ACCOUNTING

QUESTION 2 (17 MARKS) Ignore VAT Incredible Computers is a small business which specialises in selling computers to private households and small businesses in the Western Cape. You have been asked by Incredible Computers to review certain transactions that took place with respect to inventory during the financial year ended 30 April X6. Incredible Computers uses the perpetual method when recording inventory. You have been provided with the following information: 1. On I June X5, Incredible Computers ordered 25 computers from a local supplier. Each computer had a cost price of R4 550. Of these computers, 5 computers were to be used in the sales and administration office of Incredible Computers. The computers were delivered to the premises of Incredible Computers on 3 June X5. Incredible Computers settled the total amount owing for the computers on 30 June X5. 2. Tom Barton, the owner of Incredible Computers had a cousin who had just returned from overseas and was unemployed. Tom suggested to him that he could make some money by selling computers on behalf of Incredible Computers in the Montagu area where his cousin lived. On 15 November X5, Incredible Computers delivered 10 computers on consignment to Tom Barton's cousin in Montagu. Each computer had a cost of R3 980. It was agreed that the computers would each be sold for R5 600 and that Tom's cousin would earn commission of 20% on the selling price of each computer sold. On 30 April X6, Tom's cousin had sold a total of 6 computers. 3 Incredible Computers has a major client in Cape Town that required a specialised desktop computer that would have to be imported from Hong Kong. The computer had a cost price of R29 800. On 15 April X6 Incredible Computers ordered and paid for 4the computer. Other costs included import duties of R3 260 and packaging costs of RI 250. These costs would be paid in cash on the date that the computer was collected by Incredible Computers from the harbour. The sales agreement stated that the computer would be sent by the supplier to Incredible Computers F.O.B shipping point on 25 April X6. The computer arrived and was ready for collection on 2 May X6. 4. On 30 April X6. Incredible Computers had 9 computers on hand that had become obsolete. Each computer had a cost price of R2 590. Incredible Computers had done some research and found that if they spent R560 on each computer they could sell them each for R2 100. You are required to: Show how the 4 transactions above would be reported in the Statement of Financial Position. Statement of Comprehensive Income and Statement of Changes in Equity. For each financial statement indicated, you should show only the line-item(s) that would be affected by the transaction, and the amount at which the affected line-item(s) would be reported If the transaction would have no effect on the financial statement required, then write "no effect". You are not required to show the impact of income and expenses on retained earnings in the statement of financial position. You are also not required to provide full headings for each financial statement. The following abbreviations are acceptable for this question: SOFP, SOCI and SCE. (17 marks)