QUESTION ONE [20] Show how the below transactions affect the financial position of the business as represented by A = E + L. You need to clearly indicate whether the element has increased or decreased and provide the relevant amount and account that would be affected. EG. The business pays R6 333 per month for the rental of some business premises. All rentals were paid in cash during the year. No. A = E + L EG. -75 996 Bank (6 333 x 12) -75 996 Rent Expense Please use format of table above for the below transactions The following transactions occurred in the business during the year ended 31 December 2020: 1. The owner deposited R105 000 cash into the businesss bank account on 1 January 2020. 2. The business bought R450 000 worth of inventory from various suppliers during the year. 80% of these purchases were on credit and the remaining 20% were paid for in cash. 3. During the year the business paid R96 900 cash in operating costs. These costs related to goods and services that had all been used during the year. 4. The employees earned R104 000 in salaries and wages during the year. These were paid in cash by the end of the year. 5. During the year the business paid creditors R400 000. 6. The business received R1 010 000 in payments from debtors during the year. 7. The business made cash sales of R410 400 and credit sales of R957 600 during the year. 8. The cost of the inventory sold during the year was R480 000. 9. A customer had returned goods on the 15 December 2020, selling price of R2 280. The cost price was R912. The original sale had been for cash, and so the customer was refunded R2 280 in cash. The item was returned to inventory. 10. The business rents the land out. The rental is R15 200 per month. All rentals owing by tenants had been received by year-end and no amounts had been paid in advance for 2021. Page 3 of 10 QUESTION TWO [15] Hybrid Solutions have many debtors and therefore keep records of transactions with individual debtors in a Debtors Subsidiary ledger (DL) while the general ledger houses the Debtors Control account. Total of the list of debtors is reconciled at least once a month with the balance of the Debtors Control Account. The following is the summarised list of debtors at 31 August 2021 before any adjustments were made for errors and omissions: Debtors list - Balances before corrections for errors and omissions DL Folio Balance Amount - R Andy DL1 15 070 Beauty DL2 19 240 Cindy DL3 13 760 AN Other Debtors DL 4 to 79 94 880 Total of the list of debtors 142 950 All the totals from the subsidiary journals have been posted to the Debtors Control account and a debit balance of R141 500 at 31 August 2021as shown below. Errors and omissions still to be taken into account for the reconciliation of the list of debtors and the DebtorsControl account at 31 August 2021: 1. Sales of R3 680 to Cindy were incorrectly recorded in the sales journal as a sale to Andy and posted as such. 2. A receipt of R5 000 from Beauty was incorrectly recorded as R4 000 in the cash receipts journal and posted to Beautys account. 3. Cindy was granted an allowance of R400 for goods sent to her that were slightly damaged. The allowance was incorrectly recorded in the Sales journal whereas it should have been recorded in the sales returns and allowances journal. 4. Interest of R250 must be charged to the overdue part of Andys account. The interest has already been recorded in the Debtors control account. Page 4 of 10 5. Debtor Brad Pots account of R1 700 is included with AN Other debtors R94 880. Attorneys have confirmed that Brad has been declared insolvent. The balance of his account of R1 700 must be written-off as irrecoverable. The credit loss has already been recorded in the Debtors control account. Required : Take the errors and omissions into account and reconcile the list of debtors to the adjusted balance of the Debtors Control account for the period ended 31 August 2021. Present your solutions as follows: 2.1 Debtors Control account: Dr Debtors Control Account Cr 2021 31.8 Balance b/d R 141 500 2021 31.8 R 2.2 List of debtors: Debtors list DL Folio Given Balance- R Adjustments Adjusted Balance - R Andy DL1 15 070 Beauty DL2 19 240 Cindy DL3 13 760 AN Other Debtors DL 4 to 79 94 880 Total of the list of debtors 142 950 Page 5 of 10 QUESTION THREE [25] The trial balance and additional information given below were extracted from the accounting records of Warrior Traders as at 28 February 2021, the end of the financial year. Warrior Traders Pre-adjusted trial balance on 28 February 2021 Debit (R) Credit (R) Capital 162 000 Drawings 70 000 Vehicles at cost 180 000 Equipment at cost 120 000 Accumulated depreciation on vehicles 90 000 Accumulated depreciation on equipment 38 000 Trading inventory 70 000 Debtors control 32 000 Provision for bad debts 4 000 Bank 22 000 Cash float 2 000 Creditors control 40 000 Mortgage loan: Aries Bank (16% p.a.) 80 000 Sales 485 000 Cost of sales 240 000 Sales returns 5 000 Salaries and wages 84 000 Bad debts 5 000 Consumable stores 2 000 Rent expense 28 000 Motor expenses 15 000 Bad debts recovered 2 000 Telephone 7 000 Electricity and water 11 000 Bank charges 3 000 Insurance 4 000 Interest on mortgage loan 6 000 Commission income 5 000 906 000 906 000 Page 6 of 10 Adjustments and additional information: 1. According to physical stocktaking done on 28 February 2021, trading inventory on hand amounted to R68 000. 