EXERCISE 5.3 5.

3
The trial balance of Happy Hunting Traders at 31 March 2018 was as follows (ignore VAT):

DR CR
R R
Accounts payable 41 500
Accounts receivable 14 000
Accrued interest payable (01.04.2017) 750
Accumulated depreciation – Furniture & equipment (01.04.2017) 14 170
Accumulated depreciation – Motor vehicles (01.04.2017) 30 000
Administrative expenses 8 685
Allowance for credit losses (01.04.2017) 2 025
Bad debts expense 2 000
Bank 27 880
Capital (01.04.2017) 87 000
Transport expense 400
Drawings 5 000
Furniture & equipment, at cost 77 500
Insurance expense 1 860
Interest expense 8 250
Inventory (01.04.2017) 25 000
Inventory loss 1 000
15% Loan 50 000
Motor vehicle, at cost 75 000
Prepaid insurance (01.04.2017) 450
Prepaid rent (01.04.2017) 800
Purchases 96 200
Purchases returns 1 800
Rent expense 10 320
Sales 130 000
Sales returns 2 900
R357 245 R357 245

ADDITIONAL INFORMATION:

(1) Rent is R800 per month, payable quarterly in advance on 1 February, 1 May, 1 August and
1 November each year. On 1 August 2017 the rent was increased to R880 per month.

(2) The allowance for credit losses is estimated to be R1 400.

(3) Inventory which had cost R1 000 was stolen from one of the firm’s delivery vehicles. The following
entry had been recorded:

Inventory loss expense 1 000

Sales 1 000

(4) An examination of insurance policies showed three policies as follows:

POLICY DATE OF INCEPTION LIFE OF POLICY ANNUAL

PREMIUM
1 April 1, 2015 3 years R1 440
2 July 1, 2015 2 years 1 800
3 October 1, 2017 1 year 420

Annual premiums are paid in advance on the anniversary of inception of the policy.

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 5.3
(5) On 30 September 2017 Happy Hunting Traders sold a motor vehicle for R9 000. This motor vehicle
was purchased on 31 March 2015 for R20 000.

The only entry made by the accountant was:

Dr Bank 9 000
CR Motor vehicles 9 000

(6) Non-current assets are depreciated as follows:

Motor vehicles - 20% per annum on cost.

Furniture and equipment - 10% per annum on the reducing balance.

(7) The loan bears interest at 15% per annum payable quarterly in arrears on 1 March, 1 June,
1 September and 1 December. The terms of the loan agreement stipulate that a capital repayment
of R10 000 be made every year on 1 September. This payment was made and correctly recorded
during the current year as were all interest payments.

(8) Inventory on hand at 31 March 2018 amounts to R32 000.

REQUIRED:

(a) Prepare journal entries required in terms of the information included in 1 to 7. Ignore narrations.

(b) Prepare closing journal entries.

(c) Prepare the Statement of Financial Position and Notes to the Statement of Financial Position of
Happy Hunting Traders at 31 March 2018.

(The worksheet is optional, but if used should be handed in as part of your workings.)

(RV101 : 81 minutes)

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 5.3
WORKSHEET

HAPPY HUNTING TRADERS

TRIAL BALANCE ADJUSTED

31/3/2018 ADJUSTMENTS TRIAL BALANCE

DR CR DR CR DR CR

Accounts payable 41 500

Accounts receivable 14 000

Accrued interest payable (1/4/2017) 750

Accumulated depreciation -
14 170
Furniture and equipment (1/4/2017)
Accumulated depreciation -
30 000
Motor vehicles (1/4/2017)
Administrative expenses 8 685

Allowance for credit losses (1/4/2017) 2 025

Bad debts expense 2 000

Bank 27 880

Capital (1/4/2017) 87 000

Transport expense 400

Drawings 5 000

Furniture and equipment, at cost 77 500

Insurance expense 1 860

Interest expense 8 250

Inventory (1/4/2017) 25 000

Inventory loss 1 000

15% Loan 50 000

Motor vehicles, at cost 75 000

Prepaid insurance (1/4/2017) 450

Prepaid rent (1/4/2017) 800

Purchases 96 200

Purchases returns 1 800

Rent expense 10 320

Sales 130 000

Sales returns 2 900

R357 245 R357 245

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