Prepare the Income Statement on 30 June 2020

• Cost of Sales: Original Cost of Sales: R640 000 Less: Donated goods (Adjustment C): R1 800 $$\text{R}640\,000 - \text{R}1\,800 = \text{R}638\,200$$
• Telephone Expense: Original Telephone: R24 300 Add: Accrued expense (Adjustment A): R3 100 $$\text{R}24\,300 + \text{R}3\,100 = \text{R}27\,400$$
• Insurance Expense: Original Insurance: R18 600 Less: Prepaid portion of R1 320 (Adjustment B) for 9 months (July 2020 - March 2021) $$\text{R}18\,600 - \left(\text{R}1\,320 \times \frac{9}{12}\right) = \text{R}18\,600 - \text{R}990 = \text{R}17\,610$$
• Stationery Expense: Original Stationery: R13 400 Less: Stationery on hand (Adjustment D): R2 300 $$\text{R}13\,400 - \text{R}2\,300 = \text{R}11\,100$$
• Bad Debts Expense: Original Bad Debts: R33 350 Add: Debtor written off (Adjustment E): R1 350 $$\text{R}33\,350 + \text{R}1\,350 = \text{R}34\,700$$
• Rent Income: Rent received for 13 months: R40 250. Rent increased by R250 from 1 March 2020. Let $x$ be the rent per month before 1 March 2020. Rent received for 13 months = $(8 \times x) + (4 \times (x+250)) + (1 \times (x+250))$ $$13x + \text{R}1\,250 = \text{R}40\,250$$ $$13x = \text{R}39\,000 \implies x = \text{R}3\,000$$ Actual rent income for the year (12 months): $$(8 \times \text{R}3\,000) + (4 \times (\text{R}3\,000 + \text{R}250)) = \text{R}24\,000 + \text{R}13\,000 = \text{R}37\,000$$
• Discount Allowed: Original Discount Allowed: R2 800 Less: Discount reversed due to dishonoured EFT (Adjustment G): R70 $$\text{R}2\,800 - \text{R}70 = \text{R}2\,730$$
• Interest on Fixed Deposit: Fixed deposit: R90 000 at 9% p.a. from 1 October 2019 to 30 June 2020 (9 months). $$\text{R}90\,000 \times 9\% \times \frac{9}{12} = \text{R}6\,075$$
• Depreciation: Vehicles: Old vehicles (R420 000 - R120 000): R300 000 at 20% p.a. New vehicle (R120 000) at 20% p.a. for 10 months (1 Sept 2019 - 30 June 2020). $$(\text{R}300\,000 \times 20\%) + \left(\text{R}120\,000 \times 20\% \times \frac{10}{12}\right) = \text{R}60\,000 + \text{R}20\,000 = \text{R}80\,000$$
• Depreciation: Equipment: R10 800 (Adjustment I)
• Donations: R1 800 (Adjustment C)

\begin{align*}
Sales &&& R960,000 \ Less: Cost of Sales &&& (R638,200) \ Gross Profit &&& R321,800 \ Other Operating Income \ Discount received & R7,560 \ Rent income & R37,000 \ Total Other Operating Income &&& R44,560 \ Less: Operating Expenses \ Debtors allowances & R22,300 \ Salaries & R102,000 \ Telephone & R27,400 \ Water and electricity & R12,100 \ Stationery & R11,100 \ Discount allowed & R2,730 \ Advertising & R25,400 \ Insurance & R17,610 \ Bad debts & R34,700 \ Donations & R1,800 \ Depreciation: Vehicles & R80,000 \ Depreciation: Equipment & R10,800 \ Total Operating Expenses &&& (R347,940) \ Operating Profit &&& R18,420 \ Interest Income \ Interest on fixed deposit & R6,075 \ Interest Expense \ Interest on loan & (R8,400) \ Net Profit &&& R16,095
\end{align*}