Answered: REQUIRED Do a summary of the effects of…

Name: Toshib is struggling to understand the impact of certain business tran
Uploaded: 2024-03-04T10:43:15.000Z
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Description: Toshib is struggling to understand the impact of certain business transactions on the financial statements. She has very little accounting knowledge and feels intimidated by all the accounting jargon thrown around by her accountant friends. One day a

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Toshib is struggling to understand the impact of certain business transactions on the financial statements. She has very little accounting knowledge and feels intimidated by all the accounting jargon thrown around by her accountant friends. One day around a braai she raised her frustrations and gave a list of transactions of which she doesn’t understand the impact on the financial statements. As she is a good friend of yours, you willingly offer your help and asked her to put her concerns in writing. The next morning a thank you note was delivered to your office with the following list of transactions she required clarity on: 1. On 1 July 20x9 I started the business by opening a bank account with R150 000 and transferred office furniture which I had from a previous venture with a second-hand value of R35 000. 2. During the first month the following transactions occurred: 2.1 Opened an account with Magna Suppliers and bought R200 000 merchandise. 2.2 Bought a delivery vehicle from Max Auto for R130 000. A deposit of 20% was paid and the remaining balance financed by Wheels Bank over 36 months. Instalments will be R3 400 per month; 6 payments were made during until the end of the financial year. Included in the total payments was interest of R5 400 and the balance for the repayment of the principal amount. 2.3 Sales for the month was R86 000, of which R40 000 was cash and R46 000 on credit. The average mark-up on cost price is 25%. A perpetual inventory system is being used. 3. Apparently, depreciation should be provided on all non-current assets at the end of the financial year. The accountant said 10% on furniture and fittings and 15% on the delivery van per year. The financial year ends on 31 December. Please help. REQUIRED Do a summary of the effects of the above transactions in the following format: Transactions Non-Current Assets Current Assets Capital Long-term Liabilities Current Liabilities 1. Starting the business R35 000 R150 000 R185 000 2.1 Purchasing merchandise R200 000 R200 000 2.2 Purchasing a delivery vehicle R130 000 R89 000 R41 000 2.3 Sales for the month R40 000 R46 000 3. Depreciation at the end of the year R1 750 R19,500

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