Question 1:
The trial balance, adjustments and additional information given below were extracted from the accounting records of Whetstone Stores on 28 February 2022, the end of the financial year.
| WHETSTONE STORES | ||
| PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2022 | ||
| Debit (R) | Credit (R) | |
| Balance sheet accounts section | ||
| Capital | 3 759 100 | |
| Drawings | 310 000 | |
| Land and buildings | 2 840 000 | |
| Vehicles at cost | 2 100 000 | |
| Equipment at cost | 1 500 000 | |
| Accumulated depreciation on vehicles | 1 200 000 | |
| Accumulated depreciation on equipment | 840 000 | |
| Investment: Med Bank (8 % p.a.) | 450 000 | |
| Debtors control | 444 000 | |
| Provision for bad debts | 22 000 | |
| Bank | 602 700 | |
| Creditors control | 418 000 | |
| Loan: Med Bank (18% p.a.) | 750 000 | |
| Nominal accounts section | ||
| Sales | 5 600 000 | |
| Opening stock | 200 000 | |
| Purchases | 2 150 000 | |
| Purchases returns | 118 000 | |
| Sales returns | 60 000 | |
| Salaries and wages | 1 234 000 | |
| Bad debts | 42 000 | |
| Stationery | 68 000 | |
| Rates and taxes | 178 000 | |
| Motor expenses | 300 000 | |
| Repairs and maintenance | 52 000 | |
| Telephone | 100 000 | |
| Electricity and water | 150 000 | |
| Bank charges | 18 000 | |
| Advertising | 194 000 | |
| Interest on mortgage loan | 130 000 | |
| Interest on investment | 32 000 | |
| Rent income | 383 600 | |
| 13 122 700 | 13 122 700 | |
Adjustments and additional information
1. According to stocktaking done on 28 February 2022, the following were on hand:
1.1 Trading inventory R240 000
1.2 Stationery R6 000.
2. A debtor who was declared insolvent paid R4 200, which represented 60% of the amount owed, to Whetstone Stores. The amount that was received has been recorded but the rest of his account must
now be written off.
3. The provision for bad debts must be adjusted to R20 000.
4. Interest is outstanding on the investment, which was made on 01 February 2021. The maturity date is
31 July 2022.
5. The long-term loan from Med Bank was obtained on 01 March 2021. A repayment of R100 000 was
made and recorded on 31 August 2021. Provide for the outstanding interest. Interest is not capitalised.
6. An account for R2 000 to replace broken window panes has been received. This has not been
recorded and payment was due to be made during March 2022.
7. The advertising amount includes a contract for R30 000, in respect of monthly advertisements of equal
value, that was taken for the period 01 December 2021 to 31 May 2022.
8. Rent has been received for the period 01 March 2021 to 31 March 2022. Note: Rent was increased
by 10% with effect from 01 September 2021.
9. The telephone account for February 2022 was due to be paid on 02 March 2022, R10 000.
10. Provide for depreciation as follows:
10.1 On vehicles at 20% p.a. on the diminishing balance.
10.2 On equipment at 10% p.a. on cost.
Question 2:
Use the information provided below to prepare the Statement of Changes in Equity for the year ended 28
February 2022.
The information given below was extracted from the accounting records of Clairwood Traders, a partnership business with Claire and Woody as partners.
Balances in the ledger as at 28 February 2022
| Debit (R) | Credit (R) | |
| Capital: Claire | 500 000 | |
| Capital: Woody | 400 000 | |
| Current a/c: Claire (01 March 2021) | 100 000 | |
| Current a/c: Woody (01 March 2021) | 40 000 | |
| Drawings: Claire | 500 000 | |
| Drawings: Woody | 300 000 |
The following must be considered:
(a) The net profit for the financial year ended 28 February 2022 amounted to R900 000.
(b) The partnership agreement makes provision for the following:
■ Interest on capital must be provided at 15% per annum on the balances in the capital accounts. Note: Claire increased her capital by R100 000 on 01 September 2021. On the same date, Woody decreased
his capital by R100 000. The capital changes have been recorded.
