Financial Accounting I / © ICG / Page 24
ASSIGNMENT 2
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Subject: Financial Accounting 1 Assignment Code: D20059486-B Edition: 2
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Recommended time: 3 hours Total marks: 100
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INSTRUCTIONS
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Financial Accounting I / © ICG / Page 25
Additional instructions
· Please indicate on your assignments which edition of the study guide you are using.
Certain information and page references differ from edition to edition.
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Financial Accounting I / © ICG / Page 26
Question 1
An inexperienced bookkeeper prepared the following trial balance from the books of
Wilson Agencies, at 31 March 2006:
| TRIAL BALANCE | |
| Furniture and equipment | 40 000 |
| Accumulated depreciation: furniture and equipment | 10 000 |
| Bank: favourable balance | 8 000 |
| Debtors | 15 000 |
| Capital: A. Wilson | 60 000 |
| Drawings: A. Wilson | 28 000 |
| Creditors | 5 000 |
| Long-term loan | 20 000 |
| Commission earned | 45 000 |
| Insurance expense | 6 000 |
| Salaries | 15 500 |
| Rental | 24 000 |
| Telephone | 3 500 |
| R143 000 | R143 000 |
AssignmentTutorOnline
Additional information:
i. Commission earned but not invoiced, R9 300.
ii. Prepaid insurance on 31 March 2006, R1 500.
iii. Depreciation on furniture and equipment not yet provided for, R3 000.
iv. Accrued interest on long-term loan, R4 000.
v. Salaries in arrears, R2 000.
vi. Telephone due, R500.
Required
(a) Journalise the necessary adjustments. Narrations are not required.
(b) Prepare a corrected, post-adjustment trial balance as at 31 March 2006.
(c) Prepare the closing journal entries. [20]Question 2
On 1 January 2005, a manufacturer buys a manufacturing plant for R20 000 cash.
On 1 July 2006, he buys an additional plant for R4 000 cash.
On 31 December 2006, he sells a plant that he bought on 1 January 2005 for R3 000
for R1 600 cash.
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Financial Accounting I / © ICG / Page 27
On 1 April 2007, he buys a plant for R2 800 cash.
On 1 October 2008, he sells a plant that he bought on 1 July 2006 for R1 200 for
R700 cash.
He depreciates his plant on the straight-line basis on 31 December each year at the
rate of 20% of the original cost.
Required
Machinery, depreciation provision, and asset disposal accounts for the years 2005
| to 2009. | [15] |
| Question 3 The following list of balances was extracted from the books of C. Radio, general merchant, at 31 December 2002. |
| R | R | |
| Advertising Bad debts First National Bank Capital (balance at 1 Jan. 2002) Cash Creditors |
6 500 1 000 100 |
10 000 30 800 8 500 |
| Customs duty on purchase Debtors Discount Drawings Fire and motor vehicle insurance Furniture and fittings at cost Accumulated depreciation on furniture and fittings at 1 January 2002 Freight on purchases General expenses Motor vehicles at cost Accumulated depreciation on vehicles at 1 January 2002 Motor vehicle expenses Purchases Provision for bad debts Railage inwards Railage outwards Rent received Returns inwards Sales Salaries and wages Stationery Stock at 1 January 2002 |
8 000 23 150 240 2 650 380 3 500 4 000 370 7 500 1 860 93 000 3 300 2 300 1 500 24 000 350 21 000 |
500 1 000 1 000 10 400 142 500 |
| 204 700 | 204 700 |
Adjustments:
1. A further amount of R150 is to be written off in respect of bad debts.
2. The provision for bad debts is to be made equal to 10% of the outstanding
debtors.
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Financial Accounting I / © ICG / Page 28
3. Depreciation is to be written off as follows:
Furniture and fittings: 10% on cost.
Motor vehicles: 20% on diminishing balance.
4. Stock that had cost R1 000 was stolen from one of the firm’s delivery vehicles
and no entry was made to account for it.
5. Wages due but not paid at 31 December 2002 amounted to R200.
6. The rent received amounts to R800 per month.
7. Stock at 31 December 2002 was R21 500.
Required
(a) Show the income statement.
