Question

Question 5

(Marks: 25)
Windhoek Motor Spares CC was registered on 1 January 2019. The following information applies
to the CC:
21
.
© The Independent Institute of Education (Pty) Ltd 2021
.
Names of members, their interests and contributions
NAME
Maria Munonde
Petrus Mehlape
Marcus Mogale
Q.5.1
% INTEREST
Members' contributions
Retained earnings = 1 January
2020
Long-term loan
Loan to Maria Munonde
Bank
Required:
50%
40%
10%
CONTRIBUTIONS
The following abbreviated trial balance of the close corporation was available on
31 December 2021:-
R400 000
R250 000
R300 000
DEBIT
RETAINED
EARNINGS
50 000
450 000
CREDIT
Net profit after tax for the year ended 31 December 2021 amounted to R700 000.
Income tax for the year is calculated to be R196 000.
R300 000 of this amount was distributed to members at year-end
Open, post to and balance the Appropriation Account for the year ended 31
December 2021
100 000
40 000
60 000
Page 9 of 13
2021
950 000
200 000
400 000
(10)

Answer 1

The net profit after tax for the year ended 31 December 2021 was R700000.00. Income tax of R196000.00 was paid, leaving an available profit of R504000.00.

How to solve

The members' capital accounts and retained earnings are as follows:

Members Capital Accounts

Maria Munonde R100000.00

Petrus Mehlape R64000.00

Marcus Mogale R4000.00

Total Capital R168000.00

Retained Earnings R604000.00

The total capital of the CC is R168000.00 and the retained earnings are R604000.00.

The appropriation account for the year ended 31 December 2021 is as follows:

Account Debit Credit

Net profit after tax 700000

Income tax 196000

Distributed profit 300000

Retained earnings 204000

Total 700000 700000

The net profit after tax for the year ended 31 December 2021 was R700000.00. Income tax of R196000.00 was paid, leaving an available profit of R504000.00. Of this amount, R300000.00 was distributed to members, leaving retained earnings of R204000.00.