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 SELFIE UIMITED Credit Balance sheet accounts section 416 000 Retained earnings Land and buildings at cost Equipment at cost 480 000 213 000 175 000 88 000 Debtors control Provision for bad debts 3 000 14 600 65 000 50000 Creditors control Loan: Pano Bank (18% pa.) Nominal accounts section Cost of sales Services (Company t 42 800 Stat 12 000 2 000 3 000 37 000 20000 Electricity and water Telephone Interest on overdraft Directors fees Audit fees 190 00o 5 000 Bank charges Rent income 26 000 20 000 ADDITIONAL INFORMATION AND ADJUSTMENTS 1 Areording to phytiral sorktaking, the following inventnries were on hand on 28 Fehruary 018 Trading inventory R42 000 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. 4. S. 6. Make the necessary adjustment. Write off the account of debtor, P. Paul, R300. The provision for bad debts must be decreased to R2 500. 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

Answer 1

	Adjustment Journal entries
1	Cost of sales	$3000
	Trading inventory		$3000
	(45000-42000)
	Stationery expense	$11000
	Stationery inventory		$11000
2	Advance Advertising	$333
	Advertising expense		$333
	(6000/6*4/12)
3	Rent Income	$2000
	Unearned rent income		$2000
	Mar '18 rent
4	Provision for Bad debts	$300
	Debtors Control		$300
5	Provision for Bad debts	$200
	Excess provn.reversed(Credit Income statement)		$200
	(3000-300-2500)
6	Director's fees	$6000
	Director's fees payable		$6000
	(44000/2/11=2000 p.m *3 directors)
7	Interest expense	$750
	Interest Payable		$750
	(50000*18%/12)
8	Municipal taxes	$4000
	Municipal taxes payable		$4000
9	Depreciation expense-vehicles	$26200
	Acc. Depn. On vehicles		$26200
	(175000-44000)*20%
	Depreciation expense-Equipment	$31950
	Acc. Depn. On Equipment		$31950
	213000*15%
10	Company Tax	$40140
	SA Revenue Service(Company Tax)		$40140

As at Feb 28, 2018
TRIAL BALANCE	Pre-adjustment		Adj. entries		Adjusted T/B
	Debit	Credit	Debit	Credit	Debit	Credit
Ordinary Share capital		$416000				$416000
Retained earnings		$121700				$121700
Land & Bldgs at cost	$480000				$480000
Equipment at cost	$213000				$213000
Vehicles at cost	$175000				$175000
Acc. Depn. On Equipment		$88000		$31950		$119950
Acc. Depn. On vehicles		$44000		$26200		$70200
Trading Inventory	$45000		-$3000		$42000
Stationery inventory			$1000		$1000
Debtors control	$50000		-$300		$49700
Provision for bad debts		$3000		-$500		$2500
Bank Overdraft		$14600				$14600
Creditors control		$65000				$65000
Director's fees payable				$6000		$6000
Interest Payable				$750		$750
Municipal taxes payable				$4000		$4000
Loan: Pano Bank (18%)		$50000				$50000
SA Revenue Service(Company Tax)	$42800		-$40140		$2660
Nominal accounts Section
Sales		$936000				$936000
Cost of sales	$356000		$3000		$359000
Sales Returns	$24000				$24000
Advertising	$30000				$30000
Stationery	$12000		-$1000		$11000
Bad debts	$2000				$2000
Discounts allowed	$3000				$3000
Discount Received		$3000				$3000
Electricity& water	$37000				$37000
Telephone	$20000				$20000
Interest on Overdraft	$500				$500
Interest expense(on Loan)			$750		$750
Director's 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
Excess provn.reversed(Credit Income statement)				$200		$200
Depreciation expense-vehicles			$26200		$26200
Depreciation expense-Equipment			$31950		$31950
Company Tax			$40140		$40140
Difference in Pre-adj.Trial Balance		$1000				$1000
	$1768300	$1768300	$68600	$68600	$1836900	$1836900

Income Statement  & Statement of Comprehensive Income
For the Year ended Feb 28, 2018
Sales	$936000
Less:Sales Returns	-$24000
Less:Discounts allowed	-$3000
Net sales		$909000
Less: Cost of sales	$359000
Net Of Discount Received	-$3000	$356000
Gross Margin		$553000
Less: Operating expenses:
Advertising	$30000
Stationery	$11000
Bad debts	$2000
Electricity& water	$37000
Telephone	$20000
Interest on Overdraft	$500
Interest expense(on Loan)	$750
Director's fees	$50000
Audit fees	$12000
Insurance	$7000
Salaries	$190000
Bank charges	$5000
Municipal rates	$24000
Depreciation expense-vehicles	$26200
Depreciation expense-Equipment	$31950
Rent Income	-$24000
Excess provn.reversed	-$200
Operating expenses		$423200
Income before tax		$129800
Less: Company Tax		$40140
Net Profit to Shareholders		$89660