Question 5, 6, 7 and 8

Given information for questions 5 to 10: Covivi Supplies is an entity which was formed by the two partners Mutondi and Rabelani. The following information relates to the partnership: Extract of balances as at 28 February 2020 R Capital: Mutondi 600 000 Capital: Rabelani. 600 000 Current account: Mutondi (Dr) 35 000 Current account: Rabelani (Cr). 50 000 Drawings: Mutondi 156 000 Drawings: Rabelani 160 400 Land and buildings. 891 000 Mortgage... 650 000 Inventory (1 March 2019) 43 000 Trade receivables control 150 000 Trade payables control 65 000 Purchases. 741 000 Purchases returns 4 100 Settlement discount granted 3 715 Freight on sales 14 100 Sales returns 2 300 Insurance expense 48 160 Settlement discount received. 1 000 Allowance for credit losses 1 900 Carriage on purchases. 200 Gross profit 550 500 Bank 112 580 Additional information: Abstract from terms of the partnership agreement: (a) Interest on capital will be calculated at a rate of 5% per annum on the opening balances of the capital accounts and at a rate of 8% per annum on the opening balances of the current accounts. (b) Interest will be charged at a rate of 5% per annum on the balance of the drawings accounts at the end of each month. Drawings for Mutonding and Rabelani were made on 1 March 2019 and 1 December 2019 respectively. Year-end adjustments: (a) On 28 February 2020 the inventory on hand amounted to R65 000. (b) Due to the impending lockdown implications of the Covid19, a debtor owing R3 000 is irrecoverable and must be written off. A debt of R1 800 written off in the previous year has been recovered and the payment is expected to be received on 1 March 2020. (c) The allowance for credit losses must be adjusted to R1 500 (d) Covivi Supplies were offered a discount of 10% on an amount of R9 500 owing to a supplier provided the supplier is paid before 28 February 2020. Covivi Supplies intends taking the advantage of the discount offered. This transaction is yet to be recorded. (e) The terms of the mortgage loan provide for interest on the loan to be calculated at a rate of 9% per annum on the outstanding amount of the loan at the end of the financial year. QUESTION 5 (4 marks) Which one of the following alternatives represents the correct amount that must be disclosed as cost of sales in the statement of profit or loss and other comprehensive income of Covivi Supplies for the year ended 28 February 2020? 1. R712 950 2. R713 150 3. R713 900 4. R714 900 QUESTION 6 (1% marks) Which one of the following alternatives represents the correct amount that must be disclosed as credit losses expense in the statement of profit or loss and other comprehensive income of Covivi Supplies for the year ended 28 February 2020? 1. R3 400 2. R1 500 3. R1 800 4. R2 600 QUESTION 7 (3% marks) Use the given gross profit amount in the extract of balances and assume the correct credit losses expense amount is R1 000. Which one of the following alternatives represents the correct amount that must be disclosed as total comprehensive income for the year in the statement of profit or loss and other comprehensive income of Covivi Supplies for the year ended 28 February 2020? 1. R428 740 2. R428 940 3. R430 540 4. R431 540 QUESTION 8 (1 mark) Which one of the following alternatives represents the correct amount that must be disclosed as partner's capital in the statement of financial position of Covivi Supplies as at 28 February 2020? 1. R1 200 000 2. R 600 000 3. R 610 000 4. R1 300 000