Chapter 6 - Adjustments

Question 6.1 - Suggested solution

Calculations:
1. Insurance
Included in debtors 160 Prepaid last year --> belings to current year
Paid on 31 Oct (current yr) 240 20 × 12
Prepaid for next year -160 20 × 8 --> belongs in next year
240

2. Rent paid
For 12 mnths 3,600 (345 ÷ 1.15 = 300 × 12) Dr Rent
VAT input 540 (3 600 × 15%) Dr VAT input
4,140 Cr Bank

3. Vehicle sold
CP 10,000
Acc. Dep. -8,000 (10 000 × 10% × 8)
Book value 2,000
Proceeds -3,000 (3 450 ÷ 1.15)
Profit -1,000

Dr Bank 3,450
Dr VAT output 450
Cr Realisation 3,000

4. Depreciation
New vehicle:
CP 18,000
Residual value -3,000
Dep. Value 15,000

Dep. (15 000 x (11 500 ÷ 200 000)) 862.50

5. Credit losses
Owes 340
Receive -110
Write off (Cr Debtors) 230
Dr VAT output -30
Dr Credit losses 200

6. Interest paid
Overdraft 2,200
Loan 2,500 (25 000 × 10%)
Income statement should be 4,700
Now -3,700
Still payable 1,000

7. VAT paid
Paid 5,000
Question 6.1 - Suggested solution

Details Pre-adjustment TB Adjustments Post-adjustment TB

Dr Cr Nr Dr Cr Dr Cr
Capital 20,000 20,000
Drawings 60,000 60,000
Interest-bearing loan 25,000 25,000
Creditors 5,000 10 500 5,500
Bank overdraft 12,500 3,5 3,450 4,140 18,080
8,12 110 5,000
Framing equipment 50,000 50,000
Delivery vehicles 28,000 5 10,000 18,000
Acc. Dep: Delivery vehicles 8,000 4,5 8,000 862.50 862.50
Acc. Dep: Framing equipment 10,000 4 8,000 18,000
Inventory (1/3/20.1) 27,500 7 23,000 27,500 23,000
Debtors 3,500 8 340 3,500
2,10 500 160
VAT input 4,100 3 540 4,640
VAT output 7,800 5,8 30 450
8,220
Petty cash 400 400
Sales 151,600 303,200 151,600
Cost of sales 72,500 23,000 49,500
Purchases 45,000 7 45,000 -
Interest paid 3,700 9,11 1,000 4,700
Admin expenses 17,460 17,460
Insurance 240 160 160 240
Insurance prepaid 2 160 160
Rent paid 3 3,600 3,600
Depreciation 4,5 8,862.50 8,862.50
Realisation account 5 10,000 8,000 -
 5 1,000 3,000
Profit on scrapping - Vehicles 5 1,000 1,000
Credit losses 8 200 200
Interest on loan accrued 9,11 1,000 1,000
VAT control 12 5,000 1,420
4,640 8,220
Net profit
391,500 391,500 150,973 150,973 241,042.50 241,042.50
Question 6.1 - Suggested solution

NEL FRAMES
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOM
FOR THE YEAR ENDING 28 FEBRUARY 20.2
R
20.2

Net sales 151,600.00

Cost of sales: (49,500.00)
Opening inventory 27,500.00
Net purchases 45,000.00
Available for sale 72,500.00
Less: Closing inventory (23,000.00)

Gross profit 102,100.00

Operating expenses: (30,362.50)

Administrative expenses 17,460.00
Rent paid 3,600.00
Depreciation (8 000 + 862.5) 8,862.50
Credit losses 200.00
Insurance 240.00

Operating profit 71,737.50

Profit on sale of vehicle 1,000.00
Finance costs:
Interest on overdraft (2,200.00)
Interest on loan (2,500.00)
Profit for the year 68,037.50
Question 6.1 - Suggested solution

NEL FRAMES
STATEMENT OF FINANCIAL POSITION
ON 28 FEBRUARY 20.2 R
Notes 20.2
ASSETS
Non-current assets: 49,137.50
Property, plant & equipment 2 49,137.50
(50 000 + 18 000 - 862.50 - 18 000)

