FACULTY/COLLEGE College of Business and Economics

SCHOOL School of Accounting

DEPARTMENT Commercial Accounting
CAMPUS(ES) SWC
MODULE NAME Financial Accounting 2B
MODULE CODE FAC22B2
SEMESTER Second
ASSESSMENT OPPORTUNITY, First Assessment Opportunity
MONTH AND YEAR

ASSESSMENT DATE 2 September 2020 SESSION First

ASSESSOR(S) Mr N Ebrahim Mr K Morake Dr N Rhodes
MODERATOR(S) Mrs I Baigrie
DURATION 45 Minutes TOTAL MARKS 17

NUMBER OF PAGES OF QUESTION PAPER (Including cover page) 6 pages

INFORMATION / INSTRUCTIONS:

Non-programmable calculators are allowed.

Ensure that you sign the attendance register.
NO Correction fluid allowed. Your solution will not be marked where correction fluid has been used.
All cell phones must be switched off (and may not be used as a watch or calculator).
Show ALL calculations, marks will be awarded for the calculations.
Abbreviations and SMS style language will not be marked.
ANSWER EACH QUESTION ON A NEW ANSWER SHEET

___________________________________________________________________________
1 PPE 17

TOTAL 17 45 minutes
FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

1.1 CALCULATED FORMULA (2 Marks)

Commercial Sky (Pty) Ltd acquired a computer on the 01 January 2017. The cost excluding VAT amount to R [a]
15 000. The computer was available and brought into use on same day it was purchased. The computer had had
a useful life of only 3 years and had no residual value. Depreciation is calculated using the straight-line method

REQUIRED
Calculate the depreciation expense for the computer as at end of the reporting period 31 March 2020.

ANSWER
R 15 000/3 x 9/12 = R 3 750

FORMULA
[a] /3 x 9/12

1.2 CALCULATED FORMULA (2 Marks)

Commercial Sky (Pty) Ltd, a registered VAT vendor, provides local flights to major cities across South Africa. The
company owns a fleet, consisting of [a] 10 airplanes. This fleet of planes were purchased on the 15 June 2012.
planes were ready for use on the 01 July 2012 but only started operating on the 01 August 2012. The cost of each
plane amounted to R [b] R100 000 excluding VAT and it is estimated that each plane will have a residual value of
[c] 10% of the cost price. Each plane has a useful life of 10 years and is depreciated using the straight line method.
The company has a reporting period ending on the 31 March each year.

REQUIRED
Calculate the accumulated depreciation balance as at the 31 March 2020.

ANSWER
R 1 000 000 – R 100 000 x 10% x 93/12 = R 697 500

FORMULA
([b x a] – ([b x a])) x [c]) x 93/12

1.3 CALCULATED FORMULA (2 Marks)

Commercial Sky (Pty) Ltd, a registered VAT vendor, the following information was extracted from the accounting
records as at 01 April 2019.
No. of Useful Depreciation Cost Per Accumulated Residual
Class Vehicles life Method Vehicle depreciation Value
[f] [a] Straight line R [b] R [c]
Vehicle 3 3 method R 650 000 R 50 000 R 30 000

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FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

Additional information
On the 01 December 2019, Commercial Sky (Pty) Ltd acquired another vehicle. The vehicle cost R [d] R 600 000
excluding VAT and has a zero residual value. The vehicle was available for use on the 01 December 2019 but due
to the festive holidays, the company began to use the vehicle from the 01 January 2020

REQUIRED
Calculate the total depreciation expense for Vehicles for the reporting period ended 31 March 2020

ANSWER
[[(R 650 000 – R 30 000)] /3 x 3] + [600 000/3 x 4/12)
= 620 000 + 66 667
= R 686 667

FORMULA
(([b] - [c]) / [a] x [f]) + ([d] / [a] x 4/12)

1.4 CALCULATED FORMULA (2 Marks)

Tough Steel Limited, a registered VAT vendor, is a company based in the East Rand that manufactures tools.
Tough Steel Limited uses specialized machinery to manufacture these tools. During the current year the following
incident took place

On 01 March 2020, one of the machines, with a cost price of R [a] R 115 000 inclusive of VAT and a residual value
of zero was damaged and could not operate due to the constant load shedding that took place. The machine was
scrapped and it was decided that the machine would be sold for parts. The machine was sold for R [b] R 69 000
including VAT. This machine was purchased on the 01 September 2018 and had a useful life of [c] 5 years and is
depreciated using the straight line method. The accumulated depreciation on the 1 July 2019 amounted to [d] R 40
000.

REQUIRED
Calculate the total Profit or Loss for the reporting period ended 30 June 2020. Enter you answer as follows:
123456profit or -123456loss. No spaces between the word and the amount.

