Reference no: EM133516154
Case: The administrative clerk at HooJay Ltd prepared the following draft financial statements for the financial year ended 31 July 2022.
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31 JULY 2022
Sales: 7 965 224
Less: Cost of sales: 6 050 000
Opening inventory: 850 000
Purchases: 5 200 000
Closing inventory: 0
Gross profit: 1 915 224
Other income: 507 200
Rental income: 270 000
Interest income: 62 000
Proceeds on sale of asset: 175 200
Expenses: 1 702 260
Administration and marketing: 125 000
Adverting : 60 000
Bad debts: 86 500
Bank charges: 66 000
Electricity: 192 000
Insurance: 60 000
Interest on long-term loan : 50 350
Maintenance: 62 410
Salaries and wages: 975 000
Telephone: 25 000
Profit for the year: 720 164
STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 JULY 2022
NON-CURRENT ASSETS 15 023 158
Land and buildings: 8 900 000
Equipment at cost: 2 500 000
Less: Accumulated depreciation: 395 000
Motor vehicles at cost: 5 300 000
Less: Accumulated depreciation: 3 600 000
Computer equipment at cost: 95 420
Less: Accumulated depreciation: 31 807
Investment at 5.5% interest per year: 2 254 545
CURRENT ASSETS: 2 454 400
Trade debtors: 860 000
Less: Provision for bad debts: 57 600
Cash and cash equivalents: 1 652 000
TOTAL ASSETS: 17 477 558
EQUITY AND LIABILITIES
EQUITY: 15 665 769
Share Capital: 10 550 000
Retained earnings
- Opening balance: 4 395 605
- Profit for the year: 720 164
LONG TERM LIABILITIES
Long-term loan at 7.9% interest per year: 849 789
CURRENT LIABILITIES
Trade creditors: 962 000
TOTAL EQUITY AND LIABILITIES : 17 477 558
Additional information
1. The rental income was received from Mr. Abdul Gupta for the period 1 August 2021 until 31 January 2023.
2. The outstanding interest on the investment still need to be provided for.
3. The insurance on the statement of comprehensive income includes an annual insurance payment made on 1 March 2022. On this date the insurance premium increased with 7.7%.
4. Provide for the outstanding interest on the long-term loan.
5. On 1 April 2022 a vehicle with a cost of R185 000 was sold. The accumulated depreciation at the beginning of the year R85 350. Depreciation on vehicles are written off on the straight line methods over a period of five (5) years. Only the proceeds on the sale have been recorded in the financial statements.
6. Equipment are depreciated over ten (10) year and computer equipment over a period of three (3) years. Provide for the depreciation on equipment and computer equipment.
7. Closing inventory according to the stock take on 31 July 2022 was R848 600.
8. A debtor, Ms X Mfanta cannot pay her outstanding debt to the amount of R20 000 as she has been declared insolvent. This amount need to be written off. Due to bad economic provision the expectation is that 7.5% of debtors may be irrecoverable.
Required
Question: By making use of the information provided above, make the necessary year-end adjustments and prepare the financial statements for the year ended 31 July 2022.