Solution 8.

8
(65 marks: 78 minutes)
1.
1.1 (6 marks)
Bank
31/8/11 Balance (½) 165 200 31/8/11 Stationery (½) 45 (1)
(1 472 – 1 427)
Trade receivables 663 (1) Bank Charges 178 (1)
Trade receivables 1 520 (1)
Balance 164 120 (1)

165 863 165 863

1.2 (5 marks)

Balance as per bank statement (balancing figure) 165 670 (1)

Outstanding deposits 4 800 (1)
Cheques not yet presented for payment
From July (R6 200 – R5 000) (1 200) (1½)
From August (5 150) (1)
Balance as per bank account 164 120 (½)

2. (9 marks)
2.1
10/8 DR Deposit receivable (100 x R500) (1) 50 000 (1)
CR Bank 50 000 (1)
Solutions Manual for Kew, J & Carpenter, R. 2019. Financial Accounting: The Question Book revised 5e: Cape Town: Oxford University
Press South Africa. Unless otherwise indicated, the questions and suggested solutions are copyrighted to the University of Cape Town
and reprinted by Oxford University Press South Africa with permission.
 2
Paid for books on date of order (1)

2.2
15/8 DR Inventory 50 000 (1)
CR Deposit receivable 50 000 (1)
Recognise inventory – ordered FOB shipping point (1)

2.3
17 Aug
No entry (1) – Although inventory delivered on 17th – inventory recognised on 15 August as the
rights attached to the inventory transfer on this date (1) [terms FOB shipping point]

3. (2 marks)
31/8 DR Allowance for doubtful debt 5 200 (1)
CR Trade receivable 5 200 (1)

4.
Pt 7 (4 marks)
31/8 DR Insurance expense (W1) 27 800 (1)
CR Prepaid insurance 27 800 (1)
OR DR entry could be taken to bad debts expense (the allowance calculation will ensure that the
correct information reported).
W1 (R22 200 x 4/12 (1)) + (R30 600 x 8/12 (1))

Pt 9 (6 marks)
31/8 DR Bad debts (W1) 6 546 (1)
CR Allowance for doubtful debt 6 546 (1)

W1:
R178 000 – R5 200 (½) – R663 (½) +1 520 (½) = R173 657 x 4% (1) = R6 946
R5 600 – R5 200 (1) = R400
R6 826 – R400 (½)
If DR entry in pt3 was to bad debts then the R5 200 would not be subtracted in this calculation.

5.
5.1 (4 marks)
Stationery
1/9/10 Balance (½) 1 500 31/8/11 P & L (1) 4 822
1/5/11 Payables (1) 2 800 Balance (½) 950
18/8/11 Bank 1 427
31/8/11 Bank (1) 45
5 772 5 772

5.2 (5 marks)
Accumulated depreciation: Vehicles
1/9/10 Balance (½) (W1) 476 625
31/8/11 Depreciation expense (½) 76 875
(W2) 553 500

W1:
R1m – (R400 000 – R15 000(1)) = R615 000 (1)
310/400 (1) x R615 000 = R476 625

W2:
50/400 (1) x R615 000 = R76 875
Solutions Manual for Kew, J & Carpenter, R. 2019. Financial Accounting: The Question Book revised 5e: Cape Town: Oxford University
Press South Africa. Unless otherwise indicated, the questions and suggested solutions are copyrighted to the University of Cape Town
and reprinted by Oxford University Press South Africa with permission.
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5.3 (9 marks)
Interest Expense
1/12/10 Bank (W2) (½) 12 000 1/9/10 Accrued interest expense 3 000
(½) (W1)
1/4/11 Bank (W3) (½) 9 750 31/8/11 Profit and loss (½) 30 000
1/8/11 Bank (W4) (½) 9 000
31/8/11 Accrued interest expense 2 250
(½) (W5)

33 000 33 000

Loan outstanding on 31/8/11:

2 payments made (1/10 and 1/11)
R500 000/5 = R100 000 per payment (1)
OB loan = R400 000
CB loan = R300 000

W1: R400 000 x 9% x 1/12 (1)

W2: R400 000 x 9% x 4/12 (½)
W3: R400 000 x 9% x 1/12 (1) + R300 000 x 9% x 3/12 (1)
W4: R300 000 x 9% x 4/12 (½)
W5: R300 000 x 9% x 1/12 (1)

6. (2 marks)
To ensure that the correct information (1) is recognised in the financial statements (1) as at year-
end

7. (9 marks)
Statement of financial position as at 31 August 2011
Rantambore Ruminations (1)
Current Assets (½)
Inventory (½) 475 000 (½)
Trade receivables (½) (W1) 166 711
Bank (½) 164 120 (1)
Stationery (½) 950 (½)
Prepaid insurance (½) (W2) 10 200

W1: R173 657 (1) x 96% (1)

W2: R30 600 x 4/12 (1)

8. (3 marks)
As at 31 August 2011 Rantambore Ruminations owes R1 500 for electricity i.e. liabilities have
increased (1). There is no change in an asset/other liability. This means that the net asset value of
the business has decreased (1). The decrease is not due to a distribution to the owner – therefore
an expense is recognised (1).

9. (1 mark)
Relevance
Faithful representation

Solutions Manual for Kew, J & Carpenter, R. 2019. Financial Accounting: The Question Book revised 5e: Cape Town: Oxford University
Press South Africa. Unless otherwise indicated, the questions and suggested solutions are copyrighted to the University of Cape Town
and reprinted by Oxford University Press South Africa with permission.