Current assets: 28,480.00

Inventory 3 23,000.00
Petty cash 4 400.00
Trade and other debtors (3 400 + 1 420 + 160) 5 5,080.00
Total assets 77,617.50

EQUITY & LIABILITIES

Capital: 28,037.50
Opening balance 20,000.00
Profit for the year 68,037.50
88,037.50
Drawings (60,000.00)

Non-current liabilities:
Interest-bearing loans 6 20,000.00

Current liabilities: 29,580.00

Short-term portion of long-term loans 6 5,000.00
Bank overdraft 18,080.00
Trade and other creditors (5 500 + 1 000) 7 6,500.00

Total equity and liabilities 77,617.50

Chapter 6 - Adjustments

Question 6.2 - Suggested solution

Statement of profit and

Post-adjustment Statement of financial
Description Pre-adjustment trial balance Adjustments loss and other
trial balance position
comprehensive income

Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

Capital: P. Smith 438,665 438,665 438,665

Drawings: P. Smith 11,690 3,750 15,440 15,440
Loan: Absa (21%) 112,500 112,500 112,500
Fixed deposit (15%) 100,000 100,000 100,000
Land & buildings at cost 500,000 500,000 500,000
Machinery at cost 120,000 120,000 120,000
Vehicles at cost 67,500 67,500 67,500
Acc.Dep: Machinery 38,335 24,000 62,335 62,335
Acc. Dep: Vehicles 12,000 6,750 18,750 18,750
Inventory (1/8/20.4) 52,500 39,750 52,500 39,750 39,750
Debtors 47,500 2,500 45,000 45,000
Allowance: Credit losses 4,750 2,500 1,350 3,600 3,600
Bank 105,000 105,000 105,000
Creditors 102,500 102,500 102,500
Sales 558,578 558,578 558,578
Purchases 250,000 52,500 43,500 259,000 259,000
Freight on purchases 37,500 37,500 37,500
Railage in 37,500 932 38,432 38,432
Railage out 40,000 495 40,495 40,495
Water and electricity 3,750 750 3,000 3,000
Commission paid 15,000 15,000 15,000
Interest expense 3,000 20,925 23,925 23,925
Rent expense 13,500 13,500 13,500
Stationery 1,190 458 732 732
Bank charges 170 170 170
Salaries & wages 62,250 62,250 62,250
Credit losses 1,405 1,350 2,755 2,755
Consumables 21,875 3,918 17,957 17,957
Interest received 7,752 998 8,750 8,750
Rent income 6,250 1,125 2,375 7,500 7,500
Trading account 458 458 458
Stationery on hand 3,918 3,918 3,918
Consumables on hand 998 998 998
Interest receivable 20,925 20,925 20,925
Interest payable 750 750 750
Prepaid water and electricity 932 932 932
Railage in payable 495 495 495
Railage out payable 2,375 2,375 2,375
Rent receivable 1,125 1,125 1,125
Rent rec. in advance 34,800 34,800 34,800
Depreciation 4,050 4,050 4,050
Acc. Dep: Land & Buildings 25,312 25,312
Profit for the year 1,386,330 1,386,330 166,626 166,626 1,445,705 1,445,705 574,828 574,828 896,189 896,189
Chapter 6 - Adjustments

Question 6.2 - Suggested solution

Calculations

3. Interest receivable
100 000 × 15% × 7/12 8,750
Already received in income statement 7,752
Must still receive 998

4. Interest payable
Loan - 112 500 × 21% 23,625
Bank overdraft interest 300
Total interest for year 23,925
Already paid in income statement 3,000
Must still pay 20,925

5. Allowance: Credit losses

Mr Jan Spies 1,200
Mrs Sannie Brendan 1,500
Mr Piet de Vries 900
Outstanding debtors (47 500 - 2 500) 3,600
Current allowance (4 750 - 2 500) 2,250
New allowance 3,600
Increase allowance: Dr Credit losses (1,350)
Cr Allowance: Credit losses

