Question 13 of 20

After a year-end inventory count, the value of trading inventory on hand was R123 450.

Additional information

(a) On 30 January 20.20 Kumkani Traders decided to lease out the office space on the business' premises for a monthly rental amount of R2 200. The rental amount is paid in advance on the last day of each month.

Use the information in the pre-adjustment trial balance and the additional information to determine which of the following journal entries correctly accounts for the closing adjustment of the lease rentals at the year-end:

Extract of pre-adjustment trial balance of Kumkani Traders as at 30 September 20.20 Debit R Credit R 200 000 ? 61 725 4 450 195 000 50 000 345 060 9 500 6 780 Capital (1 October 20.19). Drawings.... Inventory: Trading (1 October 20.19).. Allowance for credit losses. Mortgage: Ginsberg Bank Fixed deposit (at 7.5% per annum).. Sales......... Carriage on purchases. Sales returns. Rental income. Purchases. Purchases returns. Depreciation..... Salaries and wages... Insurance expenses. Telephone expenses.. Water and electricity. Credit losses.. 19 800 197 800 2 890 38 367 88 500 27 300 14 280 23 450 1 600 A. Adjustment journal - 30 September 20.20 Debit R 26 400 Credit R Accrued income Rental income Adjustment of rental income account 26 400 B. Adjustment journal - 30 September 20.20 Debit R 2 200 Credit R Income received in advance Rental income Adjustment of rental income account 2 200 c. Adjustment journal - 30 September 20.20 Debit R 19 800 Credit R Bank Rental income Adjustment of rental income account 19 800 D. Adjustment journal - 30 September 20.20 Debit R 2 200 Credit R Rental income Income received in advance Adjustment of rental income account 2 200 E. Adjustment journal - 30 September 20.20 Debit R 2 200 Credit R Accrued income Rental income Adjustment of rental income account 2 200