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ACCOUNTING (Paper 2) 10712/20 QUESTION 1: RECONCILIATION AND VAT (35 marks; 30 minutes) 1.1 BANK RECONCILIATION You are provided with information relating to Woodmead Traders. They require your help in preparing their Bank Reconciliation Statement for June 2020. Their financial year-end is 30 June 2020. REQUIRED: 1.1.1 Identify the items that must be entered in the CRJ. (4) 1.1.2 Identify the items that must be entered in the CPJ. (3) 1.1.3 Prepare the Bank Reconciliation Statement on 30 June 2020. (7) 1.1.4 Explain how the business must handle item 9. ( 2 ) 1.1.5 In your opinion, was it wise of Woodmead Traders to invest R100 000 on fixed deposit on 15 June 2020? Explain your answer. Quote specific figures or details from the question to support your answer. (3) INFORMATION: The Bank Reconciliation Statement on 31 May 2020 reflected the following: Favourable balance as per bank statement R44 000 Outstanding deposit (dated 31 May 2020) R55 200 Outstanding cheques: No. 7155 (dated 15 December 2019) R5 000 No. 7710 (dated 20 May 2020) R22 800 No. 7747 (dated 31 July 2020) R136 000 Unfavourable Balance as per bank account R64 600 On comparing the June Bank Statement from Stander Bank with the Cash Receipts Journal (CRJ) and Cash Payments Journal (CPJ) for June, the following were noted: Item 1 A deposit of R55 200 appeared on the Bank Statement on 1 June 2020 but not in the June journals. Item 2 A deposit of R37 200 appeared in the CRJ on 29 June 2020 but not on the June Bank Statement. Item 3 Commission income of R10 000 was deposited directly into the bank account of Woodmead Traders by Oxford Products. This appeared on the Bank Statement but not in the journals. P.T.O.ACCOUNTING (Paper 2) 10712/20 Item 4 Bank charges of R1 070 appeared on the Bank Statement but not in the journals. Item 5 Interest of R410 was credited on the Bank Statement, but has not been entered in the journals. Item 6 The Bank Statement reflected a dishonoured cheque of R3 800. This cheque was originally recorded in the CRJ on 5 June 2020 received from M McGee in settlement of his debt of R4 500. 2020. It was Item 7 The Bank Statement reflected a favourable balance of R120 000 on 15 June 2020. Woodmead Traders put through a direct transfer to Maxima Bank for R100 000 on this date in order to earn a higher return on a fixed deposit for 6 months. This transaction has been entered in the journals and on the Bank Statement. Item 8 Cheque No. 7155 is stale and must be cancelled. The cheque was originally issued as a donation to the Rhino Sanctuary but it was lost in the post. It was decided to increase the donation and an EFT (electronic funds transfer) for R6 000 was made to the Rhino Sanctuary. No entry has been made. Item 9 On 30 June 2020 a debtor, J Collins, presented a cheque dated 30 July 2020 for R12 200 in settlement of his debt. Item 10 Cheque No. 7710 for R22 800 appeared on the June Bank Statement but not in the June journals. Item 11 An EFT (electronic funds transfer) of R15 400 appeared on the 30 June 2020 in the CPJ but not on the June Bank Statement received on 29 June 2020. Item 12 A sundry entry of R44 appeared on the Bank Statement on 16 June 2020. This is a fraudulent entry by a bank employee. The R44 also appeared on the Bank Statements on 16 April 2020 and 16 May 2020 and Woodmead Traders recorded these amounts as 'bank charges' in the CPJ for April and May. Stander Bank has agreed to reverse all three amounts immediately. 19