View the step-by-step solution to:

Which of the following options shows the correct surplus / deficit in the branch inventory account of Servaton Ltd for the year ended 31 January 2017?...


Which of the following options shows the correct surplus / deficit in the branch inventory 

account of Servaton Ltd for the year ended 31 January 2017? 


1. R20 930 (deficit) 

2. R 5 750 (surplus) 

3. R10 750 deficit 

4. R 150 (surplus) 


The following information relates to the head office and the branch of Servaton Ltd: Branch inventory on hand (selling price): 


1 February 2016   R5 200

31 January 2017   R5 200  


Transactions during the year ended 31 January 2017: 


Inventory sent to branch (selling price)..................................R156 200 

Sales by the branch ..............................................................R -

Cash sales ............................................................................R71 600 

Credit sales............................................................................R57 600 

Returns to head office (cost price) ........................................R7 400 

Cash received from branch debtors .....................................R11 200 

Settlement discount granted to branch debtors ....................R1 000 

Inventory stolen at the branch (selling price) .........................R7 500 

Sundry expenses of the branch paid by head office .............R18 500 


Additional information: 

1. All inventories are purchased by the head office and supplied to the branch at selling price, which is cost price plus 25%. 

2. Due to the current economic downturn, there has been a significant decline in sales at the branch. As a result, the head office has allowed the branch to sell certain products at selling price less 30%. The net proceeds of the products sold at discount amounted to R8 400. This amount is included in the above cash sales figure of R71 600. 

3. During the year a burglary took place at the branch and R1 400 in cash (in respect of cash sales) was stolen. No entries regarding the burglary were made in the books. 

4. Inventory invoiced to the branch at R5 600 included in the above amount of R156 200 pertaining to inventory sent to branch at selling price was in transit at 31 January 2017, and therefore not included in the branch's inventory on hand of R5 000 at 31 January 2017. 

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question