Question

In: Accounting

Kalokoni is a VAT registered trader. During the year to December 31, 2019, he bought from...

Kalokoni is a VAT registered trader. During the year to December 31, 2019, he bought
from a wholesaler grocery worth K9, 510 VAT exclusive. The wholesaler charges sales
tax at the prescribed rate of 16.5%. Kalokoni charged its customers on sale of the
groceries a price of K11, 200 VAT exclusive. Kalokoni also charged its customers VAT
on sales at 16.5%.
Required:

(i) Compute the VAT inclusive price that Kalokoni charged its customers on the
groceries.

(ii) Prepare the journal entries to record the sale of groceries in Kalokoni a’s general
ledger.

(iii) Calculate the input tax and output tax on Kalokoni’s purchase and sale of the
groceries.

(iv) How much VAT does Kalokoni pay to the government on the groceries
transactions above (1 mark)







(b) Kabisa commenced trading on 1 December 2018 as a distributor of the Straight Cut
garden lawn mower, a relatively new product which is now becoming increasingly
popular. Kabisa's purchases and sales of the Straight Cut garden lawn mower during the
three months ended 30 November 2019 are as follows:

Bought
January 1200 at K160 each
April 800 at K180 each.
October 1500 at K190 each

Sold.
June 1250 at k220 Each
November 2100 at k250 each.

Required:
From the following figures calculate the closing inventory-in-trade that would be shown
using;
(i) FIFO,
(ii) AVCO method on a perpetual inventory basis;
(iii) AVCO method on a simple inventory basis

Solutions

Expert Solution

purchase price 510
VAT 16.5% 84.15
TOTAL PURCHASE PRICE 594.15
SALE PRICE 200
VAT 16.5% 33
TOTAL SALES 233
I) VAT INCLUSIVE PRICE CHARGED FROM CUSTOMERS
ANSWER : $ 233
II) SALES ENTRY
CUSTOMER A/C DR 233
   TO SALES ACCOUNT 200
   TO OUTPUT VAT 33
III) INPUT AND OUTPUT TAX'
INPUT TAX = 84.15
OUTPUT TAX = 33
IV) VAT PAID TO GOVT
VAT PAID TO GOVT = 0

QUESTION 2

FIFO METHOD
OPENING PURCHASE SALES CLOSING
DATE UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL
JAN 1200 160 192000 1200 160 192000
APRIL 800 180 144000 1200 160 192000
800 180 144000
JUNE 1250 220 275000 750 180 135000
OCTOBER 1500 190 285000 750 180 135000
1500 190 285000
NOV 2100 250 525000 150 190 28500
CLOSING INVENTORY IN FIFO IS 28500
AVCO PERIODIC METHOD
PURCHASE
DATE UNIT PER UNIT TOTAL
JAN 1200 160 192000
APRIL 800 180 144000
JUNE
OCTOBER 1500 190 285000
NOV
TOTAL 3500 621000
AVERAGE PRICE = 621000/3500
AVERAGE PRICE = 177.4286
CLOSING INVENTORY PERIODIC AVCO 150 UNITS * AVERAGE PRICE
CLOSING INVENTORY PERIODIC AVCO 150*177.4286
CLOSING INVENTORY PERIODIC AVCO 26614.5
AVCO PERPETUAL
OPENING PURCHASE COST OF SALES CLOSING
DATE UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL UNIT PER UNIT TOTAL
JAN 1200 160 192000 1200 160 192000
APRIL 800 180 144000 2000 168 336000
JUNE 1250 168 210000 750 168 126000
OCTOBER 1500 190 285000 2250 182.6667 411000
NOV 2100 182.6667 383600.1 150 182.6662 27399.93
CLOSING INVENTORY = 27399.93

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