2020 USS 3N POA EOY P2 Q3

2020 USS 3N POA EOY P2 Q3

3 Roland purchases goods on credit from Lion Supplies. The following transactions took place in Roland’s business for the month of May 2020.

May

1

Roland owed Lion Supplies $720.

May

5

Roland purchased goods on credit at a list price of $2 500, less 20% trade discount. 

May

7

Roland issued a cheque to pay amount owed on May 1. A cash discount of 5% was received.

May

10

Roland returned goods at a list price $300, these goods were previously bought on 5 May.

1. The owner took out an office computer costing $2 100 for his son. This has not been recorded yet.

4. Commission income of $1 610 was received in advance.

REQUIRED

a. State one reason in each case for giving:

[2]

i. trade discount

ii. cash discount

b. Prepare Lion Supplies account in Roland’s books for the month of May 2020.

[5]

c. Suggest one possible reason for Roland to return the goods on 10 May.

[1]

On 25 June 2020, Roland purchased a batch of goods on credit from an overseas supplier, Express Trading. The following costs were incurred on this batch of goods.

  

$

(i)

Cost of goods

8 400

(ii)

Import tax on the goods

600

(iii)

Freight and delivery charges 

1 325

(iv)

Insurance for shipment of the goods

  700

(vi)

Salaries paid to workers to repack the goods

2 100

(vii)

Salaries paid to salesperson to advertise and sell the goods

4 500

REQUIRED

d. Calculate the cost of inventory purchased.

[1]

The following service fee revenue account was extracted from the books of Best Home Design Ltd, Roland’s home renovation company.

 

Service fee revenue account

Date

Particulars

Debit

Credit

Balance

2020

 

$

$

$

June 1

Balance b/d

  

265 000 Cr

June 12

Trade receivables

 

31 200

296 200 Cr

June 20

Cash at bank

 

6 800

303 000 Cr

June 30

Service fee revenue received in advance

8 500

 

294 500 Cr

REQUIRED

e. Explain the entries in the service fee revenue account above on the following dates.

[4]

i. June 1

ii. June 12

iii. June 20

iv. June 30

f. State the amount of service fee revenue to be presented in the statement of financial performance for the year ended 30 June 2020.

[1]

g. Name the section in the statement of financial position in which the service fee revenue received in advance on 30 June 2020 would be found.

[1]

[TOTAL 15]

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Trade discount - to encourage bulk purchases

Cash discount - to encourage prompt / early payment

Damaged/Defective goods
Wrong specification (wrong size, wrong colour, etc.)
Product did not match description
Expired products / Slow moving products

Cost of purchases = 8400 + 600 + 1325 + 700 + 2100 = $13125

(i) The amount of service fee revenue earned from the beginning of the financial period to date is $265 000.

(ii) On June 12, the business has not collected $31 200 from its credit
customers yet/ provided service to customers on credit / provided
service to customers but payment not received

(iii) On June 20, the business received $6 800 of service fee revenue
in its bank account fro service provided.

(iv) Service fee revenue of $8 500 collected this year but services will
only be provided next year after 30 June 2020.

$294 500

Current liabilities

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