FRK 111 – MODULE TEST 1 - SUGGESTED SOLUTION

QUESTION 1 (20 marks)

Assets Equity Liabilities
Source Account
Account debited Debit Credit Debit Credit Debit Credit
document credited
No R R R R R R
1 Electronic funds Rent expense^ Bank ^ 2 320 ^ 2 320 ^ 2½
transfer printout /
Bank statement^

2 Duplicate Debtor: Toby Mack^ Sales ^ 2 987^ 2 987^ 4½

Invoice ^
Cost of Sales^ Inventory^ 1 200^ 1 200^

Computers^ Creditor: 11 450^ 11 450^

Original invoice ^
Acer Supplies ^
3 Card payment Creditor: Acer Bank^ 3 500^ 3 500^ 4½
printout / Bank Supplies
ALTERNATIVE: 11 450^ 3 500^ 7 950
statement^

4 Duplicate credit Sales returns / Debtor: 450^ 450^ 4½

note^ Debtors allowances^ Toby Mack ^

Inventory^ Cost of Sales ^ 175^ 175^

5 Electronic funds Creditor: Bank ^ 893^ 950^ 4

transfer printout / Nikki Brown^
Bank statement^ Settlement 571
discount
received^
6
1
R893^ X ^ = R57 OR R893 x 100/94^ = R950; R950 – R893^ = R57
94

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FRK 111 2018 Module test 1 – Suggested solution
QUESTION 2 (10 marks)

Definition of an expense

Outflow of economic benefits ^

There was no outflow of economic benefits in this case. ^

Which represents a decrease in Equity^

The owner’s interest did not decrease with the purchase of the inventory. ^

Due to a decrease in assets or an increase in liabilities^

Liabilities did increase with the credit purchase of the inventory. ^

During a specific financial period^

The transaction did occur during the current financial period. ^

Definition of an asset

Resource under the control of the entity^

The inventory is a resource of the entity as it can be sold and is controlled by the entity
due to it being delivered and included under the insurance contract of the entity. ^

Due to a past event^

The purchase transaction on 1 February 2017 is the past event^

That will result in an inflow of economic benefits^

With the sale of the inventory there will be an inflow of economic benefits. ^

Recognition criteria

The value of the item can be measured reliably^

The historical cost of the inventory of R50 000 is known to both parties involved. ^

Probability of the inflow of economic benefits^

The market research indicated a big demand for the new model of tazors which
indicates a probability of the sale resulting in an inflow of economic benefits. ^

Conclusion

The inventory meets all the definition and recognition criteria of an asset^ and not an
expense and should therefore be accounted for as an asset^ in the books of Blue
Steal Business.

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FRK 111 2018 Module test 1 – Suggested solution
QUESTION 3

SECTION A (6 marks)

Garfield Traders
Statement of profit or loss and other comprehensive income for the year ended
28 February 2018^
R
Sales (R900 000^ - R120 000^) 780 000
Cost of Sales (R780 000^ x 100/125^) If no brackets, minus ^ (624 000)
Gross profit ^P156 000
Other expenses (171 000)
Salaries and wages ^(48 000)
Fuel ^ (80 000)
Cleaning material ^ (18 000)
Packaging material ^ (25 000)
Finance costs
Interest expense ^ (8 000)
Loss for the year^ (full terminology, not just “loss”) ^P (23 000)
^ Bonus mark included – maximum 6 marks for this section

SECTION B (4 marks)

Garfield Traders
Statement of financial position as at 28 February 2018^
R
ASSETS
Non-current assets
Vehicles ^150 000
Kitchen equipment ^45 000

Current assets
Inventory ^17 000
212 000

EQUITY AND LIABILITIES

Equity
Capital ^150 000
Profit for the year ^5 000

Non-current liabilities
Loan from Standard Bank (balancing amount) ^P55 000

Current liabilities
Bank overdraft ^2 000
212 000
Minus ^ EACH if Sales or Salaries and Wages were included
^ For format (use of correct subheadings in the statement)
^ Bonus mark included

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FRK 111 2018 Module test 1 – Suggested solution
QUESTION 4 (20 marks)

ELDO TRADERS
Cash receipts journal for February 2018 CRJ 2
Doc no. Day Details Fol Analysis of Bank Sales Cost of sales Debtors Settlement Sundry accounts
receipts control discount
allowed Amount Fol Details

28 Totals 95 640 84 000 50 400 11 820 (600) 420

CRR^ Sales^ ^ 3 200 ^ 3 200  1 920 1
210^ J Dube^ ^ 3 120 3  6 320 4 ^ 3 250  (130) 2
101 960 87 200 52 320 15 070 (730) 420

(7)

Cash payments journal for February 2018 CPJ 2

Doc no. Day Details Fol Bank Inventory Creditors Settlement Sundry accounts
control discount
received Amount Fol Details

28 Totals 44 700 40 000 4 000 (100) 800

224^ Total Petroleum^ ^ 280 ^ 280 Fuel ^

44 980 40 000 4 000 (100) 1 080

(2½)

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FRK 111 2018 Module test 1 – Suggested solution
Debtors journal for February 2018 DJ 2
Doc Day Details Fol Debtors Sales Cost of
no. control sales
28 Totals 3 000 3 000 1 800
214 ^ NNK Traders ^ ^ 4 200 4 200  2 520 5

7 200 7 200 4 320

(2½)
Debtors allowances journal for February 2018 DAJ 2
Doc Day Details Fol Debtors Debtors Cost of
no. control allowance sales
28 Totals 900 900 540
102 ^ K Goosen ^ ^ 2 800 2 800  1 680 6

3 700 3 700 2 220

(2½)
Creditors journal for February 2018 CJ 2
Sundry accounts
Doc Day Details Fol Creditors Inventory
no. control Amount Fol Details

28 Totals 14 300 14 000 300

682^ Bulk 6 420  6 4207

Suppliers^
20 720 20 420 300

(2)
General journal for February 2018 GJ 2
Day Details Fol Debit Credit
R R
28^ Drawings ^ 360 8
Inventory ^  360

(2½)
Calculations
Remember: CP = 60; P = 40; SP = 100
60
1. R3 200 ^ x ^
100
2. R3 250^ x 4%^
3. R3 250 – R130
4. R3 200^ + R3 120^
60
5. R4 200^ x ^
100
60
6. R2 800^ x ^
100
7. R8 025^ x (100-20)% ^ OR R8 025^ x 80%^
60
8. R600^ x ^
100

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FRK 111 2018 Module test 1
b. The transaction should be recorded in the Creditors Allowances Journal  as
all credit purchases that are returned are recorded in this journal. The
creditors allowances journal is also known as the purchases returns journal.
OR
Alternatively, if there was no creditors allowances journal present in the entity’s
accounting system, the transaction could also be recorded in the General
Journal because the general journal can be used to record any transaction.
(2)
One bonus mark included in PART B!
Maximum marks that can be achieved for this whole question is 20 marks.

QUESTION 5 (3 bonus marks)

a. Steve Jobs and he was the co-founder of Apple Inc.

b. The young entrepreneur identified that a number of people in Africa/South
Africa did not have access to water and basic sanitation that is currently a
problem in the Western Cape.

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FRK 111 2018 Module test 1