ANSWER
(R 69 000 x 100/115) – (R 115 000 x 100/115 – R 40 000 – (115 000 x 100/115 / 5 x 8/12)
= 60 000 – (100 000 – 40 000 – 13 333)
= 60 000 – 46 66
= 13 333 profit

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FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

FORMULA
([b] x 100 / 115) – [a x 100/115] – [d] – ([a] x 100/115 / [c] x 8/12)

1.5 JUMBLE SENTENCE (4 Marks)

OPTION 1
Commercial Sky (Pty) Ltd acquired land from TOP investments (Pty) Ltd in the Sandton area to construct their head
office. After months of negotiations, the following was agreed
Commercial Sky (Pty Ltd acquired the land in exchange for 2 airplanes on the 31 March 2020. On the date of
exchange each airplane had a cost exclusing VAT of R 1 500 000 and was acquired on the 01 January 2015. The
airplanes were depreciated over a useful life of 10 years to a zero residual value. On the date of exchange the
airplanes had a combined fair value of R 1 600 000 and the land had a fair value of R 1 650 000

REQUIRED
Prepare the journal entry for the above transactions in the accounting records of Commercial Sky (Pty) Ltd for the
period ending 31 March 2020. Ignore VAT. Instructions: insert the debit legs of the journal entry first in alphabetical
order and then the credit legs of the journal entry in alphabetical order.

ANSWER
Dr/Cr Description Classification Amount
Dr Acc Dep:Airplane SOFP R 1 575 000
Dr Land SOFP R 1 600 000
Cr Airplanes SOFP R 3 000 000
Cr Profit on Sale SOPL R 175 000

Acc Dep = R 3 000 000/10 x 5 3/12 = R 1 575 000

OPTION 2
Commercial Sky (Pty) Ltd acquired a vehicle from Awesome Productions (Pty) Ltd. It was agreed that Commercial
Sky (Pty Ltd would acquire the vehicle in exchange for a Machine. On the date of exchange the cost of machine
amounted to R 650 000, had an accumulated depreciation of R 150 000 and accumulated impairment of R 50 000.
The fair value of the machine on date of exchange could not be determined. The carrying amount of the vehicle on
the date of exchange amounted to R 350 000 and fair value amounted to R 425 000. The exchange took place on
the 01 March 2020

REQUIRED

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FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

Prepare the journal entry for the above transactions in the accounting records of Commercial Sky (Pty) Ltd for the
period ending 31 March 2020. Ignore VAT

ANSWER
Dr/Cr Description Classification Amount
Dr Acc Dep:Machine SOFP R 150 000
Dr Acc Impairment SOFP R 50 000
Dr Loss: on exchange SOPL R 25 000
Dr Vehicle SOFP R 425 000
Cr Machine SOFP R 650 000

OPTION 3
Commercial Sky (Pty) Ltd acquired a building from TOP investments (Pty) Ltd in the Sandton area for their new
head office. After months of negotiations, the following took place
Commercial Sky (Pty Ltd acquired the building in exchange for 2 machines and a vehicle on the 1 February 2020.
On the date of exchange each machine had a cost of R 750 000 and the vehicle had a cost of R 450 000. On the
date of exchange the machines had accumulated depreciation of R 350 000 each. The vehicle had accumulated
depreciation of R 200 000 on 01 April 2019. Depreciation on the machines is calculated at 15% per annum and
depreciation on the vehicle at 20% per annum using the straight line method. Both the machines and the vehicle
have zero residual values. The Fair Value of the machines and the vehicle could not be determined. The carrying
value of the building was R 1 350 000 and the Fair Value was R 1 500 000 on the date of exchange.

REQUIRED
Prepare the journal entry for the above transactions in the accounting records of Commercial Sky (Pty) Ltd for the
period ending 31 March 2020. Ignore VAT

ANSWER
Dr/Cr Description Classification Amount
Dr Acc Dep:Machine SOFP R 700 000
Dr Acc Dep:Vehicle SOFP R 275 000
Dr Building SOFP R 1 500 000
Cr Machine SOFP R 1 500 000
Cr Profit on Exchange SOPL R 525 000
Cr Vehicle SOFP R 450 000

Acc Dep: Vehicle =R 200 000 +R 75 000 (R 450 000 * 20% x 10/12) = R 275 000

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FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

1.6 FILL IN THE CORRECT AMOUNT (5 Marks)

Commercial Sky (Pty) Ltd, a registered VAT vendor, needed a new hangar to park one of its airplanes. During the
year a vacant hangar became available and the company decided to purchase it. The following costs were incurred:

Amount Notes
Purchase Price R2 070 000 including VAT This was the amount before a 2,5% discount was given
Legal Fees 1% of the final purchase price This was paid to the lawyers for the transfer of the building
ex VAT
Transfer Duties R 100 000 excluding VAT Duties paid for the transfer of the building
Borrowing Costs R 2 500 Overdraft used to pay for the legal fees
Architect Fee R 11 500 including VAT This was paid to the architect for plans drawn for the
expansion of the hangar
Material R 250 000 excluding VAT Materials bought to expand hangar
Labour R 100 000 Labour paid to expand the hangar
Accountant Fee R 2 000 Capturing of all costs incurred

REQUIRED
Calculate the total cost of the hangar
Amount Notes
Purchase Price R 1 755 000 R 2 070 000 x 100/115 x 97,5%
Legal Fees R 17 550 R 1 755 000 * 1%
Transfer Duties R 100 000
Borrowing Costs R 0
Architect Fee R 10 000 R 11 500 x 100/115
Material R 250 000
Labour R 100 000
Accountant Fee 0
Tot R 2 232 550
Purchase Price

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FAC22B2 FIRST ASSESSMENT OPPORTUNITY 2020

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