12.1 Analyse the above adjustments under the following headings: 10.12.2 Indicate the amounts to be shown in the Post-Adjustment Trial Balance in respect of the following: (a) Rent income (b) Commission income (c) Interest on fixed deposit (d) Depreciation

TASK 10.12

The financial year ends on 31 December 20.1.

10.12.1 Analyse the above adjustments under the following headings:

No.	Account debit	Account credit	Effect on Assets	Effect on Owner's equity	Liabilities
(i)	Fixed Deposit (R1 875)	Interest on Fixed Deposit (R1 875)	Increase	Increase	No effect
(ii)	Rent Income (R1 970)	Rent Received in Advance (R1 970)	No effect	Decrease	Increase
(iii)	Commission Income (R1 410)	Commission Received in Advance (R1 410)	No effect	Decrease	Increase
(iv)	Depreciation (R54 500)	Accumulated Depreciation: Vehicles (R45 000)	Decrease	Decrease	No effect
		Accumulated Depreciation: Equipment (R9 500)

Calculations for 10.12.1:

• Adjustment (i) - Interest on Fixed Deposit:
  • Investment 1 (1 July 20.1): $R30\,000 \times 12.5\% \times \frac{6}{12} = R1\,875$
  • Investment 2 (31 Dec 20.1): $R30\,000 \times 12.5\% \times \frac{0}{12} = R0$
  • Total Interest = $R1\,875$
• Adjustment (ii) - Rent Income:
  • Let monthly rent (July-Nov) be $X$. Rent (Dec & Jan 20.2) is $X + R150$.
  • Total rent received (Trial Balance) = R13 040. This includes 5 months at $X$, 1 month at $(X+150)$ for Dec 20.1, and 1 month at $(X+150)$ for Jan 20.2 (received in advance).
  • $R13\,040 = (5 \times X) + (X + R150) + (X + R150)$
  • $R13\,040 = 7X + R300$
  • $7X = R13\,040 - R300 = R12\,740$
  • $X = \frac{R12\,740}{7} = R1\,820$
  • Rent for Jan 20.2 (received in advance) = $R1\,820 + R150 = R1\,970$
• Adjustment (iii) - Commission Income:
  • Commission received in advance for 20.2 = R1 410.
• Adjustment (iv) - Depreciation:
  • Vehicles: $R180\,000 \times 25\% = R45\,000$
  • Equipment:
    • Original equipment (R50 000 - R10 000) = R40 000 for 12 months: $R40\,000 \times 20\% = R8\,000$
    • Additional equipment (R10 000) bought 31 March 20.1 (9 months): $R10\,000 \times 20\% \times \frac{9}{12} = R1\,500$
    • Total Equipment Depreciation = $R8\,000 + R1\,500 = R9\,500$
  • Total Depreciation = $R45\,000 + R9\,500 = R54\,500$

10.12.2 Indicate the amounts to be shown in the Post-Adjustment Trial Balance in respect of the following:

• a) Rent income
  • Trial Balance: R13 040 (Credit)
  • Less: Rent received in advance (Adjustment ii): R1 970 (Debit)
  • Post-adjustment amount: $R13\,040 - R1\,970 = \boxed{R11\,070}$
• b) Commission income
  • Trial Balance: R45 000 (Credit)
  • Less: Commission received in advance (Adjustment iii): R1 410 (Debit)
  • Post-adjustment amount: $R45\,000 - R1\,410 = \boxed{R43\,590}$
• c) Interest on fixed deposit
  • This is an income account.
  • Interest earned (Adjustment i): R1 875 (Credit)
  • Post-adjustment amount: $\boxed{R1\,875}$
• d) Depreciation
  • This is an expense account.
  • Total depreciation for the year (Adjustment iv): R54 500 (Debit)
  • Post-adjustment amount: $\boxed{R54\,500}$