2.1 REQUIRED Show the effect of the following transactions of Havenside Stores on the Accounting equation. Use + to denote an increase, to denote a decrease and 0 to denote no change to the elements of the equation. Copy the table in your answer book and follow the example given. Assume that the bank balance is favourable at all times. The periodic inventory system is in operation. Example: Paid the electricity account by cheque, R900. No. ASSETS = EQUITY + LIABILITIES e.g. R900 R900 0 (10 marks) TRANSACTIONS 2.1.1 Purchased equipment by cheque, R5 000. 2.1.2 Bought stationery on credit, R3 000. 2.1.3 The proprietor increased her capital contribution by depositing R100 000 cash into the bank account of the business. 2.1.4 Received a cheque from a debtor who settled her account of R2 400. 2.1.5 Services rendered on credit to clients, R10 000 2.1.6 Bought petrol and oil for the delivery vehicle by cheque, R800 2.1.7 Paid the insurance premium by means of a debit order, R900. 2.1.8 The proprietor used a business cheque to pay his personal electricity account, R400 2.1.9 Received the monthly rental from the tenant, R2 500. 2.1.10 Issued a cheque to a creditor to settle an account, R17 000. @@E 2.2 REQUIRED Use the information provided below to answer the following questions: 2.2.1 Calculate the amount payable to the tax authority (e.g. SARS) by Richmond Traders for VAT for February 2020. (5 marks) 2.2.2 Calculate the selling price of a desk including VAT, if Richmond Traders purchased the desk for R300 excluding VAT (15%). The desk is priced at cost plus 40%. (3 marks) 2.2.3 Explain what you understand by the term Output tax" (Output VAT). (2 marks) INFORMATION 1. Richmond Traders is a registered VAT vendor. VAT is levied at a rate of 15%. 2. The total sales of Richmond Traders for February 2020 amounted to R158 000, including VAT. This amount included zero-rated items that were sold for R20 000. 3. The total purchases for February 2020 amounted to R105 000 excluding VAT. This amount included R5 000 paid for zero-rated items purchased. @@E QUESTION 3 (20 Marks) The information given below was extracted from the accounting records of Disney Stores. REQUIRED 3.1 Complete the Cash Receipts Journal and Cash Payments Journal of Disney Stores for May 2020. Write down the name of the contra account in the details column. Cast the Journals. (10 marks) Use the following format: Cash Receipts Journal Details Bank Total Cash Payments Journal Details Bank Total 3.2 Post to the Bank account in the General ledger of Disney Stores. Balance the account. (5 marks) 3.3 Prepare the Bank Reconciliation Statement as at 31 May 2020. (5 marks) @@E INFORMATION R After comparing the cash journals for May 2020 and the bank reconciliation statement as at 30 April 2020 of Disney Stores with their bank statement as at 31 May 2020, the following differences were noted: 1. Provisional totals of the bank columns of the cash journals on 31 May 2020: Cash Receipts Journal Cash Payments Journal 68 700 73 500 2. Debit balance of the bank account in the general ledger as at 30 April 2020 750 3. Favourable balance as per bank statement as at 31 May 2020 3 000 4. Cheque that appeared on the bank reconciliation statement as at 30 April 2020 but not on the May 2020 bank statement: Cheque no. 300 issued to MP Traders for stationery purchased 600 5. Items that appeared in the cash journals but not on the bank statement: 5.1 A deposit by Disney Stores on 31 May 2020 1 800 5.2 Cheque no. 340 6 000 6. Items that appeared on the bank statement but not in the cash journals: 6.1 Bank charges 270 6.2 Interest on overdraft 90 6.3 A debit order in respect of an insurance premium 990 6.4 A dishonoured cheque that was originally received from debtor P. Peter in settlement of an account 900 6.5 An electronic funds transfer that was made by tenant Teljoy Repairs directly into the bank account of Disney Stores 4 500 @@E QUESTION 4 (20 Marks) The information given below was extracted from the accounting records of Boston Traders, a partnership business with Bosnan and Tony as partners. REQUIRED Prepare the Statement of Changes in Equity for the year ended 29 February 2020. Use the following format. