QUESTION 1: Inventory

Preliminary workings:

 Total Units Available: 1,000 (01 April) + 500 (15 April) = 1,500 units.

 Units on Hand (30 April): 750 units.

 Units Sold: 1,500 - 750 = 750 units.

 Mark-up: 25% on cost (Sales = Cost of Sales × 1.25). All sales are for
cash.

1. FIFO Method: Sales Transactions

Under First-In-First-Out, the first 750 units sold are taken from the oldest
batch (01 April).

 Cost of Sales (COS): 750 units × R1,500 = R1,125,000

 Sales Value: R1,125,000 × 1.25 = R1,406,250

General Journal:

Debit Credit
Details
(R) (R)

1,406,25
Bank
0

1,406,25
Sales
0

Cost of 1,125,00
Sales 0

1,125,00
Inventory
0

2. FIFO Method: Balance of Inventory on Hand

The 750 units on hand come from the newest batches.

 500 units from the 15 April batch @ R1,650 = R825,000

 250 units from the 01 April batch @ R1,500 = R375,000

 Total FIFO Ending Inventory: R825,000 + R375,000 = R1,200,000

3. Weighted Average Cost (WAC) Method: Sales Transactions

First, calculate the average cost per unit.

 Total Cost of Goods Available: (1,000 units × R1,500) + (500 units

× R1,650) = R1,500,000 + R825,000 = R2,325,000.

 WAC per Unit: R2,325,000 ÷ 1,500 units = R1,550

 Cost of Sales (COS): 750 units sold × R1,550 = R1,162,500

 Sales Value: R1,162,500 × 1.25 = R1,453,125

General Journal:

Debit Credit
Details
(R) (R)

1,453,12
Bank
5

1,453,12
Sales
5

Cost of 1,162,50
Sales 0

1,162,50
Inventory
0

4. WAC Method: Balance of Inventory on Hand

 750 units on hand × R1,550 (WAC per unit) = R1,162,500

QUESTION 2: PPE, Adjustments & Trial Balance

1. Adjusting Journal Entries

No Debit Credit
Details
. (R) (R)

1. Depreciation * 25,000

Accumulated Depreciation: Motor vehicle 16,000

Accumulated Depreciation: Store fittings 9,000

2. Salaries and wages (or Bonus expense) 40,000

No Debit Credit
Details
. (R) (R)

Accrued expenses (or Bonus payable) 40,000

3. Accrued income (or Interest receivable) 60,000

Interest income 60,000

4. Sales 150,000

Income received in advance (Unearned

150,000
revenue)

5. Prepaid expenses ** 7,500

Rent expense 7,500

Workings for adjusting entries:

 * Depreciation: * Motor Vehicle (20% Diminishing Balance): Cost

(R125,000) - Acc. Dep (R45,000) = R80,000. R80,000 × 20% =
R16,000.

o Store Fittings (18% Straight Line): Cost (R50,000) × 18% =

R9,000. Total Depreciation = R25,000.

 Rent: R97,500 was paid. At R7,500/month, R97,500 represents 13

months (R97,500 / 7,500 = 13). Because December paid for January, 1
month is prepaid (R7,500).

2. Adjusted Trial Balance at 31 December 2024

Debit Credit
Account Details
(R) (R)

Capital 481,000

Drawings 100,000

Motor Vehicle 125,000

Accumulated Depreciation: Motor vehicle

61,000
(45k+16k)

Store fittings 50,000

 Debit Credit
Account Details
(R) (R)

Accumulated Depreciation: Store fittings

31,500
(22.5k+9k)

Inventory 120,000

Bank 175,800

Accounts Receivable 35,000

Accrued income (Interest receivable) 60,000

Prepaid expenses 7,500

Accrued expenses (Bonus payable) 40,000

Income received in advance 150,000

Sales (600k-150k) 450,000

Cost of Sales 350,000

Interest income 60,000

Administration expenses 5,200

Salaries and wages (90k+40k) 130,000

Rent expense (97.5k-7.5k) 90,000

Depreciation 25,000

1,273,5 1,273,5
TOTAL
00 00

3. Sale of Motor Vehicle (Profit/Loss Calculation)

 Original Cost: R125,000

 Accumulated Depreciation (at date of sale: 31 Dec 2024): R45,000

+ R16,000 = R61,000

 Carrying Amount (Cost - Acc Dep): R125,000 - R61,000 = R64,000

 Proceeds from Sale: R75,000

  Profit / Loss: Proceeds (R75,000) - Carrying Amount (R64,000) =
R11,000 Profit

(Luxury shoes made a Profit on the sale of the asset because the selling
price was higher than the carrying amount).

Bonus Questions

1. When was the store fittings acquired?

 Cost of fittings = R50,000

 Straight-line depreciation at 18% per year = R9,000 per annum

 Accumulated Depreciation on 1 Jan 2024 (opening balance) = R22,500

 Time elapsed = Total Acc. Dep / Annual Dep = R22,500 / R9,000 = 2.5
years.

 2.5 years before 1 January 2024 takes us back to: 01 July 2021.

2. Bank statement positive balance: Credit or debit and why?

 A positive balance in your personal/business bank statement (provided

by the bank) is reflected as a Credit balance.

 Why? The bank statement is prepared from the bank's perspective.

From the bank's viewpoint, the money you deposit is a liability (it is
money they owe you). Because liabilities increase on the credit side, a
positive balance is shown as a credit.