Question

Question Four (10 Marks) Lukanga Stores a merchandising company had the following ever during the month of July. Lukanga is registered for Value added Tax (VAT) nad the following events that occurred istered for Value added Tax (VAT) in Zambia July 3 Purchased goods for resale costing K128, 000 net of VAT on account with tem 2/10, n/30 Sold merchandise for K168, 000 VAT inclusive on account with credit terms 3/15, 1/30. Received payments for the merchandise sold on July 5 18 Sold merchandise for K36, 000 net of VAT cash and K252, 000 Vat inclusive on account with terms 4/15 n/30 19 Paid for goods bought on July 3 in full Required Prepared the Journal entries for the above transactions (10 marks)

Answer 1

Date	Accounts Titles and Explanation	Debit	Credit
July 03	Purchase	128,000
	Input tax	20,480		($128,000 x 16%)
	Accounts Payable		148,480
	(To record purchase of goods)
July 05	Accounts Receivable	168,000
	Output Tax		23,172	($168,000 x 16/116)
	Sales		144,828	Balance
	(To record sale of goods)
July 10	Cash	162,960
	Sales discounts	5,040		($168,000 x 3%)
	Accounts Receivable		168,000
	(To record receipt from accounts receivable)
July 18	Cash	41,760
	Output Tax		5,760	($36,000 x 16%)
	Sales		36,000	Balance
	(To record sale of goods)
July 18	Accounts Receivable	252,000
	Output Tax		34,759	($252,000 x 16/116)
	Sales		217,241	Balance
	(To record sale of goods)
July 19	Accounts Payable	148,480
	Cash		148,480
	(To record payment to accounts payable)
Note: Considering VAT rate 16%