Question
Questions 12 to 15 refer to the following scenario: Big Time Biscuits (Pty) Ltd is cookies and confectionaries producer and a registered VAT vendor. It
Questions 12 to 15 refer to the following scenario:
Big Time Biscuits (Pty) Ltd is cookies and confectionaries producer and a registered VAT vendor. It uses the perpetual inventory system. The following questions refer to the general journal.
One of the businesss suppliers offered it a settlement discount of 5% on its total outstanding account of R3 040 the business took advantage of this and settled in full. What is the accounting treatment for this discount?
12. Select one:
a. Debit creditors R152, credit trading inventory R152
b. Debit creditors R152, credit discount received R132.17, credit VAT output R19.83
c. Debit creditors R132.17, debit VAT input R19.83, credit discount received R152
d. Debit creditors R152, credit discount received R152
13. A customer is overdue on the payment of her account, and the business needs to add an interest charge of R115. What is the accounting treatment?
Select one:
a. Debit debtors R115, credit interest income R115
b. Debit debtors R115, credit interest income R100, credit VAT output R15
c. Debit debtors R100, debit VAT output R15, credit interest income R115
14. The owner of the business, Ms Mbatha, took some inventory (with an original cost, and current market value, of R507) for her own personal use. What is the accounting treatment?
Select one:
a. Debit drawings R507; credit trading inventory R440.87, credit VAT output R66.13
b. Debit drawings R507; credit trading inventory R507
c. Debit drawings R507; credit purchases R507
d. Debit drawings R507; credit purchases R440.87, credit VAT output R66.13
15. The businesss policy is to offer credit customers a settlement discount of 4% if they pay within 30 days, and 8% if they pay within 7 days. One of their customers, Mr Bester, paid his R4 000 account 4 days after his credit purchase. What is the accounting treatment of this discount?
Select one:
a. Debit sales R278.26, debit VAT input R41.74, credit debtors R320
b. Debit sales R320, credit debtors R320
c. Debit discount allowed R320, credit debtors R320
d. Debit discount allowed R278.26, debit VAT input R41.74, credit debtors R320
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