QUESTION

Below is the pre-adjusted trial balance of Brothers Stores for the period ended 30 June 2019:

Ignore VAT

	DR	CR
	R	R
Land and Buildings (Land at cost: R50 000)	550 000
Equipment	220 000
Fixed Deposit (10%)	180 000
Inventory	350 400
Accumulated depreciation: Buildings (01/07/2018)		110 000
Accumulated depreciation: Equipment (01/07/2018)		24 500
Accounts receivable	23 700
Allowance for doubtful debts (01/07/2018)		800
Supplies	1 500
Stationery	600
Bank	840 090
Long-term Loan (8%)		300 000
Accounts payable		19 950
Capital		1 000 000
Drawings	10 000
Sales		1 762 430
Cost of sales	955 320
Sales returns	44 500
Delivery expenses	22 800
Bad debts	6 140
Telephone expense	4 980
Water and electricity	25 650
Interest Income		18 000

Additional Information:

1. The business uses the perpetual method for accounting for inventory and a 25% mark-up on cost is used to determine selling prices.
2. Inventory with a selling price of R7 500 was returned by a customer and a credit note was issued to him. Half of this inventory was damaged and therefore returned to the supplier. These transactions were not recorded by the bookkeeper.

3. Depreciation should be provided as follows:

• 5% on the cost price of buildings. The residual value of the buildings is R100 000.
• 10% on the reducing balance method of equipment.

On 01 January 2019, Brothers Stores purchased additional machinery from Flash Ltd for R110 000. In addition, transport costs of R2 500 and installation costs of R1 500 were incurred to bring the machine into the location and condition to have it ready for use. The machine was ready for use on 01 January; however the business only started using the machine on 01 February 2019. These transactions have not yet been recorded.

4. During the year, the owner paid a supplier from his personal bank account, R14 500. The bookkeeper recorded this transaction by processing a debit to accounts payable and a credit to bank.
5. Stationery and supplies purchased during the year amounted to R800 and R5 200 respectively. This transaction was not yet recorded.
6. A debtor, who owes the entity R2 500, has been declared insolvent. His estate paid 30 cents in the rand and the remainder must be written off as bad.
7. The allowance for doubtful debts can be calculated at 5% of outstanding debtors at year end.
8. The loan was taken out on 01 May 2019 to address cash flow issues. The interest will be paid every three months in arrears starting on 31 July 2019.
9. The owner took stationery home for personal use amounting to R150.
10. A stock count at year-end revealed that the following was on hand:

• Stationery R300
• Supplies R900

You are required to:

Prepare the Statement of Profit or Loss, the Statement of Changes in Equity and the Statement of Financial Position of Brothers Stores as at 30 June 2019.