Question 2 20 marks

Tiva Solutions accounting records reflect the following account balances as at December 31, 2016:

Building R560,000 Accumulated Deprec.--Bldg R112,000

Cash 90,000 Capital Stock 343,000

Supplies 5,000 Retained Earnings 200,000

During 2016, the following transactions occurred:

1) On March 1, purchased a one-year insurance policy for R1,200 cash.

2) On April 1, borrowed R10,000 cash from Rock City Bank. The interest rate on the note payable is 6%.

Principal and interest are due in cash in one year.

3) Employee salaries in the amount of R20,000 were paid in cash.

4) At the end of the year, R400 of the supplies remained on hand.

5) Earned R45,000 in tax consulting revenue during 2016 in cash.

6) At December 31, R5,000 in employee salaries were accrued.

7) On December 31, received R2,000 in cash representing advance payment for services to be provided in February of 2017.

8) The building has a useful life of 25 years and no salvage value. Required:

Determine the effect on the accounting equation of the preceding transactions including any related year-end adjusting entries that may be required. Create a table to reflect the increases and decreases in accounts.

Balance sheet and Income statement