Question

(a) QUESTION 5 FINANCIAL STATEMENTS (20 MARKS) The following trial balance, adjustments and additional information were extracted from the accounting records of Usman Traders on 29 February 2016, the end of the financial year. REQUIRED Prepare the Statement of Comprehensive Income of Usman Traders for the year ended 29 February 2016. Use the following format: The following must be taken into account: The net profit according to the Profit and loss account amounted to R500 000 on 29 February 2016. The partnership agreement makes provision for the following: Interest on capital must be provided at 12% per annum on the balances in the capital accounts. Note: Simon increased his capital by R100 000 on 01 September 2015. The capital change has been recorded. The partners are entitled to the following monthly salaries: Simon R13 000 Mondli R12 500 Simon is entitled to a special annual bonus of R30 000 Simon and Mondi share the remaining profits or losses equally. Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Interest income Interest expense Net profit for the year

Answer 1

Answer to Q#5 (Requested question in the list):

USMAN TRADERS Statement of Comprehensive Income For the Year Ended 29-February-2016 NOTE: Sales R1,030,000 Less: Sales Returns -R9,000 Balance used to write off J.Smith R2,000 Net Sales R1,021,000 Add: Desired ending balance of provision R4,250 Cost of Sales -R392,000 (R390 000 + (R87 000 - R85 000)] Less: Provision for bad debts, beginning balance -R4,000 Gross Profit R629,000 Bad debt expense to be recorded further R2,250 Other Operating Income: Rent Income R85,800 Less: Advance received -R7,150 [R85 800 x 1/12 --> 1 month's rent income for March 2016 received in advance] Net Rent Income R78,650 Gross Operating Income R707,650 Operating Expenses: Salaries and Wages R290,000 Stationery R16,000 [R18 000 - R500 - R1 500 --> As R500 drawn by proprietor & R1 500 available on hand out of R18 000 recorded as expense] Advertising R12,400 TR10 000 + R2 400] Telephone R25,000 [R23 000 + R2 000] Electricity and Water R32,000 Bad debt Expense R11,250 [R9 000 + R 2 250 -->Ref: NOTE for additional bad debt expense to be recorded] Rates and Taxes R30,000 Motor Expenses R15,000 Bank Charges R5,500 [R5 000 + R500] Insurance R5,400 [R6 000 - R1 200 x (6/12) -> As 6 months' premium was expired from Sep. 2015 thru Feb. 2016] Depreciation Expense R73,200 [(R460 000 - R260 000) x 20% for Vehicles + R332 000 x 10% for Equipment--> Dep. on Vehicles under diminishing balance method; Equip. on cost] Repair - Vehicles R3,000 [Provided new] Total Operating Expenses -R518,750 Operating Profit R188,900 Interest Income R9,000 (R7 400 + [(R90 000 10%) - R7 400] --> R7 400 was recorded already out of total interest income) Interest Expense -R33,000 (R30 250 + R2 750] Net Profit for the year R164,900