Question

QUESTION 2 BASIC FINANCIAL STATEMENT

The following information appeared in the records of Rodeo Traders on 31 December 2019

RODEO TRADERS TRIAL BALANCE ON 31 DECEMBER 2019
	R
Land and Buildings	48 000
Vehicles at cost	20 000
Furniture at cost	4 000
Accumulated depreciation: Vehicles	4 000
Furniture	500
Fixed deposit : Nedbank	9 600
Capital	64 000
Drawings	3 200
Loan: ABSA bank	3 200
Debtors control	12 000
Creditors control	6 400
Inventory	16 000
Bank (Overdraft)	540
Allowances for credit losses	160
Sales	135 600
Cost of sales	80 000
Rent income	8 800
Interest income	480
Salaries and wages	29 520
stationary	160
Credit losses	1 200

Additional information:

1. The fixed deposit was made on 1 January 2019 at Nedbank. The interest rate is 10%per annum. Interest is payable annually.

2. The long-term loan of 15% per annum was obtained on 1 July 2019.

3. Received R160 from debtor whose account has previously been written off as irrevocable.

4. Write off the account of a debtor of R800 as irrecoverable.

5. Adjust the allowance for credit losses to 2% of outstanding debtors.

6. The rent for one (1) month is still outstanding.

7. A physical stocktake revealed the following.

1. Inventory on hand R15 600

2. Stationary R80

8. Depreciation should be provided as follows:

1. Vehicles at 20% per annum on reducing balance method.

2. Furniture at 10% per annum on straight –line method.

You are required to:

Prepare the statement of comprehensive income of Rodeo Traders for the year ended 31 December 2019.

Prepare the statement of financial position of Rodeo Traders on 31 December 2019.

.

Answer 1

Rodeo Traders
Statement of comprehensive income
For the year ended on 31 December 2019
	R	R
Revenue		135 600
Less: Cost of sales		80 400
Gross profit		55 200
Operating Expenses
Salaries and wages	29 520
Credit losses	1 200
Depreciation
Furniture	400
Vehicle	8 000
Interest Expenses	240
Stationery consumed	80
Bad Debts	800
Allowances for credit losses	80
Total expenses		40 320
Other Income:
Rent income	9 600
Interest Income	1 440
Bad Debts Recovered	160
Total other Income		11 200
Net Income		26 080

Rodeo Traders
Statement of Retained Earnings
As on 31 December 2019
	R	R
Capital, Jan 1, 2019		64 000
Add: Net Income	26 080
Less: Drawings	3 200
Capital, Dec 31, 2019		86 880

Statement of financial position
As on 31 December 2019
	R	R
ASSETS
Non-Current Assets
Land and Buildings	48 000
Vehicles	8 000
Furniture	3 100
Fixed deposit : Nedbank	9 600	68 700
Current Assets
Debtors control	11 120
Inventory	15 600
Bank (Overdraft)	540
Accrued Rent	800
Accrued Interest	960
Stationary	80	29 020
Total Assets		97 220
LIABILITIES AND EQUITY
Equity
Capital	86 880
Total Equity		86 880
Liabilities
Loan: ABSA bank	3 700
Creditors control	6 400
Interest payable	240
Total Equity and Liabilities		97 220

Working Note:

1. Calculation of Carrying amount of Vehicles and Furniture:

Particulars	Vehicles	Furniture
Cost	20 000	4 000
Less: Accumulated Depreciation	(4 000)	500
	16,000	3 500
Less: Depreciation	8,000 (R 16 000 x 20%)	400 (R 4 000 x 10%)
Carrying amount	8 000	3 100

2. Calculation of Carrying amount of Debtors Control

Particulars	Calculation	Amount ($)
Carrying amount		12 000
Less: Bad Debts		800
Less: Allowances for credit losses	12 000 x 2%	240
Add: Bad Debts Recovered		160
		11 120