#139 J Small decided to buy and sell goods from

J Small decided to buy and sell goods from - Financial Accounting

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This question consists of three short questions
2.1 J Small decided to buy and sell goods from his garage after he lost his job at the end of April 2019. During May 2019 Small purchased goods to the value of R54 000, one third of which was sold for R38 000 during May 2019. Distribution.
and administration expenses amounted to R3 000 and electricity amounted to R800. Show workings to calculate the profit for the month of May 2019.
2.2 Quick Deliveries began business to deliver fast food to customers on 1 March 2017. Two delivery motor bikes were purchased for R30 000 each. The financial year end of the entity is 28 February of every year and depreciation on the motor bikes is calculated at 30% per year according to the diminishing balance method. On 30 April 2018 one of the motor bikes was involved in an accident and was completely written off. Miraculously no one was hurt. R9 500 was received from the insurance company. Show workings to calculate the profit or loss on scrapping the motor bike.
2.3 Fed Ltd has the following authorised share capital: Authorised:
900 000 Ordinary shares
500 000 12% Preference shares
The issued share capital at 31 December 2019 is as follows:
400 000 Ordinary shares at R1,00 each, and
200 000 12% Preference shares at R2,00 each
Of the issued share capital, the following shares were issued on 30 June 2019 and have been correctly recorded:
100 000 Ordinary shares at R1,00 each, and
50 000 12% Preference shares of R2,00 each
On 30 November 2019 directors declared an ordinary dividend of 50 cents per share payable to all shareholders registered on 31 December 2019.
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Answer to Question 2.1
As provided in the question
Goods purchased= R54,000
We need to calculate, Cost of Goods Sold = Opening inventory + purchases - Ending Inventory = 0 + 54,000 - 36,000 = 18,000
Therefore, Profit is
Sales = 38,000
Less: Cost of Goods sold = 18,000
Less: Indirect Expenses (Distribution and Administration and Electricity Expenses = 3000+ 800 ) = 3,800
Profit = 14,200
Answer to question No. 5.2
Bikes purchased (30,000 each ) = R 60,000
Depreciation till 28th Feb 2018 ( 30% on each i.e., 9000 + 9000) = 18,,000
Value of both bikes as on 1 st March 18 ( 21,000 + 21,000) = R 42,000
When one Bike written off:
Written Down Value of bike as on 1st March = 21,000
Less: Depreciation till 30th April ( 30% on 21000 for 2 months) = 1050
WDV of Bike as on 30th April = 19,950
Less: Amount Received from insurance Comapny = R 9,500
Therefore, Loss (19,950 - 9500) = 10450
Answer to Question No. 2.3
Calculation of Dividend for the shareholders registered on 31 December 2019
Shares registered on 31 Dec, 2019 = 4,00,000 - 1,00,000 = 3,00,000 shares at 100 per share
Dividend 50 -cents means
Investor with 100 shares would receive = R 50
Therefore, 3,,00,000 shares = R 1,50,000
Therefore, Total dividend paid to ordinary shares will be = R 150,000