FAC
exam pack from 2015 to 2017.pdf

# Percentage explained x with the above example the

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Percentage Explained x With the above example, the gross profit percentage is calculated at ±±ѿ ² . What this percentage represents is that for every dollar a company generates in sales, the company has ±±ѿ cents left to cover operating expenses. It also means that for every dollar a company generates in sales, (100c- ±±ѿF³ ´´ҀFHQWV of that dollar was the company's inventory cost. 1.3 Midway Traders Trade Debtors (31 March 2010) 18000 Further credit losses (not yet written off) 500 Actual outstanding debtors 17500 Allowance for credit losses at end of year = 5% x 17 500 = 875 Decrease in allowance for credit losses Allowance at end 875 Allowance at start 1000 Decrease 125 Amount to be disclosed as credit losses Credit losses written off (600+500) 1100 Decrease in allowance for credit losses 125 Credit losses (statement of comprehensive income) 975 66 | P a g e

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FAC1502 2014 NOTES Credit losses are expenses in the profit and loss statement. They are made up of proven credit losses written off and an adjustment for allowance for credit losses which represents an estimation of future credit losses which have not yet been written off. Increases in allowance for credit losses are added to the credit losses whilst decreases in the allowance for credit losses reduce the credit losses. The increase or decrease in the allowance for credit losses is found by deducting the allowance at the beginning of the period from the allowance at the end of the given period based on the information given. If the allowance at the end of the year is greater than the allowance at the beginning of the year, there is an increase in the allowance of credit losses. If the allowance for credit losses at the end of the period is less than the allowance for credit losses at the beginning of the period, there is a decrease in the allowance for credit losses which should be subtracted from the credit losses. In this case the allowance for credit losses decreased from R1 000 at the beginning of the year to R875 at the end of the year, which reduces the allowance by R125. In the statement of financial position, we deduct the new allowance for credit losses (R875) from the debtors and the decrease in the allowance (R125) is subtracted from the credit losses. 1.4 CALCULATION OF PROFIT / LOSS ON MOTOR BIKE Medical Date of Purchase 01 March 2008 Cost of Motor bike scrapped R12 000 01 March 2008 cost R 12 000 Year ended 28 February 2009 Depreciation (30% x 12 000) (3 600) Carrying amount 01 March 2009 8 400 Year ended 28 February 2010 Depreciation (30% x 8400) (2 520) Carrying amount 01 March 2010 5 880 Depreciation (1 March 2010- 30 April 2010 (30% x 5880 x 2 12 ) (294) Carrying amount 30 April 2010 5 586 Calculation of Profit or Loss on disposal Insurance Claim 5 000 Carrying amount 5 586 Loss on disposal 586 NOTES ¾ Depreciation is normally determined at the end of each period, in this case 28/29 February but in the year of disposal, depreciation can be calculated for part of the year (from the beginning of the year up to the date of disposal). In the final year of disposal, depreciation is calculated from 1 March 2010-30April 2010- 2 months.
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