This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
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To prepare the Statement of Comprehensive Income for the financial year ended 28 February 2026, we need to consider the pre-adjustment trial balance figures and all the adjustments. Step 1: Calculate Adjusted Sales and Cost of Sales. Sales from trial balance: R5 808 000 Adjustment (i): Goods returned by a debtor, R28 800. This reduces sales. Cost of sales of returned goods: The mark-up is 80% on cost. So, selling price = Cost × 1.80. Cost of returned goods = R28 800 / 1.80 = R16 000. This reduces cost of sales. Adjusted Sales &= R5\,808\,000 - R28\,800 \\ &= R5\,779\,200 \\ Adjusted Cost of Sales &= R3\,882\,000 - R16\,000 \\ &= R3\,866\,000 Step 2: Calculate Adjusted Other Operating Income. Discount received from trial balance: R14 000 Rent income from trial balance: R450 000 Adjustment (iii): Rent was paid up to 30 April 2026. The financial year ends 28 February 2026. This means rent for March and April 2026 (2 months) is unearned. The rent increased by 15% from 1 July 2025. Let R_old be the monthly rent before 1 July 2025. Let R_new be the monthly rent from 1 July 2025 (R_new = R_old × 1.15). The R450 000 received covers: 4 months (March 2025 - June 2025) at R_old 10 months (July 2025 - April 2026) at R_new 4R_old + 10R_new &= R450\,000 \\ 4R_old + 10(1.15R_old) &= R450\,000 \\ 4R_old + 11.5R_old &= R450\,000 \\ 15.5R_old &= R450\,000 \\ R_old &= R450\,00015.5 ≈ R29\,032.26 \\ R_new &= R29\,032.26 × 1.15 ≈ R33\,387.09 Unearned rent (March 2026 and April 2026) = 2 × R_new = 2 × R33\,387.09 = R66\,774.18. Adjusted Rent income = R450 000 - R66 774.18 = R383 225.82. Rounded to R383 226. Adjustment (iv): Stock surplus of calculators. Units available for sale = Opening stock (600) + Purchases (2 650) - Returns (185) = 3 065 units. Expected closing stock = Units available for sale (3 065) - Units sold (2 745) = 320 units. Actual closing stock = 430 units. Stock surplus = 430 - 320 = 110 units. Value of stock surplus = 110 units × R175/unit = R19 250. This is other operating income. Total Other Operating Income &= R14\,000 + R383\,226 + R19\,250 \\ &= R416\,476 Step 3: Calculate Adjusted Operating Expenses. Depreciation from trial balance: R285 500 (No adjustment) Insurance from trial balance: R132 600 Adjustment (ii): Annual premium of R14 400 covers 1 April 2025 to 31 March 2026. The financial year ends 28 February 2026. Prepaid insurance for March 2026 = R14 400 / 12 months = R1 200. Adjusted Insurance = R132 600 - R1 200 = R131 400. Directors' fees from trial balance: R492 000 (Adjustment (v) confirms fees were received for the current year, so no adjustment to the expense amount). Salaries and wages from trial balance: R850 000 Adjustment (vi): Omitted clerk's salary. Net salary R9 424 is 76% (100% - 24% deductions) of gross salary. Gross salary = R9 424 / 0.76 = R12 400. Employer contributions = R1 240. Additional Salaries and Wages expense = R12 400 (gross salary) + R1 240 (employer contributions) = R13 640. Adjusted Salaries and Wages = R850 000 + R13 640 = R863 640. Audit fees from trial balance: R23 400 Adjustment (vii): Adjusted assessment for audit fees is R30 500. Adjusted Audit fees = R30 500. Sundry expenses from trial balance: R128 000 (No adjustment) Total Operating Expenses &= R285\,500 + R131\,400 + R492\,000 + R863\,640 + R30\,500 + R128\,000 \\ &= R1\,931\,040 Step 4: Calculate Interest Income and Interest Expense. Interest income from trial balance: R5 700 (No adjustment) No interest expense is given in the trial balance or adjustments for the Luther Bank loan. Assume R0. Step 5: Prepare the Statement of Comprehensive Income. l r Statement of Comprehensive Income & \\ for the year ended 28 February 2026 & \\ Sales & R5\,779\,200 \\ Cost of Sales & (R3\,866\,000) \\ Gross Profit & R1\,913\,200 \\ Other Operating Income & \\ Discount received & R14\,000 \\ Rent income & R383\,226 \\ Stock surplus & R19\,250 \\ Total Other Operating Income & R416\,476 \\ Operating Expenses & \\ Depreciation & (R285\,500) \\ Insurance & (R131\,400) \\ Directors' fees & (R492\,000) \\ Salaries and wages & (R863\,640) \\ Audit fees & (R30\,500) \\ Sundry expenses & (R128\,000) \\ Total Operating Expenses & (R1\,931\,040) \\ Operating Profit & R398\,636 \\ Interest Income & R5\,700 \\ Profit before Tax & R404\,336 \\ Income Tax Expense & (R882\,000) \\ Net Profit/(Loss) for the year & (R477 664) Note: The SARS: Income tax of R882 000 from the trial balance is treated as the income tax expense for the year, as no further information (e.g., tax rate) is provided to calculate the actual tax liability. That's 2 down. 3 left today — send the next one.