QUESTION THREE [25 marks]

James Dean trades in clothing for the middle market. James Dean Clothing use the Periodic Inventory Method to keep records of trade goods. The following is an extract of balances from the general ledger for the year ended 28 February 2021

extract of balances as at28 february 2021	R
Revenue from sale of trade goods	735 100
Rent income received from tenant	66 000
Inventory: Trade goods - balance at 1 March 2020 : Consumables on hand at 1 March 2020	150 500 7 600
Purchases	353 000
Settlement discounts received	18 400
Settlement discounts granted	15 800
Railage inwards	36 200
Railage outwards	39 100
Goods returned to suppliers	21 400

Goods returned by customers	34 600

Additional information:

1. Physical stock-take at 28 February 2021 determined the following: - Trade goods R166 800 - Consumables on hand R 7 940

2. Goods to the value R7 600 were donated to the local community organisation

3. An invoice for R4 500 was received on 28 February 2021 for goods transported from the supplier to James Dean Clothing. The invoice needs to be recorded.

4. James Dean rents office space to a tenant. Rental income of R18 700 was credited to the sales in error. A correction needs to be recorded.

Required:

3.1 Show journal entries to record adjustments for all the additional information. (6)

3.2 Prepare the trading section of the Statement of Profit or Loss and other comprehensive income for James Dean Clothing for the year ended 28 February 2021. Sales, Cost of sales and gross profit must be shown. Also show the gross profit percentage (%) on cost. (16)

3.3 Briefly describe three important features of the Perpetual Inventory Method. (3)