6. Water and electricity

Paid in advance - Aug to Oct (3 000 × 3/12) 750

8. Rent received
S. Schoeman (375 × 12) 4,500
R. van Rooi (250 ×12) 3,000
Total for year should be 7,500

Already received in income statement 6,250

Less: Schoeman paid in advance (375 × 3) (1,125)
Amount received for current year 5,125
Total for year should be 7,500
R. van Rooi still owes (2,375)

9. Depreciation
Buildings (135 000 × 3%) 4,050
Machinery (120 000/5) 24,000
Vehicles (67 500 × 10%) 6,750
34,800
Chapter 6 - Adjustments

Question 6.3 - Suggested solution

1 Dr -
Cr Sales 500,000

Dr Sales 2,000
Cr Settlement discount 2,000

Calculating closing inventory:

SP 100 250,000
CP 70 175,000
GP 30 75,000

Cost of sales 175,000

Opening inventory 50,000
Purchases 169,000 (170 000 - 1000)
Closing inventory (44,000)

Dr Cost of sales 50,000

Cr Inventory 50,000

Dr Cost of sales 169,000

Cr Purchases 169,000

Dr Inventory 44,000
Cr Cost of sales 44,000

Dr Electricity 250
Cr Electricity payable 250

Dr Rent expense 3,000

Cr Rent paid in advance 3,000

Dr Damaged books (Liab.) 1,000

Cr Bank 1,000

Dr Inventory written-off 1,000

Cr Purchases 1,000

Dr ---
Cr Creditors 18,000

Dr Credit losses 10,000

Cr Debtors 10,000

Dr Credit losses 5,000

Cr Allowance: credit losses 5,000

Question b
Dr Debtors 100,000
Cr Sales 98,000
Cr Allowance: settlement discount 2,000
Chapter 6 - Adjustments

Question 6.4 - Suggested solution

Pre-adjustment Adjustments Post-adjustment SCI SFP

trial balance trial balance
DR CR No DR CR DR CR DR CR DR CR
Capital 50,000 50,000 50,000
Drawings 15,250 15,250 15,250
Land and buildings 85,000 85,000 85,000
Vehicles 15,000 8 5,000 10,000 10,000
Acc dep: Vehicles 9,000 8 4,000 3,000 8,000 8,000
Bonds 60,000 5 10,000 50,000 50,000
VAT input 2,500 2 2,500 2,500
VAT output 10,000 8 30 375 10,345 10,345
VAT control 4,000 4,000 4,000
Debtors control 4,550 2 460 4,090 4,090
Bank 250 2,5 230 10,000 6,645 6,645
8 2,875
Inventory 6,250 7 1,999 6,250 1,999 1,999
Rent received 11,000 4 1,000 12,000 12,000
Fuel 17,000 17,000 17,000
Interest paid - bond 11,000 5 1,000 12,000 12,000
Interest paid - bank overdraft 365 365 365
Insurance 11,600 1 5,500 6,100 6,100
Provision for credit losses 500 2 200 409 409
Admin expenses 3 109
Purchases 14,200 14,200 14,200
Sales 53,900 53,900 0 0
100,365 100,365 100,365
Prepaid expenses
Credit losses 1 5,500 5,500 5,500
3 109 109 109
Income receivable 4 1,000 1,000 1,000
Accrued expenses 5 1,000 1,000 1,000
Depreciation 8 3,000 3,000 3,000
Asset realisation 8 5,000 4,000
8 1,500 2,500
Profit on scrapping (veh.) 8 1,500 1,500 1,500
Cost of sales 7 6,250 1,999 58,151 58,151
53,900
Profit for the year 2,940 2,940
240,865 240,865 96,593 96,593 240,264 240,264 113,865 113,865 129,339 129,339
-
Calculations:
1) Insurance 6 600/12 = 550 per month
Paod in advance for 10 months 5,500

2) Insolvent debtor owes VAT incl. 230 × 2 460

Write off VAT incl. 230

VAT excl. 230/1.15 200
VAT 30

3) Adjust allowance (4 550 - 460) × 0.10 409

Currently 500 - 200 300
Adjustment (increase) 109

4) Rental income 1 000 × 12 12,000

Currently 11,000
Still receivable 1,000

5) Interest on mortgage 60 000 × (0.17 + 0.03) 12,000

Currently 11,000
Still owing 1,000

8) Dep Per vehicle:

