question archive QUESTION TWO [20] Sifiso Phakathi has a general dealer store in the Ixopo area that he has been operating for a few years

QUESTION TWO [20] Sifiso Phakathi has a general dealer store in the Ixopo area that he has been operating for a few years

Subject:AccountingPrice: Bought3

QUESTION TWO [20]

Sifiso Phakathi has a general dealer store in the Ixopo area that he has been operating for a few years. The following information was provided by Sifiso for the financial year ended 28 February 2021:

 

 

Pre-adjustment trial balance at 28 February 2021

Debit - R

Credit - R

Land and buildings

604 000

 

Equipment at cost

195 000

 

Accumulated Depreciation: Equipment 1 March 2020

 

32 100

Inventory: trade goods – 1 March 2020

109 500

 

Trade receivables

81 630

 

Bank

20 220

 

Capital - Sifiso

 

626 400

Drawings

130 530

 

Long term borrowing: Niks Finance (15% per year)

 

65 000

Trade payables

 

69 400

Sales

 

853 470

Rent income

 

80 400

Purchases returns

 

5 000

Purchases

409 660

 

Sales returns

6 800

 

Settlement discounts received

 

5 150

Settlement discounts granted

4 720

 

Advertising

14 800

 

Consumables

10 960

 

Insurance

5 850

 

 

Other operating expenses

136 000

 

Interest on borrowings

7 250

 

 

1 736 920

1 736 920

 

 

 

Additional information:

  1. A physical stock-take on 28 February 2021 revealed the following:
    • Trade goods on hand was valued at R96 000; and
    • Consumable stores on hand were R1 830.

 

  1. Advertising included an amount of R 2 160 for advertisement to appear in print from 1 November 2020 to 30 April 2021.

 

  1. Depreciation on equipment is provided at 10% per year using the reducing balance method. Note that equipment was purchased on 31 July 2020 for

R30 000. The purchase was recorded and is included in the above balances.

 

 

  1. The long term borrowing from Niks’ Finance was granted on 1 May 2020. The borrowing is payable in full on 31 April 2025. Provide for the outstanding interest.

 

  1. The tenant has already paid the rent for March 2021. Note that the monthly rent was increased by 10% effective on 1 December 2020.

 

  1. A debit order of R800 for the insurance of Sifiso’s home was erroneously allocated to the business insurance account. A correction is required.

 

  1. A debtor who owed R1 600 has been declared insolvent and his estate paid out 70 cents in the Rand on all debts. The balance of the account must be written off as irrecoverable. Entries must be made to record the receipt of money from the estate and the write-off of the remaining balance.

 

  1. Create an allowance for credit losses equal to 5% of remaining outstanding debtors.

 

 

Required:

Prepare the following for Sifiso’s Stolo for the financial year ended 28 February 2021:

The statement of profit or loss and other comprehensive income.

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