There are external and internal users of accounting information. Which of the following will be considered as an external user of accounting information for Gizmo Traders? (a) Employees, investors and lenders of Gizmo Traders (b) Investors and lenders of Gizmo Traders as well as government and their agencies. (c) Management, employees and customers of Gizmo Traders. (d) The general public, customers of Gizmo Traders and Gizmo Traders suppliers and other trade creditors. (e) Employees and lenders of Gizmo Traders as well as the general public. (1) a,b,c and d. (2) a,b,c and e. (3) b and d only (4) a and c only. (5) b, c and d. 31 ASSIGNMENT 01 (continued) 2. Middy Garden Services provides you with the following information at 28 February 20.9. Machinery Bank Vehicles 60 000 250 000 100 000 Dale Golf Course, a client of Middy Garden Services, owes R30 000 to Middy Garden Services for garden services rendered in January 20.9 - Middy Garden Services owes Clean It Machines R5 000. What is the net asset value (equity) of Middy Garden Services as at 28 February 20.9? (1) 445 000 (2) 450 000 (3) 440 000 435 000 (5) 405 000 Which of the following statements are correct? (a) When income earned by an entity is more than its expenditure, the entity makes a profit. (b) When the income earned by an entity is less than its expenditure, the entity makes a profit. (c) The profit that an entity makes, increases the net worth of the owner. (d) The loss that an entity makes, decreases the net worth of the owner. (e) The statement of financial position measures the financial performance of an entity. (1) a,b,c,d and e. (2) a,b,c and e. (3) a,c,d, and e. (4) a,b,c and d. (5) a,c,and d. Gizmo Traders bought a new electricity generator, to be used during load shedding, from Luna Lights for R50 000 and paid for it through an electronic funds transfer (EFT). What effect will the above transaction have on the accounting equation if Gizmo Traders has a favourable bank balance? 4. Liabilities Equity +R50 000 0 +R50 000 +R100 000 Assets +R50 000 +R50 000 eaosa +R50 000 0 +R50 000 -R50 000 R50 000 FAC1502/101/3/2020 ASSIGNMENT 01 (continued) 5. On 29 March 20.9, the bookkeeper of Gizmo Traders recorded the cash sales of R5 750 for the day. Which of the following represents the correct posting for the above transaction? VAT output VAT input R750 Sales R5 000 R5 000 Journal (1) Cash receipts journal (2) Cash payments journal Cash receipts journal Cash receipts journal (5) Cash payments journal R750 R750 GEOR R750 R750 R5 000 R5 000 Gizmo Traders has a long-term loan at Vice Bank for R150 000. On 28 February 20.1, the end of the financial year, the interest on long-term loan account had a debit balance of R10 000. At the end of the financial year, it was determined that interest at a rate of 10% must still be provided for the long-term loan for four months. Which of the following is correct? General ledger account to be General ledger account to be debited credited (1) Prepaid expense Interest on long term loan 10 000 Accrued expenses 5 000 (2) Interest on long-term loan (3) Interest on long-term loan (4) Interest on long-term loan Accrued income 5 000 Income received in advance 15 000 (5) Accrued expense Interest on long-term loan 15 000 Use the information provided below, for Snow Plumbing Services, which uses the periodic inventory system, to answer question 7: Inventory (1 July 20.7). Cash purchases... Credit purchases.. Purchases returns. Freight inwards. Freight outwards. Settlement discount received........ Settlement discount granted Inventory (31 July 20.8)......... 150 000 15 000 6 000 2 000 1 200 1 800 1 700 2 500 120 000 Additional information: The owner of Snow Plumbing Services donated taps and basins to the value of R1 000 to the local crche on 16 June 20.7. No entries regarding this transaction was made in the accounting records of Snow Plumbing Services, yet. ASSIGNMENT 01 (continued) 7. The cost of sales is ... (1) 47 500 (2) 17300 (3) 10 300 (4) 19 000 (5) 18 000 Use the information provided below, for Summerhill Traders for the month of September 20.7, to answer questions 8 to 11: The accountant at Summerhill Traders was on sick leave during the month of September 20.7. Her assistant, who has limited accounting knowledge, prepared the trade receivables control account below. She has given you the following financial information for the month of September 20.7 and requested your help in identifying and rectifying her mistakes. Dr Trade receivables control B5 Cr R 20.7 Sept 30 20.7 Sept 30 Sales and VAT output Balance SJ9 bld CRJ9 15 900 9 130 cld 12 600 18 030 Balance Bank Sales returns and VAT input SRJ9 5 600 30 630 30 630 20.7 Oct 1 Balance | b/d 18 480 Additional information: In addition to the errors made in the trade receivables control account above, you have listed the following errors and omissions made by the assistant: Interest was charged on Mrs A Naidoo, a debtor, who owed Summerhill Traders R2 000. Her account was overdue by six months. Interest is charged at 12% per annum on the overdue account. The trade receivables control column and the settlement discount granted column in the cash receipts journal had totals of R9 130 and R450 