Sales QUESTION 1 [40 MARKS 60 MINUTES] Mrs. Honey Bunch owns an online store called The Bee Hive, that supplies fresh honey to customers all over South Africa. The Bee Hive has a 28 February financial year end and is not a registered VAT vendor. The Bee Hive's accountant had to take a month's leave during February 2021 to go and take care of her mother who had broken her hip after a bad fall. Mrs. Honey Bunch asked you to help out with the accounting stuff whilst the accountant is on leave. The accountant emailed you the following information with regards to the trade receivables of Honey Bunch: 1. An extract from the trial balance at 31 January 2021 showing the relevant opening balances: EXTRACT FROM THE TRIAL BALANCE AT 31 JANUARY 2021 Dr I(C) R (573 000) Interest received on overdue customer accounts (4 500) Trade receivables control 107 892 Allowance for expected credit losses (at 1 March 2020) (4 342) Credit losses expense 7800 2. A list of transactions that occurred during February 2021: Transaction Details 1 Total sales for February 2021 amounted to R67 030 of which 80% represented credit sales. Mr B Sting, one of the Bee Hive's regular customers was declared insolvent. During February 2021, the executor paid an initial amount equal to 20% of the balance owing and announced that a further 10% would be paid soon. Mr B Sting's account in the trade receivables subsidiary ledger showed a balance owing, at 31 January 2021. of R7 920 3 One of The Bee Hives' customers, Mr Buzz Bee deposited R2 163 into The Bee Hives' bank account. According to the remittance advice received with the payment, the amount is made up as follows: R Amount outstanding as at 31 January 2021 1966 Interest on overdue account accrued during February 2021. 197 Total 2 163 An EFT payment of R3 204 was received from a customer, Ms Pollen, in full and final settlement of her account. However, Ms Pollen's debt was written off as a credit loss in the previous financial year after all attempts in recovering the debt proved futile. 2 3 Transaction Details 5 Cash received from debtors during February 2021 amounted to R57 800. 6 Based on past experience, the accountant of The Bee Hive reliably estimates the allowance for expected credit losses at 5% of the outstanding trade receivables at year end. 3. An extract from the trial balance at 28 February 2021 showing the relevant closing balances: EXTRACT FROM THE TRIAL BALANCE AT 28 FEBRUARY 2021 Dr / (Cr) R Cost of sales 333 000 Operating expenses 87 000 MARKS (30) REQUIRED: a) Prepare the journal entries that needs to be processed in the financial records of The Bee Hive for the month ended 28 February 2021, based on the information given in note 2 above. - Dates and narrations ARE REQUIRED. Show all your calculations. Round all amounts to the nearest Rand. b) Prepare the statement of profit or loss of The Bee Hive for the year ended 28 February 2021. Presentation and layout. c) Show how trade receivables will be presented in the statement of financial position of The Bee Hive as at 28 February 2021. Presentation and layout. [7] [3]