QUESTION TWO [25] Molefe and Johannes are partners operating a retail business Mojo Trading. The information that follows is relevant to the business activities of the partnership for the year ended 31 December 2018: [NB: settlement discounts are off-set against sales and purchases). Mojo Trading uses the periodic inventory system. Abstract from terms of the partnership agreement 1. Interest on capital is calculated at 10% per year on opening balances of the capital accounts. 2. Each partner is entitled to a salary of R6 000 per month. 3. Molefe and Johannes share profits and losses in the ratio of 40%: 60%. Mojo Trading Balances as at 31 December 2018 R 830 000 144 000 12 000 130 000 24 000 71 505 61 680 2 000 71 440 Land and buildings at cost Vehicles at cost Accumulated depreciation: Vehicles (1 January 2018) Equipment at cost Accumulated depreciation Inventories Trade debtors Allowance for credit losses (Provision for bad debts) Bank (favourable balance) Capital: Molefe Capital: Johannes Current account: Molefe (credit balance) Current account: Johannes (debit balance) Long term borrowings Trade creditors Sales Purchases Credit losses recovered Settlement discounts received Advertising Credit losses written-off Depreciation (30 June 2018) Electricity and water General expenses Rates Salaries and wages Settlement discounts granted Telephone expenses Interest on long term borrowings 450 000 450 000 132 500 6 000 108 000 47 050 891 090 502 530 3 000 2 400 10 400 4 250 75 30 760 38 720 17 600 173 600 2 000 23 160 4 320 Additional information: (year-end adjustments) 1. Trading inventory on hand at 31 December 2018 amounted to R178 080. 2. An invoice dated 27 December 2018 for R4 920 relating to delivery expenses for goods purchased from a supplier located in Cape Town has not been recorded. 3. The total salaries paid to the partners in lieu of salaries as per the parthership agreement was as follows for the year ended 31 December 2018: Molefe R36 000 Johannes R30 000 Both these amounts were debited to the salaries and wages account. 4. Electricity and water of R1 920 for December 2018 has not yet been paid nor recorded. 5. The following have been paid in advance: R1 840 paid for January 2019. The amount is included in the above telephone account of R23 160. Rates of R17 600 cover the period 1 January 2018 to 30 April 2019 (a period of 16 months). The monthly rates did not change over this period. 6. The long term borrowing was obtained from Blood Bank on 1 July 2018 at an interest rate of 12% per year, payable on 31 October every year. The capital amount of the loan must be repaid in full on 1 January 2022. 7. The only transactions involving equipment were as follows: Old equipment with a cost price of R15 000 and accumulated depreciation of R14000 at 1 January 2018, was traded-in for R1 500 on 30 June 2018. New equipment was purchased for R25 000 on 1 July 2018. The difference between the cost price of the new equipment and the trade-in value of the old equipment was settled in cash. . 8. Depreciation is to be provided as follows: Vehicles: 20% per year according to the straight line method. Equipment: 15% per year according to the diminishing balance method. . Required Prepare the statement of comprehensive income of Mojo Trading for the year ended 31 December 2018 to comply with international financial reporting standards appropriate to the business of the partnership. Show all workings. Notes are not required
