REQUIRED Prepare the Statement of Comprehensive Income of Leo Traders for the year ended 29 February 2020 INFORMATION The trial balance, adjustments and additional information given below were extracted from the accounting records of Leo Traders on 29 February 2020, the end of the financial year. LEO TRADERS PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020 Debit (R) Credit (R) Balance sheet accounts section Capital 660 000 Drawings 56 000 Land and buildings 503 000 Vehicles at cost 369 000 Equipment at cost 264 000 Accumulated depreciation on vehicles 211 000 Accumulated depreciation on equipment 151 000 Fixed deposit: Tab Bank (10% p.a.) 79 000 Trading inventory 60 000 Debtors control 70 000 Provision for bad debts 4 000 Bank 51 000 Cash float 1 000 Creditors control 74 000 Mortgage loan: Tab Bank (16% p.a.) 132 000 Nominal accounts section Sales 830 000 Cost of sales 317 000 Sales returns 5 000 Salaries and wages 235 000 Bad debts 7 000 Stationery 2 000 Rates and taxes 20 000 Motor expenses 12 000 Marketing expenses 9 000 Telephone 17 000 Electricity and water 26 000 Bank charges 4 000 Insurance 6 000 Interest on mortgage loan 20 000 Interest on fixed deposit 6 000 Rent income 65 000 2 133 000 2 133 000 Adjustments and additional information 1. Stationery, cost R300, was taken by the proprietor for her personal use. No entry has been made for this. 2. Physical stocktaking on 29 February 2020 reflected the following inventories: 2.1 2.2 Trading inventory Stationery R57 000 R200 3. H. Larkens, a debtor, was declared insolvent. Received an amount of R1 500, which represented 60% of his debt, from his insolvent estate. This has been recorded. The balance of his account must now be written off. 4. The provision for bad debts must be decreased by R500. 5. Rent income amounts to R5 000 per month. Make the necessary adjustment. 6. The water and electricity account for February 2020 has been paid, R2 500, but the payment was erroneously posted to the telephone account. 7. The insurance total includes a premium of R2 400 that was paid for the period 01 December 2019 to 30 November 2020. 8. An amount of R200 appeared in the February 2020 bank statement for cash deposit fees. This amount was not recorded by the bookkeeper. 9. The investment in fixed deposit was made on 01 March 2019. Provide for the outstanding interest. 10. Provide for outstanding interest on loan, R1 120. 11. Provide for depreciation as follows: 11.1 On vehicles at 20% per year using the diminishing balance method. 11.2 On equipment at 10% per year on cost.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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REQUIRED |
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Prepare the Statement of Comprehensive Income of Leo Traders for the year ended 29 February 2020 |
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INFORMATION |
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The records of Leo Traders on 29 February 2020, the end of the financial year. |
LEO TRADERS
PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020
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Debit (R) |
Credit (R) |
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Capital |
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660 000 |
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Drawings |
56 000 |
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Land and buildings |
503 000 |
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Vehicles at cost |
369 000 |
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Equipment at cost |
264 000 |
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211 000 |
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Accumulated depreciation on equipment |
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151 000 |
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Fixed deposit: Tab Bank (10% p.a.) |
79 000 |
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Trading inventory |
60 000 |
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Debtors control |
70 000 |
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Provision for |
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4 000 |
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Bank |
51 000 |
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Cash float |
1 000 |
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Creditors control |
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74 000 |
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Mortgage loan: Tab Bank (16% p.a.) |
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132 000 |
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Nominal accounts section |
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Sales |
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830 000 |
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Cost of sales |
317 000 |
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Sales returns |
5 000 |
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Salaries and wages |
235 000 |
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Bad debts |
7 000 |
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Stationery |
2 000 |
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Rates and taxes |
20 000 |
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Motor expenses |
12 000 |
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Marketing expenses |
9 000 |
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Telephone |
17 000 |
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Electricity and water |
26 000 |
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Bank charges |
4 000 |
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Insurance |
6 000 |
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Interest on mortgage loan |
20 000 |
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Interest on fixed deposit |
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6 000 |
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Rent income |
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65 000 |
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2 133 000 |
2 133 000 |
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Adjustments and additional information |
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1. |
Stationery, cost R300, was taken by the proprietor for her personal use. No entry has been made for this. |
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2. |
Physical stocktaking on 29 February 2020 reflected the following inventories: |
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2.1 2.2 |
Trading inventory Stationery |
R57 000 R200 |
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3. |
H. Larkens, a debtor, was declared insolvent. Received an amount of R1 500, which represented 60% of his debt, from his insolvent estate. This has been recorded. The balance of his account must now be written off. |
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4. |
The provision for bad debts must be decreased by R500. |
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5. |
Rent income amounts to R5 000 per month. Make the necessary adjustment. |
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6. |
The water and electricity account for February 2020 has been paid, R2 500, but the payment was erroneously posted to the telephone account. |
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7. |
The insurance total includes a premium of R2 400 that was paid for the period 01 December 2019 to 30 November 2020. |
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8. |
An amount of R200 appeared in the February 2020 bank statement for cash deposit fees. This amount was not recorded by the bookkeeper. |
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9. |
The investment in fixed deposit was made on 01 March 2019. Provide for the outstanding interest. |
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10. |
Provide for outstanding interest on loan, R1 120. |
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11. |
Provide for depreciation as follows: |
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11.1 |
On vehicles at 20% per year using the diminishing balance method. |
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11.2 |
On equipment at 10% per year on cost. |
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