The transactions below appeared in the books of Fidel Fertiliser Company.

Fidel set up the business to sell the latest grass fertiliser that ensures that grass stays green all year round. Fidel purchases all his Fertiliser on credit on a bi-monthly basis at 1 000 kg at a time.

All fertiliser is sold and bought at a cost/kg.

• The business uses the perpetual system to account for inventory movements.

• Cost of sales is calculated using the first-in-first-out system.

• Fidel uses a mark up of 50% on the cost of goods sold.

• All amounts include VAT unless otherwise stated.

Transactions for May 20x1:

2 Fidel invested R87 000 in the business.

Purchased 2 000 kg at a cost of R16 000 (VAT excl.) on credit from Fertile Ground. Fertile

Ground has indicated that a discount of 5% will be received if the account is settled within two weeks.

Incurred delivery charges of R1 140 from Fertile Ground that was settled in cash.

Purchased stationery for an amount of R1 710 and issued cheque 12.

3 Paid the rent for the month that amounted to R5 700 and issued cheque 13.

Purchased office equipment from Off Equ LTD on credit for R9 800.

6 Sold 600 kg of fertiliser to Stoddles Farms on credit.

Sold 1 100 kg of fertiliser to Evergreen Grass on credit.

Sold 100 kg of fertiliser to Miss Biggs and received a cheque.

Paid Fertile Ground the outstanding amount owing.

9 Took 150 kg of fertiliser home for personal use.

Purchased new equipment from Factory Equip that cost R11 400 and issued cheque 14.

13 Stoddles Farms returned 50 kg of fertiliser claiming that the order was for 550 kg and not 600 kg.

16 Purchased an additional 5 000 kg of fertiliser at R7.50 (VAT excl.) a bag from Fertile

Ground. Incurred delivery charges of R2 500 (VAT excl.) from Fertile Ground that was settled in cash.

18 Sold 1 100 kg of fertiliser to Stoddles Farms on credit.

20 Sold 1 200 kg of fertiliser to Evergreen Grass on credit.

24 Paid salaries and wages for the month by cheque, R62 500.

25 Received interest on investment from the Amalgamated Banks of South Africa, R12 300.

Paid interest of R9 800 to Capital Bank.

31 Bank charges for the month, R285.

Electricity for the month was settled by cheque 15, R1 140.

Received R12 000 from Evergreen Grass as part payment on their account.

Stationery available at the end of the month, R700 (VAT excl.).

You are required to:

1. Post the transactions to the general journal for May 20x1.

2. Prepare the statement of profit or loss & other comprehensive income on 31 May 20x1.

3. Calculate the VAT payable / receivable for the VAT period by distinguishing between output and VAT input using the VAT control account.

4. Show how the VAT balance and the inventory balance should be shown on the statement of financial position for the period ending 31 May 20x1.