UNIVERSITY EXAMINATIONS UNIVERSITEITSEKSAMENS a oe, UNISA liz FAC2601 October/November 2014 FINANCIAL ACCOUNTING FOR COMPANIES Duraton 2 Hours 100 Marks EXAMINATION PANEL AS APPOINTED BY THE DEPARTMENT. Use of a non-programmable pocket calculator Is permissible, Closed book examination, This examination question paper remains the property of the University of South Africa and may not be ‘removed from the examination venue. THIS PAPER CONSISTS OF SEVEN (7) PAGES NB. 1 This paper consists of THREE (3) questions 2 Allquestons must be answered 3. Basic workings, where applicable, must be shown 4 Ensure that you are handed the correct examination answer book (blue for accounting) by the invigilator 5 Each question attempted must be commenced on a new (separate) page. 6 — PROPOSED TIMETABLE: (Avoid deviatng from this as far as possible) ‘Question ‘Time in No Subject Marks_| minutes 1 | Statement of profit or ioss and other comprehenswe income and statement of changes in equity 40 48 2 | Statement of financial position 40, 48 3 [teases 20 24 TOTAL| 100 120 (TURN OVER]2 FAC2601 OCTINOV 2014 QUESTION 4 (40 marks}(48 minutes) The following information was extracted from the financial records of Vuzela Limited, a listed company, for the financial year ended 30 June 2014 Additional §=-R information Sales (including VAT @ 14%) : 1 7 980.000 Otherincome 7 : 387 2 Other expenses. eee 489 2 Administrative expenses. He 5 1.383 000 Income tax expense . : 341 100 ‘Ordinary share capital (Issued at R2) (1 sity 2013). 10812 4.000000 10% Cumulative preference shares : " 450.000 12% Long-term loan : Beene : 6 135.000 Retained eamings (1 July 2013) ae 780 000 Land at cost (1 July 2013) 9 550.000 Machinery and equipment at cost (1 July 2013) 9 760 000 Accumulated depreciation. = Machinery and equipment (1 say 2013) 9 266 400 Investment at cost : 7 1200 000 Loan granted to Canbury Limited 8 120.000 Bank (favourable) 450.000 Mark-to-market reserve (1 July2013) : - Additional information 11 The following transactions relating to sales have not yet been taken into account for the year ended, 30 June 2014 11 Lay-away sales a deposit of R80 000 (excluding VAT) recenved in respect of goods with a total sales value of R120 000 (excluding VAT) 12 Consignment inventory with a sales value of R160 000 (excluding VAT) was held at vanous Vendors Of this amount, inventory with a cost pnce of R45 000 (sales value of R75 000 (excluding VAT)) was unsold at year end 2° Vuzela Limited maintained a gross profit percentage of 40% on total sales during the 2014 financial year 3° Other income consist of the following R Dividends received Canbury Limited . ‘ ae 11.000 Interest received ‘Trade and other receivables a . . 9000 Canbury Limited : eee rE EPeereeeee ? Profit on sale of machinery : eee eee ; ” 4. Other expenses consist of the following R Interest paid Long-term loan. . a : . > Interest on overdue supplier accounts . cote 5.000 Sundry expenses... eee . . 370000 [TURN OVER]3 FAC2601 OCTINOV 2014 QUESTION 4 (continued) 5 Administrative expenses consist of the following R Salanes and wages foe Ee 850 000 Telephone... - hee a 55.000 Water and electricity 5 7 . . 115 000 Office rent bet Ft ner 363 000 8 The 12% long-term loan was obtained on 1 July 2012 and the caprtal portion is repayable in 5 annual instalments of R45 000 each, payable on 31 December every year Interest 1s payable biannually on 31 December and 30 June each year All payments are up to date at year end 7 Investment consist of. 100000 Ordinary shares in Canbury Limited, purchased for R12 each Canbury Limited's total ‘ssued ordinary share capital consists of 1 000 000 shares. Canbury Limited's shares are traded on the JSE and the price on 30 June 2014 was R15,50 each. This investment was designated as “at fair value through other comprehensive income (not held for trading)” No fair value adjustment has yet been made in the current financial year Canbury Limited deciared a dividend of 11 cents per ‘share on 30 June 2014 8 The loan to Canbury Limited was granted on 1 January 2014 at an interest rate of 11% per annum Interest 1s payable annually in arrears and the capital portion will be settled in full on 30 June 