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EXERCISE 1 34

EXERCISE 1 34

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EXERCISE 1.34 1.34

The following is the trial balance of A. Vest, trading as Vest Traders, at 31 March 20x1:

VEST TRADERS

TRIAL BALANCE

AT 31 MARCH 20x1

Sales

164 000

Sales returns

1 400

Capital: A. Vest

40 000

Bank

42 335

Cost of sales

86 400

Loan: A. Smith

15 000

Administrative expenses

6 490

Furniture and fittings

30 600

Interest revenue

900

Inventory

13 300

Salaries expense

33 000

Prepaid salaries 1.4.20x0

3 300

Loan: T. Jones

28 000

Accrued interest payable 1.4.20x0

425

Carriage outwards expense

250

Advertising expense

1 250

R233 325

You are the accountant for Vest Traders and following an investigation you ascertain the following

information:

1. The bookkeeper had forgotten to reverse certain of the adjustments made on 31 March 20x0.

2. The owner, A. Vest, had used merchandise, which had cost R600 (selling price R900), for personal

purposes. This event had not been recorded.

3. The loan (A. Smith) bears interest at 12% p.a. payable quarterly in advance on 1 September,

1 December, 1 March and 1 June. The loan agreement was entered into on 1 December 20x0. The

capital amount of the loan is to be repaid on 30 November 20x5.

4. Salaries for March were only paid on 2 April 20x1. Monthly salaries had remained unchanged for the

financial year ending 31 March 20x1.

5. The loan (T. Jones) currently bears interest at 15% p.a. payable monthly in arrear. The loan

agreement was entered into on 1 January 20x0. The rate of interest was changed on 1 January 20x1

from 17% p.a. to 15% p.a. The capital amount of the loan is repayable in 15 equal instalments on

30 June every year. The capital repayment made on 30 June 20x0 was made and correctly recorded.

The bookkeeper had mistakenly posted all interest payments to administrative expenses. You have

decided to rectify the error. All interest payments had been made except for that relating to March

20x1. This payment had been made on 2 April 20x1.

6. During the year Vest Traders had acquired the assets and liabilities of a competitor on credit for

R24 900. The bookkeeper had not known how to account for the transaction so had omitted it entirely.

Assets acquired: Motor vehicles 14 000

Accounts receivable 16 000

Liabilities taken

over: Accounts payable 5 100

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1.34

7. R400 of the advertising expense relates to advertisements due to appear in the newspaper in June

20x1.

REQUIRED:

(a) Entries in general journal form (without narrations) required in terms of the information contained in

1. to 7. above.

(b) Closing journal entries (without narrations) on 31 March 20x1.

NOTE: Show all workings.

The attached worksheet may be used as part of your workings.

If you use the worksheet it must be handed in.

(R101 April 1999 : 40 minutes)

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EXERCISE 1.34 1.34 The following is the trial balance of A. Vest, trading as Vest Traders, at 31 March 20x1: VEST TRADERS TRIAL BALANCE AT 31 MARCH 20x1 DR R Sales Sales returns Capital: A. Vest Bank Cost of sales Loan: A. Smith Administrative expenses Furniture and fittings Interest revenue Inventory Salaries expense Prepaid salaries 1.4.20x0 Loan: T. Jones Accrued interest payable 1.4.20x0 Carriage outwards expense Advertising expense CR R 164 000 1 400 40 000 42 335 86 400 15 000 6 490 30 600 900 13 300 33 000 3 300 28 000 425 250 1 250 R233 325 R233 325 You are the accountant for Vest Traders and following an investigation you ascertain the following information: 1. The bookkeeper had forgotten to reverse certain of the adjustments made on 31 March 20x0. 2. The owner, A. Vest, had used merchandise, which had cost R600 (selling price R900), for personal purposes. This event h ...
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