Question
Peep Stores and all its suppliers are registered VAT vendors, and VAT is calculated at 14%. The following information was extracted from the ledger of
Peep Stores and all its suppliers are registered VAT vendors, and VAT is calculated at 14%. The following information was extracted from the ledger of Peep Stores for the reporting period ended 28 February 2018:
Trade inventories (1 March 2017) R277 500
Purchases R820 000
Freight (in) R80 000
Freight (out) R120 000
Total sales R1 252 500
Additional information:
R
277 500 820 000 80 000 120 000 1. 1 252 500
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During June 2017 goods were sold on a sale at a discount of 20% on selling price. The total sales figure provided above includes sales of R140 000 (excluding VAT) in respect of goods sold duringthe June sale.
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Peep Stores maintains a consistent mark-up (except for the June sale).
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On 12 March 2018 a fire erupted while the shop was closed for the lunch hour and almost all the inventories were destroyed.
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Peep Stores is insured for R136 800 for loss of inventories in terms of a policy which contains anaverage clause.
5. The following information is available for March 2018:
Trade inventories March 01 R147 500
Purchases (VAT included) March 02 R79 800
March 17 R 153 900
March 20. R228 000
Sales (VAT included) March 05 R125 400
March 23. R182 400
6. The value of trade inventories was determined by a physical count on 31 March 2018 and amounted to R258 800. The insurance company paid the claim on 31 March 2018.
Required
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b) Calculate the cost of trade inventories destroyed by the fire on 12 March 2018 assuming a gross profit margin of 20% on sales. (Hint: Calculate trade inventories salvaged.)
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