Cost 15 000/3 5,000
Dep 5 000 × 20% 1,000

Vehicle sold Cost 5,000

Acc dep 3 000 + 1 000 (4,000)
Carrying amount 1,000
Proceeds 2 875/1.15 2,500
Profit (1,500)
Chapter 6 - Adjustments

Question 6.5 - Suggested solution

Statement of profit and

Statement of financial
Description Pre-adjustment TB Adjustments Post-adjustment TB loss and other
position
comprehensive income

Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
Sales 680,000 680,000 680,000
Cost of sales 448,820
Purchases (calc 1)+(3) 450,000 6,800 10,480 446,320
Freight on purchases 2,500 2,500
Telephone & fax 1,844 1,844 1,844
Repairs & maintenance (2) 23,300 18,700 4,600 4,600
Rent paid (calc 8) 8,520 690 7,830 7,830
Rates & taxes 230 230 230
Salaries & wages 15,400 15,400 15,400
Insurance (calc 7) 315 150 165 165
Printing & stationery 3,330 150 3,180 3,180
Retained earnings (balancing) 40,661 40,661 177,686 137,025
Capital (28/2/20.5) 850,000 850,000 850,000
Buildings 880,000 880,000 880,000
Equipment (2) 158,600 18,700 177,300 177,300
Acc.Dep: Equip (1/3/20.4) (calc 9) 25,800 20,855 46,655 46,655
Cash on hand 2,100 2,100 2,100
Bank (overdraft) (4) 21,000 3,500 17,500 17,500
Inventory (28/2/20.5) (3) 6,800 8,600 6,800 8,600 8,600
Debtors (5) 48,350 2,750 45,600 45,600
Allow: Credit losses (5)+(calc 6) 1,000 2,750 2,890 1,140 1,140
Creditors 64,000 64,000 64,000
Accrued expenses (RSL) (calc 7) 150 150 - -
Drawings (calc 1) 1,880 1,880 1,880
Consumables on hand 150 150 150
Credit losses recovered (4) 3,500 3,500 3,500
Credit losses (calc 6) 2,890 2,890 2,890
Prepaid rent (calc 8) 690 690 690
Depreciation (calc 9) 20,855 20,855 20,855

1,641,950 1,641,950 66,965 66,965 1,662,795 1,662,795 683,500 683,500 1,116,320 1,116,320
-
Chapter 6 - Adjustments

Question 6.5 - Suggested solution

Calculations

1. Drawings

% R
CP 100.0 ? 100 × 2,115 = 1,880
Profit 12.5 112.5
SP 112.5 2,115

Cr Purchases with R1 880

6. Allowance: Credit losses

Debtors 1,140
New allowance 1,140 (Cr)
Current allowance (-1 000 + 2 750) 1,750 (Dr)
Increase allowance: Dr Credit losses 2,890
Cr Allowance: Credit losses

7. Insurance

% R
Prev. yr 100 ? 100 × 315 = 150
Curr. yr 110 210
Total 210 315

Thus the whole amount of Accrued Expenses (R150) is for insurance

Current yr = 150 × 110% = 165 (or 315 - 150 = 165)

8. Rent paid

5y + (8y × 115%) = R8 520

5y + 9.2y = R8 520
14.2y = R8 520
y = 8 520/14.2 = R600 per month (for 1st 5 months)

R600 × 115% = R690 per month (for next 8 months)

13th month = R690

9. Depreciation

R158 600 - R25 800 = R132 800 × 15% = 19,920

R18 700 × 15% × 4/12 (see point 2) = 935
20,855
Chapter 6 - Adjustments

Question 6.6 - Suggested solution

Description Pre-adjustment TB Adjustments Post-adjustment TB Income statement Balance sheet

Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
Capital 8,020 8,020 8,020
Drawings 500 500 500
Land & buildings 8,000 8,000 8,000
Furniture 5,700 5,700 5,700
Vehicles (4) 5,000 1,000 6,000 6,000
Acc.Dep: Furniture (calc) 1,884 144 1,740 1,740
Acc.Dep: Vehicles (calc) 1,600 75 1,675 1,675
Inventory (28/2/20.2) 3,500 3,500 3,500
Creditors (3) 7,600 170 7,430 7,430
Bank 2,300 2,300 2,300
Debtors 5,950 5,950 5,950
Allow: Credit losses 800 800 800
Trading acc (GP) (1)+(4) 260 14,000 1,000 14,740 14,740
Dep: Vehicles (calc) 750 75 825 825
Dep: Furniture (calc) 684 144 540 540
Rent received (7) 2,800 600 3,400 3,400
Credit losses 400 400 400
Interest received (5) 840 60 780 780
Wages (5) 1,300 100 1,200 1,200
Water & lights (2)+(3) 3,200 120 170 3,150 3,150
Accrued Water & lights (2) 120 120 120
Interest rec. in advance (5) 60 60 60
Prepaid wages (5) 100 100 100
Rent receivable (7) 600 600 600

Profit for the year 12,805 12,805

37,544 37,544 2,269 2,269 38,765 38,765 18,920 18,920 32,650 32,650

Depreciation: Vehicles Depreciation: Furniture

R5 000 × 15% 750 Acc.Dep. (open. bal. = 1 884 - 684) 1,200
R1 000 × 15% × 6/12 75
825 R5 700 - R1 200 = R4 500 × 12% 540
Too much dep. written off (684 - 540) 144
Already brought into account 750
Must still be brought into account 75
Question 6.7 - Suggested solution
only one side of the entry is wrong
Uno Shops
General journal
20.4
Dec 31 Equipment (TB) Dr 55,600
Returns in (TB) Dr 5,000
Water en electricity (TB) Dr 14,300
Lease expenditure (TB) Dr 17,400
Telephone (3) Dr 700
Returns out (TB) 7,200
Purchases (1) 2,000
Lease expenditure (2) 900
Capital (7) 10,000
Suspense account 72,900

Uno Shops
Statement of financial position
At 31 December 20.4
R
ASSETS
Non-current assets: 273,800
Land & Buildings 160,000
Vehicles 86,000
Equipment 27,800

Current assets: 104,500

Inventory 40,500
Trade debtors 42,000 5,6
Bank 22,000

Total assets 378,300

EQUITY & LIABILITIES

Equity:
Capital 285,670
Opening balance 112,800
Additions 10,000 7
Add: Profit for the year (calc.) 166,670
Less: Drawings (3,800)

Liabilities: 92,630
Trade creditors (87 500 + 5 130) 92,630 4

Total Equity & Liabilities 378,300

Profit calculation
Income: 369,600
Returns out 3,600
Sales (364 000 + 2 000) 366,000 6

Expenses: 202,930
Returns in 2,500
Water + electricity 7,150
Salaries 23,750
Telephone (4 200 + 700) 4,900 3
Stationery 3,700
Purchases (147 000 - 2 000 + 5 130) 150,130 1,4
Rent expense (8 700 - 900) 7,800 2
Credit losses 3,000 5

166,670
Chapter 6 - Adjustments

Question 6.8 - Suggested solution

Statement of profit
Pre-adjustment trial Post-adjustment trial and loss and other Statement of
Details Adjustments
balance balance comprehensive financial position
income
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
Capital 83,600 83,600 83,600
Drawings 12,000 12,000 12,000
Land and buildings 24,000 24,000 24,000
Furniture at carrying amount 6,000 600 5,400 5,400
Motor vehicles at carrying amount 15,000 1,800 13,200 13,200
Inventory 28,000 24,000 28,000 24,000 24,000
Purchases 68,000 68,000
Purchases returns 4,000 4,000
Sales 3,000 3,000
Sales returns 92,000 92,000 92,000
Freight on purchases 6,000 6,000 6,000
Rent income 7,800 600 7,200 7,200
Salaries and wages 11,000 1,000 12,000 12,000
Commission income 1,000 80 1,080 1,080
Water en electricity 1,000 100 900 900
Bank 12,800 12,800 12,800
Trade debtors 5,800 200 5,600 5,600
Allowance for credit losses 400 200 80 280 280
Trade creditors 3,800 3,800 3,800
Cost of sales (iro inventory) 28,000 24,000 4,000 71,000
Depreciation 2,400 2,400 2,400
Rent received in advance (7 800/13) 600 600 600
Salaries and wages accrued 1,000 1,000 1,000
Prepaid water en electricity 100 100 100
Commission receivable 80 80 80
Credit losses 80 80 80

