HIGHER EDUCATION PROGRAMMES

Academic Year: Past Paper 1

Summative Assessment 1: Financial Accounting Reporting
(HFAC132-1)
NQF Level, Credits: 5, 20
Weighting: 60%
Assessment Type: Examination
Stationery: Black/blue pen/calculator
Pass requirement: 50%
Examiner: E Bungne
Educator E Bungne
Due Date: Past Paper
Total: 100 marks
Duration: 3 Hours
Instructions:

1. This examination script consists of 12 pages including the cover sheet. Ensure that you
have all the pages.

2. This examination consists of Essay-Type questions.

3. Answer all questions in the Assessment Answer Book provided.

4. Show all calculations.

5. No answers in pencil will be marked.

6. Ensure that you hand in the entire examination script and the answer book at the end of the
session. This script remains the property of Boston City Campus & Business College (Pty)
Ltd.

7. All the best!

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For your convenience, an overview of the Assessment Rules:
1. In order to control invigilated assessments in accordance with module specific guidelines,
published rules are enforced.
2. Students must bring a valid identity document (ID or Passport) and means to disclose their
student number to all (formative and summative) invigilated assessments.
3. Students participating in assessments in the form of invigilated tests or exams must arrive and
be seated in the assessment venue fifteen (15) minutes prior to the start of the assessment.
4. Students must sign the Assessment Register on arrival and when handing in their assess-
ment paper before leaving the assessment venue.
5. Students who arrive fifteen (15) minutes after the start of an assessment will not be allowed to
attempt the assessment under any circumstances.
6. Students who are late for an assessment, without just cause for an application for deferral, will
not be granted another assessment opportunity and will receive a zero (0) grade for the as-
sessment.
7. Students are required to complete all the necessary information (name, surname, student
number and module code) on the assessment answer sheet.
8. Students will be required to remain in the assessment venue for forty-five (45) minutes from
the start of the assessment.
9. Other than what is specified by the particular requirements of a module, no student may make
use of any form of equipment, stationery or any other materials or resources during the as-
sessment session.
10. Other than what is specified, all electronic devices must be switched OFF for the duration of
the assessment.
11. Other than what is specified, no materials or equipment nor any other resources may be taken
into the assessment venue but must be left at a designated location, which is in most instanc-
es near the entrance of the assessment venue.
12. Tippex (correction fluid) may not be used. Any section where Tippex is used will not be
marked.
13. Students are not permitted to talk or communicate whatsoever during an assessment session
or cause any form of disturbance.
14. Students may not ask the invigilator for assistance in answering questions during an assess-
ment.
15. Should a student require anything during an assessment they may only communicate this
need to the invigilator on duty usually by raising their hand.
16. Students may not leave the assessment venue without informing the invigilator and signing
out the exit attendance register.
17. No materials may be removed from the assessment venue at the end of an assessment. This
includes question papers as they remains the property of Boston City Campus & Business
College.
18. Learners must leave all personal belongings at the front of the assessment venue. This is
done at the learner’s own risk and neither Boston City Campus & Business College nor the
staff will be held responsible for the loss, theft or damage of belongings.
19. No student will be permitted extra time to complete an assessment unless the prior permis-
sion granted has been brought under the attention of the invigilator prior to commencement of
the assessment. It is recommended that students do take along a copy of the approved per-
mission slip to overcome any unforeseen situation.
20. If an invigilator finds a student in contravention of any rule governing an assessment session,
the assessment script will immediately be confiscated and inform the Academic Committee at
Head Office Orange Grove. The student may be summoned to attend a disciplinary inquiry at
Head Office.

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QUESTION 1 (20 MARKS)
Boomerang is a business selling camera equipment. Their year-end is 28 February
2019. Unfortunately, a fire recently destroyed most of their accounting records, but
some information has luckily been salvaged from the fire.
You have been asked to assist in reconstructing the general ledger at the year-end
so that the financial statements can be prepared.
Assume all parties are registered for VAT and that a VAT rate of 15% applies.

