Question

Use the information provided below for Herbie to answer questions 4 to 6.
The following is the general ledger balances of Herbie a herb trading business entity as at
31 July 20.8:
HERBIE
EXTRACT FROM THE LIST OF BALANCES AT 31 JULY 20.8

R
Capital………………………………………………………………………………………….. Drawings……………………………………………………………………………………….. Vehicles at cost (1 August 20.7)…....……………………………………………………….. Accumulated depreciation: Vehicles (1 August 20.7)…………………………………….	100 000 52 000 100 000 46 000
Inventory: Trading (1 August 20.8)………………………………………………………….. Stationery (1 August 20.7)……………………….…………………………………………... Fixed deposit…………………………………………………………………………………... Bank (favourable)…………………………………………………………………………….. Mortgage (ZZC bank)………………………………………………………………………… Commission income………………………………………………………………………….. Insurance expenses………………………………………………………………………….. Packing materials (1 August 20.7)………………………….………………………………. Rental income…………………………………………………………………………………. Water and electricity expenses……………………………………………………………… Deposit water and electricity…………………………………………………………………. Advertising…………………………………………………………………….……………….. Bank charges………………………………………………………………………………….. Communication and website expenses……………………………………………………. Interest income………………………………………………………………………………... Salaries………………………………………………………………………………………… Trade receivables control………………………………………………………….…………. Trade payables control………………………………………………………………………..	116 000 11 200 200 000 38 974 380 000 192 888 27 000 9 000 77 900 105 100 2 000 260 000 5 564 7 600 8 500 376 000 80 000 67 000

(a) (b)

An annual rental income of R27 000 was received on 1 October 20.7. On 31 June 20.8 water and electricity of R33 000 was paid for the period up to 30 December 20.8.

(c) (d) (e)	On 31 July 20.8 stationery on hand amounted to R13 000. On 31 August 20.7 Herbie bought a new delivery van for R60 000 cash. Depreciation must still be provided for as follows:
-	Vehicles at 20% per annum on the diminishing-balance method.
(f) (g)	Packing materials on hand at 31 July 20.8 amounted to R6 000. On 31 August 20.8 an instalment of 5% on the mortgage was due. The interest payable on the mortgage is at a rate of 15% per annum and is still due for the current year. An inventory count on 31 July 20.8 revealed that inventory amounting to R66 000 was on hand. You may assume that the total comprehensive loss for the year, after all the above adjustments have been taken into account, amounted to R31 243.
(h)
(i)

4. The amount for rental income to be shown in the statement of profit or loss and other
comprehensive income for the year ended 31 July 20.8 will be …
(1) R22 500
(2) R73 400
(3) R 4 500
(4) R77 900
(5) R55 400
5. The amount for water and electricity to be shown in the statement of profit or loss and
other comprehensive income for the year ended 31 July 20.8 will be …
(1) R107 100
(2) R105 100
(3) R 79 600
(4) R 77 600
(5) R 99 600
6. The amount for finance charges to be shown in the statement of profit or loss and other
comprehensive income for the year ended 31 July 20.8 will be …
(1) R57 000
(2) R48 500
(3) R54 150
(4) R45 650
(5) R65 500

Answer 1

4. The amount of R 77900 will be shown in profit and loss acoount as the rent income generated during the year If the entity would have followed cash system then actuals receipts should have been accounted.

5.The water and electricity bill to be shown in profit and loss account will be R 105100 . The deposit amount of R 2000 will not be added because it is the security amount paid to the department which is refundable. So will be shown as asset in Balance sheet

6.The amount of finance charges will be R 380000*15/100 = R 57000 .

The amount due was R 380000 and no payment was made so the interest will be calculated at entire amount