TA PROVIDED The pre-adjustment trial balance of Wing-It (Pty) Ltd as at 31 August 2022 is presented: Account Debit Credit Professional fees 765 000 Goods sold 435 000 Cost of sales
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
DATA PROVIDED
The pre-adjustment
Account
Debit
Credit
Professional fees
765 000
Goods sold
435 000
Cost of sales
215 000
Interest received
19 500
Interest on loan
6 300
Bank charges
3 200
Cleaning
1 500
Staff welfare
650
Salaries and wages
35 850
Municipal services
6 850
Printing and stationery
16 715
Telephone
18 600
Fuel and oil
56 000
Repairs and maintenance: Building
5 200
Repairs and maintenance: Vehicles
6 850
Capital: Blue
520 000
Capital: Green
630 000
Drawings: Blue
35 000
Drawings: Green
27 000
Current account: Blue
2 500
Current account: Green
6 400
Retained income
265 000
Land
500 000
Buildings
1 500 000
21 000
Vehicles
380 000
Accumulated depreciation on vehicles
65 000
Equipment and electronics
79 500
Accumulated depreciation on equipment and electronics
1 500
8% Long-term loan
325 000
Bank: FNB
168 000
Bank: ABSA
32 000
Debtors control account
85 000
Allowance for credit losses
6 400
Creditors control account
78 600
Petty cash
2 685
Inventory: Stationery
3 500
Inventory: Materials
14 500
3 170 400
3 170 400
Additional information
1. Professional services to the value of R5 000 has been rendered by Mr. Blue to a trusted client Mrs Navy, but as the accountant is on sick leave an invoice is yet to be submitted to Mrs. Navy.
2. Defective goods to the value of R2 500 was returned by Mr Spring on 31 August 2022. Mr Spring opted to have the refund processed on his account. The goods had an original cost of R1 800.
3. An order to repair the roof of the building, to the value of R7 000 was issued on 31 August 2022. Commencement of the maintenance is planned for 1 October 2022.
4. Mrs Jump’s estate was finalised by her lawyer. The
5. The company purchases fuel on account for the company vehicle. The invoice from Petroleum SA has not been received yet. The slips supporting the fuel purchases in August 2022 amounts to R3 500.
6. The advance to Mr Green of R 15 000 was debited to the salaries and wages account.
7. The partnership agreement states that partners earn 7% interest on their capital accounts and 9,5% on their current accounts. Mr Green contributed R130 000 capital on 31 August 2022, which was already recorded.
8. The company policy requires a reported balance on the allowance for credit losses at 10% of outstanding debtors.
9. The stock count performed on 31 August 2022 reported stationery of R2 800 on hand. During this stock take, the supervisor discovered a rodent issue in the materials store. The material loss was calculated at R1 600. Opening materials on 1 September 2021 amounted to R22 400.
10. Land is not
11. Buildings are depreciated at 2% per year on the straight-line basis.
12. Vehicles are depreciated at 25% on the
13. Equipment is depreciated at 12% on the straight-line basis. Equipment of R15 000 was sold on 1 March 2022. On 1 September 2021 this equipment had accumulated depreciation of R8 400. The equipment was replaced with updated technology to the value of R25 000 on 1 April 2022. The transactions on the sale and purchase were recorded. Depreciation has not been accounted for.
With reference to the data-set provided, address the following questions:
Prepare the Statement of Comprehensive Income for the period ended 31 August 2022 of Wing-It
(Pty) Ltd. The tax rate on private companies set by the South African Revenue Services is 28%.
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