■ The partners are entitled to the following monthly salaries:
Claire R7 000
Woody R6 000
Note: The partners’ salaries were increased by 12% with effect from 01 November 2021.
■ Claire is entitled to a bonus equal to 80% of her salary for February 2022.
■ Claire and Woody share the remaining profit or loss equally.
Question 3:
Prepare the Statement of Financial Position as at 28 February 2022. The notes to the financial statements are not required. Show workings in the space provided in the answer book.
The trial balance, adjustments and additional information given below were extracted from the accounting records of Metro Limited on 28 February 2022, the end of the financial year.
METRO LIMITED PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2022
| Debit (R) | Credit (R) | |
| Balance sheet accounts section | ||
| Ordinary share capital (100 000 shares) | 2 000 000 | |
| Retained earnings | 620 000 | |
| Vehicles at cost | 1 800 000 | |
| Equipment at cost | 1 200 000 | |
| Accumulated depreciation on vehicles | 900 000 | |
| Accumulated depreciation on equipment | 380 000 | |
| Trading inventory | 700 000 | |
| Debtors control | 320 000 | |
| Provision for bad debts | 40 000 | |
| Bank | 1 820 000 | |
| Cash float | 20 000 | |
| Creditors control | 400 000 | |
| South African Revenue Services: Company tax | 100 000 | |
| Long-term loan: Aries Bank (16% p.a.) | 800 000 | |
| Nominal accounts section | ||
| Sales | 4 850 000 | |
| Cost of sales | 2 400 000 | |
| Sales returns | 50 000 | |
| Salaries and wages | 840 000 | |
| Bad debts | 50 000 | |
| Consumable stores | 20 000 | |
| Rent expense | 280 000 | |
| Motor expenses | 150 000 | |
| Bad debts recovered | 20 000 | |
| Telephone | 70 000 | |
| Electricity and water | 110 000 | |
| Bank charges | 30 000 | |
| Insurance | 40 000 | |
| Interest on mortgage loan | 60 000 | |
| Commission income | 50 000 | |
| 10 060 000 | 10 060 000 |
Adjustments and additional information
1. According to physical stocktaking done on 28 February 2022, trading inventory on hand amounted to
R680 000.
2. Consumable stores unused according to stocktaking amounted to R2 000 on 28 February 2022.
3. No entry has been made for a commission of 10% earned but not received on 500 items that were sold
for R600 each.
4. Received a cheque for R6 000 from an insolvent debtor, J. Marsh, who was only able to pay 30% of her debt. The balance of her account must now be written off. No entries were made for these
transactions.
5. The provision for bad debts must be decreased to R15 000.
6. The telephone account for February 2022 was due to be paid on 03 March 2022, R7 000.
7. The rental agreements signed with the lessor (landlord) are as follows:
R300 000 for the period 01 January 2021 to 31 December 2021, and
R360 000 for the period 01 January 2022 to 31 December 2022.
Make the necessary adjustment.
8. The loan from Aries Bank was obtained on 01 September 2021. Provide for the outstanding interest.
(Interest is not capitalised.) Loan repayments (excluding interest) are expected to amount to R120 000 in the next financial year.
9. The insurance total includes an annual premium of R18 000 that was paid for the period 01 June 2021
to 31 May 2022.
10. The bank statement for February 2022 reflected bank charges of R1 800 that have not been recorded.
11. The electricity and water statement for February 2022 included an amount of R10 000 for a deposit
required by the municipality. This was recorded in the water and electricity account.
12. Provide for depreciation as follows:
12.1 On equipment at 15% per annum using the fixed instalment method.
12.2 On vehicles at 25% per annum on the carrying value (as at 01 March 2021).
13. An account received from Heidi Motors to replace the tyres on the delivery vehicle of the business,
R20 000, has not been recorded.
14. The profit after tax for the year ended 28 February 2022, after taking the above into account, was
R272 790.
