Nickel Traders is a book retailer and makes use of the periodic inventory system to account for its trade inventory. Nickel Traders and all of its suppliers are registered VAT vendors and a VAT rate of 15% is applicable. Nickel Traders uses the retail method of inventory valuation and they maintain a gross profit margin of 20% on sales. The following information was obtained from the trial balance of Nickel Traders for the period 1 January 2019 to 28 April 2019. R Inventories (1 January 2019) 500 000 Sales 1 600 000 Purchases 1 000 000 Sales returns 100 000 Purchase returns 250 000 Import duty 150 000 Freight (in) 200 000 Freight (out) 250 000 On 28 April 2019 a fire destroyed most of the inventories in the shop except for inventories with a selling price of R113 850 (VAT inclusive) which were kept on another premises. Nickel Traders is insured for R460 000 for “loss of inventories” and the policy contains an average clause. REQUIRED: a) Calculate the amount that can be claimed from the insurance company in respect of the cost of inventories destroyed in the fire on 28 April 2019.
Question
Nickel Traders is a book retailer and makes use of the periodic inventory system to account for its trade inventory. Nickel Traders and all of its suppliers are registered VAT vendors and a VAT rate of 15% is applicable. Nickel Traders uses the retail method of inventory valuation and they maintain a gross profit margin of 20% on sales. The following information was obtained from the trial balance of Nickel Traders for the period 1 January 2019 to 28 April 2019. R Inventories (1 January 2019) 500 000 Sales 1 600 000 Purchases 1 000 000 Sales returns 100 000 Purchase returns 250 000 Import duty 150 000 Freight (in) 200 000 Freight (out) 250 000 On 28 April 2019 a fire destroyed most of the inventories in the shop except for inventories with a selling price of R113 850 (VAT inclusive) which were kept on another premises. Nickel Traders is insured for R460 000 for “loss of inventories” and the policy contains an average clause. REQUIRED: a) Calculate the amount that can be claimed from the insurance company in respect of the cost of inventories destroyed in the fire on 28 April 2019.
Solution
To calculate the amount that can be claimed from the insurance company in respect of the cost of inventories destroyed in the fire on 28 April 2019, we need to follow these steps:
Step 1: Calculate the cost of goods available for sale. This is the beginning inventory plus purchases, import duty, and freight in, minus purchase returns.
Cost of goods available for sale = Beginning inventory + Purchases + Import duty + Freight in - Purchase returns = R500,000 + R1,000,000 + R150,000 + R200,000 - R250,000 = R1,600,000
Step 2: Calculate the cost of goods sold. This is the sales minus sales returns, and then subtract the gross profit margin.
Cost of goods sold = (Sales - Sales returns) * (1 - Gross profit margin) = (R1,600,000 - R100,000) * (1 - 0.20) = R1,200,000
Step 3: Calculate the ending inventory. This is the cost of goods available for sale minus the cost of goods sold.
Ending inventory = Cost of goods available for sale - Cost of goods sold = R1,600,000 - R1,200,000 = R400,000
Step 4: Calculate the cost of the inventory that was not destroyed. This is the selling price of the inventory that was not destroyed divided by 1 plus the VAT rate.
Cost of inventory not destroyed = Selling price of inventory not destroyed / (1 + VAT rate) = R113,850 / (1 + 0.15) = R99,000
Step 5: Calculate the cost of the inventory that was destroyed. This is the ending inventory minus the cost of the inventory that was not destroyed.
Cost of inventory destroyed = Ending inventory - Cost of inventory not destroyed = R400,000 - R99,000 = R301,000
Step 6: Calculate the amount that can be claimed from the insurance company. This is the lesser of the cost of the inventory destroyed and the insurance coverage.
Amount that can be claimed = min(Cost of inventory destroyed, Insurance coverage) = min(R301,000, R460,000) = R301,000
Therefore, Nickel Traders can claim R301,000 from the insurance company in respect of the cost of inventories destroyed in the fire on 28 April 2019.
