Question
Given information for statement of profit or loss and other comprehensive income questions below Vuyo and Wanda are in a partnership trading as VW Traders.
Given information for statement of profit or loss and other comprehensive income questions below
Vuyo and Wanda are in a partnership trading as VW Traders. They have an equal interest in the partnership and distribute profits accordingly.
The following information is extracted from the accounting records of the partnership as at 31 July 2022, the financial year-end of the corporation.
EXTRACT OF BALANCES AS AT 31 July 2022: | |
R | |
Buildings | 620 140 |
Bank (Dr) | 85 800 |
Sales | 3 213 700 |
Investment in Pusha Ltd at fair value | 300 000 |
Income received in advance | 5 800 |
Prepaid expenses | 22 700 |
Rental income | 8 200 |
Purchases | 994 200 |
Other general expenses | 66 000 |
Salaries and wages | 987 500 |
Carriage of purchases | 60 900 |
Carriage on sales | 62 200 |
Sales returns | 74 300 |
Settlement discount granted | 11 600 |
Settlement discount received | 18 900 |
Allowance for credit losses | 5 000 |
Purchases returns | 25 700 |
Allowance for credit losses (Cr) | 2 500 |
Capital contribution: Vuyo | 135 500 |
Capital contribution: Wanda | 100 000 |
Retained earnings (1 August 2021) | 372 400 |
Loan from KK Loans CC | 58 700 |
Loan to partner: Wanda | 44 400 |
Inventory (1 August 2021) | 51 300 |
Petty cash | 11 400 |
Trade receivables control | 270 185 |
Trade payables control | 515 100 |
Additional information:
1. An invoice relating to carriage on purchases amounting to R5 500 was received on 30 July 2022 and must still be taken into account.
2. The closing inventory amounted to R93 400.
3. The investment in Pusha Ltd consist of 80 000 shares bought for R201 000 and was acquired in March 2021. The investment was acquired for trade purposes. At the end of the current financial year, the fair value of the investment amounted to R212 345.
4. Each member received a monthly salary of R22 000 paid in cash. Wanda the managing member of VW Traders is entitled to a bonus of R30 000 payable on 1 August 2022. These amounts were debited to the salaries and wages account.
5. The allowance for credit losses must be increased to R3 800.
6. Partners withdrew cash amounting to R20 000 equally to pay for holiday flights to Cape Town on 31 July 2022.
7. Interest must be recorded on the loan accounts to partners at 10% per annum on the opening balance of any existing loans as well as on any additional loans granted. On 1 February 2022, an additional loan of R10 000 was granted to Wanda and was correctly accounted for in the books of the close corporation. Interest on the loans to members is still to be accounted for and must be capitalised. All loans are unsecured and immediately callable.
8. Interest on loans from KK Loans CC is calculated at 15% per annum and is not yet accounted for. The loan amount is repayable in full on 16 November 2022.
Which one of the following alternatives represents the correct amount for credit losses in the statement of profit or loss and other comprehensive income of VW Traders for the year ended 31 July 2022?
1.
1,900
2.
1,300
3.
1,800
4.
2,000
5.
1,500
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