Question

QUESTION 2

REQUIRED
Use the information provided below to prepare the Statement of Comprehensive Income for the year ended
29 February 2020. Use the following format as a guide:
Statement of Comprehensive Income format
Sales
Cost of sales
Gross profit
Other operating income
Gross operating income
Operating expenses
Operating profit
Interest income
Interest expense
Net profit for the year
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INFORMATION
DURAVIT TRADERS
PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020
Debit (R)
Credit (R)
Balance Sheet accounts section
Capital
1 255 000
Drawings
80 000
Land and buildings
900 000
Vehicles at cost
680 000
Equipment at cost
500 000
Accumulated depreciation on vehicles
380 000
Accumulated depreciation on equipment
160 000
Fixed deposit: Sen Bank (6% p.a.)
150 000
Trading inventory
115 000
Debtors control
130 000
Provision for bad debts
8 000
Bank
67 000
Cash float
6 000
Creditors control
110 000
Mortgage loan: Sen Bank (12% p.a.)
320 000
Nominal accounts section
Sales
1 500 000
Cost of sales
480 000
Sales returns
10 000
Salaries and wages
419 000
Bad debts
12 000
Stationery
20 000
Rates and taxes
58 000
Motor expenses
90 000
Repairs to building
17 000
Telephone
38 000
Electricity and water
46 000
Bank charges
8 000
Insurance
20 000
Interest on mortgage loan
33 000
Interest on fixed deposit
6 000
Rent income
140 000
3 879 000
3 879 000
Adjustments and additional information
1.
The electricity and water account for February 2020, R4 000, was due to be paid on 03 March 2020.
2.
A debtor, P. Smith, was declared insolvent. His insolvent estate paid R600 which represented 40% of his debt. The balance of his account must now be written off.
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3.
3.1
3.2
Stocktaking on 29 February 2020 revealed the following inventories:
Trading inventory R110 000
Stationery R2 000
4.
The provision for bad debts must be decreased by R1 500.
5.
Rent has been received up to 30 April 2020.
6.
The insurance total includes an annual premium of R6 000 that was paid for the period 01 September 2019 to 31 August 2020.
7.
Provide for outstanding interest on the mortgage loan for February 2020.
8.
Provide for outstanding interest on fixed deposit. The investment in fixed deposit was made on
01 June 2019.
9.
The credit purchase of tyres for a motor vehicle was not recorded, R5 000.
10.
10.1
10.2
Provide for depreciation as follows:
On equipment at 10% p.a. on cost.
On vehicles at 20% p.a. using the diminishing balance method.

Answer 1

29th Feb 2020	Adjustments	Closing balances
	(Amount $)	(Amount $)	(Amount $)	(Amount $)	(Amount $)	(Amount $)
	Debit	Credit	Debit	Credit	Debit	Credit
Capital		1,255,000.00				1,255,000.00
Drawings	80,000.00				80,000.00
Land and buildings	900,000.00				900,000.00
Vehicles at cost	680,000.00		5,000.00		685,000.00
Equipment at cost	500,000.00				500,000.00
Accum depr vehicle		380,000.00		61,000.00		441,000.00
Accum depr equip		160,000.00		50,000.00		210,000.00
Fixed deposits: Sen Bank (6% p.a)	150,000.00				150,000.00
Trading inventory	115,000.00			5,000.00	110,000.00
Stationery inventory			2,000.00		2,000.00
Debtors control	130,000.00		750.00	900.00	129,850.00
Provision for bad debts		8,000.00	2,400.00	-		5,600.00
Bank	67,000.00				67,000.00
cash float	6,000.00				6,000.00
Deferred rent				23,333.00		23,333.00
Prepaid insurance			3,000.00		3,000.00
Creditors control		110,000.00		12,200.00		122,200.00
Mortagage loan: Sen Bank (12% p.a)		320,000.00				320,000.00
Sales		1,500,000.00				1,500,000.00
Cost of sales	480,000.00		5,000.00		485,000.00
Sales return	10,000.00				10,000.00
Salaries and wages	419,000.00				419,000.00
Bad debts	12,000.00			1,500.00	10,500.00
Stationery	20,000.00			2,000.00	18,000.00
Rates and taxes	58,000.00				58,000.00
Motor expenses	90,000.00				90,000.00
Repairs to buildings	17,000.00				17,000.00
Telephone	38,000.00				38,000.00
Electricity and water	46,000.00		4,000.00		50,000.00
Bank charges	8,000.00				8,000.00
Insurance	20,000.00			3,000.00	17,000.00
Depreciation-equipment			50,000.00		50,000.00
Depreciation-motor vehicles			61,000.00		61,000.00
Interest on mortagage loan	33,000.00		3,200.00		36,200.00
Interest on Fixed deposits		6,000.00		750.00		6,750.00
Rent income		140,000.00	23,333.00			116,667.00
	3,879,000.00	3,879,000.00	159,683.00	159,683.00	4,000,550.00	4,000,550.00
Assuming that rent income has been received for 12 month and so 2 months will be deferred.140000/12=11667 per month so 2 months would be 23333 will be deferred)