EXERCISE 5.2 5.2
The trial balance of Happy Hunting Traders at 31 March 2023 was as follows (ignore VAT):
DR
R CR
R
Accounts payable 415 000
Accounts receivable 140 000
Accumulated depreciation – Furniture & equipment (01.04.2022) 141 700
Accumulated depreciation – Motor vehicles (01.04.2022) 300 000
Administrative expenses 93 100
Allowance for credit losses (01.04.2022) 20 250
Bad debts expense 20 000
Bank 265 300
Capital (01.04.2022) 870 000
Transport expense 4 000
Drawings 50 000
Furniture & equipment, at cost 775 000
Insurance expense 36 600
Interest expense 68 750
Inventory (01.04.2022) 250 000
Inventory loss expense 10 000
15% Loan 500 000
Motor vehicle, at cost 840 000
Profit on disposal of motor vehicles 90 000
Purchases 962 000
Purchases returns 18 000
Rent expense 111 200
Sales 1 300 000
Sales returns 29 000
R3 654 950 R3 654 950
ADDITIONAL INFORMATION:
(1) Rent is R8 000 per month, payable quarterly in advance on 1 February, 1 May, 1 August and
1 November each year. On 1 August 2022 the rent was increased to R8 800 per month.
(2) The allowance for credit losses at 31 March 2023 is estimated to be R14 000.
(3) Inventory which had cost R10 000 was stolen from one of the firm’s delivery vehicles. The following entry had been recorded:
Inventory loss expense 10 000
Sales 10 000
(4) An examination of insurance policies showed two policies as follows:
POLICY DATE OF INCEPTION LIFE OF POLICY ANNUAL PREMIUM
1 April 1, 2020 3 years R14 400
2 October 1, 2022 1 years 22 200
Annual premiums are paid in advance on the anniversary of inception of the policy.
5.2
(5) On 30 September 2022 Happy Hunting Traders sold a motor vehicle for R90 000. This motor vehicle was purchased on 31 March 2020 for R200 000.
The only entry made by the accountant was:
Dr Bank 90 000
CR Profit/loss on disposal of motor vehicles 90 000
No other vehicles were purchased or sold during the current year.
(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 and is repayable in full on 1 September 2027. All interest payments were made and correctly recorded during the current year.
(8) Inventory on hand at 31 March 2023 amounts to R320 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 2023
