Text Book Solutions - Chapter 5
Text Book Solutions - Chapter 5
Text Book Solutions - Chapter 5
year-end adjustments
Exercise 1
The following balances were extracted from the books of TKZ Stores as at 30 June 20x2.
Adjustments
1. Depreciation on vehicles must be provided for at 20% per annum using the straight-line
method.
2. Depreciation on furniture and fittings must be provided for at 15% per annum using the
reducing balance method.
Required
Prepare the journal entry for depreciation and indicate how the following will be shown in the
statement of profit or loss and other comprehensive income, as well as the statement of
financial position:
• Depreciation
Debit Credit
Debit Credit
R R
Depreciation 5 355
Accumulated depreciation on furniture and 5 355
fittings
TKZ Stores statement of profit or loss and other comprehensive income as at 30 June
20x2
Non-current assets
Adjustments
1. Isaac, who owes the business R640, has been declared insolvent and his debt must be
written off.
Required
Prepare the journal entry and indicate how the following accounts will be shown in the
statement of profit or loss and other comprehensive income and the statement of financial
position:
• Debtors control
• Credit losses
Debit Credit
R R
Credit losses 640
Allowance for credit losses 640
Current assets
R
Purchases 364 965
Carriage on sales 5 642
Discount received 3 690
Rates and taxes 4 320
Salaries and wages 67 420
Rent received 13 200
Sales 564 369
Telephone 3 622
Stationery 2 913
Carriage on purchases 3 696
Returns inwards 5 729
Furniture at cost 24 364
Allowance for credit losses 3 600
Returns outwards 2 984
Accumulated depreciation on furniture 1 464
Accumulated depreciation on plant 13 000
Repairs 995
Insurance 1 985
Credit losses 1 365
Debtors 74 965
Drawings 14 360
Plant at cost 73 000
Stock (1/3/02) 36 982
ADDITIONAL INFORMATION
5.
Statement of profit or loss and other comprehensive income of Hot Chicks for the year
ended 28 February 20x3
R R
Debit Credit
R R
Capital 500 000
Cash at bank 11 900
Buildings 360 000
Vehicles 240 000
Furniture 30 000
Salaries 77 000
Electricity and water 6 600
Sales 507 230
Carriage on sales 1 340
Purchases 341 000
Carriage on purchases 800
Sales returns and allowances 1 230
Purchases returns and allowances 1 100
Commission received 960
Rent received 5 720
Insurance 5 500
Packing material 1 600
Drawings 8 800
Credit losses 460
Opening inventory 8 000
Debtors 80 280
Creditors 101 500
Accumulated depreciation: Vehicles 52 000
Accumulate depreciation: Furniture 6 000
1 174 510 1 174 510
ADDITIONAL INFORMATION
2. Debtor P. Jabu is insolvent; his debt of R240 has to be written off as irrecoverable.
3. An employee is on leave and his January salary of R3 000 has been paid to him in advance.
5. An insurance premium of R500 per month has been paid until the end of November 20x1.
Furniture R2 500
Required
Draft a statement of profit or loss and other comprehensive income, and a statement of
financial position for Speedy Dealers.
Statement of profit or loss and other comprehensive income of Speedy Dealers for the
year ended 31 December 20x1
R R
Net sales:
506 000
(R507 230 – R1 230)
ASSETS R R
Non-current assets
538 000
Note 2
Buildings 360 000
Vehicles 156 500
Furniture 21 500
Current assets 110 050
Inventory 13 000
Packing material on hand 350
Debtors (R80 280 – R240) 80 040
Prepaid salary 3 000
Accrued income (commission
1 760
received)
Bank 11 900
648 050
OWNERS’ EQUITY AND
LIABILITIES
Owners’ equity 545 510
Liabilities
Current liabilities 102 540
Creditors 101 500
Accrued expenses
100
(delivery fees)
Income received in
advance (rent 440
received)
Accrued expense
500
(insurance)
Accumulated
Note 2: Noncurrent Cost Carrying value
depreciation
assets
R R R
Buildings 360 000 - 360 000
83 500 (52 000+ 31
Vehicles 240 000 156 500
500)