2. Consumable stores used during the financial year amounted to R1 800. 3. No entry has been made for a commission of 10% earned bit not received on 500 items that were sold for R60 each. 4. Received a cheque for R600 from an insolvent debtor, J Marsh, who was only able to pay 30% of her debt. The balance of his account must now be written off. 5. The provision for bad debts must be decreased to R1 500. 6. The telephone account for February 2021 has not yet been paid, R700. 7. The rental agreements signed with the lessor were as follows: R30 000 for the period 01 January 2020 to 31 December 2020 R36 000 for the period 01 January 2021 to 31 December 2021 8. The loan from Aries Bank was obtained on 01 September 2020. Provide for the outstanding interest. 9. The insurance total includes an annual premium of R1 800 that was paid for the period 01 June 2020 to 31 May 2021. 10. The bank statement for February 2021 reflected bank charges of R180 that have not yet been recorded. 11. The electricity and water account was debited with an amount of R1 000 for personal electricity account of the proprietor, that was paid with a business cheque 12. Provide for depreciation as follows: On equipment at 15% per annum on cost On vehicles at 25% per annum on the diminishing balance method 13. An account received from Heidi Motors to replace two tyres on the delivery vehicle of the business R2 000, has not been recorded. Required: Prepare the following for Warrior Traders for the financial year ended 28 February 2021 3.1 The statement of profit or loss and other comprehensive income; and (20) 3.2 The statement of changes in equity. (5) Page 7 of 10 QUESTION FOUR [20] The information given below was extracted from the accounting records of Total Limited, a partnership business with Glen and Murry as partners. Information: Extract from the ledger of Total Limited on 30 June 2021 R Capital : Glen 400 000 Capital: Murry 300 000 Current a/c: Glen (01 July 2020) 45 000 CR Current a/c: Murry (01 July 2020) 42 000 DR Drawings: Glen 95 000 Drawings: Murry 110 000 The following must be taken into account: 1. On 30 June 2021 the Profit and Loss account reflected a net profit of R940 000. 2. Partners are entitled to interest at 14% p.a. on their capital balances. Note: Glen decreased his capital contribution by R90 000 on 01 July 2020. This capital decrease has been recorded. 3. Partners are entitled to the following monthly salaries: Glen R13 000 for the first ten months of the financial year and R15 000 for the next two months. Murry R10 000 per month throughout the year. 4. Partner Murry is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have been taken into account. 5. The remaining profit/shortfall must be shared equally between Glen and Murry. Required: Prepare the Statement of Changes in Equity for the year ended 30 June 2021. Page 8 of 10 Use the following format: Statement of changes in equity Capital accounts: Balance at Balance at Current accounts: Appropriation Balance at Appropriations: ------ ------ Balance at Page 9 of 10 QUESTION FIVE [20] Cheetahs Limiteds Statement of Comprehensive Income for the year ended 31 December 2021 and the Statement of Financial Position as at 31 December 2021 and 2020 are as follows: Statement of Comprehensive Income R million (m) Revenue 723 Less Cost of sales (453) Gross profit 270 Less Distribution costs 71 Administrative expenses 30 (101) 169 Rental income 27 Operating profit 196 Less Interest payable (26) Profit on ordinary activities before taxation 170 Less Tax on profit on ordinary activities (36) Profit on ordinary activities after taxation 134 Retained profit brought forward from last year 123 257 Less Dividend paid on ordinary shares (60) Retained profit carried forward 197 Page 10 of 10 Statement of Financial Position as at 31 December 2020 and 2021 2020 2021 Rm Rm Non-current assets Property, plant and equipment Land and buildings 310 310 Plant and machinery 325 314 635 624 Current assets Stock 41 35 Trade debtors 139 145 180 180 Current liabilities Bank overdraft 56 89 Trade creditors 54 41 Corporation tax 23 18 133 148 Net current assets 47 32 Total assets less current liabilities 682 656 Less Non-current liabilities Debenture loans 250 150 432 506 Equity Ordinary share capital 200 300 Share premium account 40 - Revaluation reserve 69 9 Retained profit 123 197 432 506 During 2021, the business spent R67 million on additional plants and machinery. There were no other non-current asset acquisitions or disposals. There was no share issue for cash during the year. The interest payable expense was equal in amount to the cash outflow. Required: Prepare the Cash Flow Statement with the notes for Cheetahs Ltd for the year ended 31 December 2021. END OF QUESTION PAPE