Due to the high crime rate in South Africa, Thabo and Nandi have a close corporation trading as Best Security CC. The services provided by the CC include VIP protection, Community security services, Surveillance monitoring and Access control. The close corporation provides services within Gauteng in the Sandton Area. The financial period for the CC ends 28 February.

The following extract of balances as at 28 February 2023 from the accounting records of Bester CC is presented to you for assistance:

	R
Loan to Nandi - 01 March 2020	25,000
Members contribution: Thabo	300,000
Members contribution: Nandi	275,000
Members contribution: Moses	??
Retained earnings (1 March 2022)	272,450
Trade debtors control	161,500
Trade creditors control	158,700
Loan from Thabo - 01 March 2022	120,500
Bank (favourable)	2,876,100
Long-term loan (Times Bank)	4,806,900
SARS (income tax) liability	120,300
Vehicles at cost	3,540,400
Accumulated depreciation: Vehicles (1 March 2022)	427,200
Furniture at cost	120,000
Accumulated depreciation: Furniture (1 March 2022)	26,800
Equipment at cost	1,700,600
Accumulated depreciation: Equipment (1 March 2022)	491,800
Inventory	314,800
Profit before tax (before taking into account the additional information)	3,259,800

Additional information

1. In the financial year ending 2022, Nandis father named Moses a professional within the security industry with over 25 years of experience was admitted to the CC in July 2022 to assist in managing and overseeing a new division. Moses contributed R70 000,00 cash, he further contributed a patrol vehicle to the valued at R150 000.

2. The loan from Thabo was advanced to the CC on the 1^{st of} November 2021 and is repayable on 31 October 2023.

3. On 01 August 2022 the electronic Gun Safe (Equipment) got damaged by floods and was not reparable. This Safe was acquired on 30 June 2020 at a cost of R150 000.The carrying amount of the Safe on the day of the floods amounted to R95 000. Best CC received an insurance pay-out of R95 0000 on 15^th September 2022.

4. Depreciation for the year ended 28 February 2023 was calculated as follows:

Vehicles: R123 000

Furniture: R12 000

Equipment: R78 000

5. Nandi experienced personal financial problems during the year and borrowed R30 000 from the close corporation. The loan was granted to Nandi on 31 May 2022 at an interest rate of 13% per annum. The interest on this loan is capitalised. This transaction is still to be recorded.

6. On 30 November 2022, a profit distribution of R47 000 was made to each member of the close corporation. These amounts should be regarded as loans from members with interest charged and capitalised at 15% per annum. This transaction is yet to be accounted for.

7. The Inventory amount relates to the pepper spray, surveillance camera and other protection gear sold to the public. The Net Realisable Value for the inventory amounted to R320 000,00 at year end.

8. The income tax assessment, received from SARS on 1 March 2023, indicated that the normal income tax for the 2022 financial year amounted to R278 000.

All amounts should be rounded off to the nearest Rand.

Use the above information to answer the following: 1.1 Which one of the following alternatives represents the correct amount of members contributions from the new member Moses to be included in the statement of changes in net investments of members of Best CC for the year ended 28 February2023?

A. R70 000

B. R 130 000

C. R 220 000

D. R150 000

1.2 Assume the correct members contribution from Moses is R125 000. Which one of the following alternatives represents the correct total members contributions to be included in the statement of changes in net investments of members of Best CC for the year ended 28 February 2023?

A. R 700 000

B. R 795 000

C. R 575 000

D. R 645 000

1.3 Which one of the following alternatives represents the correct total comprehensive income for the year to be disclosed in the statement of changes in net investments of members of Best CC for the year ended 28 February 2023?

A. R 2 863 800

B. R 3 259 800

C. R 2 861 438

D. R 2 766 438

1.4 Assume the correct total comprehensive income for the year is R2 750 000. Which one of the following alternatives represents the correct retained earnings to be disclosed in the statement of changes in net investments of members of Best CC for the year ended 28 February 2023?

A. R 272 450

B. R 2 992 888

C. R 2 881 450

D. R 3 022 450

1.5 Which one of the following alternatives represents the correct loans to members to be disclosed in the statement of changes in net investments of members of Best CC for the year ended 28 February 2023?

