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
Drawings310 000 
Land and buildings2 840 000 
Vehicles at cost2 100 000 
Equipment at cost1 500 000 
Accumulated depreciation on vehicles 1 200 000
Accumulated depreciation on equipment 840 000
Investment: Med Bank (8 % p.a.)450 000 
Debtors control444 000 
Provision for bad debts 22 000
Bank602 700 
Creditors control 418 000
Loan: Med Bank (18% p.a.) 750 000
Nominal accounts section  
Sales 5 600 000
Opening stock200 000 
Purchases2 150 000 
Purchases returns 118 000
Sales returns60 000 
Salaries and wages1 234 000 
Bad debts42 000 
Stationery68 000 
Rates and taxes178 000 
Motor expenses300 000 
Repairs and maintenance52 000 
Telephone100 000 
Electricity and water150 000 
Bank charges18 000 
Advertising194 000 
Interest on mortgage loan130 000 
Interest on investment 32 000
Rent income 383 600
 13 122 70013 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: Claire500 000 
Drawings: Woody300 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 cost1 800 000 
Equipment at cost1 200 000 
Accumulated depreciation on vehicles 900 000
Accumulated depreciation on equipment 380 000
Trading inventory700 000 
Debtors control320 000 
Provision for bad debts 40 000
Bank1 820 000 
Cash float20 000 
Creditors control 400 000
South African Revenue Services: Company tax100 000 
Long-term loan: Aries Bank (16% p.a.) 800 000
Nominal accounts section  
Sales 4 850 000
Cost of sales2 400 000 
Sales returns50 000 
Salaries and wages840 000 
Bad debts50 000 
Consumable stores20 000 
Rent expense280 000 
Motor expenses150 000 
Bad debts recovered 20 000
Telephone70 000 
Electricity and water110 000 
Bank charges30 000 
Insurance40 000 
Interest on mortgage loan60 000 
Commission income 50 000
 10 060 00010 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)
Sales18 560 00012 000 000
Cost of sales(12 800 000)(7 500 000)
Gross profit5 760 0004 500 000
Operating expenses(2 912 000)(2 120 000)
Depreciation300 000260 000
Other operating expenses2 612 0001 860 000
Operating profit2 848 0002 380 000
Interest on mortgage loan(240 000)(720 000)
Profit before tax2 608 0001 660 000
Company tax(782 400)(498 000)
Profit after tax1 825 6001 162 000

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:

 

 2021 (R) 2020 (R)
ASSETS  
Non-current assets24 641 60024 440 000
Fixed assets24 641 60024 440 000
Current assets3 560 0003 360 000
Inventories (all Trading inventory)1 200 0002 500 000
Accounts receivable400 000640 000
Cash & cash equivalents1 960 000220 000
 28 201 60027 800 000
   
EQUITY AND LIABILITIES  
Equity24 495 60019 883 000
Ordinary share capital21 800 00017 600 000
Retained income2 695 6002 283 000
Non-current liabilities2 000 0006 000 000
Mortgage loan (12% p.a.)2 000 0006 000 000
   
Current liabilities1 706 0001 917 000
Accounts payable850 0001 290 000
SARS (Company tax)96 00067 000
Shareholders for dividends760 000560 000
 28 201 60027 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:

 20212020
Profit margin (Net profit margin)9.84%9.68%
Acid test ratio1.38:10.45:1
Return on equity7.45%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:

answer

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