NB: (spot rate is 1 Euro is R15)
The question asks to complete and redo the entire entry for the financial accounts drafted by the accountant with the given informations in the text. Looking at the entire 2020 financial year and also looking back in time as this will assist in ensuring that the accounts of the month of September 2020 is done correctly.
Currency is in Rand
(South Africa)
Background: You and a couple of your friends are astute students at IE MSA in the Engineering programme and have been requested to do an internship at Voltage Engineers based in Feather-Brook. The accountant has been diagnosed with COVID-19 as he has travelled to Wuhan this past summer to seek alternative suppliers. He has therefore not been able to complete his month end duties and the audit is due to start in two weeks' time. Voltage Engineers specialises in electrical engineering and has recently procured a lucrative deal with a large petroleum entity to assist with a full solar power solution given the recent surge in load shedding. The government has recently signed off the IPP agreement which will see a great amount of strain relieved from the grid. All transactions are recorded each day. The accounting records are only performed between Monday and Friday, being the normal working days. Financial Information (Accounting Balances and Transactions): The accountant was instructed by the CFO to provide you with the full accounting information and records of the following items in order to prepare for month end: Trade receivables Trade payables Trade inventories Cash and cash equivalents Non-Current Assets The information below was extracted from the records of Voltage Engineers for the month of September 2020: As at 31 August 2020: General Ledger accounts balances R Trade Receivables 450 000.00 Trade Payables 1500 500.00 (Credit) Trade Inventories 1 800 000.00 Bank 1 300 000.00 Property, plant and Equipment 500 760 000 Page 6 of 14 The following transactions and events took place during the month of September 2019: Trade Receivable: Date Details R 30 Sep Total - Sales journal 950 560 Returns-out 99 000 Returns - in 27 918 R/D cheques received from debtors 46789 Credit losses for settlement discount 980 Allowance for settlement discount 68590 Discount received 9862 Total - Purchases journal 750658 Bad debts recovered 9500 Interest charged - debtors 1250 Cash and cheques received from debtors 550350 Cash sales for the month 350960 Payables: R Totals of subsidiary ledgers on 30 September 2020: Cash receipts journal: Receivables column 843 000 Sales column 930 000 105 000 VAT output Cash payment journal: Receivable column 19 500 Purchases column 930 000 Payables column 558 000 VAT input 114 000 Total: Purchases book 856 000 Purchases returns book 9 800 Page 7 of 14 Total of the general journal: 24 500 45 900 Debit: Payables ledger General ledger Credits: Payables ledger General ledger 17 500 42 600 Additional information: Airliner's debt of R45 000.00 should be written off. The account of Eishkom should be charged with interest of R8950. Inventories: Voltage Engineers purchased solar panels, invertors and solar control regulators from Germany on 3 September 2020. The purchase price is 158 000 Euros (spot rate is Euro 15: R?). The items were transported from Frankfort to OR Tambo on a Boeing A350 on 6 September. This cost to transport the inventory paid to the airliner is R178 000 on 5 September. Upon arrival, on 7 September, customs duties levied a further 10% on the purchase price when goods were acquired was levied. The entity spent a further R28 000.00 to transport the item to its warehouse in Little Falls. The spot rates on 6 and 7 September were 15.5 and 16 respectively. All the amount incurred were paid by EFT on the same day. Cash and cash equivalents: The following transactions were not processed and need to be accounted for: The bank statements reflected an interest income of R8500.00 interest on a money market account that was not accounted for The bad debts recovered of R9500 from a debtor was not posted to the cashbook. Cheque 4540 for R650 000, which was on the outstanding cheque list at the end of August 2020, has still not been processed in the bank statement in September 2020. Bank charges were not accounted for an amount of R850. Page 8 of 14 Property, Plant and Equipment: Looking at the entire 2020 financial year and also looking back in time as this will assist in ensuring that the month of September is done correctly. Machinery A machine was purchased on 01 January 2018 for R1 900 000 (VAT included). The estimated useful life of the machine is ten (10) years, and it was expected that the residual value at the end of the ten (10) years will be R150 000 Motor vehicles Fleet C of vehicles was also purchased on 02 January 2016 for R1 300 000 (VAT included). Vehicles incurred licence and registration costs of R35000 (excl. vat) upon acquisition. Motor vehicles are depreciated at 10% p.a, and it is expected that the residual value at the end of the useful life will be R 135 000 Additional information: Property, plant and equipment: o Are held at cost model. Depreciation methods for different classes are as follows: Machinery - Diminishing Method Motor vehicles - Cost model Page 9 of 14 SRJ GI Incomplete financial accounts drafted by the Accountant: Receivable (Debtors) control account Opening balance b/d 450,000 Returns Sales - credit SJ 950.560 Allowance settlement discount R/D cheques CBP 46,789 Bad debts Cash sales CBR 350.960 credit losses balance b/ 27,918 68,590 GJ 45,000 890 167,489 01/10/2020 Balance b/d 167,485 DR CR Payable (Creditors) control account opening Balance b/d 1,500,500 Bank CBP 558,000 Journal credits Discount received GI GI 16,500 9,862 Journal debit G] 24,500 Balance c/d 1,434,858 1,526,862 1,526,862