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 FEBRUARY 2020 Capital Accounts Bosnan Tony Total Balance at 28 February 2019 Changes in capital Balance at 29 February 2020 Current Accounts Balance at 28 February 2019 Net profit for the year Interest on capital Salaries Bonus Profit Share Drawings Balance at 29 February 2020 @@E INFORMATION Balances in the ledger as at 29 February 2020 Debit R Credit R Capital: Bosnan 500 000 Capital: Tony 300 000 Current a/c: Bosnan (01 March 2019) 20 000 Current a/c: Tony (01 March 2019) 30 000 Drawings: Bosnan 300 000 Drawings: Tony 350 000 The following must be taken into account. 1. The net profit according to the Profit and Loss account amounted to R700 000 on 29 February 2020. 2. The partnership agreement makes provision for the following: 2.1 Interest on capital must be provided for at 15% per annum on the balances in the capital accounts from 01 March 2019 to 31 August 2019. The interest rate increases to 18% per annum with effect from 01 September 2019. 2.2 The partners are entitled to the following monthly salaries: Bosnan R12 000 Tony R15 000 2.3 Bosnan is entitled to a special bonus equal to his salary for one month. 2.4 Bosnan and Tony share the remaining profits or losses equally. @@E QUESTION 5 (20 Marks) REQUIRED Use the trial balance, additional information and adjustments given below to prepare the Statement of Comprehensive Income for the year ended 29 February 2020 using the following format as a guide. STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 29 FEBRUARY 2020 Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Interest income Interest expense Net profit for the year @@E XPANDA TRADERS PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020 Debit (R) Credit (R) Balance sheet accounts section Capital 1 273 000 Drawings 125 800 Land and buildings at cost 818 600 Equipment at cost 500 000 Vehicles at cost 400 000 Accumulated depreciation on equipment 182 000 Accumulated depreciation on vehicles 89 000 Fixed deposit: Mint Bank (6% p.a.) 30 000 Trading inventory 80 000 Debtors control 108 400 Provision for bad debts 5 000 Bank overdraft 33 300 Petty cash 1 000 Creditors control 132 000 Loan: Mint Bank (15% p.a.) 60 000 Nominal accounts section Sales 1 400 000 Cost of sales 800 000 Sales returns 20 000 Advertising 17 000 Consumable stores 21 000 Bad debts 9 000 Discount allowed 6 000 Discount received 4 000 Electricity and water 48 000 Telephone 26 000 Interest on fixed deposit 1 500 Interest on overdraft 1 000 Insurance 8 000 Salaries 160 000 Bank charges 5 000 Rent income 33 000 Municipal rates 28 000 3 212 800 3 212 800 @@E ADDITIONAL INFORMATION AND ADJUSTMENTS 1. According to physical stocktaking, the following inventories were on hand on 29 February 2020: 1.1 Trading inventory R77 000 1.2 Consumable stores R2 000 2. The advertising account includes a payment of R2 000 made to the Weekly News for four identical advertisements that were scheduled to be published monthly from January 2020 to April 2020. 3. Part of the building has been let to a tenant since 01 March 2019. Rent has been received up to 31 January 2020. 4. Write off the account of debtor, B. Stanmore, who owed R3 000. 5. The provision for bad debts must be increased to R5 300. 6. The telephone account for February 2020 was due to be paid on 02 March 2020, R2 500. 7. Provide for the outstanding interest on fixed deposit, R300. 8. The loan was obtained on 01 February 2020. Provide for outstanding interest for February 2020. 9. Municipal rates paid in advance amounted to R4 000. 10. Provide for depreciation as follows: 10.1 On vehicles at 20% per year on the diminishing balance. 10.2 On equipment at 10% per year on cost.