are increased by £2500
2. Eli’s sales returns are increased by £2500
3. Ethan’s purchases returns are increased by £2500
4. Eli’s purchases returns are increased by £2500

Which of the statements are true?

Elmira sells goods on credit, requiring payment within 30 days. Because she, typically, does not receive payment for between 45 and 60 days from most of her customers, she decides to offer a discount of 0.3% for early payment. One of her customers, Ellington Clipboard Limited, takes advantage of the discount and sends a cheque for £5982 to settle an invoice of £6000 sent by Elmira.

How is the discount dealt with in Elmira’s income statement?

Evangeline is a wholesaler of exclusive babies’ clothing, some of which is imported from the USA. In her trading year ending 31 December 20X7, Evangeline’s revenue is £305 210.
Other relevant figures:
£
Sales returns 1 450
Purchases 181 033
Import duties on purchases 5 633
Opening inventory at 1 January 20X7 16 460
Closing inventory at 31 December 20X7 16 921

Which of the following is correct? Evangeline’s gross profit for the year ending 31 December 20X7 is:

In the income statement, discounts received are:

Etta’s records include the following totals for her accounting year ending 31 August 20X6:
£
Expenses 96 777
Opening inventory at 1 September 20X5 47 270
Purchase returns 944
Sales returns 1 227
Discounts received 126
Revenue 527 487
Purchases 376 213
Closing inventory at 31 August 20X6 45 211

Which of the following is correct? Etta’s net profit for the year ending 31 August 20X6 is:

Frazer prepares accounts to 30 November each year. In the year to 30 November 20X4 he has received and paid the following bills for electricity:


Date received..........Date paid................Period covered.............Amount
10 January 20X4.....25 January 20X4.....1.10.X3 – 31.12.X3........£679
6 April 20X4.............30 April 20X4..........1.1.X4 – 31.3.X4............£721
14 July 20X4...........1 August 20X4.........1.4.X4 – 30.6.X4............£510
10 October 20X4.....18 October 20X4......1.7.X4 – 30.9.X4 ...........£529

Frazer estimates that the charges for electricity for the period 1.10.X4 to 30.11.X4 will be about £400.

What figure for electricity expense should be included in Frazer’s accounts to 30 November 20X4? (to the nearest £).

Floyd pays business insurance annually in advance on 1 March. His payments for 20X1 and 20X2 are as follows:
20X1 £9 468
20X2 £9 612
What amount for business insurance will appear in his income statement for the year ending 31 October 20X2?

Giulia deals in fashion goods. At 31 December 20X5 her end of year inventory totals £18 270, valued at cost. Included in this amount is inventory at a cost price of £4 750. Guilia estimates that its net realisable value, however, is only £680.

Giulia’s opening inventory at 1 January 20X5 is £16 777. Revenue for the year is £193 939 and purchases are £141 338. Purchases returns are £1385.

Which of the following is correct? Applying the rules of inventory valuation, Giulia’s gross profit for the year is:

Hari’s business supplies goods on credit to many hundreds of customers. Experience has shown that, on average, 1% of Hari’s trade receivables will not be settled. Therefore, Hari makes a general allowance in each year’s accounts of 1% of his year end trade receivables.
Trade receivables at Hari’s 31 December year ends were:
20X7 £309 700
20X8 £316 100

Assuming that there are no other transactions relating to Hari’s bad and doubtful receivables in 20X8, what is the doubtful receivable expense in Hari’s income statement for the year ending 31 December 20X8?

Igor’s wholesale camera business supplies goods on credit.

Inventory: the total value of his inventory at cost at his year end of 31 August 20X9 is £27 880. £3900 of this figure relates to cameras which have now been superseded by new models. Igor thinks that he will probably be able to sell these for no more than £2000.
Trade receivables: Igor’s trade receivables at 31 August 20X9 total £35 570. A customer, Direct Camera Supplies Limited, has just gone into liquidation owing Igor £950. The amount due will almost certainly not be paid, and Igor decides to write it off. All other trade receivables are likely to be settled.

Prepayments: Igor pays his insurance on 1 January annually. The insurance charge for the 4 months to 31 December 20X8 was £462. On 1 January 20X9 Igor pays the insurance bill for 20X9 which amounts to £1476. There are no other prepayments.

Cash: Igor’s cash at bank on 31 August 20X9 is £5928.

There are no other current assets.

Which of the following is correct? Igor’s current assets total at 31 August 20X9 is: