problem1) The following information has been extracted from the books of HMN Branding Solutions (Pty) Ltd for the year ended 28 February 2013:
Balances as at 1 March 2012:
Vehicles @ Cost R 340000
Accumulated Depreciation:
Vehicles R 140000
Additional Information:
• A new vehicle was purchased at a cost of R 140000 on 1 September2012.
• The depreciation rate is as follows:
Vehicles: 20% diminishing balance method
• The current financial year end is the 28 February 2013.
• Ignore VAT.
Required:
1.1 Complete the following note to the balance sheet for property, plant and equipment
(vehicles) for the year ended 28 February 2013. (Be sure to show all workings clearly referenced in order to be awarded part marks.)
Property, Plant and Equipment Vehicles (R)
Opening carrying amount/ Book value–1 March 2012
Cost (1/3/2012) Accumulated Depreciation (1/3/2012) ()
Additions at cost
Depreciation for the period ()
Closing carrying amount/ Book value–28 February 2013
Cost(28/2/2013)
Accumulated Depreciation (28/2/2013) ()
1.2 Process the journal entry to account for the depreciation expense for the 2013 financial year find out d in 1.1 above. (Clearly show the account to be debited and the account to be credited.)
1.3 Briefly describe your understanding of the ‘diminishing balance method’ for calculating depreciation.
1.4 Would ‘accumulated depreciation’ impact the elements under current assets, current liabilities, non-current assets or non-current liabilities?
problem2) The following information relates to the books of Highveld Traders (Pty) Ltd. The year end of the company is 31 December 2012.
Additional information:
a) Stationery on hand as at 31 December 2012 was R 1050. R5000 worth of stationery was purchased and recorded as stationeryexpense during the year.
b) Long term borrowings of R 32000 were established on 1 September 2012.Interest is accounted for at 15% per annum payable annually from the date of inception of the borrowings. The entity has accounted for the receipt of the funds but not the accrual of the outstanding interest on the loan as at year end.
c) Advertising expense includes an amount of R 1200 paid for January 2013.
d) Rent income includes an amount in respect of January 2013. Rent income as per the Trial Balance is R 15600.
e) Interest on the fixed deposit has not yet been received for the last 2 months of the financial year. Interest is find outd at a rate of 8 % per annum. The Fixed Deposit was reflected at the correct amount of R 60000 on the Trial Balance.
f) Insurance expense includes an annual premium of R750 paid for 1 November 2012 to 31 October 2013.
g) The telephone account of R355 for December 2012 was paid by electronic funds transfer but has not yet been recorded in the accounting records.
h) The account of a debtor, Mr Wong, owing an amount of R560 must be written off as irrecoverable.
i) An amount of R5700 was paid to settle an account with a creditor. No entry was made for this.
Required:
For each of the transactions identified above, show the effect on the elements of the accounting equation (by showing the amount and a ‘+’ or ‘ -‘) as well as the account to be debited and account to be credited for each adjustment. You must show supporting calculations where applicable. An ex and suggested format have been provided below:
EG:
Bought Inventory on account from a supplier for R2500. No entry has been processed for his.
ASSETS EQUITY LIABILITIES ACCOUNT DEBIT ACCOUNT CREDIT
EG +2 500 0 +2 500 Inventory Accounts Payable /Creditors
problem5) Below is an extract from the books of PG Batteries Ltd as at 31 December 2012, the end of the financial period:
Sales R250000
Purchases R157000
Sales Returns R15500
Purchases Returns R7800
Carriage on purchases R27000
Carriage on sales R9800
Stock (01/01/2012) R50000
A physical inventory count was performed on 31 December 2012, which revealed that stock to the value of R 37000 was on hand.
Required:
find out the gross profit for the period.