QUESTION 2 (20 Marks) 2.1 REQUIRED Show the effect of the following transactions of Avis Services on the accounting equation. Use + to denote an increase, to denote a decrease and 0 to denote no change to the elements of the equation. Copy the table in your answer book and follow the example given. The business uses the periodic inventory system. Assume that the bank balance is favourable at all times. (10 marks) Example: Paid the insurance premium by cheque, R500 ASSETS EQUITY LIABILITIES No. Equipment Receivables Bank = Capital Profit + Payables e.g. R500 R500 TRANSACTIONS 2.1.1 Purchased packing materials by cheque, R900. 2.1.2 Issued a cheque to Lin Bank for part repayment of loan, R7 000 2.1.3 Bought a computer by cheque, R18 000. 2.1.4 Received a cheque from a tenant for the monthly rental, R3 000 2.1.5 Cash from services rendered amounted to R6 000. 2.1.6 Purchased a motor cycle on credit, R50 000. 2.1.7 Issued a cheque to settle the account of a creditor, R12 000. 2.1.8 The proprietor used a business cheque to purchase a television set for his home, R11 000. 2.1.9 Purchased stationery on credit, R400. 2.1.10 The proprietor increased her capital contribution from R100 000 to R180 000 by making a direct deposit into the bank account of the business. vmc 2.2 REQUIRED Study the information given below and answer the following questions: 2.2.1 Calculate the profit or loss on the equipment sold. (State whether a profit or loss was made.) (5 marks) 2.2.2 Prepare the Fixed Asset Realisation account in the General ledger. (5 marks) INFORMATION 1. The following balances, amongst others, appeared in the ledger of Richmond Stores on 01 March 2019, the beginning of the financial year: Equipment R300 000 Accumulated depreciation on equipment R180 000 2. On 31 May 2019, equipment that cost R30 000 was sold for R5 000 cash. The accumulated depreciation on the equipment sold amounted to R22 000 on 01 March 2019. 3. Depreciation on equipment is calculated at 20% per year on cost. vmc QUESTION 3 (20 Marks) 3.1 REQUIRED Use the information provided below to prepare the Bank account in the ledger of Prince Stores showing all the entries that would have been made in the cash journals. Clearly show the contra account for each entry. Balance the account. The cash journals are not required. Use the following format: (10 marks) General ledger DR BANK CR 2020 Jan 31 2020 Jan 31 INFORMATION When comparing the bank statement with the cash journals of Prince Stores for January 2020 the following differences, amongst others, and additional information is available: 1. The bank account in the ledger of Prince Stores had a favourable balance of R12 000 on 31 January 2020 before the bank statement was received. 2. A cheque for R3 000 that was issued to a creditor, RT Manufacturers, was lost by the payee. The bank has been instructed to stop payment on the cheque. No entry has been made for the cancellation. A replacement cheque has not yet been issued. 3. A cheque issued to Metro Distributors for equipment purchased was erroneously entered in the Cash Payments Journal as R6 400 instead of R4 600. 4. Entries that appeared on the bank statement for January 2020 but not in the cash journals: 4.1 A cheque for R1 200 previously received from a debtor, S. Winston, in settlement of an account of R1 300 was dishonoured by the bank due to insufficient funds. 4.2 The bank statement reflected the following additional entries: * Service fees R450 * Cash deposit fees R150 * Interest income R100 4.3 The bank statement showed a credit entry for a loan obtained from the bank, R100 000. vmc 3.2 REQUIRED Redraft the following Debtors Control account of Caltex Traders after taking into account the errors and omissions. (10 marks) INFORMATION The inexperienced bookkeeper of Siyakha Traders prepared the following account in the general ledger: DR DEBTORS CONTROL CR 2019 May 01 31 Balance Bad debts Interest income Balance b/d J J c/d 150 000 1 500 300 73 200 2019 May 31 Bank and discount Bank Sales returns Sales CRJ CPJ SRJ SJ 112 500 3 000 4 500 105 000 225 000 225 000 2019 Jun 01 Balance b/d 73 200 Additional information 1. Three entries appear on the incorrect side of the account. 2. The debtors control column in the Sales Journal was overcast by R3 000. 3. A credit note for R1 100 issued to debtor L. Mthethwa was incorrectly entered in the Sales Returns Journal as R1 000. 4. A cheque for R1 000 previously received from a debtor, J. Kitch, in settlement of her account was dishonoured by the bank due to insufficient funds. This transaction has not yet been recorded. 5. A debtor, J. Visser, who owed R2 000 was declared insolvent. His account must now be written off. 6. F. Pillay must be charged interest at 12% per annum for 1 month on his overdue account of R2 400. vmc QUESTION 4 (20 Marks) Ash and Leigh are partners in a business called Ashleigh Traders. REQUIRED Use the information provided below to prepare the Statement of Changes in Equity for the year ended 29 February 2020. Use the following format: STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 FEBRUARY 2020 Capital Accounts Ash Leigh Total Balance at 28 February 2019 Changes in capital Balance at 29 February 2020 Current Accounts Balance at 28 February 2019 Net profit for the year Salaries Interest on capital Bonus Profit Share Drawings Balance at 29 February 2020 INFORMATION Extract from the ledger of Ashleigh Traders as at 01 March 2019 Debit Credit R R Capital: Ash 900 000 Capital: Leigh 800 000 Current account: Ash 120 000 Current account: Leigh 100 000 vmc Extract from the ledger of Ashleigh Traders as at 29 February 2020 R Drawings: Ash 350 000 Drawings: Leigh 250 000 The following must be taken into account: (a) The net profit according to the Profit and loss account amounted to R800 000. (b) The partners are entitled to the following monthly salaries: Ash Leigh R15 000 R18 000 (c) The partners are entitled to interest on their capital balances at a rate of 12% per year. Note: On 01 September 2019, Ash increased his capital contribution by R100 000. On the same date Leigh decreased her capital balance by R200 000. (d) Ash is entitled to a special bonus equal to 10% of the net profit before any of the above appropriations. (e) The remaining profit or shortfall must be shared equally. vmc QUESTION 5 (20 Marks) REQUIRED Use the information given below to prepare the Statement of Financial Position of Mika Traders as at 29 February 2020. The Statement of Comprehensive Income and notes to the financial statements are not required. Use the following format and fill in the missing details and amounts: STATEMENT OF FINANCIAL POSITION AS AT 29 FEBRUARY 2020 ASSETS R Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables Trade debtors Cash and cash equivalents Bank Total assets EQUITY AND LIABILITIES Equity Capital Non-current liabilities Current liabilities Trade and other payables Trade creditors Total equity and liabilities vmc INFORMATION Mika Traders PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020 Debit (R) Credit (R) Balance sheet accounts section Capital 1 875 000 Drawings 343 270 Land and buildings 1 425 000 Vehicles at cost 1 050 000 Equipment at cost 750 000 Accumulated depreciation on vehicles 600 000 Accumulated depreciation on equipment 420 000 Fixed deposit: Len Bank (8 % p.a.) 225 000 Debtors control 222 000 Provision for bad debts 11 250 Bank 103 730 Creditors control 208 350 Loan: Len Bank (18% p.a.) 375 000 Nominal accounts section Sales 2 803 200 Opening inventory 110 000 Purchases 1 050 000 Purchases returns 59 870 Carriage on purchases 15 000 Sales returns 30 000 Salaries and wages 617 500 Bad debts 21 000 Stationery 34 200 Rates and taxes 89 250 Motor expenses 150 000 Repairs and maintenance 26 920 Telephone 50 780 Electricity and water 75 920 Bank charges 9 430 Advertising 97 350 Interest on mortgage loan 65 000 Interest on fixed deposit 16 880 Rent income 191 800 6 561 350 6 561 350 vmc Adjustments and additional information 1. According to stocktaking undertaken on 29 February 2020, the following inventories were on hand: 1.1 Trading inventory R125 000 1.2 Stationery R2 000 2. An account to replace broken windows, R1 000, has been received. This has not yet been recorded in the appropriate journal and payment will be made during March 2020. 3. The advertising account includes an amount of R7 500 paid for the period 01 March 2020 to 31 May 2020. 4. A debtor was declared insolvent. His account of R1 800 must now be written off. 5. The provision for bad debts must be decreased to R10 750. 6. R1 120 interest is still outstanding on the fixed deposit. Fifty percent (50%) of the fixed deposit matures on 30 June 2020. The rest matures on 30 June 2021. 7. Provide for the outstanding interest on loan, R6 550. R45 000 will be paid towards the loan in the next financial year. 8. Provide for depreciation as follows: 8.1 On equipment, R112 500. 8.2 On vehicles at 20% p.a. using the diminishing balance method. 9. Rent received in advance amounted to R15 400. 10. The water and electricity account for February 2020 has not yet been paid, R7 000. 11. The net profit for the year ended 29 February 2020 after taking the above information and adjustments into account amounted to R531 270.