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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 treatment of carriage on sales in the statement of profit or loss and other comprehensive income of VW Traders for the year ended 31 July 2022?

A. Deducted from revenue amount

B. Deducted from cost of sales amount

C. Added to administrative, distribution and other expenses amount

D. Added to the credit losses amount

1.

C

2.

D

3.

None

4.

B

5.

A

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