Answer for No. 1 (a)

MODEL ANSWER TO QUESTION 1

(a)                                                                    Squash Club

Refreshments Trading Account for the year ended 31 May 2007

                                                                          £                 £                £

Sales                                                                                                 369,135

Less: Cost of sales

Stock at 31 May 2006                                   13,140

Add: Purchases (W1)                                     230,601       243,741

Less: Stock at 31 May 2007                                              17,415    226,326

Gross Profit                                                                                     142,809

Less: Wages (55,851 + 2,634)                                         58,485

        Depreciation on equipment (W2)                              10,881        69,366

Net profit                                                                                          73,443

Working

(1) (217,392 – 4,545) + 17,754 = 230,601

(2) (403,200 – 4,707) + 166,050 = 564,543

Depreciation = 564,543 – 531,900 = 32,643

Refreshments Trading depreciation = 32,643 = 10,881

     3

Income & Expenditure depreciation = 32,643 – 10,881 = 21,762