Furniture 30 000 8 500 (6 000 + 2 500) 21 500
538 000
R
Capital 39 000
Drawings 7 000
Carriage on sales 582
Insurance 150
Rates 270
Salaries and wages 7 300
Railage on purchases 540
Telephone 250
Repairs 400
Stationery and printing 208
Discount allowed 180
Discount received 120
Rent received 440
Inventory 1/1/20x4 8 370
Purchases 26 850
Sales 50 682
Returns inwards 190
Returns outwards 220
Trade debtors 6 130
Bond on land and buildings 10 000
Bank overdraft 1 200
Cash on hand 467
Trade creditors 2 375
Bills payable 3 800
Bill receivable 700
Furniture and fittings 6 400
Land and buildings 43 000
Accumulated depreciation on furniture 1 000
Allowance for credit losses 150
ADDITIONAL INFORMATION
2. On checking debtors accounts it was found that debts of R130 must be written off.
4. Calculate the depreciation on furniture and fittings at 10% per annum on the diminishing
balance method.
Required
Statement of profit or loss and other comprehensive income of Valerie Irons for the
year ended 31 December 20x4
R R
Sales 50 682
Less: Returns inwards 190 50 492
Less: Cost of sales 25 980
Opening inventory 8 370
Add: Purchases 26 850
Railage on
540
purchases
35 760
Less: Returns
220
outward
35 540
Less: Closing
9 560
inventory
Gross profit for the year 24 512
ASSETS
Non-current 2
assets Land and 43 000
furniture
buildings 4 860
and 47 860
- Drawings (R 7 000)
R46 912
The financial statements have been prepared in accordance with generally accepted
guidelines laid down in the International Financial Reporting Standards (IFRS). The
financial statements have used accounting policies that are consistent with previous
financial periods.
Note 3: Debtors
Debtors R6 130
R5 700
Debit Credit
R R
Capital 66 100
Drawings 16 000
Vehicles (at cost price) 100 000
Equipment (at cost price) 40 000
Accumulated depreciation on vehicles 36 000
Accumulated depreciation on equipment 8 000
Loan: Zuza Bank 20 000
Bank 4 300
Fixed deposit: Zuza Bank 15 000
Debtors’ control 5 200
Trading inventory (1 March 20x5) 10 000
Creditors’ control 4 100
Sales 250 000
Purchases 153 600
Carriage of purchases 4 200
Carriage on sales 550
Rent expense 15 600
Debit Credit
R R
Stationery 3 800
Insurance 4 800
Rates and taxes 350
Credit losses 400
Telephone 1 980
Water and electricity 10 800
Commission received 180
Rental income 2 200
ADJUSTMENTS
3. The loan from Zuza Bank was obtained on 31 December 20x5. Interest was payable at the
end of each six months at 15% per annum. As yet, no interest has been paid.
4. A fixed deposit was made on 1 September 20x5. The interest rate amounted to 10% per
annum. As yet, no interest has been received.
6. Insurance included an amount of R1 800 in respect of additional insurance taken out and
paid for, for the period 1 January 20x6 to 31 December 20x6.
Required
8.1 Prepare the statement of profit or loss and other comprehensive income for the year
ended 28 February 20x6.
Statement of profit or loss and other comprehensive income of Nitro Traders for the
year ended 28 February 20x6
R R
Sales 250 000
WORKINGS
2. Insurance
3. Depreciation
R23 200
4. Interest on loan
R R
ASSETS
Non-current assets Note 2 87 800
Vehicles 44 000
Equipment 28 800
Fixed deposit 15 000
Current assets
Trading inventory 17 800
Stationery on hand 200
Accrued income 750
Debtors
5 000
(R5 200 - R200)
Prepaid expenses 1 500
Bank 4 300 29 550
Non-current liabilities
Loan 20 000
Current liabilities
Creditors 4 100
Income received in
200
advance
Accrued expenses 500 4 800
R92 550
The financial statements have been prepared in accordance with generally accepted
guidelines laid down in the International Financial Reporting Standards (IFRS). The
financial statements have used accounting policies that are consistent with previous
financial periods.
Accumulated
Cost price Book value
depreciation
R R R
Note 2:
Non-current assets
Vehicles 100 000 56 000 44 000
Equipment 40 000 11 200 28 800
140 000 67 200 72 800