A. R 55 000

B. R 21 000

C. R 25 000

D. R 57 925

1.6 Which one of the following alternatives represents the correct loans from members to be disclosed in the statement of changes in net investments of members of Best CC for the year ended 28 February 2023?

A. R 261 500

B. R 120 500

C.R 266 788

D. R 269 500

1.7 Which one of the following alternatives represents the correct carrying amount for vehicles to be disclosed in the statement of financial position of Best CC at 28 February 2023?

A. R 3 113 200

B. R 2 990 200

C. R 2 658 200

D. R 3 578 400

1.8 Which one of the following alternatives represents the correct carrying amount for furniture to be disclosed in the statement of financial position of Best CC at 28 February 2023?

A. R 58 200

B. R 93 200

C. R 92 600

D. R 81 200

1.9 Which one of the following alternatives represents the correct carrying amount for equipment to be disclosed in the statement of financial position of Best CC at 28 February 2023?

A. R 1 185 800

B. R 1 058 800

C. R 980 800

D. R 1 130 800

1.10 Which one of the following alternatives represents the correct interest income to be disclosed in the statement of profit or loss and other comprehensive income of Best CC at 28 February 2023?

A. R 2 925

B. R 5 228

C. R 3 900

D. R 3 250

1.11 Which on the of the following alternatives represents the correct interest expense to be disclosed in the statement of profit or loss and other comprehensive income of Best CC at 28 February 2023?

A.R 21 150

B.R 7 050

C.R 5 288

D. R 315

1.12 Which one of the following alternatives represents the correct inventory amount to be disclosed in the statement of financial position of Best CC at 28 February 2023?

A. R 301 420

B. R 320 000

C. R 319 400

D. R 314 800

1.13 Which one of the following alternatives represents the correct SARS (income tax) balance to be disclosed in the statement of financial position of Best CC at 28 February 2023?

A. R 398 300

B. R 493 300

C. R 120 300

D. R 278 000

1.14 Which one of the following alternatives is correct?

A. A close corporation is taxed separately from its members.

B. A close corporation is taxed separately from its members only during its last year of operation.

C. A close corporation is taxed 50% of the profits separately from its members and the other half is taxed directly on the members in their personal capacity

D. A close corporation is not taxed separately from its members as members are liable for the entitys tax in their individual capacity based on the balance of individual loans they owe to the entity.

1. 15 Which one of the following alternatives is incorrect?

A. A close corporation can enter into contracts and cannot be sued as a legal person in its own right.

B. A close corporation may give financial assistance to a person to acquire an interest in the close corporation.

C. A close corporation can have up to ten natural persons as members.

D. A close corporation continues to exist under its registered name irrespective of a change in its membership.

1.16 A close corporation is a legal entity, which implies that it is not liable to pay for obligations and can acquire assets in its own name.

a. True

b. False

1.17 Which one of the following alternatives is correct?

A. The liability of a member for the obligations of the close corporation is limited to the extent of the member's contribution to the close corporation.

B. The liability of a member for the obligations of the close corporation is limited to the extent of the member's contribution to the close corporation less distributions already paid to the members.

C. The liability of a member for the obligations of the close corporation is limited to the extent of the member's contribution to the close corporation and members loans advanced to the business.

D. The liability of a member for the obligations of the close corporation is limited to the extent of the member's contribution of the least active members in the close corporation.

1.18 A Close corporation must comply with specific liquidity and solvency requirements whenever certain payments, such as the distribution of total comprehensive income are to be made?

a. True

b. False

1.19 Which of the following journal entries is correct for recording the provision of distribution of total comprehensive income to members of a Close Corporation?

A. Debit Distribution to members payable; Credit - Distribution to Members

B. Debit Bank; Credit- Distribution to members

C. Debit- Distribution to Members; Credit- Distribution to Members payable

D. Debit - Distribution to Members; Credit- Retained earnings

1.20 Which one of the following alternatives is false regarding the loans advanced to the members of the close corporation?

A. Loans to members of the close corporation are recorded as current assets and interest may be charged on the amount owing to the close corporation.

B. Interest on loans to members of the close corporations may not be charged if the loan is advanced 1 month before the close corporations financial year end.

C. If the terms of the loan is that interest is capitalised, the interest correctly calculated should be added to the loan capital to increase the balance owing to the close corporation.

D. Loans to members of the close corporation are recorded as current assets unless clearly indicated that they are repayable in less than 12 months.