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Question 1: COMPANY FINANCIAL STATEMENTS The information relates to ZOZIE (PTY) LTD, a stationery retailer, for the year ended 28 February 2026.

Accounting

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Answer

(R477 664)\textbf{(R477 664)}

Step-by-step solution

5 steps

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.

  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 ×\times 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 200Adjusted Cost of Sales=R3 882 000−R16 000=R3 866 000\begin{align*} \text{Adjusted Sales} &= \text{R}5\,808\,000 - \text{R}28\,800 \\ &= \text{R}5\,779\,200 \\ \text{Adjusted Cost of Sales} &= \text{R}3\,882\,000 - \text{R}16\,000 \\ &= \text{R}3\,866\,000 \end{align*}

  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 RoldR_{old} be the monthly rent before 1 July 2025. Let RnewR_{new} be the monthly rent from 1 July 2025 (Rnew=Rold×1.15R_{new} = R_{old} \times 1.15). The R450 000 received covers: 4 months (March 2025 - June 2025) at RoldR_{old} 10 months (July 2025 - April 2026) at RnewR_{new}
    4Rold+10Rnew=R450 0004Rold+10(1.15Rold)=R450 0004Rold+11.5Rold=R450 00015.5Rold=R450 000Rold=R450 00015.5≈R29 032.26Rnew=R29 032.26×1.15≈R33 387.09\begin{align*} 4R_{old} + 10R_{new} &= \text{R}450\,000 \\ 4R_{old} + 10(1.15R_{old}) &= \text{R}450\,000 \\ 4R_{old} + 11.5R_{old} &= \text{R}450\,000 \\ 15.5R_{old} &= \text{R}450\,000 \\ R_{old} &= \frac{\text{R}450\,000}{15.5} \approx \text{R}29\,032.26 \\ R_{new} &= \text{R}29\,032.26 \times 1.15 \approx \text{R}33\,387.09 \end{align*} 
    Unearned rent (March 2026 and April 2026) = $2 \times R_{new} = 2 \times \text{R}33\,387.09 = \text{R}66\,774.18$.
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 ×\times R175/unit = R19 250. This is other operating income.
    Total Other Operating Income=R14 000+R383 226+R19 250=R416 476\begin{align*} \text{Total Other Operating Income} &= \text{R}14\,000 + \text{R}383\,226 + \text{R}19\,250 \\ &= \text{R}416\,476 \end{align*}

  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\begin{align*} \text{Total Operating Expenses} &= \text{R}285\,500 + \text{R}131\,400 + \text{R}492\,000 + \text{R}863\,640 + \text{R}30\,500 + \text{R}128\,000 \\ &= \text{R}1\,931\,040 \end{align*}

  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.

  5. Prepare the Statement of Comprehensive Income.

    Statement of Comprehensive Incomefor the year ended 28 February 2026SalesR5 779 200Cost of Sales(R3 866 000)Gross ProfitR1 913 200Other Operating IncomeDiscount receivedR14 000Rent incomeR383 226Stock surplusR19 250Total Other Operating IncomeR416 476Operating ExpensesDepreciation(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 ProfitR398 636Interest IncomeR5 700Profit before TaxR404 336Income Tax Expense(R882 000)Net Profit/(Loss) for the year(R477 664)\begin{array}{l r} \textbf{Statement of Comprehensive Income} & \\ \textbf{for the year ended 28 February 2026} & \\ \text{Sales} & \text{R}5\,779\,200 \\ \text{Cost of Sales} & (\text{R}3\,866\,000) \\ \text{Gross Profit} & \text{R}1\,913\,200 \\ \text{Other Operating Income} & \\ \quad \text{Discount received} & \text{R}14\,000 \\ \quad \text{Rent income} & \text{R}383\,226 \\ \quad \text{Stock surplus} & \text{R}19\,250 \\ \text{Total Other Operating Income} & \text{R}416\,476 \\ \text{Operating Expenses} & \\ \quad \text{Depreciation} & (\text{R}285\,500) \\ \quad \text{Insurance} & (\text{R}131\,400) \\ \quad \text{Directors' fees} & (\text{R}492\,000) \\ \quad \text{Salaries and wages} & (\text{R}863\,640) \\ \quad \text{Audit fees} & (\text{R}30\,500) \\ \quad \text{Sundry expenses} & (\text{R}128\,000) \\ \text{Total Operating Expenses} & (\text{R}1\,931\,040) \\ \text{Operating Profit} & \text{R}398\,636 \\ \text{Interest Income} & \text{R}5\,700 \\ \text{Profit before Tax} & \text{R}404\,336 \\ \text{Income Tax Expense} & (\text{R}882\,000) \\ \textbf{Net Profit/(Loss) for the year} & \boxed{\textbf{(R477 664)}} \end{array}

    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.

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