List of balances at 31 January 2019

Debits Credits
Sales 522 200
Cost of sales 96 225
Inventory 52 022
Rent received 25 540
Electricity 8 521
VAT control 4 412
Trade payables 12 443
Trade receivables 8 665
Bank 12 885
Salaries and wages 5 824

The following information was gathered from the journals for February 2019:
Total credit sales (excl. VAT) 25 500
Total cash sales (excl. VAT) 82 000
Total credit purchases (excl. VAT) 35 000
Total cash purchases (excl. VAT) 42 000
Cash receipts from debtors 25 430
Cash payments to suppliers 35 200
Total Cost of sales for February 2019 21 006
VAT column in the Cash Payments 6 552
VAT column in the Cash Receipts journal
journal 15 446

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Required:
Complete the following general ledger accounts that will display the opening
balance, transactions for February 2019 and the closing balance.

1.1 Trade receivables (6 marks)

1.2 Trade payables (6 marks)

1.3 SARS VAT account (8 marks)

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QUESTION 2 (10 MARKS)

The bookkeeper of Kumba Traders received a statement of their account dated 26

March 2018 from a supplier, Teko Distributors. When comparing the statement with
the supplier’s account in the creditors’ subsidiary ledger, he discovered the following:

1. The statement showed an amount of R42 200 brought forward from February
2018.
2. Invoice No. 125 had been entered in the purchases journal at its gross amount
whereas the statement correctly showed the net amount from which a trade
discount of 20% amounting to R500 had been deducted.
3. Invoice No. 136 for R800 had been duplicated on the statement.
4. Invoice No. 152 for R400 was correctly shown on the statement but had
been received in the mail too late to be included in the purchases journal for
March 2018 despite the fact that the goods had been received.
5. Invoice No. 179 for R6 400 had been entered on the statement as R4 600.
6. Credit note No. 045 for R1 100 was correctly shown on the statement and in the
purchases returns journal, but had been posted to the supplier’s accounts as if it
were an invoice.
7. The suppliers’ statement had been overcast by R200.
8. The balance in the creditors’ subsidiary ledger account of Teko Distributors at 26
March 2018 amounted to R45 300.

Required:
Calculate the balance owing by Kumba Traders by drafting the trade payables
account in the books of Kumba Traders and the trade receivables account in the
books of Teko Distributors on 26 March 2018.

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QUESTION 3 (23 MARKS)
Ignore VAT
Meat Market Ltd is a meat factory and wholesale business that supplies pre-packed
meat to retailers in Cape Town. Meat Market Ltd has a financial year-end of 31
August. You have been provided with the following information about machinery,
which is measured on the cost model:
1. The machinery on hand at 1 September 2017 had a gross carrying amount of
R1 380 000 and a residual value of R415 000. All the machinery on hand at
1 September 2017 had been purchased on 1 September 2015.

2. Machinery is used evenly over its estimated useful life of 8 years (with the excep-
tion of the new part described in point 4 below).

3. On 15 April 2018, machinery with a cost price of R375 000 and a residual value of
R110 000 was sold for a cash price which was 25% below the carrying amount on
the date of sale.

4. On 1 June 2018, the business paid R98 000 for an annual service to the remaining
machinery. On the same date a new part, to be used to accelerate the process of
mincing meat, was purchased and fitted to the mincemeat machine. All costs for
the new part were paid in cash on this date. This part is to be depreciated on the
units of production basis. Details of the part are as follows:

Purchase price R178 000

Delivery and installation costs R12 000
Residual value R50 000
Total expected number of kilograms of meat to mince 500
Number of kilograms of meat minced by 31/8/2018 72

5. On 31 August 2018, there were signs that the carrying amount of machinery might
exceed its future economic benefits. On this date, the value in use of machinery
amounted to R732 000 and the fair value less costs to sell amounted to R643 000.

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Required:
3.1 Prepare the PPE: machinery and accumulated depreciation: machinery
accounts as they would appear in the general ledger of Meat Market Ltd for the
year ended 31 August 2018. (14 marks)

3.2 Show how the information provided in points 1 - 5 above would be reported on
the statement of comprehensive income of Meat Market Ltd for the year
ended 31 August 2018.. (6 marks)

3.3 Show how PPE: Machinery would be reported in the statements of financial
position of Meat Market Ltd as at 31 August 2017 AND 31 August 2018. You
are not required to provide a separate SOFP for each year. A column showing
the amount for each year is sufficient (3 marks)

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QUESTION 4 (12 MARKS)

Kalahari Ltd wants to purchase plant and equipment to use to expand operations.
The directors have decided that the best way to finance this investment is with a
share issue. They have taken a resolution to issue 100 000 Class A shares at R5 per
share. The offer is made to the public on 1 June 2018. On 1 July 2018 (the closing
date for the application), 80 000 Class A shares had been applied for by members of
the public. The directors issued the shares on 10 July 2018.
The directors employed the Afriland Bank (AB) to underwrite the share issue at a
3.5% commission. The commission was still owing to AB on 31 December 2018. The
underwriter’s commission was to be written off to Class A share capital. At 31
December 2018, no entries had been processed to record the commission.

