FINBUS2

JUNE 2012 EXAMINATION

DATE: 4 JUNE 2012

TIME: 09H00 – 12H00 TOTAL: 100 MARKS

DURATION: 3 HOURS PASS MARK: 40%

(BUS-AC1)
FINANCIAL ACCOUNTING 1

THIS EXAMINATION PAPER CONSISTS OF 5 QUESTIONS:

ANSWER ALL THE QUESTIONS (100 MARKS)

INSTRUCTIONS:

1. Read the following instructions carefully before answering the paper, as failure to act upon them will
result in a loss of marks.
2. Write your answers in your answer book, which is provided in the exam.
3. Ensure that your name and student number are clearly indicated on your answer book.
4. Write your answers in either blue or black ink in your answer book.
5. Read each question very carefully before you answer it and number your answers exactly as the
questions are numbered.
6. Begin with the question for which you think you will get the best marks.
7. Note the mark allocations for each question – give enough facts to earn the marks allocated.
Don't waste time by giving more information than required.
8. You are welcome to use diagrams to illustrate your answers.
9. Please write neatly – we cannot mark illegible handwriting.
10. Any student caught cheating will have his or her examination paper and notes confiscated.
The College will take disciplinary measures to protect the integrity of these examinations.
11. If there is something wrong with or missing from your exam paper or your answer book, please inform
your invigilator immediately. If you do not inform your invigilator about a problem, the College will not
be able to rectify it afterwards, and your marks cannot be adjusted to allow for the problem.
12. This paper may be removed from the examination hall after the examination has taken place.
NOTE: YOU ARE ALLOWED TO USE A NON-PROGRAMMABLE CALCULATOR. AN ACCOUNTING
ANSWER BOOK WILL BE PROVIDED.
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 FINANCIAL ACCOUNTING 1

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ANSWER ALL THE QUESTIONS (100 MARKS)
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QUESTION 1

Tiger and Woods carried on business in partnership, sharing profits and losses
in the proportion of three-fifths and two-fifths, respectively.

On 31 December 2011, Tiger and Woods' balance sheet was as follows:

BALANCE SHEET 31 DECEMBER 2011

R
Assets
Sundry assets 18 000
18 000
Liabilities
Tiger's capital 11 000
Woods' capital 7 000
18 000

Tiger and Woods agreed to admit Els as a partner from 1 January 2012 on the
following terms:

• The assets, liabilities, and capital to be taken as shown in the balance

sheet at 31 December 2011.
• R2 500 to be added to the assets for goodwill must be added to Tiger's
and Woods' capitals in the proportion in which they divide profits.
• Els to pay in R5 000 as capital.

You are required to:

(a) Refer to the information provided and complete the journal entries affected
by the transactions above. (11)

(b) Complete the balance sheet as at 1 January 2012. (7) [18]

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 FINANCIAL ACCOUNTING 1

QUESTION 2

Information for Joubert Traders follows below.

The following is the trial balance of Joubert Traders at 29 February 2012, its
financial year-end.

Capital account 75 000

Drawings 84 000
Long-term loan 60 000
Motor vehicles 60 000
Office equipment 12 000
Furniture and fittings 15 000
Provision for depreciation:
Motor vehicles 24 000
Office equipment 4 800
Furniture and fittings 3 000
Fixed deposit 20 000
Stock: 1 March 2011 45 600
Debtors 46 000
Provision for bad debts 1 800
Bank 56 275
Creditors 32 150
Sales 605 660
Sales returns 4 700
Purchases 308 970
Purchases returns 3 870
Freight inwards 28 000
Customs duty 25 400
Discount received 2 500
Interest received 1 800
Advertising 4 800
Bad debts 950
Bank charges 4 100
Discount allowed 2 240
Electricity and water 3 150
Freight outwards 8 120
Insurance 10 875
Interest on loan 6 000
Motor vehicle expenses 9 230
Postage and telephones 6 980
Printing and stationery 6 000
Repairs and maintenance 2 660
Salaries and wages 34 980
Travelling and entertainment 8 550 ___
814 580 814 580

Stock on hand at 29 February 2012 amounts to R55 800.

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 FINANCIAL ACCOUNTING 1

Adjustments and additional information:

1. Accounting fees of R4 000 should be provided for.

2. Bad debts of R1 000 should be written off, and the provision for bad debts
should be adjusted to 5% of outstanding debtors.
3. Interest on the fixed deposit is 12% per annum. Interest for three months is
due, but has not yet been received.
4. Insurance of R2 175 is prepaid.
5. Printing paper and stationery stock of R750 is still on hand.
6. Depreciation on fixed assets should be provided for as follows on the
straight-line method:
• Motor vehicles at 20% per year.
• Office equipment at 20% per year.
• Furniture and fittings at 10% per year.

