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$)$:

$\backslash$table$[[,\backslash$table$[[$Refer to$],[$point$]],$R$],[$Accumulated depreciation: Rides and attractions $(1$ June $2018),3,89600],[$Capital $(1$ June $2018),,87165],[$Drawings$,,72541],[$Entrance fees,$5,380000],[$Expenses payable $(1$ June $2018),4,2250],[$Insurance$,1,2400],[$Interest expense,$4,20250],[$Loan from Medici Brothers,$4,360000],[$Rent income,$2,50500],[$Rides and attractions,$3,280000],[$Vehicles$,3,460500]]$

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.

FRK$111$ Exam $2019($Amended$)$

Page $1$ of $2$

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 secondhand 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 $2019.$