15. The company tax for the financial year amounted to R116 910.
16. The directors proposed a final dividend of 36 cents per share.
Question 4:
Use the information provided below to prepare the Cash Flow Statement of Nascar Limited for the year ended 31 December 2021.
The following Information was extracted from the records of Nascar Limited for the past two years:
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER:
| 2021 (R) | 2020 (R) | ||
| Sales | 18 560 000 | 12 000 000 | |
| Cost of sales | (12 800 000) | (7 500 000) | |
| Gross profit | 5 760 000 | 4 500 000 | |
| Operating expenses | (2 912 000) | (2 120 000) | |
| Depreciation | 300 000 | 260 000 | |
| Other operating expenses | 2 612 000 | 1 860 000 | |
| Operating profit | 2 848 000 | 2 380 000 | |
| Interest on mortgage loan | (240 000) | (720 000) | |
| Profit before tax | 2 608 000 | 1 660 000 | |
| Company tax | (782 400) | (498 000) | |
| Profit after tax | 1 825 600 | 1 162 000 |
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
| 2021 (R) | 2020 (R) | ||
| ASSETS | |||
| Non-current assets | 24 641 600 | 24 440 000 | |
| Fixed assets | 24 641 600 | 24 440 000 | |
| Current assets | 3 560 000 | 3 360 000 | |
| Inventories (all Trading inventory) | 1 200 000 | 2 500 000 | |
| Accounts receivable | 400 000 | 640 000 | |
| Cash & cash equivalents | 1 960 000 | 220 000 | |
| 28 201 600 | 27 800 000 | ||
| EQUITY AND LIABILITIES | |||
| Equity | 24 495 600 | 19 883 000 | |
| Ordinary share capital | 21 800 000 | 17 600 000 | |
| Retained income | 2 695 600 | 2 283 000 | |
| Non-current liabilities | 2 000 000 | 6 000 000 | |
| Mortgage loan (12% p.a.) | 2 000 000 | 6 000 000 | |
| Current liabilities | 1 706 000 | 1 917 000 | |
| Accounts payable | 850 000 | 1 290 000 | |
| SARS (Company tax) | 96 000 | 67 000 | |
| Shareholders for dividends | 760 000 | 560 000 | |
| 28 201 600 | 27 800 000 |
Additional information
The issue price of all the shares is R10 each. New shares were issued on the first day of the financial
year.
Interim and final dividends for the year ended 31 December 2021 amounted to R1 413 000.
Fixed assets were sold at carrying (book) value during the year for R1 440 000. Fixed assets were also
purchased.
The shares in Nascar Limited are currently selling for R12 each.
All purchases and sales of inventories are on credit.
The following ratios have been calculated:
| 2021 | 2020 | |
| Profit margin (Net profit margin) | 9.84% | 9.68% |
| Acid test ratio | 1.38:1 | 0.45:1 |
| Return on equity | 7.45% | 5.84% |
Question 5:
REQUIRED
Use the information provided in Question 4 to answer the following questions:
5.1 Calculate the following ratios for 2021 only. Express the answers to two decimal places.
5.1.1 Inventory turnover (2 marks)
5.1.2 Creditor payment period (2 marks)
5.1.3 Return on assets (2 marks)
5.1.4 Debt to assets (2 marks)
5.1.5 Dividend per share (2 marks)
5.1.6 Current ratio (2 marks)
5.1.7 Earnings yield (2 marks)
5.2 Comment briefly but meaningfully on the following ratios which have been calculated:
5.2.1 Profit margin (Net profit margin) (2 marks)
5.2.2 Acid test ratio (2 marks)
5.2.3 Return on equity (2 marks)
Answers to Above Accounting Questions:
The comprehensive income statement for Whetstone Stores on 28 February 2022, the end of the financial year is prepared as follows:
Get assistance in writing accounting assignments from the accounting assignment writing experts available at Student Life Saviour South Africa.
Content Removal Request
If you believe that the content above belongs to you, and you don’t want it to be published anymore, then request for its removal by filling the details below. It will only be removed if you can provide sufficient evidence of its ownership.
