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6.1 Indicate whether the following statements are True or False - NSC Accounting - Question 6 - 2016 - Paper 1
Question 6
6.1 Indicate whether the following statements are True or False. Write only True or False next to each number (6.1.1 – 6.1.3) in the ANSWER BOOK. 6.1.1 All goods and... show full transcript
Worked Solution & Example Answer:6.1 Indicate whether the following statements are True or False - NSC Accounting - Question 6 - 2016 - Paper 1
Step 1
6.2.1 Calculate the amount that is either payable to or receivable from the revenue for the two-month period ending 30 April 2016.
Answer
To determine whether the VAT amount is payable or receivable, we calculate the input VAT and output VAT for the period.
-
Output VAT:
Total sales (inclusive of VAT) = R277,020
Output VAT = Total Sales x (14/114) = R277,020 x (14/114) = R34,000 (approximately) -
Input VAT:
Total purchases (exclusive of VAT) = R102,000
Input VAT = Total Purchases x (14/100) = R102,000 x (14/100) = R14,280
To find the net VAT:
Net VAT = Output VAT - Input VAT
Net VAT = R34,000 - R14,280 = R19,720
Since the output VAT is greater than the input VAT, the amount is payable to the revenue.
Step 2
6.2.2 Joe Fiji, the owner of Fiji Traders, needs to sell all the old summer shirts at a profit mark-up of 20% on cost. What advice would you offer Joe regarding this proposal? Explain.
Answer
Joe should consider a few factors before proceeding with the sale:
- Cash Flow: Selling for cash minimizes the risk of bad debts, ensuring immediate cash inflow. This is beneficial for the business's liquidity.
- Market Demand: Joe should assess if there is enough demand for the summer shirts at the marked-up price. Overpricing may lead to unsold inventory, whereas underpricing may result in losses.
- Profitability: Calculating the cost price accurately is essential to ensure that the 20% markup aligns with market expectations.
- Promotion Strategy: Utilizing promotions or discounts may expedite sales without compromising profit margins.
Step 3
6.3.1 Prepare the Asset Disposal account to take into account the disposal of the old office equipment on 1 December 2015.
Answer
Asset Disposal Account
-Debit Side:
- Cost of old office equipment: R54,800
-Credit Side:
- Accumulated Depreciation: R6,960 (assuming 20% depreciation on R34,800)
- Sale of Old Equipment: R25,000
-Balance:
Asset Disposal Gain/Loss = (Cost - Accumulated Depreciation - Sale) = R54,800 - R6,960 - R25,000 = R22,840 Loss
Step 4
6.3.2 Calculate the missing amounts denoted by (a) to (d) on the fixed asset note provided.
Answer
To find missing amounts:
(a) Additions = R126,000
(b) Disposals = R0
(c) Depreciation = Estimated Depreciation on assets, for example, if it’s 20%:
- Property: R930,000 x 20% = R186,000
- Vehicles: R520,000 x 20% = R104,000
- Equipment: R435,000 x 20% = R87,000 (d) If Total carrying values are required, sum up all values after considering the inputs calculated.
Step 5
6.3.3 Provide TWO possible reasons why the business decided to dispose of the old office equipment.
Answer
- Efficiency Improvement: The old equipment may be outdated and less efficient, impacting productivity. Disposing of it could lead to upgrading to modern equipment that enhances efficiency.
- Cost Savings: Maintaining old equipment often results in higher repair costs. Disposal may save money and allow for investment in new equipment that requires less maintenance.