2016 9 The following must still be provided for- 81 Depreciation at 20% per annum on the canying amount of machnery and equipment Machmery ‘with a cost price of R100 000 and a carrying amount of R64 000 on 1 July 2013 was sold on ‘1 Apnl 2014 for R63 000 The sale of the machine was the only change in the carrying amount of machinery and equipment that occurred dunng the year Depreciation is regarded as an operating expense 92 The land was revalued for the first tme at 30 June 2014 by Mr J Springer, an independent valuer, to its current market value of R800 000 10 On 2 July 2013, Vuzela Limited issued an additional 300 000 ordinary shares at R2,50 per share. 11 The cumulative preference shares were issued at incorporation and the company did not issue any Preference shares dunng the previous financial year On 1 January 2014, 60 000. addttone! ‘cumulative preference shares were issued at R5 each 12 Decisions taken and approved at an annual general meeting of Vuzela Limited held on 29 June 2014 Must stil be recorded in the following order 121 Capitalisation shares must be sssued to the ordinary shareholders in the ratio of 4 ordinary share at R2,30 for every 10 ordinary shares held 122 No dividends were declared or paid dunng the previous financial year but after the capitalsation \ssue an ordinary dividend of 5 cent per share was declared, Cumulative preference dividends were fully paid on 30 June 2012 (TURN OVER}4 FAC2601 OCTINOV 2014 QUESTION 4 (continued) REQUIRED Prepare the statement of profit or loss and other comprehensive income and the statement of changes in equity of Vuzela Limited for the year ended 30 June 2014 to comply with the requirements of Intemational Financial Reporting Standards (IFRS) gnore the total column of the statement of changes in equity Ignore comparative figures: ‘The profit before tax note and the note on accounting policy are not required ‘Show all calculations ITURN OVER]5 FAC2601 OCTINOV 2014 QUESTION 2 (40 marks)(48 minutes) The following information was taken from the financial records of Jay Construct (Pty) Limited, on. 31 December 2013 Additional = R information Land at cost : 182 400 000 Office building at cost 1&2 1875000 Motor vehicles at cost (1 January 2013) eee 182 750 000 Machinery and equipment at cost (1 January 2013) 1&2 1000000 Office equipment at carrying amount a is 182 75.000 Accumulated depreciation - Motor vehicles (1 January 2013). 182 250 000 = Machinery and equipment (1 January 2013) ‘| eee 182 590 400 Investment (1 January 2013) : 3 250.000 Inventones : : : t 4 250.000 Trade and other recervables : 313.600 Bank (favourable) 400 000 Ordinary share capttal ae : 1500 000 Retained earnings (1 January 2013) .. 2520000 Profit before tax. att 5 237 300 Mark-to-market reserve (1 January 2013) : : 70.000 Trade and other payables Hae 350.000 Additional information ‘The following information 1n respect of transactions that occurred dunng the year was supplied to you 1. Non-current assets are depreciated as follows. Office buildings 2% per annum, straight-4ine ‘Motor vehictes - 20% per annum, straightine Machinery and equipment 20% per annum, reducing balance Office equipment - 25% per annum, straight-line 2 The following transactions in respect of property, plant and equipment took place dunng the year 21 On 14 January 2013 the land was revalued by Mr M Zimba, an independent valuer to the current market value of R1 000 000. 2.2 Construction of the new office building commenced in the current financial year Total expenditure Capttalised to date amounted to R1 875 000 The estimated date of completion is 31 August 2014 23 On 1 Apnl 2013 one of the motor vehicles was sold atts carrying amount (on that date) of R87 500 ‘The onginal cost pnce of this vehicle was R250 000 24 A new vehicle, with a cost pnce of R320 000 was purchased on the same date to reptace the old vehicle 25 A new machine, machine A, was purchased on 1 February 2013 at a cost pce of R260 000 The following additonal costs retating to the purchase were paid Transport costs R25 000 Installation costs R15 000 ‘The machine was delivered, mstalled and ready for use on 1 March 2013 [TURN OVER]6 FAC2601 OCTINOV 2014 QUESTION 2 (continued) 2.6 Anew finance lease agreement was entered into on 1 January 2013 to lease machine B for a penod of 5 years The cost pnce of this machine was R500 000 The lease agreement bears interest at 11% per annum and monthly instalments of R10 800 are payable in arrears ‘You may assume that the lease instalments’ spit for the duration of the lease agreement was correctly calculated as follows ‘Year? Year2 Years Year4 Yoars (31 Doc 2013) | (31 Dec 2014) | (31 Doc 2018) _| (31 Dec 2016) | (34 Dec 2017) R R R R z Capital portion, 78 000. 