An extract from the notes to the statement of financial position as at 31

December 2017 is set out below:
Authorised share capital
1 000 000 Class A shares
Issued share capital
700 000 Class A shares

Required:
4.1 Prepare all the general journal entries to record the application and issue of
Class A shares. Show all dates. Narrations not required. (7 marks)

4.2 Calculate the commission owing to Afriland Bank as at December 2018.

(2 marks)
4.3 Prepare the general journal entries that should be processed by Kalahari Ltd on
31 December 2018 to record the under writer’s commission. Show all dates.
Narrations are not required. (3 marks)

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QUESTION 5 (20 MARKS)

John and Johnson are attorneys that have operated a successful partnership since 1
July 2016. The partnership has a 30 June year end. They asked you for some
guidance relating to their financial year ended 30 June 2019. You have been
provided with the following information:

John and Johnson Attorneys Partnership

Extract of post – closing trial balance as at 30 June 2019
Capital account:
John R750 000 CR
Johnson R1200 000 CR
Current account:
John R328 000 CR
Johnson R540 000 CR

Additional information:

1. The above trial balance contains all of the equity accounts of the partnership.
2. The following details are contained in the partnership agreement.
• Interest on capital accounts: 7% per annum.
• Interest on current accounts: none.
• Partners’ salaries: John and Johnson are entitled to salaries of R10 000 and
R15 000 per month respectively. These amounts are not paid regularly: They
are appropriated to partner’s current accounts if there are sufficient profits at
the end of the year.
• Interest on drawings: 10% per annum.
• Profits sharing ratio: John and Johnson share all profits remaining after
appropriations for interest on capital, interest on drawings and partners’
salaries in the ratio 1:3 respectively.
3. The partnership earned profits of R485 000 during the year ended 30 June 2019.

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4. On 1 April 2019, John decided to make additional contribution to the partnership
with his car valued at R120 000. Johnson made drawings of R50 000 on 1
August 2018.

Required:
5.1 Prepare the appropriation account as it would appear in the general ledger of
John and Johnson partnership for the year ended 30 June 2019. Ignore dates.
(16 marks)

5.2 Calculate the balance on John’s current account on 30 June 2018. (4 marks)

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QUESTION 6 (15 MARKS)

The following information has been extracted from the financial statements of
Atlantic Adventures for the year ended 30 June 2018.

Statement of comprehensive income of Atlantic Adventures Ltd

for the year ended 30 June 2018
2018 2017
Sales 150 000 131 000
Cost of sales (62 000) (51 000)
Gross profit 88 000 80 000
Net operating costs (41 000) (45 000)
Operating profit 47 000 35 000
Finance costs ( 6 000) ( 5 000)
Profit before tax 41 000 30 000
Taxation expense (11 480) ( 8 400)
Profit for the period 29 520 21 600

Statement of financial position of Atlantic Adventures Ltd (extract)

as at 30 June
2018 2017
Trade receivables 12 500 3 500
Inventory 1 500 2 500
Trade payables 11 000 9 000
Accrued expense 2 500 5 000

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Additional information
Net operating costs include:
Depreciation expense R6 000
Bad debts expense R2 000
Loss on sale of PPE R3 000
Rent expense R8 500
Interest income R5 000

Required:

6.1 Prepare the cash from operations section of the Statement of Cash Flows for
Kayak Adventures Ltd for the year ended 30 June 2018 using the indirect
method. (8 marks)

6.2 Calculate the following ratios for Atlantic Adventures Ltd.

a) Gross profit percentage for 2018 and 2017 and comment on the two periods.
(3 marks)
b) Inventory turnover for 2018. (2 marks)
c) Debtors collection period for 2018. (2 marks)

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