ANNEXURE I: FORMATIVE ASSESSMENT $2$

QUESTION $3$

$(35$ marks$)$

Treehouse Ltd was incorporated in $2021$ by Eric, the sole founder. Treehouse Ltd$\text{'}$s primary operations are the building and selling of treehouses. They also have a large treehouse that they rent out as a secondary income. The entity has a June year$-$end.

You are presented with the following pre$-$adjustment trial balance of Treehouse Ltd for the year ended $30$ June $2023$:

$\backslash$table$[[$Account$,\backslash$table$[[$Debit$],[($R$)]],\backslash$table$[[$Credit$],[($R$)]]],[$Land$,2000000,],[$Building$,2000000,],[$Inventory$,652000,],[$Trade receivables,$145000,],[$Cash$,251000,],[$Ordinary share capital,,$2500000],[$Retained earnings,,$950000],[$Loan payable,,$1560000],[$Trade payables,,$178500],[$Revenue$,,1789000],[$Cost of sales,$894500,],[$Rental income,,$250000],[$Salaries$,335000,],[$Insurance$,450000,],[$Electricity$,150000,],[$Repairs$,350000,],[$TOTAL$,7227500,7227500]]$The following transactions for the financial year ended $30$ June $2023$ took place but

have not been recorded yet:

Eric uses a certain type of wood in making the treehouses. His wood supplier,

Treetoppers Ltd$,$ had a sale on $25$ June $2023$ and Eric bought R$400000$ worth of

wood. Treehouse Ltd has a credit arrangement with Treetoppers Ltd$,$ allowing

payment at the end of the month following the purchase.

On $28$ June $2023,$ Stephany $($a customer$)$ signed a purchase contract for a luxury

treehouse. The selling price of a luxury treehouse is R$245000.$ She paid the full

amount on $28$ June $2023.$ Manufacturing of the treehouse will commence in the

following financial year and be completed and delivered on $1$ August $2023.$

The salaries for June $2023$ have not yet been paid. The amount for salaries per

month was equal throughout the year.

Treehouse Ltd has decided to write off a long overdue debtor, Hugo Rental, as

irrecoverable. Hugo Rental had a balance outstanding of R$55000.$

After accounting for the write$-$off of Hugo Rental, Treehouse Ltd has reliably

estimated that $5\%$ of the remaining trade receivables balance as at $31$ June $2023$

should be recognised as a doubtful debt.

During June $2023,$ Eric noticed some wear and tear on the building that he is

renting out. He repaired the building himself using some of the wood Treehouse

Ltd had in stock. The wood used was worth R$11000.$

The insurance contract was renewed on $1$ June $2023.$ The contract is valid for $6$

months. The full amount of R$240000$ was payable upfront. On $1$ June $2023,$

Treehouse Ltd didn't have the cash to pay the full amount and they therefore only

paid half of it$.$ At year$-$end Treehouse Ltd haven't yet paid the outstanding amount.REQUIRED:

$3\mathrm{.}1$ Prepare the general journal entries to document transactions $1-6$ for

Treehouse Ltd for the financial year ended $30$ June $2023.$

Please note that specific dates and detailed narratives are not necessary.

$(22$ marks$)$

$3\mathrm{.}2$ Prepare an extract from the Statement of Financial Position for Treehouse

Ltd as at $30$ June $2023,$ showing ONLY the Current Assets section.

Notes to the financial statement extract are not required.

Totals and subtotals are not required.

Use and reference figures from $3\mathrm{.}1$ where necessary.

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