88 000. 38 000 70 0007 724 000 Interest portion 50 600. 41 600 30600 719.600 ‘6600 Total lease payment | 129 600 129 600 729.600 729 600 729.600 27 All office equipment was purchased on 1 January 2011. No office equipment was purchased or sold dunng the current financial year 3 The investment consists of the following 10.000 Ordinary shares in Pepcold Limited purchased at a cost of R180 000 on 31 August 2012 The issued share capital of Pepcold Limited consists of 200 000 ordinary shares Each share has one vote and voting rights alone, determine control These shares are traded on the JSE and the fair value of the shares was R25 each on 31 December 2012 and R37 each on 31 December 2013 ‘These shares are classified as “financial assets through other comprehensive income (not held for trading)" 4 The mventones at cost consist of R Raw matenais 60 000 Work in progress: 110 000 Finished goods 80.000 250,000 ‘On 31 December 2013 the net realisable value (NRV) of mventories were calculated as follows R Raw materials 65.000 Work in progress 100 000 Finished goods 75.000 240-000. 5 The auditor calculated the amount of normal tax to be provided as R92 220 after taking all adjustments into consideration REQUIRED Prepare the statement of financial position as well as the property, plant and equipment note of Jay Construct (Pty) Limited at 31 December 2013, in order to comply with the requirements of Intematonal Financial Reporting Standards (IFRS) ‘Comparative figures are not required ‘The accounting policy note is not required ‘Show all calculations [TURN OVER]7 FAC2601 OCTINOV 2014 QUESTION 3 (20 marks)(24 minutes) 1 Els Limited, a manufacturing concem, has a 28 February financial year end Els Limited entered into an operating lease agreement on 1 March 2013 whereby a machine with a cost price of R250 000 is leased from a finance company The penod of the lease 1s 3 years and the lease payments are Payable monthly in arrears, The following terms apply to the above lease instalment payable months 1-24 8 000 permonth months 25 - 36 R7 400 per month 2 _ Els Limited leased a second machine from Steyn Limited from 1 March 2013 according to a finance lease agreement The conditions of the finance lease agreement are as follows The period of the lease 1s 4 years, ending on 28 February 2017 The cost of the machine was 80.000 A half-yearly instalment of R12600 1s payable in arrears on 31 August and 28 February each year The following amortisation table was correctly compiled by the accountant to assist you Date. instalment Capital Interest Balance R R R R 80 000 31 Aug 2013, 12.600 8200 4400 77600 28 Feb 2014 12.600, 8700 3900 63100 31 Aug 2014 12.600 ‘9200 3.400 53900 28 Feb 2015, 12.600 ‘9700 2900 ‘44 200 [31 Aug 2015 12.600 10 200 2.400, 34.000 28 Feb 2016 12.600 10 800 1800 23200 '31 Aug 2016 42 600 11-400 1200 11-800 28 Feb 2017 12.600 41800 ET = 3 Machinery 1s depreciated at 25% per year according to the straight-line method REQUIRED: a) Show all the journal entnes per year in the accounting records of Els Limited for the full duration of the operating lease agreement in order to comply with the requirements of Intemational Financial Reporting Standards (IFRS) All dates and calculations must be shown Ignore income tax implications No journal narrations are required 5) Show only the Journal entnes for the financial year ending 28 February 2014 m the accounting records of Els Limited in order to account for the finance lease agreement in accordance with the requirements of Intemational Financial Reporting Standards (IFRS) All calculations must be shown Ignore mcome tax implications No journal narrations are required