The reporting period of Smitshop ends on 31 December. The transactions for the past
financial year, which ended on 31 December 20.9, have been fully recognised in the
ledger. The following pre-adjustment trial balance was prepared on 31 December 20.9.
SMITSHOP
Pre-adjustment trial balance as at 31 December 20.9
R R
Inventories 01/01/20.9 100 000
Purchases 700 000
Sales 960 000
Stationery 50 000
Rent expense 65 000
Rent income 2 600
Salaries 80 000
Sundry expenses 6 350
Interest income 6 750
Receivables control 120 000
Payables control 80 000
Investment 90 000
Land and buildings 410 000
Furniture (purchased 02/01/20.9) 50 000
Capital 670 000
Drawings 48 000
R1 719 350 R1 719 350
Additional information
1 Inventories amounted to R160 000 as at 31 December 20.9.
2 Unused stationery amounted to R10 000 as at 31 December 20.9.
3 Rent expense amounts to R5 000 per month. The rent for January 20.10 had already
been paid on 28 December 20.9.
4 Rent income according to a sub-letting agreement, amounts to R200 per month. The
rent for January 20.10 had already been received on 29 December 20.9.
5 Salaries payable on 31 December 20.9 amount to R5 400.
6 Interest on the investment is received every third month. The interest for the last
quarter of 20.9 was R2 250, and was only received on 10 January 20.10
7 Depreciation on furniture must be written off at 10% per annum, according to the
straight-line method.
Assignment
(a) Complete the necessary adjustment journal entries.
Adjustment journal entries:
1. Inventory adjustment:
Inventory (DR) 60,000
Inventory 01/01/20.9 (CR) 60,000
2. Stationery adjustment:
Stationery expense (DR) 40,000
Stationery (CR) 40,000
3. Rent expense adjustment:
Rent expense (DR) 5,000
Prepaid rent (CR) 5,000
4. Rent income adjustment:
Rent income (DR) 200
Rent income received in advance (CR) 200
5. Salaries payable adjustment:
Salaries expense (DR) 5,400
Salaries payable (CR) 5,400
6. Interest income adjustment:
Interest receivable (DR) 2,250
Interest income (CR) 2,250
7. Depreciation on furniture:
Depreciation expense (DR) 5,000
Accumulated depreciation - Furniture (CR) 5,000
(b) Prepare the adjusted trial balance:
SMITSHOP
Adjusted trial balance as at 31 December 20.9
R R
Inventories 31/12/20.9 60,000
Purchases 700,000
Sales 960,000
Stationery 40,000
Rent expense 60,000
Rent income 200
Salaries 85,400
Sundry expenses 6,350
Interest income 4,500
Receivables control 120,000
Payables control 80,000
Investment 90,000
Land and buildings 410,000
Furniture (net of depreciation) 45,000
Capital 670,000
Drawings 48,000
R1,719,350 R1,719,350
The adjusted trial balance reflects the correct account balances after the necessary adjustments have been made.