respectively. Mr R Nyathi, a cash client of Summerhill Traders, retumed goods to the value of R500 to Summerhill Traders. This transaction was recorded in the sales returns journal. Miss T Luna's attorneys declared a dividend of 30c in the rand from her insolvent estate. Miss T Luna owed Summerhill Traders R1 000 on 1 September 20.7. Her outstanding debt must be written off as irrecoverable. The sales journal was undercast by R100. Mr Y Smith's cheque of R1 500 was dishonoured by the bank, due to insufficient funds in his account The trade receivables control account had a debit balance of R15 900 at 31 August 20.7. Mrs K Singh's account of R150 was written off as irrecoverable on 30 August 20.7. She paid Summerhill Traders R150 on 1 September 20.7. ASSIGNMENT 01 (continued) 8. What will be the general ledger entries for the interest charged on Miss A Naidoo's overdue account? (1) The trade receivables control account in the general ledger will be debited with R120 and the interest income account in the general ledger will be credited with R120. (2) The trade receivables control account in the general ledger will be debited with R240 and the interest income account in the general ledger will be credited with R240. (3) The interest income account in the general ledger will be debited with R120 and the trade receivables control account in the general ledger will be credited with R120. (4) The interest income account in the general ledger will be debited with R240 and the trade receivables control account in the general ledger will be credited with R240. (5) The trade payables control account in the general ledger will be debited with R240 and the interest income account in the general ledger will be credited with R240. What will be the general ledger entries be for the outstanding debt of Miss T Luna which must be written off as irrecoverable? (1) The trade receivables control account in the general ledger will be debited with R700 and the credit losses account in the general ledger will be credited with R700. (2) The trade receivables control account in the general ledger will be debited with R1 000 and the credit losses account in the general ledger will be credited with R1 000. (3) The trade receivables control account in the general ledger will be debited with R300 and the credit losses account in the general ledger will be credited with R300. (4) The credit losses account in the general ledger will be debited with R700 and the trade receivables control account in the general ledger will be credited with R700. (5) The credit losses account in the general ledger will be debited with R1 000 and the trade receivables control account in the general ledger will be credited with R1 000. What will the general ledger entries be for the credit losses recovered from Miss T Luna's insolvent estate? 10. (1) The credit losses recovered account in the general ledger will be debited with R300 and the bank account in the general ledger will be credited with R300. (2) The bank account in the general ledger will be debited with R300 and the credit losses recovered account in the general ledger will credited with R300 (3) The credit losses recovered account in the general ledger will be debited with R700 and the bank account in the general ledger will be credited with R700. (4) The bank account in the general ledger will be debited with R700 and the credit losses recovered account in the general ledger will credited with R700. (5) The trade receivables control account in the general ledger will be debited with R300 and the credit losses recovered account in the general ledger will be credited with R300 The sales journal was under cast by R100. The rectification of this error will be recorded as follows in the trade receivables control account: (1) The sales amount in the trade receivables control account will be decreased by R100 (2) The sales returns amount in the trade receivables control account will be decreased by R100 (3) The sales returns amount in the trade receivables control account will be increased by R100 (4) The balance brought down on 1 September 20.7 will be increased by R100 (5) The sales amount in the trade receivables control account will be increased by R100 Use the information provided below, for KA Furniture Stores for the month of May 20.7. to answer questions 12 to 15: KA Furniture Stores is a furniture shop operating in Ivory Park. The following information appeared in the accounting records of the business and relates to the month of May 20.7. a) The totals of the cash receipts journal and the cash payments journal was R107 000 and R202 000 respectively b) The balance in the bank account in the general ledger of KA Furniture Stores was an unfavourable balance of R40 063 c) The bank statement of KA Furniture Stores for May 20.7 had a debit balance of R44 970. The bookkeeper of KA Furniture Stores compared the cash receipts and cash payments journal for May 20.7 with the bank statement for May 20.7 and she noted the following differences: d) The following cheques issued in May 20.7 were not yet presented for payment: Cheque no: 456 20 000 Cheque no: 460 14 700 Cheque no: 467 9900 A deposit made on 31 May 20.7. for R65 000 did not reflect on