Lerumo Solutions’ accounting records reflect the following account balances at December 31, 2018: Building R560,000 Accumulated Deprec.--Bldg R112,000 Cash 90,000 Capital Stock 343,000 Consumable 5,000 Retained Earnings 200,000 Stores During 2019, the following transactions occurred: 1) On March 1, purchased a one-year insurance policy for R1,200 cash. 2) On April 1, borrowed R10,000 cash from Letsatsi Bank at 6% per annum,interest payable is due in cash in one year. 3) Employee salaries in the amount of R20,000 were paid in cash. 4) At the end of the year, R400 of the consumable stores remained on hand. 5) Earned R45,000 in tax consulting revenue during 2019 in cash. 6) At December 31, R5,000 in employee salaries were accrued. 7) On December 31, received R2,000 in cash representing advance payment for services to be provided in February of 2020. 8) The building has a useful life of 25 years and no salvage value. Required: 1) Determine the effect on the accounting equation of the preceding transactions including any related year-end adjusting entries that may be required. Create a table to reflect the increases and decreases in accounts. 2) Prepare an income statement for Lerumo Solutions for 2019. Ignore income tax effects. Prepare a classified balance sheet for Lerumo Solutions at December 3,31, 2019.
Question 1
Lerumo Solutions’ accounting records reflect the following account balances at December 31, 2018:
Building R560,000 Accumulated Deprec.--Bldg R112,000
Cash 90,000 Capital Stock 343,000
Consumable
5,000 Retained Earnings 200,000
Stores
During 2019, the following transactions occurred:
1) On March 1, purchased a one-year insurance policy for R1,200 cash.
2) On April 1, borrowed R10,000 cash from Letsatsi Bank at 6% per annum,interest payable is due in cash in one year.
3) Employee salaries in the amount of R20,000 were paid in cash.
4) At the end of the year, R400 of the consumable stores remained on hand.
5) Earned R45,000 in tax consulting revenue during 2019 in cash.
6) At December 31, R5,000 in employee salaries were accrued.
7) On December 31, received R2,000 in cash representing advance payment for services to be provided in February of 2020.
8) The building has a useful life of 25 years and no salvage value.
Required:
1) Determine the effect on the
2) Prepare an income statement for Lerumo Solutions for 2019. Ignore income tax effects.
Prepare a classified balance sheet for Lerumo Solutions at December 3,31, 2019.
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