2. The long-term loan from World Bank had been taken out on 1 April 2018 to fund the company. According to the loan agreement, five annual installments of R36 000 are to be paid each year commencing on 1 April 2019 and interest of 15% per annum is payable every six months in arrears on 1 October and 1 April each year.

3. At the end of May 2021, a debtor, Mr. Lazybones, had been declared insolvent. He owed the company an amount of R3 750. Mr. Lazybones’ estate had paid 40 cents for every rand owed to the company (this entry has been recorded). Steve decided that the entity should write the remainder of the debt off as bad at the end of the current financial year.

4. The company purchases all stationery on credit from Zade’s Stationers and records stationery as an asset when purchased. On 1 July 2020, stationery on hand amounted to R130. During the year stationery of R1 500 was purchased. The company returned stationery amounting to R175 to Zade’s Stationers on 30 June 2021 and this transaction still has to be recorded in the books of the company. Stationery at the end of business on 30 June 2021 amounted to R348.

5. On 30 June 2021, the telephone account of R420 was still outstanding.

6. Rent is paid in advance on the last day of each month. The amount of rent increased by 10% on 31 December 2020. Up to this date, the rent per month had been R6 000. All payments had been made on time and debited to the rent expense account.

7. The allowance for doubtful debts is to be calculated at 5% of debtors after all adjustments have been taken into account.

8. The inventory was counted at year end and closing inventory was computed as R33 200.

You are required to: Prepare the following for Stevies Books for the year ended 30 June 2021:

a) Statement of Profit or Loss (19 marks)

b) Statement of Changes in Equity (4 marks)

c) Statement of Financial Position (14 marks

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QUESTION 2 Ignore VAT Steve Wonder, the owner of Stevies Books, had decided to start a business selling books on 1 July 2016 in Cape Town's CBD. Steve's business has been operating for five years. Just before 30 June 2021, the end of the fifth financial year, Steve's bookkeeper left South Africa with the rest of her family to live in Australia. He now needs to complete the financial statements of the entity so that he can submit the tax return to the South African Revenue Services but he has no accounting experience and needs your help. You have agreed to come to Steve's rescue. The following is a list of balances of Stevies Books at 30 June 2021: Capital (1 July 2020) Long-term loan: World Bank (15% p.a.) Motor Vehicle at cost Accumulated depreciation: Motor Vehicle (1 July 2020) Inventory (1 July 2020) Accounts Receivable Allowance for doubtful debts (1 July 2020) Stationery asset Accounts Payable Bank (favourable) Drawings Revenue Returns inwards Purchases Returns outwards Railage inwards Advertising Income Interest expense on loan Courier expense Rent expense Telephone expense Water and electricity expense Salaries and wages expense (50 MARKS; 90 MINUTES) Rand 182 000 72 000 70 000 25 683 24 000 82 250 4 500 1630 7 500 149 250 9 000 430 287 25 000 217.900 8.500 19 700 22 000 8 100 3 000 82 200 4 440 2960 26 400 12 450 Petrol expense Bank charges Bad debts ADDITIONAL INFORMATION: 1. The motor vehicle was purchased on 1 August 2018. The vehicle is expected to have a useful life of 5 years after which it will have a residual value of R3 000. The company adopts the straight-line method for calculating depreciation. Depreciation for the year had not yet been taken into account. 2340 11 850 QUESTION 2 Ignore VAT Steve Wonder, the owner of Stevies Books, had decided to start a business selling books on 1 July 2016 in Cape Town's CBD. Steve's business has been operating for five years. Just before 30 June 2021, the end of the fifth financial year, Steve's bookkeeper left South Africa with the rest of her family to live in Australia. He now needs to complete the financial statements of the entity so that he can submit the tax return to the South African Revenue Services but he has no accounting experience and needs your help. You have agreed to come to Steve's rescue. The following is a list of balances of Stevies Books at 30 June 2021: Capital (1 July 2020) Long-term loan: World Bank (15% p.a.) Motor Vehicle at cost Accumulated depreciation: Motor Vehicle (1 July 2020) Inventory (1 July 2020) Accounts Receivable Allowance for doubtful debts (1 July 2020) Stationery asset Accounts Payable Bank (favourable) Drawings Revenue Returns inwards Purchases Returns outwards Railage inwards Advertising Income Interest expense on loan Courier expense Rent expense Telephone expense Water and electricity expense Salaries and wages expense (50 MARKS; 90 MINUTES) Rand 182 000 72 000 70 000 25 683 24 000 82 250 4 500 1630 7 500 149 250 9 000 430 287 25 000 217.900 8.500 19 700 22 000 8 100 3 000 82 200 4 440 2960 26 400 12 450 Petrol expense Bank charges Bad debts ADDITIONAL INFORMATION: 1. The motor vehicle was purchased on 1 August 2018. The vehicle is expected to have a useful life of 5 years after which it will have a residual value of R3 000. The company adopts the straight-line method for calculating depreciation. Depreciation for the year had not yet been taken into account. 2340 11 850

Answer rating: 100% (QA)

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