Similar Questions
homas Trading, a registered VAT vendor, uses the periodic inventory system. The VAT rate is 15%.The following is an extract from the financial records of Thomas Trading for January 2024: RTrade receivables: opening balance (1 January)55 000Credit sales182 300Cash receipts journal: Trade receivables column total (31 January)93 600Sales returns journal: Trade receivables column (31 January)10 400 At month's end, the Bookkeeper completed a debtor’s reconciliation and found the following:On 10 January, a client returned goods sold to him on credit in the amount of R1 020. This transaction was incorrectly recorded in the Purchases returns journal instead of the Sales returns journal.The trade receivables column in the cash receipts journal was undercast by R1 400.On 18 January, goods sold on credit in the amount of R7 600 were recorded in the sales journal as R6 700. No journal entry has been made to correct this error.On 15 January 2024 Thomas Trading was informed that S Cook, a debtor who owed the entity R1 500, had been declared insolvent. The amount must be written off as irrecoverable.On 31 January 2024 Thomas Trading charged interest on overdue clients’ accounts of R170. Required:Complete the trade receivables account in the general ledger of Thomas Trading for the month ending 31 January 2024. Instructions:Use a full stop to indicate any decimals (eg: 1000.01)Round off to the second decimal after the full stop (eg: 50.56)If no amount should be recorded in any of the numeric spaces, please indicate it by filling in a zero ("0") Dr Trade receivables control Cr2024 R2024 RJan1Balanceb/dAnswerJan1Balanceb/dAnswer 31AnswerAnswerAnswer 31AnswerAnswerAnswer Answer AnswerAnswer AnswerAnswer Answer AnswerAnswerAnswer Balance c/d Answer Balance c/d Answer Answer AnswerFeb1Balanceb/dAnswerFeb1Balanceb/dAnswer
On 1 May 20.2 Ms T Naidoo opened a supermarket under the tradename Better Traders. Better Traders is a registered VAT vendor and the VAT rate applicable is 15%. Better Traders will use the periodic inventory system and entered into the following transactions during May 20.2:20.2Day DetailsMay1The owner, Ms T Naidoo, deposited R250 000 of her own funds directly into the bank account of the business. Cash purchase of merchandise from Vice Suppliers for R24 150. 2Bought shop equipment from EQUIP on credit, R10 005, and paid R1 005 by credit card as a deposit. 3Purchased merchandise on credit from Big Wholesalers, R28 750. Made an EFT of R7 980 to creditor, Green Stores and received a settlement discount of R1 035. 10Credit card sales of R3 105. Cash sales of R4 600. Credit sales to B Sullivan of R6 900 15B Sullivan deposited R5 750 directly into the bank account of Better Traders in full settlement of his account. 18Borrowed an amount of R50 000 from Better Bank. The amount must be paid back on 1 May 20.4. 25Ms T Naidoo withdrew R10 000 from the Better Traders business account to pay for her son's school fees. Instructions:1. Use a full stop to indicate any decimals (eg: 1000.01)2. Round off to the second decimal after the full stop (eg: 50.56)3. Don’t use any special characters (&) and don’t use bold in your answer. It will be marked incorrect.4. Do not use any abbreviations.5. Please remember the brackets around the amounts must be indicated by a negative amount [eg: (50) will be -50].6. Keep the transactions strictly according to date sequence.7. If an option has been provided and it is not applicable to the specific question, please put 0 in the amount column and N/A in the detail column. You can also leave the blocks empty because no marks were allocated to the 0 and N/A columns. The answer will be marked incorrect, but you will not lose any marks because no marks were allocated to these columns. The transactions in the cash payments journal of Better Traders for May will be … BETTER TRADERSCASH PAYMENTS JOURNAL - MAY 20.2 CPJ1 Documentnumbers Date Details Fol Bank Trade payables control Settlement discount received VAT input VAT output Purchases WagesSundry accountsAmountFolDetails RRRRRRRR P/R P0011Answer AnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer AnswerP/R P0053Answer AnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer AnswerP/R P00625Answer AnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer Answer
