PA Nelson Mandela € &% P metropolitan wed University for tomorrow TEST 2 QUESTION PAPER MODULE DESCRIPTION MODULE CODE FACULTY QUALIFICATION TEST DATE TIME HOURS 5 PAGES ADDENDUMS EXAMINERS MODERATOR INSTRUCTIONS: 1.All questions must be answered. ACCOUNTING 1A, R101/R151/RV101/RF103/RF1X1 BUSINESS AND ECONOMIC SCIENCES BCOM FRIDAY 12 MAY 2017 15:30 41 HOUR 4 NIA Ms BI Prinsloo Ms A Prinsloo 2.Answers must be written in ink. Workings may be done in pencil. 3.Start each question on a new page. 4.Number your answers clearly. 5.Hand in all workings. Candidates must use their initiative to deal with any perceived errors or ambiguities in the paper. Any assumptions made by candidates should be clearly stated. REQUIREMENTS: QUESTION MARKS. MINUTES 1. | Correction of errors, adjustments, trial balance and trading summary account 25 45 2._| Non-current assets 8 15 33 60 DO NOT TURN THE PAGE BEFORE TOLD TO DO So.RA01/R151/RV101/RF103/RF 1X1 Page 1 of 4 pages QUESTION 4 (25 marks : 45 minutes) The bookkeeper of Saloon Shoe Traders extracted a trial balance on 30 April 2017, the end of the financial year. The trial balance did not balance, so being properly trained, the bookkeeper undertook the proper process to detect error. Saloon Shoe Traders consistently uses a mark-up on cost of 50%, ‘The following is the Pre-adjusted Trial Balance taken from the ledger before any errors were detected: DR cR R R Real Accounts Capital 388 000. Equipment, at cost 150 000 Accumulated depreciation: Equipment (01.05.2016) 30 000 Accounts payable 24700 Accounts receivable 52600 Accrued interest revenue receivable (01.05.2016) 2000 Inventory: Merchandise (01.05.2016) 97 400 Inventory: Stationery (01.05.2016) 4000 Tand and buildings, at cost ‘500 000 investment: Rafael Bank 30.000 Bank (overdraft) 3.300 Nominal Accounts Administrative expenses 199 000 Import duties 12 960 Interest revenue 4000 Sales 900 000 Purchases: 310 040 Purchases returns 8 000 R1 370 000 R1 346 000 The following information relates to the detected errors and the end-of-year adjustments: 1 At 30 April 2016 the bookkeeper had omitted to record prepaid advertising expense of R15 000 (advertising expense is classified as an administrative expense). The fixed deposit in Raphael Bank was invested on 1 February 2016, for twelve months. On 1 February 2017, the full amount was reinvested and the investment was increased by 10.000. ‘The bookkeeper had correctly recorded the new investment. Up to 1 February 2017 the interest on investment was payable annually at 10% p.a., but this increased to 12% p.a. after the additional investment was made. Import duty of R10 000, on equipment purchased from Singapore, for R80 000, had been erroneously included administrative expenses. The invoice for the equipment was correctly recorded and the equipment was taken into use on 1 November 2016, This was the only purchase or disposal of equipment in the current financial year. It is the policy of the business to depreciate equipment by 25% p.a., on cost. Land and buildings are not depreciated.R104/R151/RV104/RF103/RFAX4 Page 2 of 4 pages QUESTION 1 (continued) 4. On 30 April 2017 it was determined that a debtor, owing R4 500, was declared insolvent. His estate peid 40 cents in the rand in full settlement of his debt. No entries have been recorded for this event. 5. An invoice of R1 500 for stationery bought on credit, which had been delivered on 30 April 2017, had only been received on 15 May 2017. The bookkeeper had ignored this transaction as he was uncertain how to record it. The bookkeeper determined that the value of the stationery on hand on 30 April 2017 amounted to R2 590. 6. During September a special sale was held at discounted prices of 25%. During the sales period, goods to the value of R45 000 was sold. 7. The owner felt that a comprehensive stock-take of inventory at year-end was a waste of time and money. The bookkeeper estimated the value of the closing inventory by doing the necessary calculation (see part b below). REQUIRE! (a) Draft the Post-adjustment Trial Balance after taking into account each of the errors and adjustments evident from No. 1 to No. 5 above, Aworksheet has been provided on page 4. It is compulsory to use this worksheet and it must be handed in as your answer. Cross-reference your figures on the worksheet in the corrections/adjust ment column, (20) (b) Prepare the “Pretend” Trading Summary Account in the general ledger of Saloon Shoe Traders, and calculate the estimated closing inventory value on 30 April 2007. 