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AF Entity, as well as all of AF Entity's suppliers, are registered as VAT vendors in accordance with the VAT-Act. AF Entity uses the
AF Entity, as well as all of AF Entity's suppliers, are registered as VAT vendors in accordance with the VAT-Act. AF Entity uses the periodic inventory system. The following balances, amongst others, relate to AF Entity's reporting period ended 31 December 20.7: Inventories (1 January 20.7) Purchases Vat input Vat output (65 MARKS) Dr 1 428 000 1 290 000 188 000 Cr AF Entity's current reporting date is 31 December 20.7. The financial statements for the reporting period ended 31 December 20.7 will probably be approved by the owner for distribution on 28 February 20.8. The following transactions have reference and, where applicable, include VAT at 14% 256 888 1. On 1 December 20.7, inventories were sold on credit to Receivable AA and were delivered on the same day. The invoice reflects the amount as R278 646 (including VAT) and is payable on or before 6 January 20.8. (Note: Provide only the journal entry/entries for the initial recognition of the transaction.). 2. On 8 December 20.7, repairs to office furniture and equipment were completed to the satisfaction of the owner. The invoice from Payable PP to the amount of R28 665 (including VAT) was received on this date and is payable on or before 15 January 20.8. (Note: Provide only the journal entry/entries for the initial recognition of the transaction.) 3 On 28 November 20.7, inventories that were previously bought from Payable QQ were returned since the goods were not of the quality that was agreed upon. On 11 December 20.7, a credit note to the amount of R23 260 (including VAT) was received from Payable QQ in this regard. 4. AF Entity's inventories are insured for R684 000 (including VAT). Early in the morning of 1 November 20.7, a fire destroyed the majority of AF Entity's inventories. On 15 December 20.7, it was agreed with the insurer, in respect of the following amounts, that The estimate of the cost (excluding VAT) of the inventories on hand immediately before the fire amounts to R840 000; The estimate of the cost (excluding VAT) of the portion of the inventories on hand immediately before the fire that were not damaged by the fire amounts to R120 000; and The amount (including VAT) that will be paid to AF Entity on 15 January 20.8, in settlement of the claim, amounts to R570 000. The loss resulting from the inventories destroyed in the fire and the income arising from the insurance claim still have to be recognised. 5. Inventories, which were ordered from Payable K on 18 December 20.7, were received on 22 December 20.7. The invoice from Payable K, to the amount of R196 500 (including VAT), reflects that a settlement discount of 4% will be granted if the invoice is paid on or before 5 January 20.8. As in the past, AF Entity utilised the settlement discount. (Note: Provide only the journal entry/entries for the initial recognition of the transaction.) The VAT owing for November 20.7 were paid to SARS on 24 December 20.7 per electronic fund transfer. On 30 November 20.7, the balances on the VAT accounts in AF Entity's accounting records were as follows: . 6. On 29 December 20.7, R46 250 (including VAT) was paid to the service provider that was responsible for the function that was held for AF Entity's employees on 28 December 20.7. 9. VAT output account VAT input account 7. Inventories that were sold on credit to Receivable CC on 14 December 20.7, were returned by Receivable CC to AF Entity on 19 December 20.7. The debit note reflected: the reason for the return as "latent defects". In this regard, AF Entity issued a credit note, dated 30 December 20.7, to the amount of R111 820 (including VAT) to Receivable CC. R177 044 R115 724 8. During December 20.7, a number of temporary employees were appointed and was paid a total amount of R17 500 on 30 December 20.7. The bank statement for December 20.7, which was received from the bank on 8 January 20.8, reflects a direct deposit of R856 000 into AF Entity's bank account. The direct deposit relates to a term deposit that expired on 31 December 20.7. The amount of the direct deposit comprises the following the initial amount invested of R800 000 and interest of R56 000. The accrued interest still has to be recognised and the term deposit still has to be derecognised. 10. On 31 December 20.7, AF Entity counted the inventories on hand and calculated the cost thereof as R1 686 245, by applying the average cost formula. Inventories on hand as at 31 December 20.7 still has to be recognised. (a) 11. On 15 January 20.8, the net realisable value of the inventories on hand on 31 December 20.7 was calculated on an item-by-item basis. The calculation indicates that a write- down of R76 152 has to be recognised since certain inventory items' cost price exceeds the estimated sales price (net realisable value) thereof. (b) 12. After consideration of objective indications in respect of the recoverability of individual trade receivables, it was decided on 20 January 20.8 to increase the allowance for doubtful debts, as at 31 December 20.7, with R29 500. REQUIRED Recognised the abovementioned transactions and events in the records (general journal) of AF Entity for the reporting period ended 31 December 20.7. Prepare the following ledger accounts:
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a Journal Entries for AF Entity 1 On 1 December 207 inventories were sold on credit to Receivable AA Receivable AA Dr R242000 Sales Revenue R242000 2 On 8 December 207 repairs to office furniture and ...Get Instant Access to Expert-Tailored Solutions
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