192,600 192,600 56,460 56,460 193,560 193,560 92,380 100,280 97,180 89,280
Profit for the year 7,900 7,900
100,280 100,280 97,180 97,180

Depreciation
Furniture:
Carrying amount 6,000
Dep = 10% 600

Vehicles
Carrying amount 15,000
Dep = 12% 1,800
2,400

Allowance: Credit losses

Debtors (5 800 - 200) 5,600

Allowance should be (5 600 × 5%) 280

Allowance is (400 - 200) 200
Increase allowance 80
Chapter 6 - Adjustments

Question 6.9 - Suggested solution

R R
No. Account DR CR

1 Salaries 2,250
Salaries payable 2,250
Salaries not yet paid

2 Rent paid in advance 3,000

Rent expense 3,000
Rent paid in advance

3 Interest received 1,500

Interest received in advance 1,500
Interest received in advance

4 Rent income receivable 750

Rent income receivable 750
Rent income for December not yet received

5 Opening inventory - SPL (Cost of Sales) 16,500

Inventory - SFP 16,500
Inventory - SFP 12,750
Closing inventory - SPL (Cost of Sales) 12,750
Record closing inventory

6 Allowance for credit losses 2,500

Debtors 2,500
Credit losses written off

7 Allowance for credit losses 2,150

Credit losses 2,150
Adjustment for allowance for credit losses

8 Depreciation: Equipment 15,000

Depreciation: Vehicles 20,000
Accumulated depreciation: Equipment 15,000
Accumulated depreciation: Vehicles 20,000
Record depreciation

Calculations

Allowance for credit losses

Debtors given 112,500

Credit losses (2,500)
Balance 110,000

Allowance for credit losses 11,250

Credit losses (2,500)
Balance 8,750

Debtors balance 110,000

Allowance (110 000 × 6%) 6,600

Current balance 8,750

Ending balance 6,600
Reversal 2,150
Chapter 6 - Adjustments

Question 6.10 - Suggested solution

Simba Traders
General Journal

20.8
Feb 28 Depreciation 10,000
Accumulated depreciation: Equipment 10,000
Depreciation written off
Dep = (205 000 - 140 000 - 35 000) × 10% = 3 000
New = 140 000 × 10% × 6/12 = 7 000
28 Depreciation 30,000
Accumulated depreciation: Equipment 30,000
Depreciation written off
Dep = (150 000 - 3 000) × 20% = 29 400
Sold = 3 000 × 20% = 600
28 Acc. Depreciation: Equipment (3 000 × 20% ×3) 1,800
Debtor: Equipment 1,000
Loss on sale of equipment 200
Equipment 3,000
Loss on sale of equipment
28 Trade creditors 1,500
Purchases returns 1,500
Closing inventory recorded
28 Purchases 32,500
Carriage on purchases 2,600
Customs duty 4,800
Trade creditors 32,500
Bank 7,400
Goods purchased
28 Trade debtors 6,400
Sales 6,400
Sales on credit at 20% trade discount
28 Trading inventory 78,000
Trading account 78,000
Trading inventory on hand at yearend
28 Trading account 73,000
Trading inventory 73,000
Transfer of opening inventory
28 Packing material on hand 4,800
Question 6.10 - Suggested solution

Packing material consumed 4,800

Packing material on hand at yearend
28 Wages and salaries 10,400
Wages and salaries accrued 5,750
PAYE payable/control 2,850
Pension payable/control 1,600
UIF payable/control 200
Salary not recorded in journal
28 Loan: BB Bank 24,000
Short-term portion of long-term loan 24,000
Transfer amount payable within 12 months
to current liabilities
28 Interest on loan (calc.8) 6,760
Interest on loan payable 6,760
Interest on loan still payable
28 Prepaid insurance 1,200
Insurance 1,200
Insurance paid in advance for 4 months
28 Prepaid rent (calc.10) 2,000
Rent expense 2,000
Rent paid in advance for one month
28 Bank charges 190
Interest received on current account 30
Bank 160
Recording of items on bank statement
Question 6.10 - Suggested solution

