QUESTION $1(35$ MARKS$)$

Milan Traders is a sole proprietor in Silverlakes Pretoria, who deals with importing and selling

of French furniture. The owner, Mila Nel, started the business on $1$ March $2010.$ The following

pre$-$adjustment trial balance of Milan Traders at $28$ February $2023$ was provided to you by

Mila since she asked for your assistance.

Milan Traders Debit Credit

Pre$-$adjustment trial balance at $28$ February $2023$ R R

Land and buildings $1250000$

Long$-$term borrowing $$ XYZ Bank $1326400$

Accounting fees $28000$

Advertising fees $21000$

Allowance for credit losses $5600$

Bank charges $5600$

Bank interest on overdraft $5800$

Bank overdraft $53000$

Capital $136000$

Carriage $($freight$-$in$)$ on purchases $8000$

Import duties on inventory $10000$

Cleaning materials $3600$

Credit losses $6800$

Creditors control $90000$

Debtors control $112000$

Employee contributions $22000$

Drawings $25000$

Entertainment $6000$

Fixed deposit $$ ABC Bank $100000$

Insurance $29600$

Interest on fixed deposit $10000$

Interest on long$-$term borrowing $7800$

Inventory $1/3/2022288000$

Computer equipment at cost $1/3/202270000$

Accumulated depreciation: Computer equipment

$1/3/2022$

$28000$

Accumulated depreciation: Vehicles $1/3/202216000$

Vehicles at cost $1/3/202240000$

Printing and stationery $8600$

Purchases $800000$

Purchases Returns $20000$

Repair and maintenance $7600$

Salaries and wages $288000$

Sales $1560000$

Sales Returns $30000$

Telephone $20000$

Vehicle expenses $51600$

$32450003245000$

The following transactions took place:

$1.$ Inventory on $28$ February $2023$ amounted to R$166000.$

$2.$ No vehicles were purchased during the year, but a new computer system was bought on

credit from Delta Computers on $1$ February $2023$ for R$120000.$The old computer system

was traded in for R$30000.$ The trade$-$in will take place when the new computer system

is fully operational. The cost price of the old system was R$60000$ and the book value on

$1/3/2022$ was R$48000.$ This transaction was not yet recorded in the records at yearend

since the installation of the new computer was only completed on $28$ February $2023.$ The

owner paid the outstanding amount to Delta on $1$ March $2023.$

$3.$ The long$-$term borrowing is from XYZ Bank and was acquired on $1$ January $2023.$ It is

re$-$payable in four equal annual payments, with the first payment on $28$ February $2024.$

The interest rate is $5\%$ per annum and is secured by a personal guarantee of the owner.

$4.$ Mr Badboy, a debtor from Milan Traders, was declared insolvent and the outstanding

amount of R$2280$ on his account must be written off.

$5.$ After inspecting the outstanding debtor$$s list at year$-$end, Mila decided that there is a

possibility that one of the debtors, Bali Traders, won$$t be able to pay their account. The

allowance for credit losses must be adjusted to make provision for the possible loss.

The outstanding balance on Bali Traders$$ account is R$7500.$

$6.$ The owner made an additional capital contribution of R$10000$ during the year.

$7.$ Depreciation on computer equipment and vehicles is calculated at $20\%$ per annum on

the straight$-$line method at year$-$endye.

$8.$ The fixed deposit is with ABC Bank from $1$ March $2022$ for $24$ months and carries interest

at $10\%$ per annum. This amount has not yet been received.

REQUIRED $$ QUESTION $1$

Show all calculations. Round to the nearest Rand.

$1.$ Prepare the general journal entries for the following transaction numbers

$1,3,4,5,6,7$ and $8.$

$$ Journal narrations are required.

$2.$ Prepare the asset realisation account in the General Ledger of Milan

Traders for the trade$-$in$.$

$3.$ Identify any four $(4)$ accounts to be disclosed in the Statement of profit or

loss and other comprehensive income of the entity.

$4.$ Determine the net debtors amount that will appear on the Statement of

financial position of Milan Traders.

$5.$ True or false. The drawings account will be disclosed in the Statement of

profit or loss and other comprehensive income. Motivate your answer.