QUESTION THREE

Benji Walker developed keep fit programmes which he also conducted to select groups of

people. The following details appeared in the pre$-$adjustment trial balance of Keep$-$fit

Services as at $31$ December $2019,$ the end of the financial year.

Additional information:

Physical stock$-$taking revealed that there was consumable material on hand at $31$

December $2019$ valued at R$70000$

Repairs to the vehicle costing R$10000$ was erroneously charged to the vehicle at cost

account. A correction has not been recorded as yet.

Equipment and Vehicles have to be depreciated as follows:

a$)$ Equipment must be depreciated at $10\%$ per year on the reducing balance method.

No equipment was bought or sold during the current year.

b$)$ Vehicles must be depreciated on the straight line method over a $4$ year period. The

residual value of the vehicle is estimated at R$30000.$

A debtor's account of R$2600$ must be written off as irrecoverable.

The allowance for credit losses must be adjusted to $3\%$ of outstanding debtors.

Included in the rent expense is an amount of R$20000$in respect of rent for January $2020$

which was paid and recorded in December $2019.$

The telephone account of R$1200$ was received in December $2019$ but not yet paid nor

recorded.

An amount of R$20000$ was repaid towards the long term borrowing on $31$ December

$2019$ and recorded correctly. Account for outstanding interest on the long term

borrowing. Interest on the borrowing is payable at $5\%$ per year.

Required:

$3\mathrm{.}1$ Prepare the statement of profit or loss and other comprehensive income for

Keep Fit Services for the year ended $31$ December $2019$ in compliance with

requirements of Intemational Financial Reporting Standards $($IFRS$)$ appropriate to

businesses such as Keep Fit Services.

$3\mathrm{.}2$ Show workings to determine the value at which the following items will be shown in

the statement of financial position at $31$ December $2019$:

$3\mathrm{.}2\mathrm{.}1$ Trade and other receivables

$3\mathrm{.}2\mathrm{.}2$ Inventory: consumable material

$3\mathrm{.}2\mathrm{.}3$ Trade and other payables