Simba Traders
Statement of profit or loss and other comprehensive income
For the year ending 28 February 20.8 20.8
R

Net sales 671,260

Gross sales (725 260 + (8 000 × 80%)) 731,660 5
Less: Sales returns -60,400
Cost of sales -438,200
Opening inventory 73,000
Purchases (383 300 - 1 500 + 32 500) 414,300 3,4
Carriage on purchases (7 700 + 2 600) 10,300 4
Customs duty (13 800 + 4 800) 18,600 4
Available for sale 516,200
Less: Closing inventory -78,000 6
Gross profit 233,060
Other income: 48,600
Rent income (20 800 - 2 000) 18,800 10
Commission income 29,800
281,660
Operating expenses: -231,080
Property taxes 11,850
Insurance (15 800 - 1 200) 14,600 9
Packing material (17 900 - 4 800) 13,100 6
Salaries and wages (123 700 + 10 400) 134,100 7
Bank charges (2 100 + 190) 2,290 11
Depreciation (3 000 + 7 000 + 30 000) 40,000 1,2
Carriage on sales 14,940
Loss on sale of asset 200 2

Operating profit 50,580

Interest income (590 + 30) 620 11
Interest expense -17,640 8
Profit for the year 33,560
Question 6.10 - Suggested solution

Simba Traders
Statement of financial position
On 28 February 20.8 20.8
R
ASSETS
Non-current assets: 589,290
Land and buildings 370,490
Equipment at carrying amount (150 000 - 3 000 - 60 000 + 1 800 - 30 000) 58,800 2
Vehicles at carrying amount (205 000 - 35 000 - 10 000) 160,000 1

Current assets: 179,400

Inventory 78,000 6
Packing material 4,800 6
Trade debtors (88 000 + 6 400) 94,400 5
Debtor: Equipment 1,000 2
Prepaid insurance 1,200 9

768,690
EQUITY AND LIABILITIES
Equity:
Capital 413,970
Opening balance 380,410
Add: Profit for the year 33,560

Non-current liabilities:
Loan: BB Bank (120 000 - 24 000) 96,000 8

Current liabilities: 258,720

Trade creditors (177 000 - 1 500 + 32 500) 208,000 3,4
Bank overdraft (2 600 + 4 800 + 190 - 30) 7,560 4
Short-term portion of long-term loan 24,000 8
Salaries and wages accrued 5,750 7
LBS payable/control 2,850 7
Pension payable/control 1,600 7
UIF payable/control 200 7
Rent received in advance 2,000 10
Interest on loan accrued 6,760 8

768,690
Chapter 6 - Adjustments

Question 6.10 - Suggested solution

Calculations
8. Interest on loan
March - May 20.7 ((120 000 + 24 000) × 14% × 3/12) 5,040
June 20.7 - Feb 20.8 (120 000 × 14% × 9/12) 12,600
17,640
Already recorded (10,880)
Still owing 6,760

10. Rental income:

6y + (5y + 1 000) = R20 800
5y + 9.2y = R8 520
11y + 1 000 = R20 800
y = (20 800-1 000)/11 = R1 800 per month (for 1st 6 months)

R1 800 + R200 = R2 000 per month (for next 5 months)

13th month = R2 000

Chapter 6 - Adjustments

Question 6.11 - Suggested solution

Dr Cr

Capital 1,156,000
Drawings 30,000
Land 970,000
Vehicles 100,000
Acc. Depreciation: Vehicles 20,000
Bank 10,000
Services rendered 290,000
Consumable 40,000
Salaries 264,000
Maintenance 70,000
Telephone 2,000

1,476,000 1,476,000
Question 6.12 - Suggested solution

Input VAT 27,260.87 (209 000 × 15/115)

Inventory 27,260.87
Take input VAT out of inventory

Sales 10,222.83 (78 375 × 15/115)

Output VAT 10,222.83
Take output VAT out of sales

Cost of sales 54,521.74 (209 000 × 100/115 × 30%)

Inventory 54,521.74
Record cost of sales as per
perpetual inventory system