ADDITIONAL QUESTION $($CHAPTER $8)$

$(15$ marks; $23$ minutes$)$

REQUIRED

Prepare the journal entries in the general journal to account for the additional information

provided below of Dream World for the year ended $31$ May $2019.$

NOTE:

Take note of the numbers provided in the answer sheet. These numbers correspond

with the numbers in the "Additional information" section.

Where more than one journal entry is required, take note of the journal narrations

provided in the answer sheet.

INFORMATION

Dream World is an amusement park run by Holt Farrier. Dream World is not

registered as a Value Added Tax $($VAT$)$ vendor. The owner provided you

with the following information for the year ended $31$ May $2019$:

Balances and totals from the general ledger on $31$ May $2019($in alphabetical order$)$:

Additional information:

On $1$ January $2019,$ Dream World paid its insurance agent R$2400$ for the annual insurance

premium covering the twelve$-$month period, beginning on $1$ January $2019.$ The payment

was recorded correctly in the accounting records.

Starting on $1$ June $2018,$ Dream World rented out a section of its premises to Collette

Marchant, the owner of a coffee shop. The rental agreement was signed for a two$-$year

period, ending $31$ May $2020.$

The "Rent income" total provided includes the rent received from Collette Marchant for the

period $1$ June $2018$ to $31$ March $2019.$ The rental agreement states that rent increases by

$5\%$ on $1$ February every year, starting on $1$ February $2019.$ No adjustments have been

recorded for rent income.

Depreciation must still be provided for the year. The following depreciation methods and

rates are applicable to Dream World's property, plant and equipment:

$3\mathrm{.}1)$ Rides and attractions are depreciated at a rate of $20\%$ per annum using the

diminishing balance method. All the rides and attractions were ready for use as

intended by management on the first day of a financial year.

$3\mathrm{.}2)$ Dream World owns only one vehicle. Vehicles are depreciated according to the

production unit method. On $1$ February $2019,$ Dream World purchased a second$-$

hand vehicle at a cost of R$460500.$ The current estimated residual value of the

vehicle amounted to R$15500.$ This transaction was correctly recorded in the

accounting records of Dream World. On purchase date, the vehicle had an odometer

reading of $40000km.$ By $31$ May $2019,$ the odometer reading was $90000km.$ Holt

expected to use this vehicle for $250000km.$

Dream World is in arrears with the repayments on the loan from Medici Brothers. The last

time he made a payment was on $31$ May $2018,$ but the entity has promised Medici Brothers

that they will pay Medici Brothers R$150000$ on $1$ December $2019.$ The interest rate on the

loan is $7\mathrm{.}5\%$ per annum. Dream World pays the interest on the loan every month in arrears.

On $31$ May $2019,$ Dream World had three months of interest outstanding. This interest

owing was only paid on $30$ June $2019.$

The "Interest expense" and "Expenses payable" amounts provided relates only to interest

on the loan from Medici Brothers. No reversals or adjustments have been recorded for

interest expense.

On $31$ May $2019,$ Dream World sold $20$ tickets for entrance to the amusement park on

$1$ June $2019.$ The entrance fee $($ticket price$)$ is R$150$ per ticket. This amount as been

included in "Entrance fees" for the year ended $31$ May $2019.$