Mr Gugu and Lethu are members of Gugulethu CC. The bookkeeper attempted to prepare the financial statements of the entity however, he lacked the technical knowhow of the task.

The following information is extracted from the workings of the bookkeeper and relates to the close cooperation on 28 February 2021, the end of the financial year:

	R
Vehicles	780 000
Land and buildings	1 210 000
Long-term loan	520 000
Inventory (1 March 2020)	52 000
Trade receivables control	150 000
Trade payables control	84 790
Purchases	761 000
Purchases returns	5 100
Settlement discount granted	2 800
Freight on sales	12 300
Interest on long-term loan	43 875
Sales returns	2 300
Insurance expense	48 000
Settlement discount received	850
Allowance for credit losses	1 900
Bank	112 050

Additional information:

1. Abstract from the members arrangements:

1.1 Members are entitled to a commission of 4% of total revenue for the financial year.

1.2 The members agreed that their business will operate on a 40% gross profit on net sales.

2. Year-end adjustments:

2.1 On 28 February 2021 the inventory on hand amounted to R82 000.

2.2 An outstanding debt of R4 800 is irrecoverable and must be written off. R1 800 has been recovered from previously written off debts.

2.3 The allowance for credit losses must be adjusted to R1 500.

2.4 One of the vehicles of the entity was involved in an accident on 30 November 2020. The car was repaired from the insurance claim and excess amounting to R2 000 was paid. After this incident the insurer increased the premiums by 20% with the effect from 1 December 2020. The transactions relating to the incident and insurance claim are still to be recorded in the books of Gugulethu CC.

2.5 Gugulethu CC was offered a discount of 10% on an amount of R9 500 owing to a supplier provided the supplier is paid before 28 February 2021. Gugulethu CC decided to take the discount offer.

2.6 The long-term loan was obtained on 31 December 2019 from BR Bank and amounted to R650 000. The capital balance of the loan is repayable in five annual instalments payable on 30 June every year with the effect from 30 June 2020. The interest on loan is calculated at a rate of 12% per annum and payable on 31 October every year.

2.7 Income tax for the year amounted to R75 000.

2.8 A revaluation loss amount of R30 000 on land and buildings must still be recorded.

QUESTION 1

Which of the following alternatives represent the correct gross profit amount in the statement of profit or loss and other comprehensive income of Gugulethu CC for the year ended 28 February 2021? Round off to the nearest rand.

• A.

  R 477 633

• B.

  R 482 733

• C.

  R 470 555

• D.

  R 478 267

• E.

  R 1 081 050