Question 5.3
The following pre-adjustment trial balance appeared in the records of Dina’s Translating Services on 31 December 20.23 (the end of the reporting period).
Dr balances Cr balances
R R
Capital 934 100
Drawings 2 700
Buildings at cost price 790 200
Vehicles at cost price 159 800
Furniture 12 700
Accumulated depreciation – vehicles 17 000
Receivables 19 900
Bank overdraft 5 000
Payables 27 500
Services rendered 9 900
Insurance 1 200
Rent income 15 200
Stationery 1 600
Salaries and wages 19 000
Telephone 1 600
508 700 508 700
The following information has not been taken into account in the above figures:
1. Insurance for 20.23 amounted to R120 per month.
2. Depreciation must be calculated as follows:
Vehicles-20% per annum using the diminishing balance method.
Furniture-25% per annum using the straight line method. The office furniture was bought on 1 July 20.23 and has a residual value of R700.
3. Rent was received for four months in advance for an office used by a friend of Dina. Dina’s friend is an accountant and she uses the office since 1 January 20.23 to render accounting services.
Required:
a) The following ledger accounts for the year ending 31 December 20.23:
Insurance
Depreciation
Rent income
Show all your calculations
a)
1. Insurance Account:
Insurance Expense (120 x 12) 1 440
Insurance Payable 1 440
2. Depreciation Account:
Accumulated Depreciation – Vehicles (159 800 x 20%) 31 960
Depreciation Expense – Vehicles 31 960
Accumulated Depreciation – Buildings (790 200 x 20%) 158 040
Depreciation Expense – Buildings 158 040
Accumulated Depreciation – Furniture (12 000 – 700) x 25% x 6/12 1 387.50
Depreciation Expense – Furniture 1 387.50
3. Rent Income Account:
Prepaid Rent (15 200 x 4) 60 800
Rent Income 60 800