Dr Bad Debt Expense a/c

Cr Debtors a/c

With $250 to write of the bad debt.

Dr Profit & Loss a/c

Cr Provision for bad debt a/c

With $100 to increase the provision for bad debt from $300 to $400.

Dr Bank a/c

Cr Debtors a/c

With $200 to record the cheque payment of $200.

Below is the updated debtor’s account for Alvin Preston based on the details of notes one (1) and three (3).

Please note students were not required to prepare this account for the May 2008 examination. The updated account has been presented to illustrate how the notes affected the debtors’ balance.

30% ($12,500 - $7,500) = $1,500 per annum.

The depreciation expense for the year ended 31st December 2007 that would appear in the Profit and Loss Account is $1,500 and the accumulated depreciation figure for the Balance Sheet would be ($7,500 + $1,500) = $9,000.

Cost of production per unit = __Total cost of production __= __553,350__ = $13.83/unit

Number of units produced 40,000

Number of units produced 40,000

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Calculation of interest on capital:

- Benji = $160,000 x 10% = $16,000.
- Nicka = $140,000 x 10% = $14,000

Calculation of interest on drawings:

- Benji = $6,000 x 5% = $300
- Nicka = $4,300 x 5% = $215

Calculation of share of profit using ratio of 3:2:

Remaining profits = (56,200 + 300 + 215) – (16,000 +14,000 + 5,000) = $21,715

- Benji = $21,715 x 3/5 = $13,029
- Nicka = $21,715 x 2/5 = $8,686

Return on investment = ___

Capital Employed (160,000 + 140,000)

The formula to compute gross profit margin is;

Sales

The gross profit margin for the year ended 31st December 2017 was 24%. This means that for every $1 of sales revenue earned the business had $0.24 to help cover the expenses for that period. This is a 4% increase when compared to the gross profit margin of 2016 and thus a strength, or a positive thing for the business.

The formula to compute operating expenses/sales revenue is;

Sales Revenue

The operating expenses/sales revenue for the year ended 31st December 2017 was 11%. This means that for every $1 of sales revenue earned the business paid $0.11 towards expenses for that period. This is a 2% increase opposed to the $0.09 they paid in 2016. This may be perceived as a negative thing as it means that the expenses of the business increased during 2017. Please note however, that there may be a number of reasons for this such as increased sales resulting in increased expenses, and therefore may not necessarily be a sign of weakness.

Sabrina Weeks can review the expenses incurred by her business during 2017 to determine if she can cut back on any expenses. If she can do this it would allow her to retain more profits, thus improving business performance in this aspect.

Inventory turnover =

Average inventory

Inventory turnover =

Average inventory

2

1.

Cheque will equal $7,500 less a 5% discount.

The discount equals 5% x $7500 = $375.

Therefore the cheque total equals = $7,500 - $375 = $7,125.

Invoice total on the 13th March sent to Layby Stores equals $2,250 less 20% trade discount.

The discount equals 20% x $2,250 = $450.

Therefore the invoice total equals = $1,800.

19th March 2018 the total of the credit note sent to Layby Stores equals $200 less 20% trade discount.

The discount equals 20% x $200 = $40.

Therefore the credit note total equals $200 - $40 = $160.

This means that the total on Layby Store’s account on the 30th March 2018 = $1800 - $160 = $1640.

Layby Stores was given a cash discount of $150 therefore the cheque received from Layby will equal

$1640 - $150 = $1,490.

The balance of the bank account at the 31st March 2018 is credit of $1,035. This means that Sanjeev's bank account is in overdraft. He owes the bank $1,035 as at the 31st March 2018.

5th March 2018 the total of the invoice received from DD Ltd:Invoice will equal $7,500 less a 25% discount.

The discount equals 25% x $7500 = $1,875.

Therefore the invoice total equals = $7,500 - $1,875 = $5,625.

14th March 2018 the total of the credit note received from DD Ltd equals $800 less 25% trade discount The discount equals 20% x $800 = $200.

Therefore the credit note total equals = $800 - $200 = $600.

This means that the total owed to DD Ltd 31st March 2018 = $5,625 - $600 = $5,025.

Revenue expenditure – The payment of rent expenses

Capital expenditure – The purchase of the packaging machine.

- Loans to members
- Equipment

- The unpaid telephone bill.
- Mortgage interest outstanding.
- Interest income received in advance.

Mark’s gross pay = 27 hours x $30 = $810.

John’s gross pay = 40 hours x $30 = $1,200

= 6 hours x 1.5($30) = $270

Total gross pay for John = $1,200 + $270 = $1,470.

Statutory deductions are mandated by law therefore an employer is obligated to deduct it from an employee’s salary. Voluntary deductions on the other hand are not mandated by law and is usually based on the request or approval of an employee.