Melvyn Jones uses the perpetual inventory system to record purchases and sales of inventory in his retail business, ABC Traders. He marks his inventory at cost plus 20%.

Here is the abridged statement of financial position as at 31 March 20x7.

Additional information:

• The term of the loan agreement is that the loan is to be repaid in five equal instalments, the first instalment starting on 31 March 20x7.

• Interest is payable each month, the amount is based on the capital balance outstanding at the beginning of each month.

Transactions for March (ignore VAT):

1 The owner increased his capital contribution by investing a further R30 000 cash.

Bought a desk, filing cabinet and printer from J. Mills and Co and paid by cheque, R3 000.

Bought inventory for R1 580 from XYZ (Pty) Ltd.

Bought a motor vehicle for cash, R10 000.

5 Sold inventory to A. Mays that cost R1 500.

Paid electricity account, R50.

Paid wages to staff, R2 000.

Sold inventory that cost R5 000 for cash.

Bought inventory from HW Supplies for R1 000.

7 Paid H. Smith the amount due to him.

8 Bought inventory from P. Lace for R98 on credit.

9 Sold inventory for cash R800.

11 Bought a motor vehicle on credit from HW Auto, R8 000.

12 Paid XYZ (Pty) Ltd the amount due.

13 Received a cheque from A. Mays in full settlement of the amount owing on 1 March 20x7.

14 Sold inventory to J. Black R1 500. On the same day, J. Black paid R2 000 on his account.

15 Sold a desk for R300 and received a cheque from A. Dilly for the amount.

16 Paid R3 100 for stationery bought from Faber Castell.

17 Paid rent for March R300.

21 Sold inventory that cost R2 000 to A. Mays.

26 Bought inventory on credit R50 from H. Smith.

Paid HW Suppliers for inventory bought on 5 March.

Sold inventory for cash R3 000. Included in these sales are inventory that was marked down by 10% on selling price, the selling price of these inventory being R900.

27 Paid for car licences, R150.

Paid wages to cleaning staff, R300.

28 Paid HW Auto half the amount due to them.

Received a cheque from A. Mays for the amount owing.

Mr Jones complied with the terms of the loan agreement and paid the Allied Bank the amount due.

You are required to:

1. Record the transactions for March in the general journal.

2. Enter the opening balances in the general ledger.

3. Post all entries from the general journal to the general ledger.

4. Balance the ledger accounts.

5. Extract a trial balance as at 31 March.

6. Prepare the trading account and profit and loss account. (Show all closing entries in the general journal and post to the ledger accounts.)

7. Prepare the statement of profit or loss & other comprehensive income for the month and statement of financial position as at 31 March.

Transcribed Image Text:

ABC Traders STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20x7 40 000 00 Capital 2 500 00 6% loan (Allied Bank) 3 100 00 Accounts payable: H. Smith 3 000 00 P. Lace 48 600 00 Inventory Accounts receivable: A. Mays J. Black Bank 15 000 00 30 000 00 2 100 00 1 500 00 48 600 00