QUESTION 1: ASSET DISPOSAL (20 MARKS)
The information provided was extracted from the financial records of Caribbean Traders. Their financial year ends on the 28 February 2022.
INFORMATION
A. INCOMPLETE FIXED ASSET NOTE
| Equipment | |
| Cost | 900 000 |
| Accumulated depreciation | (370 000) |
| Carrying value | |
| Movements | |
| Additions |
120 000 |
| Disposals | |
| Depreciation | |
| Carrying value | |
| Cost |
930 000 |
| Accumulated depreciation |
B. Fixed Assets Equipment
A printer bought on 1 June 2018 for R90 000, was sold for cash on 31 August 2021 at carrying value. A new printer was bought for R120 000 on 1 September 2022.
Depreciation on equipment is written off at 20% per annum on the diminishing balance method.
REQUIRED
Calculate the accumulated depreciation and carrying value for the disposal of the printer. (8 marks)
Calculate the depreciation on equipment on the 28 February 2022. (7 marks)
Prepare the following ledger account: (5 marks)
• Asset disposal on the printer
QUESTION 2: FINANCIAL STATEMENTS (20 marks)
This following information relates to a sole trader called Confidence Traders. The financial year end is February 2022.
INFORMATION
| PRE-ADJUSTED Trial Balance on 28 February 2022 | |||
| Balance Accounts Section | Debit | Credit | |
| Capital | 775 694 | ||
| Fixed assets at carrying value [01/03/2021] | 942 260 | ||
| Loan: Emperor’s Bank [17% p.a.] | 114 000 | ||
| Fixed deposit: Diamond Bank [9% p.a.] | 240 000 | ||
| Trading Inventory | 75 000 | ||
| Debtors’ control | 86 780 | ||
| Provisions for bad debts | 4 500 | ||
| Bank | 54 000 | ||
| Cash float | 2 000 | ||
| Petty cash | 800 | ||
| Creditors’ control | 165 300 | ||
| Creditors for salaries | 13 786 | ||
| SARS: PAYE | 15 000 | ||
| Pension fund | 12 780 | ||
| Nominal Accounts Section | |||
| Sales | 1 775 500 | ||
| Cost of sales | 1 055 000 | ||
| Debtors’ allowances | 110 000 | ||
| Rent income | 169 000 | ||
| Salaries | 181 000 | ||
| Wages | 127 770 | ||
| Bad debts | 5 150 | ||
| Insurance | 27 800 | ||
| Audit fees | 44 000 | ||
| Consumable stores | 24 000 | ||
| Interest on current account | 4 100 | ||
| Discount allowed | 8 500 | ||
| Discount received | 3 200 | ||
| Sundry expenses | 68 800 | ||
| 3 052 860 | 3 052 860 |
Adjustments and Additional Information
The accounting officer is paid the same remuneration per month for the whole year. Outstanding accounting fees owed amounted to R4000.
Physical stocktaking of inventories on 28 February 2022 revealed the following:
• Consumable items to the value of R22 220 were used during the year. • Trading inventory showed a surplus of R5 500
Received a cheque for R7 620 from the insolvent estate of a debtor. His estate paid a first and final dividend of R0.30 in the rand. No entries have been made.
• The provision for bad debts must be decreased to R2 800.
• An insurance contract for R15 600 was taken out for the period 1 September 2021 to 31 August 2022.
• Depreciation of R45 000 on tangible assets must be provided for, for the year.
• Provide for outstanding interest for the loan obtained from Emperor’s Bank for February 2022.
• Interest on fixed deposit from Diamond Bank needs to be provided for February 2022.
• Rent was received for one month in advance. Adjust accordingly.
• Confidence Traders received a commission income of R50 000.
REQUIRED
Prepare the Statement of Comprehensive Income of Confidence Traders for the year ending 28 February 2022. (20 Marks)
QUESTIONS 3: PARTNERSHIPS (20 marks)
The information below was extracted from the accounting records of Nkosi Enterprises, a partnership business with Nkosi and Sikelela as partners.
| Capital: Nkosi | 480 000 |
| Capital: Sikelela | 370 000 |
| Current account: Nkosi (01 March 2021) | 15 000 |
| Current account: Sikelela (01 March 2021) | 18 000 |
| Drawings: Nkosi | 81 000CR |
| Drawings: Sikelela | 128 000CR |
The following transactions must be taken into account:
• The net profit according to Profit and Loss account amounted to R680 500
• The partners are entitled to the following salaries:
Nkosi = R12 000 pm, Sikelela = R15 000 pm
• The partners are entitled to interest on their capitals at a rate of 15% per year.
• Nkosi is entitled to a special bonus equal to 10% of his annual salary.
• Sikelela increased his capital by R50 000 on 01 January 2022.
• Profit sharing between Nkosi and Sikelela will be shared equally.
Prepare the statement of changes in equity for year ended 28 February 2022
Note: The statement must reflect changes to both capital and current account balances.
Answers to Above Questions on Financial Accounting
Answer 1: The calculation of the accumulated depreciation and carrying value for the disposal of the printer is performed as follows:
Get completed answers on the questions above on financial accounting from the accounting assignment help South Africa experts of Student Life Saviour.
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