QUESTION 3 REQUIRED Use the trial balance, additional information and adjustment

Question

QUESTION 3 REQUIRED Use the trial balance, additional information and adjustments given below to prepare the Statement of Comprehensive Income of Selfie Limited for the year ended 28 February 2018 FINANCAL STATEMENTS OF A COMPANY SELFIE LIMITED PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2018 Debit Balance sheet accounts section Ordinary share capital 416 000 121 700 Land and buildings at cos Equipment at cost Vehicles at cost 480 000 213 000 175 000 88 000 44 000 45 000 Provision for bad debts Bank overdraft Creditors control Loan: Pano Bank (18% South African Revenue Services (Company t Nominal accounts section 3 000 14 600 65 000 50 000 2 800 936 000 Cost of sales 356 000 24 000 12 000 2 000 3 000 Bad debts Discount allowed Discount received Electricity and water 3 000 37 000 20000 500 Interest on overdraft Directors' fees Audit fees 12 000 5000 Rent income Municipal rates 26 000 1. According to physical stocktaking, the following inventories were on hand on 28 February 2018 Tradine inventoryR42 000 Stationery R1 000 2. Advertising includes a payment of R6 000 for advertisements that will be published monthly for the period 01 January 2018 to 30 June 2018. 3. Part of the building has been let to a tenant since 01 March 2017. Rent amounts to R2 000 per month. Make the necessary adjustment 4. Write off the account of debtor, P. Paul, R300. 5. The provision for bad debts must be decreased to R2 500. 6. Directors' fees have been paid up to 31 January 2018. A third director was employed from 01 February 2018. The three directors earn the same remuneration. Provide for the fees still due 7. The loan from Pano Bank was obtained on 01 February 2018. Provide for the outstanding interest on loan. 8. A notice from the municipality indicated that the rates assessment for the year ended 28 February 2018 has been finalised and it amounts to R24 000 for the financial year 9. Provide for depreciation as follows: On vehicles at 20% per year using the diminishing balance method. On equipment at 15% per year on cost. 10. The company tax for the year ended 28 February 2018 amounts to R40 140

Explanation / Answer

Adjusting Entries Sl.No. Account Title Debit Credit 1 Cost of sales 3000 Trading Inventory 3000 (45000-42000) Stationery 1000 Stationery expense 1000 2 Prepaid Advertising 4000 Advertising 4000 (6000/6*4) 3 Rent Income 2000 Unearned rent income 2000 (26000-(2000*12)) 4 Provision for bad debts 300 Debtors Control 300 5 Provision for bad debts 200 Bad debts written back 200 (3000-300-2500) 6 Directors' Fees 6000 Directors' Fees payable 6000 $ 44000/2 drs./11 mths*3 Drs. 7 Interest expense 750 Interest payable 750 (50000*18%/12) 8 Municipal taxes 4000 Municipal Taxes payable 4000 (24000-20000) 9 Depreciation Expense-Vehicles 26200 Accumulated depreciation on Vehicles 26200 (175000-44000)*20% Depreciation Expense-Equipment 31950 Accumulated depreciation on Equipment 31950 213000*15% 10 Company Tax 40140 South African Revenue Services(Company Tax) 40140 119540 119540 Selfie Limited Unadjusted T/B Adjustments Adjusted T/B Debit Credit Debit Credit Balance Sheet accounts Ordinary share capital 416000 416000 Retained Earnings 121700 121700 Land & Buildings at cost 480000 480000 Equipment at cost 213000 213000 Vehicles at cost 175000 175000 Accumulated depreciation on equipment 88000 31950 119950 Accumulated depreciation on Vehicles 44000 26200 70200 Trading Inventory 45000 3000 45000 3000 Debtors' Control 50000 -300 49700 Provision for Bad debts 3000 -500 2500 Stationery 1000 1000 Prepaid Advertising 4000 4000 Bank Overdraft 14600 14600 Creditors' Control 65000 65000 Unearned rent income 2000 2000 Directors' Fees payable 6000 6000 Interest payable 750 750 Municipal Taxes payable 4000 4000 Loan:Pano Bank(18%) 50000 50000 South African Revenue Services(Company Tax) 42800 -40140 2660 Nominal Accounts Sales 936000 936000 Cost of sales 356000 3000 359000 Sales Returns 24000 24000 Advertising 30000 -4000 26000 Stationery expense 12000 -1000 11000 Bad debts 2000 -200 1800 Discount allowed 3000 3000 Discount Received 3000 3000 Electricity & water 37000 37000 Telephone 20000 20000 Interest on overdraft 500 500 Directors' Fees 44000 6000 50000 Audit Fees 12000 12000 Insurance 7000 7000 Salaries 190000 190000 Bank charges 5000 5000 Rent Income 26000 -2000 24000 Municipal rates 20000 4000 24000 Interest expense 750 750 Depreciation Expense-Vehicles 26200 26200 Depreciation Expense-Equipment 31950 31950 Company Tax 40140 40140 Difference in Given Trial balance 1000 1000 1768300 1768300 71400 71400 1839700 1839700 Selfie Limited Statement of Income   For the yr. ended Feb.28.2018 Sales 936000 Less:Sales Returns -24000 Less:Discount allowed -3000 Net sales 909000 Less: Cost of sales 359000           Discounts received -3000 356000 Gross Income 553000 Less: Operating expenses Advertising 26000 Stationery expense 11000 Bad debts 1800 Electricity & water 37000 Telephone 20000 Interest on overdraft 500 Directors' Fees 50000 Audit Fees 12000 Insurance 7000 Salaries 190000 Bank charges 5000 Municipal rates 24000 Interest expense 750 Depreciation Expense-Vehicles 26200 Depreciation Expense-Equipment 31950 Rent Income -24000 Total operating expense 419200 Income before tax 133800 Less:Company Tax 40140 Net Income 93660 Statement of comprehensive income For the yr. ended Feb.28.2018 Net income for the year 93660

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