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Show the effect of the following transactions of Avis Services on the accounting equation. Use “+”...

Show the effect of the following transactions of Avis Services on the accounting equation. Use “+” to denote an increase, “–” to denote a decrease and “0” to denote no change to the elements of the equation. Copy the table in your answer book and follow the example given. The business uses the periodic inventory system. ■ Assume that the bank balance is favourable at all times. Example: Paid the insurance premium by cheque, R500 ASSETS EQUITY LIABILITIES No. Equipment Receivables Bank = Capital Profit + Payables e.g. –R500 –R500 TRANSACTIONS 2.1.1 Purchased packing materials by cheque, R900. 2.1.2 Issued a cheque to Lin Bank for part repayment of loan, R7 000 2.1.3 Bought a computer by cheque, R18 000. 2.1.4 Received a cheque from a tenant for the monthly rental, R3 000 2.1.5 Cash from services rendered amounted to R6 000. 2.1.6 Purchased a motor cycle on credit, R50 000. 2.1.7 Issued a cheque to settle the account of a creditor, R12 000. 2.1.8 The proprietor used a business cheque to purchase a television set for his home, R11 000. 2.1.9 Purchased stationery on credit, R400. 2.1.10 The proprietor increased her capital contribution from R100 000 to R180 000 by making a direct deposit into the bank account of the business. vmc 2.2 REQUIRED Study the information given below and answer the following questions: 2.2.1 Calculate the profit or loss on the equipment sold. (State whether a profit or loss was made.) 2.2.2 Prepare the Fixed Asset Realisation account in the General ledger. INFORMATION 1. The following balances, amongst others, appeared in the ledger of Richmond Stores on 01 March 2019, the beginning of the financial year: Equipment R300 000 Accumulated depreciation on equipment R180 000 2. On 31 May 2019, equipment that cost R30 000 was sold for R5 000 cash. The accumulated depreciation on the equipment sold amounted to R22 000 on 01 March 2019. 3. Depreciation on equipment is calculated at 20% per year on cost.

Solutions

Expert Solution

2.1

Transactions ASSETS = EQUITY LIABILITIES Equipment Stationary Receivables Bank = Capital Profit + Payables
2.1.1 -R900 = R900 -R900 = +
R900 = = +
2.1.2 -R7,000 = -R7,000 -R7,000 = + -R7,000
2.1.3 R18,000 = R18,000 -R18,000 = +
-R18,000 = = +
2.1.4 R3,000 = -R3,000 R3,000 = +
-R3,000 = = +
2.1.5 -R6,000 = -R6,000 R6,000 = +
R6,000
2.1.6 R50,000 = R50,000 R50,000 = + R50,000
2.1.7 -R120,000 = -R12,000 -R120,000 = + -R12,000
2.1.8 -R11,000 = -R11,000 -R11,000 = -R11,000 +
2.1.9 R400 = R400 R400 = + R400
2.1.10 R80,000 = R80,000 R80,000 = R80,000 +

2.2.1

Equipment cost = R30,000

Accumulated Depreciation = R22,000

Depreciation for 3 months (March to May) = ((R30,000 x 20%) / 12) x3

= R1,500

Equipment book value = R30,000 - R22,000 - R1,500 = R6,500

Sales value = R5,000

Loss on sale = R6,500 - R5,000 = R1,500

2.2.2

Fixed Asset Realisation Account
Particulars Amount Particulars Amount
To Equipment R30,000 By Accumulated depreciation R23,500
By Sales R5,000
By Loss on sales R1,500
R30,000 R30,000

ekkarill92 answered 2 years ago
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