(b) Show the balance sheet. [20]Question 4
Depreciation is an important factor in reflecting the true value of the assets of a
business in the balance sheet. The following balances of the assets of Naidoo
Enterprises were reflected in their balance sheet at 28 February 2003.
| R | |
| Motor vehicles (at cost) | 52 050 |
| Office equipment (at cost) | 19 418 |
| Security alarm systems (at cost) | 17 223 |
The accumulated depreciation reflected in the balance sheet at 28 February
2003 was:
R
Motor vehicles 12 236
Office equipment 5 879
Security alarm 2 583
The transactions affecting assets and depreciation during the financial year
1 March 1993 to 28 February 1994 were as follows:
| March 1 | Sold old motor vehicle (cost price R5 770 and accumulated depreciation R3 250) to J. Smith for R2 000 cash. |
| April 30 | Purchased new vehicle for R35 000 cash. |
| June 1 | Purchased a computer for R12 500 cash. |
| July 31 | Sold four old typewriters (cost price R1 000 and accumulated depreciation R750) for R200 cash. |
| February 28 | Depreciate: Motor vehicles at 20% on the straight-line basis. Office equipment at 15% on the reducing balance. Security alarm at 15% on the reducing balance. |
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Financial Accounting I / © ICG / Page 29
Required
| (a) | Journalise the above transactions. | |
| (b) | Reflect all the transactions, including balances at 28 February 2003, in the ledger of Naidoo Enterprises. |
[15] |
Question 5
Required
From the following, taken from the books of Bingo Club, prepare:
(a) the income and expenditure account for the period ended 31 December 2002;
(b) the subscriptions account (balanced properly); and
(c) the refreshments account in order to determine the profit or loss to be
transferred to the income and expenditure account.
Balances at 1 January 2002:
| R | |
| Accumulated funds | 18 570 |
| Loan from West Bank (15%) | 10 000 |
| Club equipment (cost) | 16 000 |
| Accumulated depreciation on club equipment | 2 400 |
| Stocks on hand: Refreshments | 1 400 |
| Stationery | 420 |
| Income received in advance: subscriptions | 140 |
| Income receivable: subscriptions in arrears | 90 |
| Bank balance | 4 860 |
| Petty cash balance | 250 |
| Buildings, at cost | 8 090 |
Statement of receipts and payments for the year ended 31 December 2002:
| Receipts | Payments | ||
| R | R | ||
| Balances (01/01/2002) | Interest on loan | 750 | |
| Bank | 4 860 | Stationery | 350 |
| Petty cash | 250 | Affiliation fees | 200 |
| Subscriptions: 2001 | 60 | Refreshments purchases | 7 860 |
| 2002 | 8 760 | Honorarium | 100 |
| 2003 | 220 | Water and electricity | 480 |
| Refreshments sales | 12 680 | Wages | 3 600 |
| Entrance fees | 380 | Postage | 20 |
| Donations | 1 800 | Balances (31/12/2002) | |
| Bank | 15 400 | ||
| Petty cash | 250 | ||
| 29 010 | 29 010 |
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Financial Accounting I / © ICG / Page 30
Adjustments:
1. Stocks on hand: Refreshments, R1 420
Stationery, R170
2. Subscriptions still outstanding for 1991 should be written off.
3. R240 (subscription fee) is still outstanding for 1992.
4. Entrance fees should be treated as revenue income.
5. Provide for outstanding interest on loan.
6. Calculate depreciation on club equipment at 15% p.a. on the diminishing
balance method. [15]Question 6
The following are the transactions of the Goodrow Athletic Club for the six months
ended 30 June 2000. The only assets and liabilities of the club at 1 January 2000
were:
R
Cash in hand 112
Furniture 700
Creditors 96
Subscriptions due for the six months 730
Subscriptions received in cash (including R50 in advance for July) 640
Amount paid for purchase of sports ground 400
Refreshments purchased by club for cash 756
Cash received on loan 600
Paid creditors 96
| Groundman’s wages for six months amount to R120, of which R100 has been paid Sales of refreshments for cash |
1 312 |
| Stock of refreshments on hand, 30 June 2000 | 56 |
| General expenses paid in cash | 64 |
| Furniture is to be depreciated at the rate of 20% per annum. Required |
||
| (a) | Cash receipts and payments. | |
| (b) | Income and expenditure account for the six months with balance sheet. | [15] |
TOTAL: [100]