Leaving Cert Accounting Service Firms: Service Firm

The following were

Question

Service Firm

The following were included in the assets and liabilities of M. Noctor, a doctor, on 01/01/2017:

Surgery €160,000, equipment €90,000, stock of medical supplies €8,000, 7% investments €70,000, creditors for medical supplies €10,400, furniture €30,000, amount owing from medical card scheme €9,500, capital and reserves €284,700, insurance prepaid €700.

The following is a receipts and payments account for the year ended 31/12/2017:

Receipts and Payments account for the year ended 31/12/2017:

Receipts                           €         Payments                           €
Balance at bank 01/01/2017  4,000    Purchase of medical supplies      20,600
Sale of equipment (cost €12,000) 6,000    Cleaning expenses                     3,200
Medical card scheme               72,000    Sponsorship of prize at local GAA club  2,000
Receipts from private patients     40,750    Drawings                              37,000
Investment income                  4,900    Light and heat                          3,000
Balance at bank 31/12/2017     3,000    Telephone                              8,450
Total                                   126,250         Total                                 126,250

The following information and instructions are to be taken into account:

(i)  Stock of medical supplies at 31/12/2017 was €8,300.

(ii) The figure for cash drawings includes €1,600 for 2 weeks wages paid to a locum doctor and you are required to provide for a further 4 weeks' wages due.

(iii) The figure for bank does not take into account bank charges of €120 and a dishonoured cheque €150 received from a private patient and lodged in December.

(iv) 70% of light and heat and telephone relate to the practice and the remainder is for a private residence.

(v) Provide for depreciation as follows:

Equipment – 20% of cost
Furniture – 15% of cost
Surgery – 2% of cost

Note: Fixed assets are given at cost and depreciation on them has been accumulated for 3 years to 01/01/2017. The depreciation policy is to charge full year's depreciation in the year of acquisition and none in the year of disposal.

(vi) Fees due from medical card scheme and private patients are €9,100 and €430 respectively. Creditors for medical supplies 31/12/2017 are €5,000.

(vii) The insurance payment is for the year ended 01/05/2018.

Required:
(a)     Prepare an income and expenditure/profit and loss account for the year ended 31/12/2017.

(b)     Prepare a balance sheet as at 31/12/2017.

(c)     Dr. Noctor is considering updating the IT system and requires a loan of €150,000. Outline the factors a lender should consider before granting this loan.

Description	Cost	Depreciation	Net Book Value
Surgery	€160,000	€12,800	€147,200
Equipment	€78,000	€62,400	€15,600
Furniture	€30,000	€18,000	€12,000
Total	€268,000	€93,200	€174,800

Description	Amount
7% Investments	€70,000
Investment bonds	€30,000
Total	€100,000

Description	Amount
Stock of medical supplies	€8,300
Bank	€3,830
Medical card fees due	€9,100
Private patients fees due	€430
Investment income due	€1,400
Insurance prepaid	€200
Total Current Assets	€24,010

	Amount
Fixed Assets	€174,800
Financial Assets	€100,000
Current Assets	€24,010
Total Assets	€298,810

Description	Amount
Creditors (medical supplies)	€5,000
Locum wages due	€4,800
Total Liabilities	€9,800

Service Firm The following were included in the assets and liabilities of M - Leaving Cert Accounting - Question 4 - 2018

Worked Solution & Example Answer:Service Firm The following were included in the assets and liabilities of M - Leaving Cert Accounting - Question 4 - 2018

Prepare an income and expenditure/profit and loss account for the year ended 31/12/2017

Income and Expenditure Account for M. Noctor for the year ended 31/12/2017

Income

Expenditure

Net Profit

Prepare a balance sheet as at 31/12/2017

Balance Sheet of M. Noctor as at 31/12/2017

Fixed Assets

Financial Assets

Current Assets

Total Net Assets

Liabilities

Equity

Outline the factors a lender should consider before granting a loan of €150,000

Factors to Consider Before Granting a Loan of €150,000

Join the Leaving Cert students using SimpleStudy...

Description	Amount
Capital	€284,700
Net Profit	€52
Less Drawings	€38,835
Total Equity	€245,917