Kindly assist with Activity 16.7 please provide an explanation, and show all calculations.

The accounting period of Homezone Traders ends annually on the last day of February. The following information appeared in their books on 29 February 2016. (Owner: C Pappendort)

Required

Use the necessary information to draw up the Income Statement and Balance Sheet for the year ended 29 February 2016.

Adjustments

1. On 26 February 2016 a debtor returned goods, R360. The goods were sold at a profit mark-up of 25%. No entry of these returns has been made yet.

2. Stock on hand on 29 February 2016:

Trading stock R20 000

Stationery R282

Packaging R256

3. An amount of R30 was received from a debtor whose account had previously been written off as irrecoverable. The bookkeeper has credited the amount to Debtors Control. Correct the error.

4. Write off T Bell's Debtor of R40 as irrecoverable.

5. An insurance premium of R490 was paid on 1 December 2015 for the period 1 December 2015 to 30 June 2016.

6. The fixed deposit was invested on 1 October 2015. Interest is paid quarterly at 18 % per annum.

7. Rent income amounts to R353 per month.

8. The bank statement was received on 29 February 2016. The following items must be recorded:

- Cost of cheque book R9

- Service fees R14

- Sundry debits R5

- Interest on overdraft R70

- Monthly stop order for R200 for the owner's personal loan.

- RD Cheque for R150 from D Bruwer, received in settlement of his account of R155.

9. The mortgage loan was increased by R5 000 on 1 September 2015. Provide for the outstanding interest. The interest rate was originally 15% per annum but was increased to 18% per annum on 1 September 2015.

10. Provide for depreciation as follows:

- Equipment R1 864

- Vehicles R930

Note

* Capital was increased by R12 000 on 1 October 2015. (The transaction has already been recorded.)

Pre-adjustment Trial Balance on 29 February 2016.

Balance Sheet accounts	Debit	Credit
Capital		72 208
Drawings	22 824
Mortgage loan: United		35 000
Land and buildings	115 000
Fixed deposit: Allied	5 000
Equipment (Cost price)	12 000
Accumulated depreciation on equipment		3 171
Vehicles (cost price)	17 500
Accumulated depreciation on vehicles		6 300
Trading stock	19 980
Debtors control	9 740
Bank		2 355
Creditors control		14 782
Petty cash	50
Cash float	200
Nominal Account
Sales		395 853
Cost of sales	250 060
Debtors allowances	4 260
Rates and taxes	4 010
Salaries	59 550
Bank charges	310
Rent Income		3 795
Discount received		734
Discount allowed	870
Bad debts	320
Interest on mortgage loan	2 250
Stationery	1 682
Packaging	4 056
Telephone	1 552
Insurance	820
Water and electricity	2 419
Interest on fixed deposit		255
	534 423	534 423

An improvement of R15 000 was made to land and buildings. It has already been entered.