In: Accounting
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
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 |