NSC Accounting Note to the Balance Sheet and Asset disposal: 6.1 Indicate whether the followi

Question

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 services in South Africa are subject to VAT at the standard rate of 14%.  
6.1.2 Businesses must submit the VAT money collected to the South African Reserve Bank.  
6.1.3 VAT on sales (received by a business) is referred to as Output VAT.

6.2 VAT CALCULATIONS  
Fiji Traders submit their VAT returns on a bi-monthly basis. VAT at 14% is applicable on all goods. The information relates to the VAT period ended 30 April 2016.  
REQUIRED:  
6.2.1 Calculate the amount that is either payable to or receivable from the revenue authority for the two-month period ended 30 April 2016. Indicate whether the amount is payable or receivable.  
6.2.2 Joe Fiji, the owner of Fiji Traders, proposes to sell all the old summer shirts at a profit mark-up of 20% on cost. These transactions will be for cash only and not credit.  
What advice would you offer Joe regarding this proposal? Explain.

INFORMATION:  
A. On 1 April 2016, the VAT Control account balance was R9 589 (debit).  
B. Transactions during April 2016:  
Total sales – cash and credit (inclusive of VAT) R277 020  
Total purchases – cash and credit (excluding VAT)  R102 000  
VAT on total returns and allowances of debtors  R490  
VAT on goods returned to suppliers  R553  
VAT on goods taken by Joe for personal use  R112  
VAT on scotch allowed  R98  
VAT on bad debtors accounts written off  R406

6.3 FIXED ASSETS  
The information relates to Chumlee Stores for the financial year ended 29 February 2016.  
REQUIRED:  
6.3.1 Prepare the Asset Disposal account to take into account the disposal of the old office equipment on 1 December 2015.  
6.3.2 Calculate the missing amounts denoted by (a) to (d) on the fixed asset note provided.  
6.3.3 Provide TWO possible reasons why the business decided to dispose of the old office equipment.

INFORMATION:  
A. Incomplete Fixed Asset note:  
Cost (1/3/2015)  
PROPERTY  R930 000  
VEHICLES  R520 000  
EQUIPMENT  R435 000  
Accumulated depreciation (1/3/2015)  
  
PROPERTY  (234 000)  
VEHICLES  (212 280)  
Carrying value (1/3/2015)  
  
930 000 286 000 222 720  
Movements:  
Additions:  
(a) 126 000  
Disposals:  
(b)  
Depreciation  
(c)  
Carrying value (29/2/2016)  
  
Cost (29/2/2016)  
1 380 000  
1 380 000  
468 000

B. The business has two vehicles. Both were purchased on 1 March 2012. Vehicles are depreciated on the straight line method.  
C. On 1 December 2015, old office equipment was sold on credit for R25 000. The cost price of the old equipment sold was R54 800 on 1 March 2015.  
New equipment were purchased on 1 January 2016.  
Depreciation on equipment is provided at 20% p.a. on carrying value.

6.1 Indicate whether the following statements are True or False - NSC Accounting - Question 6 - 2016 - Paper 1

Worked Solution & Example Answer:6.1 Indicate whether the following statements are True or False - NSC Accounting - Question 6 - 2016 - Paper 1

6.1.1 All goods and services in South Africa are subject to VAT at the standard rate of 14%.

6.1.2 Businesses must submit the VAT money collected to the South African Reserve Bank.

6.1.3 VAT on sales (received by a business) is referred to as Output VAT.

6.2.1 Calculate the amount that is either payable to or receivable from the revenue authority for the two-month period ended 30 April 2016.

6.2.2 Joe Fiji, the owner of Fiji Traders, proposes to sell all the old summer shirts at a profit mark-up of 20% on cost. These transactions will be for cash only and not credit.

6.3.1 Prepare the Asset Disposal account to take into account the disposal of the old office equipment on 1 December 2015.

6.3.2 Calculate the missing amounts denoted by (a) to (d) on the fixed asset note provided.

6.3.3 Provide TWO possible reasons why the business decided to dispose of the old office equipment.

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