Speedy Gonzales is a well-known motorcycle shop that sells a range of accessories. The business has been expanding rapidly over the past 2 years as the increased petrol price has lead to a larger number of clients for the industry.

You have been provided with the following information:

1. On 10 March 2013, Speedy Gonzales ordered 20 biker jackets from a supplier in Johannesburg for a purchase price of R1 380 each. The supplier offered Speedy Gonzales a trade discount of 10%. The jackets were sent FOB shipping point on 14 March 2013 and arrived at the business’ premises on 18 March 2013. On receiving the jackets, Speedy Gonzales paid the transport company R3 450 for delivery costs and packaging costs of R30 (excluding VAT) per jacket. On 31 March 2013, Speedy Gonzales paid the supplier the amount owing for the jackets.

2.The owner’s son celebrated his 16th birthday on 26 March 2013. The owner surprised his son and took home a pair of biker boots for him as his birthday gift. The biker boots had a cost price of R2 800 and a marked selling price of R3 900

Assume VAT of 15%

Assume that ALL parties are VAT vendors

Assume perpetual inventory method

1) Calculate the total cost per biker jacket. Show ALL calculations clearly. For this question only, do NOT round off figures to the nearest rand.

2) Prepare the journal entry/ies that would be processed by Speedy Gonzales to record the information provided in point 2 of the additional information. Dates and narrations are not required.

3) Indicate the date on which Speedy Gonzales will recognize the jackets as an asset. Explain, with reference to the Conceptual Framework, why the jackets would be recognized as an asset on this date.