INSTITUTE OF ADMINISTRATION AND COMMERCE

A MEMBER OF THE PUBLIC ACCOUNTANTS AND AUDITORS BOARD (PAAB)

FINANCIAL ACCOUNTING I OCTOBER 2009

TIME ALLOWED: 3 hours TOTAL MARKS: 100

__________________________________________________________________________________

Instructions to Candidates:

1. Answer all 5 (five) questions.

2. Begin each question on a fresh page.

3. Show all necessary workings.

1
QUESTION 1

The pre-closing trial balance of T. Dhewa, a general dealer, showed the following balances
on 30 September 2009:

DR CR
$ $
Capital 765 380
Drawings 19 250
Purchases 308 000
Sales 826 210
Insurance 23 100
Advertising 12 320
Travel expenses 45 892
Discount allowed & received 8 085 12 705
Rent income 20 790
Salaries 138 600
Wages (administrative) 38 500
Freehold premises (valuation) 385 000
Plant & machinery 231 000
Motor vehicles 261 800
Carriage inwards 24 255
Carriage outwards 31 493
Returns inwards 4 620
Returns outwards 5 775
Opening stock (1/10/08) 63 910
Debtors 52 360
Creditors 57 750
Cash at bank 32 340
Cash on hand 8 085 ________
1 688 610 1 688 610

Additional information:

(i) Closing stock on 30 September 2009 amounted to $75 320 at cost.

(ii) The insurance figure includes an annual premium of $12 600 which was paid on 1
January 2008.

(iii) There was an accrued amount of $5 300 on the advertising account.

2
(iv) Rent amounting to $6 700 was received in advance.

(v) Plant & machinery and motor vehicles should be depreciated at 20% of the net book
values shown in the trial balance. Freehold premises should not be depreciated.

(vi) The owner of the business took goods costing $20 000 for his own use during the year.
These withdrawals were not recorded in the books.

REQUIRED:

a) Journal entries for closing stock, accruals and prepayments. Narrations are required.
Transfers to the Income Statement must be clearly shown. (10 marks)

b) An Income Statement for the year ended 30 September 2009 (10 marks)

c) A Balance Sheet as at 30 September 2009 (10 marks)

Both (b) and (c) must be in vertical format. Show all workings.
IGNORE TAXATION.

QUESTION 2

The assets and liabilities of Magwegwe Sports Club on 30 June 2008 were as follows:

ASSETS $
Premises at cost 324 000
Equipment 86 400
Delivery truck 108 000
Subscriptions in arrears 23 760
Bar stock 80 000
Cash at bank 27 000
LIABILITIES
Subscriptions in advance 11 610
Creditors for bar stocks 37 800
Outstanding rates 3 240

3
The Receipts and Payments Account drawn up by the secretary was as follows:

RECEIPTS & PAYMENTS A/C FOR Y/E 30/06/09

$ $
RECEIPTS PAYMENTS
Balance b/d 27 000 Secretary’s salary &
Subscriptions 105 300 expenses 30 000
Entrance fees 14 310 Fuel 10 800
Bar takings 529 200 Barman’s wages 18 900
Additional equipment 21 600
Rates 3 240
Bar creditors 321 300
______ Balance c/d 269 970
675 810 675 810

Balance b/d 269 970

Additional information:

a) Bar wages of $11 500 were outstanding at the year-end.

b) The equipment on hand at the year-end is to be depreciated by 10%.
c) Subscriptions of $6 210 were in arrears and $7 290 had been paid in advance.
d) There was an outstanding bill of $6 750 for fuel.
e) Creditors for bar stocks amounted to $51 900.
f) Bar stocks were valued at $69 750 at cost.

REQUIRED:

i) Opening statement of affairs as at 1 July 2008. (5 marks)

ii) Bar income statement for the year-ended 30 June 2009. (5 marks)
iii) Income & expenditure account for the year-ended 30 June 2009. (5 marks)
iv) Statement of affairs as at 30 June 2009. (10 marks)

QUESTION 3

Blue Ridge Supermarket has 3 departments selling furniture, clothes and groceries respectively.
The following information on the operations of the departments was available on 31 March
2009.

4
 FURNITURE CLOTHES GROCERIES
$ $ $

Opening stock 135 960 180 000 210 000

Purchases 780 000 1 080 000 360 000
Sales 1 800 000 2 520 000 1 440 000
Packaging wages 54 000 72 000 39 600
Closing stock 164 400 199 200 230 400

The following expenses could not be directly related to any particular department:

$
Rent 340 000
Administrative
Salaries 421 200
Light and power 86 400
Repairs to premises 100 800

It was decided to charge rent to the departments on the basis of floor space occupied, which was
as follows:

Furniture 4 000 square metres

Groceries 3 000 square metres
Clothes 2 000 square metres

The other expenses were to be charged as follows:

Administrative
Salaries Number of employees in each department
i.e. Furniture 5, Clothes 15, groceries 20

Light and power Floor space occupied

Repairs to premises In the ratio 3:2:1 for the Furniture, Clothes and
Groceries departments respectively

REQUIRED:

Draw up a columnar departmental income statement for the year-ended 31 March 2009, showing
results for the separate departments and the business as a whole. (20 marks)

5
QUESTION 4

A trader undertook the following transactions in respect of product Y during a certain period.

2009
August
1 Opening stock 224 units at $30 per unit
3 Received 176 units at $27.72 per unit
6 Sold 110 units
12 Received 1 000 units at $36.00 per unit
15 Sold 184 units
20 Received 288 units at $37.00 per unit
25 Received 216 units at $35.00 per unit
26 Sold 270 units
27 Sold 115 units
29 Received 150 units at $36.50 per unit
30 Sold 120 Units
31 Received 218 units at $38.00 per unit

REQUIRED:

Calculate the value of closing stock and the cost of goods sold during this period, using the
following cost assumptions:

i) FIFO and continuous inventory (7½ marks)

ii) LIFO and continuous inventory (7½ marks)

QUESTION 5

Discuss the view that depreciation is a way of providing for the replacement of non-current
assets. (10 marks)

*****End of examination*****