SA Traders operates as a hardware store and is a registered VAT vendor. The applicable tax rate is 15%. SA Traders makes use of the periodic inventory system, as well as control accounts. The transaction amounts are VAT inclusive where applicable.On 4 February 2022, SA Traders purchased stationery for use in the office and paid R1 120 in cash. The transaction will be entered into the .... as book of first entry.Select one:a.cash receipts journalb.purchases journalc.cash payments journald.general journal
The following transactions for the month ended 30 November 2022 relate to S Mathi Traders. S Mathi Traders is a registered VAT vendor and uses the periodic inventory system (When using the periodic inventory system all inventory purchased is recorded in the purchases account (expense). No entry is made on date of sale for the cost price. You will learn more about the topic in learning unit 6 and 7) . Where applicable VAT is included in all amounts at a rate of 15%. Transactions by S Mathi Traders for November 2022 Cash sales per cash register roll, R20 000. Received a direct deposit for R6 000 from C Crawl in full settlement of his account. Credit sales of R30 000 to a debtor R Rose. Purchased inventory worth R12 000 on credit from B Bryn. Cash sales as per cash register roll, R11 000. Purchased inventory from, S Sam, and paid R2 875 in cash. Paid Inner-city Municipality for water and electricity consumed, R4 900. Interest of R850, received from ZM Bank on a fixed deposit, was recorded as R650 in the cash receipts journal. Bank charges for November 2022 amounts to R300 and must still be recorded. REQUIRED:Record the above transactions of S Mathi Traders in the following subsidiary journals for November 2022: Cash receipts journalCash payments journal Instructions for numeric responses:1. Use a full stop to indicate any decimals (eg: 1000.01)2. Round off to the second decimal after the full stop (eg: 50.56)3. If no amount should be recorded in any of the numeric spaces, please indicate it by filling in a zero ("0") Cash Receipts journal of S Mathi Traders for November 2022CRJDateDetailsAnalysesof receiptBankSalesVATAnswerTrade receivables controlSundry accountsAmountDetails2 AnswerAnswerAnswerAnswerAnswer 6Answer Answer Answer Answer Answer 15 AnswerAnswerAnswerAnswerAnswer 29 Answer Answer Answer Answer Answer Answer AnswerAnswerAnswerAnswerAnswer Cash payments journal of S Mathi Traders for November 2022CPJDateDetailsBankAnswerVATAnswerSundry accountsAmountDetails22 AnswerAnswerAnswerAnswer 25 AnswerAnswer AnswerAnswer Answer30 AnswerAnswer Answer Answer Answer AnswerAnswerAnswerAnswer Please answer all parts of the question.
Zack’s Hardware, a registered VAT vendor, makes use of the periodic inventory system. The VAT rate is 15%.The following is an extract from the financial records of Zack’s Hardware for January 2023: RTrade receivables: opening balance (1 January)33 000Credit sales131 200Cash receipts journal: Trade receivables column total (31 January)64 600Sales returns journal: Trade receivables column (31 January)6 200 On month end, the auditors completed a debtors reconciliation and found the following:On 10 January, Mr Zack returned goods sold to him for cash to the amount of R550. This transaction was incorrectly recorded in the sales returns journalThe trade receivables column in the cash receipts journal were overcast by R400.On 18 January, goods sold on credit to the amount of 8 500 was recorded in the sales journal as R5 300. No journal entry has been made to correct this error. Required:Complete the trade receivables account in the general ledger of Zack’s Hardware for the month ending 31 January 2023. Instructions:Use a full stop to indicate any decimals (eg: 1000.01)Round off to the second decimal after the full stop (eg: 50.56)If no amount should be recorded in any of the numeric spaces, please indicate it by filling in a zero ("0") Dr Trade receivables control Cr2023 R2023 RJan1Balanceb/dAnswerJan1Balanceb/dAnswer 31AnswerAnswerAnswer 31AnswerAnswerAnswer AnswerSRJAnswer Balancec/dAnswer Balancec/dAnswer Answer AnswerFeb1Balanceb/dAnswerFeb1Balanceb/dAnswer
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.