Reference no: EM131191668

Important information:

1. SONGO DEALERS sells clothing and began trading operations on 1 April 20X3.

2. All amounts are paid by cheque, unless otherwise stated.

3. The entity uses the perpetual inventory system and maintains a gross profit percentage of 35% (on selling price).

4. During a period of November each year, the entity has an annual sale during which clothing are sold at a discount of 20% on normal selling price. The discount is only applied to cash sales concluded during the specified sale period.

5. Assume that all items purchased or sold are received or dispatched correctly unless otherwise told.

6. Cash and cheques received are deposited into the entity's bank account as indicated in the transactions provided.

7. The entity is registered for VAT on the invoice basis. All transactions include VAT (where applicable) unless otherwise stated. The VAT periods of the entity are as follows: January - February, March - April, May - June, July - August, September, - October, November - December. Accept that all suppliers are also registered for VAT. The entity uses a VAT-input, VAT-output and VAT control account.

8. A vehicle with an estimated useful life of 300 000 kilometres and a current estimated residual value of R30 000 was originally purchased on 30 June 20X5.  

YEAR END ADJUSTMENTS-

1. Rent is payable monthly and must still be provided for, for the last two months.

2. Depreciation:

- Depreciation must still be provided for the year.

- All of the office equipment items on the asset register, except those purchased during the current year, were purchased and ready for use on 1 April 20X5.

- Office equipment is depreciated at 20% per annum in accordance with the reducing balance method. The current residual value of old office equipment was estimated at R1 800,00.

- Vehicles are depreciated in accordance with the production unit method.

- All residual values stayed unchanged since the date of purchase.

3. Kilometres reading for vehicle:

31 December 20X6 - 102 000 km

31 December 20X7 - 165 000 km

4. The property (Erf 1480 Silverton), with buildings thereon, was purchased and ready for use on 1 January 20X4 as intended by the owner. The original cost price of the land was R100 000. Depreciation is calculated on buildings in accordance with the straight line method. Assume a residual value of Rnil.

5. The 18% long-term loan from SARB is repayable in 10 equal annual instalments from 30 June 20X8, whilst the interest is payable half-yearly on 30 June and 31 December. The loan commenced on 1 November 20X6.

6. The bank has undertaken to correct any errors it has made during January 20X8.

7. The owner calculated the allowance for credit losses to be R1 000,00.

Attachment:- Assignment.rar