the May 20.7 bank statement. The following cheques were recorded as outstanding cheques in April's bank reconciliation statement. Cheque no 436 issued on 31 March 20.7 for R11 000 Cheque no 440 issued on 2 April 20.7 for R14 000. Cheque no 441 issued on 17 April 20.7 for R1 500 Only cheque no 441 was presented for payment in May 20.7. The following debit orders were noted on the bank statement A debit order to JJ Municipality for R6 500 for the monthly water and electricity account A debit order to Yourway Insurers for R2 900 for the monthly insurance premium. A debit order to Katara Rental Properties for R9 000 for rent of the current business premises FAC1502/101/3/2020 ASSIGNMENT 01 (continued) h) The following clients made direct deposits to KA Fumiture Stores bank account: Mrs K Singh Mr S Sithole Miss Y Kruger 5 100 4 700 3500 K) On 30 November 20.6. Naidoo's Catering Service provided a catering service to KA Furniture Stores. The bookkeeper issued cheque no 220 for R15 000 to Naidoo's Catering Services on 30 November 20.6. The cheque has not yet been presented for payment. Bank charges for the month of May was R250 and interest on overdraft is R120. Mr KA Locker deposited R10 000 on 31 May 20.7 directly into the business bank account to increase his capital contribution. Mr KA Locker went to the bank to deposit R5 000 into his personal bank account. A trainee bank teller at ABC Bank deposited R5 000 into KA Furniture Stores business account. Cheque no 470 for R281 was correctly recorded in the cash payments journal but according to the bank statement received from ABC Bank the amount paid was R218. 1) m) 12. How would you rectify the error made by the bank for the incorrect amount reflecting on the bank statement of R218 instead of R281 for cheque no 470? (refer to 'm in the above information provided to you) (1) An entry will be made in the cash receipts journal with the difference of R63 (2) An entry will be made in the cash payments journal with the difference of Re3 (3) An entry will be made on the credit side of the bank reconciliation statement with the difference of R03 (4) An entry will be made in the general journal with the difference of R63. (5) An entry will be made on the debit side of the bank reconciliation statement with the difference of R63. Where would you record cheque no 220 which was not yet presented for payment? (refer to T in the above information provided to you) (1) An entry will be made in the cash payments journal of R15 000 as a cancelled cheque. (2) An entry will be made in the cash payments joumal of R30 000 as a cancelled cheque. (3) An entry will be made in the cash receipts joumal of R30 000 as a cancelled cheque (4) A entry will be made on the credit side of the bank reconciliation statement with R15 000 (5) An entry will be made in the cash receipts journal of R15 000 as a cancelled cheque. 13 37 ASSIGNMENT 01 (continued) 14. in which of the following will you record the direct deposits made by the clients of KA Furniture Stores? (refer ton in the above information provided to you) (1) Cash payments journal (2) Bank reconciliation statement (3) Cash receipts joumal. (4) General joumal. (5) Sales joumal. 15. Which of the following represents the correct bank reconciliation statement for May 20.7? (1) KA FURNITURE STORES BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.7 Credit Debit R 44 970 65 000 Debit balance as per bank statement.... Credit outstanding deposit...... Debit incorrect credit made by the bank. Debit outstanding cheques no 436. no 440. no 456. no 460. no 467 Credit balance as per bank account.. 5 000 11 900 14 000 20 000 14 700 9 900 120 470 55 470 120 470 (2) KA FURNITURE STORES BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.7 Debit balance as per bank statement........... Credit outstanding deposit...... Debit incorrect credit made by the bank. Debit outstanding cheques no 436.. no 440. no 456. no 460 no 467. Debit correction of error made by the bank. Credit balance as per bank account.... Debit Credit R LR 44 970 65 000 5 000 11 900 14 000 20 000 14 700 9 900 63 55 533 120 533 120 533 THUIJUI IUIJ 2020 (3) KA FURNITURE STORES BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.7 Credit Debit R 44 970 65 000 Debit balance as per bank statement.. Credit outstanding deposit... Debit incorrect credit made by the bank. Debit outstanding cheques no 436. no 440. no 456. no 460. no 467. Credit correction of error made by the bank.. Credit balance as per bank account... 5 000 11 900 14 000 20 000 14 700 9 900 63 55 407 120 470 120 470 (4) KA FURNITURE STORES BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.7 Debit Credit R 44 970 65 000 Debit balance as per bank statement.. Credit outstanding deposit.. Debit outstanding cheques no 456. no 460. no 467. Credit balance as per bank account..... 20 000 14 700 9 900 24 570 89 570 89 570 (5) KA FURNITURE STORES BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.7 Debit Credit R Debit balance as per bank statement... Credit outstanding deposit. Debit outstanding cheques no 436. no 440. no 456. no 460 no 467. Credit balance as per bank account...... 44 970 65 000 11 900 14 000 20 000 14 700 9 900 50 470 115 470 115 470