You are required to:

Complete the Income Statement for Joubert Traders for the year ended
29 February 2012. [24]

QUESTION 3

AFS Sports Club was founded on 1 June 2011.

Transactions: June 2011

1 Membership fees received from founding members, R8 000;

11 Paid affiliation fees by cheque, R400;
29 Issued a cheque in favour of the secretary to pay the honorarium agreed
upon by management, R600.
An account was opened at Lemkus Sports, and equipment to the value of
R7 700 was purchased.
30 Drew a cheque for R1 750 and deposited the amount in the savings
account.

Accrued income: membership fees R200.

Accrued expenses: affiliation fees, R1 000, honorarium, R 500.

You are required to:

(a) Record the given transactions directly into the following general ledger
accounts:
• Equipment
• Savings account
• Membership fees account
• Affiliation account
• Honorarium (12)

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 FINANCIAL ACCOUNTING 1

(b) Complete the Statement of Receipts and Payments for the year ended
30 June 2011.

Close the income accounts and expense accounts off to the income and
expenditure account. (6) [18]

QUESTION 4

At 1 October 2011 Jim had fixed assets as follows:

Freehold Land Buildings Machinery

R R R
Cost 85 000 120 500 74 800
Accumulated Depreciation – 28 920 35 600

Jim’s policy is to provide for a full year’s depreciation in the year of acquisition,
but no provision is made in the year of disposal. Depreciation is provided at the
following rates:

Land: nil
Buildings: written off over 25 years, on the straight line basis
Machinery: 20% per annum, on the reducing balance basis

During the year to 30 September 2011, Jim added an extension to the buildings
at a cost of R6 800. He also acquired a new machine, by paying the dealer
R9 000 by cheque and trading in an old machine for R5 500. The machine traded
in had been acquired in January 2008 at a cost of R11 000.

Jim has asked why depreciation is not charged on the land, but is charged on
other fixed assets.

You are required to:

(a) As at 30 September 2011, calculate:

i. the value of Jim’s non-current assets, before deducting

depreciation. (3)
ii. the accumulated depreciation. (7)
iii. the net book value of non-current assets. (3)

(b) Calculate the profit or loss on the machine that was traded in. (3)

(c) Explain briefly why depreciation should be charged on the non-current

assets other than freehold land. (4) [20]

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 FINANCIAL ACCOUNTING 1

QUESTION 5

A trainee in your office has prepared draft accounts for a client for the year to
31 March 2012, but has not dealt with the adjustments for accrued expenses,
prepaid expenses, bad and doubtful debts and depreciation.

Following the preparation of the income statement, the trainee prepared the
balance sheet shown below. You have been asked to complete the final
accounts.

Draft of the Balance Sheet as at 31 March 2012 (before adjustments)

R R
Non-current assets
Equipment at cost 175 000
Accumulated depreciation (at 31 March 2011) (85 400) 89 600
Current Assets
Inventory 42 339
Trade receivables 149 411
Bank account 6 280 198 030
287 630
Proprietor’s capital 201 070
Current liabilities
Trade payables 86 560
287 630

The trainee has given you the following information about the remaining
adjustments:

(a) The last invoice received for electricity covered the three-month period to
31 January 2012. The invoice was for R6 870.
(b) Rent of R28 500 for the six months to 30 June 2012 was paid in January.
(c) The trade receivables figure of R149 411 is stated after deducting the
existing allowance for doubtful debts of R7 900 from the total trade
receivables balance of R157 311.
(d) The total trade receivables balance of R157 311 includes a balance of
R660 that has been outstanding for eight months. The client has decided to
write off this balance.
(e) The client’s policy is to allow for doubtful debts based on the length of the
time they have been outstanding. The age analysis of the trade receivables
at 31 March 2012 and the required allowance is shown below:

Age of debt Balance Allowance required

R
0 – 30 days 125 275 Nil
31 – 60 days 27 200 20% of balances
Over 60 days 4 836 75% of balances
175 311

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(f) Depreciation is to be provided at a rate of 20% per annum on the reducing

balance basis.

You are required to:

Calculate the correct balance at 31 March 2012 for each of the following:
(a) accrued expenses (4)
(b) prepaid expenses (5)
(c) allowance for doubtful debts (7)
(d) accumulated depreciation (4) [20]

[100]

TOTAL: 100 MARKS

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