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ABC (Pty)Ltd is an SME furniture retailing business. On the 1st of January 2022, the premises were subject to a serious fire which destroyed the
ABC (Pty)Ltd is an SME furniture retailing business. On the 1st of January 2022, the premises were subject to a serious fire which destroyed the building, all contents and stock. Despite an effort to find alternative temporary premises, nothing suitable could be located before expiry of the maximum indemnity period (MIP). The insured are tenants in the building and only insure Contents, Stock and BI under their policy. There is a cessation of rent clause within the lease with the landlord. The policy is subject to average. BI insurance is provided as follows: Gross Profit sum insured R200,000 Maximum Indemnity Period 12 months Uninsured Working Expenses as stated in the policy are: Purchases, net of stock movement Delivery charges Bad debts The company continued to pay staff during the interruption period and all other costs remained the same. Turnover for the years before the fire was as follows: 2019 R959,591 2020 R1,165,775 2021 R1,088,819 Financial details for the year ending 31 December 2021: Sales R1,088,819 Finance commission Income from concession Turnover R1,088,819 Opening stock R21,367 Production wages R71,494 Purchases R608,323 Closing stock -R22,646 Cost of sales R678,538 Gross profit R410,281 Wages and salaries R126,368 Rent R44,068 Rates R73,678 Delivery charges R36,422 Utilities R8,507 Cleaning R372 Waste disposal R779 Repairs and maintenance R2,912 Communication R2,481 Advertising R37,198 Bad debts R2,500 Credit card charges R548 Depreciation R1,015 Total overheads R336,848 Net profit R73,433 Question Calculate the net loss after average for 2021. a. R81,984 b. R71 862 c. R68 230 d. R169 551
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