Fairweather CC was incorporated on 30 June 20x7. The members (Messrs Fairly, Poorly and Mildly) each

Question:

Fairweather CC was incorporated on 30 June 20x7.

• The members (Messrs Fairly, Poorly and Mildly) each have a 33.33% interest.

• Profits and losses are shared in the same ratio as the capital contributions.

Here is the post-adjustment trial balance of Fairweather CC as at 31 December 20x7 (financial year end):

Additional information:

• These salaries were paid in cash to the members during the year:

• The members’ loans are unsecured and earn interest at a rate of 6% per annum based on the year’s opening loan balance.

– The loans for the members were made on the date of incorporation and interest should be credited to the loan accounts.

– No provision has been made for the interest charged in the current year.

• The current profit represents the balance after distributions had been made to the partners.

– The distributions of R12 000 per member were paid in cash.

– No further members’ contributions were made during the period.

• The 12% mortgage bond is secured over land and buildings and is repayable in equal instalments over 20 years commencing on 31 October 20x8.

– Interest is payable half-yearly in arrears on 1 January and 1 July.

– No accrual was made for the year ended 31 December 20x7.

• The CC uses the straight-line method of depreciation at 20% on vehicles and 15% on machinery and equipment.

– All non-current assets were bought on the date of incorporation with the exception of a vehicle that cost R65 000 that was bought on 31 September 20x7.

– Land and buildings are not depreciated.

• During the year, land and buildings were revalued by the members, increasing the original cost by R60 000. It is the policy of the CC to revalue land and buildings every five years.

• Inventory is valued on the FIFO basis and consists of: