Following the surge in crime rates around the Dzingidzingi Village in 2017, Baloyi and Manzini came together to form a security company to operate around the village. Yena[1]Aya-Kwin Security was formed as a partnership with Baloyi and Manzini as partners. The information below pertains to the business activities of the partnership for the year ended 29 February 2020.

1. EXTRACT OF BALANCES AS AT 29 FEBRUARY 2020: R Land.............................................................................................................. 799 200 Buildings ....................................................................................................... 2 268 000

Accumulated depreciation: Buildings (1 March 2019) .................................. 154 000

Equipment (at cost)....................................................................................... 423 500

Accumulated depreciation: Equipment (1 March 2019)................................ 99 000

Vehicles (at cost) .......................................................................................... 606 600

Accumulated depreciation: Vehicles (1 March 2019) ................................... 92 100

Allowance for credit losses ........................................................................... 5 500

Trade receivables control ............................................................................. 315 800

Fixed deposit ................................................................................................ 103 200

Investments .................................................................................................. 162 000

Prepaid expenses {Advertising).................................................................... 9 900

Capital: Baloyi............................................................................................... . 525 600

Capital: Manzini ............................................................................................ . 373 800

Capital: Nkuna .............................................................................................. . 747 500

Current account: Baloyi (Dr - 1 March 2019) ................................................ 102 400

Current account: Manzini (Dr - 1 March 2019) ............................................. 79 600

Drawings: Baloyi ........................................................................................... . 20 900

Drawings: Manzini ........................................................................................ . 5 600

Allowance for settlement discount granted ................................................... 8 800

Long-term loan: Giyani Development Agency (1 March 2019)..................... . 890 700

Loan to Manzini ............................................................................................ . 54 500

Loan from Baloyi........................................................................................... . 339 900

Bank overdraft .............................................................................................. . 26 100

Trade payables control ................................................................................. . 543 400

Profit for the year (before year-end adjustments)......................................... 1 035 800

Terms of the partnership agreement

2.1 Interest is calculated at 8% per annum on the opening balances of the partners current and capital accounts.

2.2 Each partner is entitled to a monthly salary of R12 500.

Additional information

3.1 Due to investment commitments requiring cash injection, the partnership decided on the following:

Only paid 92% of the salaries to the partners for the year.

On 1 February 2020, admitted a new partner Nkuna for a contribution of cash amount of R320 000 and security equipment valued at R427 500. Nkuna started earning a salary from the date of admission

The three partners decided to share profits and losses equally.

3.2 A commission of R18 900 was paid to Nkuna for securing additional security contracts at the nearby village. This amount was recorded as part of wages and salaries expense.

3.3 The long-term loan from Giyani Development Agency was granted on 1 December 2016. The loan is secured by a first mortgage over land and buildings and is repayable together with interest, on 1 December 2020.

3.4 All loans to partners are immediately callable whilst the loan from Baloyi is repayable in full on 30 November 2022.

3.5 Investments consist of

Investment in Mfunekani (Pty) Ltd valued R82 000

12 000 shares in Mpange Ltd valued at R80 000

3.6 The accountant of the partnership neglected to record the sale of a vehicle with a cost price of R85 000. The vehicle was sold for R21 000 cash on 1 November 2019. The accumulated depreciation on the vehicle amounted to R66 000 on 1 November 2019.

3.7 Depreciation for the year which must still be provided for was correctly calculated as follows:

Buildings R148 000

Equipment R 35 600

Vehicles R 42 200

Question 8

Which one of the following alternatives represents the correct prepayments amount that must be presented in the statement of financial position of Yena-Aya-Kwin Security as at 29 February 2020? Select one:

a. R 9 800

b. R 9 000

c. R 9 100

d. R 5 500

e. R 9 900