6) ie is Show all workings clearly. Work to the nearest R1R101/R154/RV101/RF103/RFAX1 Page 3 of 4 pages QUESTION 2 (8 marks : 14 minutes) Japanese Manufacturers, whose financial year ends on 28 February, has consistently depreciated its plant and machinery by 25% per annum on cost with a residual value assigned to each item (see table below), The following information is given: ‘On 1 March 2016 the company owned two items of plant and machinery: PLANT & MACHINERY | DATE PURCHASED COST RESIDUAL VALUE Machine A 01/03/2014 R75 000 R15 000 Machine B ov/ogi2014 R84 000 R20 000 Machine A was exchanged on 1 September 2016 for a new machine, Machine C, with a cost price of R120 000. The trade-in value of the Machine A was agreed to be carrying amount for this machine. The balance of the purchase price was paid by cheque. It cost the company R8 000 to install the machine, which was paid by cheque. The residual value assigned to the Machine C was set at R20 000. Machine C was taken into use on 1 October 2016 Gains and losses on the disposal of fixed assets are recognised immediately. REQUIRE! Prepare entries in general journal form for the current financial year in respect of the information above. Dates are required. Narrations are not required. Note: Show all workings clearly Work to the nearest R1.R101/R151/RV101/RF103/RF1X1 Page 4 of 4 pages QUESTION 1 WORKSHEET Pre-Adjustment Corrections? Post-Adjustment Trial Balance Adjustments Trial Balance 30/4/2017 30/4/2017 DR CR DR CR OR CR R R R R R R Capital 388 000 Equipment, at cost 150 000 Accumulated depreciation: Equioment 30.000 Accounts payable 24700 Accounts receivable 52.600 | Arcrued interest revenue receivable 2.000 Inventory: Merchandise (01.05.2016) 97 400 Inventory: Stationery (01.05.2016) 4.000 Land and buildings, at cost 500 000 Investment: Rafael Bank 30.000 Bank (overdraft) 3.300 Nominal Accounts Administrative expenses 199 000 Import duties 12.960 Interest revenue 4.000 Sales 900 000 |r ‘chases 310 040 Purchases returns 8.000NAME: TUTOR: NELSON MANDELA METROPOLITAN UNIVERSITY DEPARTMENT OF ACCOUNTING SCIENCES ACCOUNTING 1A R101/R154/RV104/RF103/RF1X1 TEST 2-12 MAY 2017 MARK SCHEDULE Pos | ACT Qi 25 Q2 8 33R104/R151/RV104/RF103/RF1X1 Page 1 of 3 pages QUESTION 4 SUGGESTED SOLUTION AND MARK PLAN (a) Pre-Adjustment Corrections/ Post-Adjustment MARKS a : eee Adjustments Ws) Balance BOS TACT DR CR DR CR DR oR R R R R R R Real Accounts Capital 388 000 T5000) 403000] | %+% Equipment, at cost 180 000 10 000(4) 160 000 Wh ‘Acc dep: Equipment 30.000 28 75008) 58750] | 4+% ‘Accounts payable 24700 150018) 26200| | %+% TOO) Accounts receivable 52.600 2700(7)| 48 100 1” Accrued interest revenue 2000 400(3) 2.000(2) 400 Nth Inventory: Merchandise_| 97 400 97 400 % | Inv=ntory: Stationery 4.000 o00(8) | -2810(0) 2590 1” Land and buildings 500 000 500 000 Investment: Rafael Bank | 30 000 30.000 Bank (overdraft) 3300 1. 800(6) 1500 Vth Nominal Accounts ‘Administrative expenses | 199 000 TOOT) | T0000) | 204 000 1% Import duties 12 960 12 960 Interest revenue (W1) 4.090, 4000 2 000(2) -400(3) 2.400 A+ Sales 900 000 900 000 Purchases 310 040 310 040 Purchases returns 8990, 8000 8000 w% Depreciation exp (W2) 2B TEE) 28 750 HH Bad debts expense (W3) 2 7007) 2700 14% ‘Stationery expense (W4) 291010) 2910 14% R1 399850 | R1 200 850 Vath 20R101/R151/RV101/RF103/RFAX1 Page 2 of 3 pages QUESTION 4 (continued) SUGGESTED SOLUTION AND MARK PLAN MARKS Pos | ACT (b) “Pretend” Trading Summary Account 2017 _| Inventory (01/05/2017) ‘97 400 | 2017 % Apr 30 ‘Apr 30 | Sales (W5) 915000) | %441 Inventory (30/04/2017) | 107 400 % Purchases (W6) 302.040 ne Import duties 12960 % Gross profit (W7) 610 000 wn 1.022 400 1.022 400, (b) 5 (a) |_20 25 Workings’ 1. Interest Revenue R20000x10%x9/12 = R1500 + R30 000x12% x3/12 = R_ 900 per Interest eamed for the year: 2400 less received R2.000 (4000 -2000)=R400 _| error 1 2. Depreciation R70 000 x 25% R17 500 * R90 000 x 25% x6/12 = R14. 250 per R28 750 error Th 3. Bad debts exnense R4 500 x 60% = R2 700 (therefore, cash portion R1 800) we 4, Stationery expense A ‘On hand (BOY) R4 000 + purchase R1 500 — on hand (EOY) R2 590 = R2 910 per error 4 5. Sales “A = R45 000 x 25/75 = R15 000 (special sale) per = R900 000 + 15 000 = R915 000 error 1 6. Purchases R310 040 ~ 8 000 (purchases returns) = R302 040 % 7. Gross profit R915 000 (sales) x 100/150 = R610 000 %R104/R151/RV101/RF103/RF1X1 Page 3 of 3 pages QUESTION 2 SUGGESTED SOLUTION AND MARK PLAN (a) JOURNAL ENTRIES MARKS. DR CR POS | ACT 2016 Sept 1 | Depreciation 7.500 Accumulated depreciation: A 7500] | % (75 000 ~ 15 000) + 4 = R15 000 x 6/12) % Profit or loss on disposal of asset 75 000 Motor vehicles 75000] | % Accumulated depreciation: A 37 500 Profit or loss on disposal of asset 37500| | % (15 000 x 2 yrs) + 7 500) 1 Motor vehicles 37 500 Profit or loss on disposal of asset 37 500 % (CA 75 000 - 37 500) % Motor vehicles 82 500 Bank 82500] | % (120 000 - 37 500) % 2017 Feb 28 | Depreciation 37 250 Accumulated depreciation: B 16 000 ” (84.000 — 20 000) + 4 ‘% Accumulated depreciation: C 11 250 (120 000 + 8 000 — 20 000) + 4x 5/12) 1 8