Requirements for this paper:

Multiple choice card: Non-programmable calculator: x Open-book exam:

Graph paper: Laptop:

SEMESTER TEST: 4 MAY 2017 GRADE/DIPLOMA: B. Com, etc.

SUBJECT CODE: ACCF 111 DURATION: 90 MINUTES

SUBJECT: FINANCIAL ACCOUNTING MAX: 50 MARKS

EXAMINERS: ME WEYERS DATE: 04/05/2017

ME R CASSIM
ME A SMIT
ME J MANYAAPELO

TIME: 12:00
MODERATOR:

Examination and Test Instructions

1. Students are not allowed to handle cell phones in the examination room and cell phone
accessories including but not limited to earpieces, are not allowed.
2. Students must put their bags in front of the venue.
3. Students are subject to disciplinary procedures should they:
3.1 have books or notes in their possession (except during open book examinations);
3.2 attempt to assist another student, or attempt to obtain assistance from any student.
4. No student is allowed to leave the examination venue before half an hour of the examination
session has elapsed.
5. No refreshments are allowed in the examination venue.
6. No pages may be removed from the answer scripts.
7. Before students leave the examination venue, answer scripts must be handed to the invigilators.
8. The attendance slip that also serves as an undertaking must be completed!!!
9. All examination answers must be written in black or blue ink.
10. Students may make notes on paper during reading time
11. Round off all amounts to the nearest Rand.

IMPORTANT!!!
READING TIME: 10 MINUTES (0.2 MINUTES PER MARK)
WRITING TIME: 80 MINUTES (1.6 MINUTES PER MARK)
TOTAL TIME: 90 MINUTES

CONTENTS MARKS MINUTES

Question 1 - Conceptual Framework 10.0 18.0

Question 2 - VAT 10.0 18.0

Question 3 - Settlement Discount 15.0 27.0

Question 4 - Inventory 15.0 27.0

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QUESTION 1 (MARKS: 10; READING: 2 MINUTES; WRITING: 16 MINUTES)

TICK TOCK Traders provides plumbing services to a number of large organisations in the Meyerton
area. TICK TOCK entered into a service contract with a large hotel group and TICK TOCK is
profitable and positive regarding the future of the business. The service contract stipulated that
maintenance and repair work will be carried out for a three-month period, commencing on 15 January
2017, for an amount of R60 780.The hotel group paid TICK TOCK, in terms of the contract, 50% up
front. The rest of the money will be paid at the end of the contract. The required amount was received
on the commencement date of the contract. Mr Thomas is the accountant of TICK TOCK Traders and
approached you to advise him on the following matters.

REQUIRED – QUESTION 1 Sub-total Total

1. Explain what the objective of general purpose financial reporting is, as 2.5 2.5
well as what it provides information about.

2. Name and discuss fundamental qualitative characteristics of the 3.0 5.5

usefulness of financial information according to the Conceptual
Framework.
State the definition of a going concern and explain to Mr Thomas 1.5 7.0
3.
whether TICK TOCK Traders is a going concern or not.
In terms of the Conceptual Framework explain to Mr Thomas when the
4. 3.0 10
50% upfront payment will be recorded in the accounting records of
TICK TOCK Traders. Assume the element you will be discussing meets
the definition of a liability.

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QUESTION 2 (MARKS: 10; READING: 2 MINUTES; WRITING: 16 MINUTES)

Royalty Traders is a business that provides computers to clients. Jafo, the manager, is worried
because he needs to submit the VAT return for Royalty Traders for the two month period ending
28 February 2017. The bookkeeper is currently on honeymoon, and Jafo does not know how to
calculate the amounts that need to be completed on the VAT return. The balance on the VAT control
account on 14 February 2017, when the bookkeeper went on leave, was a liability of R140 444.
The following transactions occurred between the period of 14 February 2017 and
28 February 2017:
The firm bought 25 laptops for their new staff who would be starting 15 March 2017. The laptops had
a purchase price of R20 000 (excluding VAT) each. Royalty Traders received a 10% trade discount
for buying in bulk. The computers were delivered to them COD (cash on delivery) on
18 February 2017.
The firm sent a cheque to the South African Revenue Service (SARS) on 21 February 2017, in
payment of their November/December outstanding VAT balance of R92 220.
On 24 February 2017 Royalty Traders received a cheque from one of their debtors, Delphi dealers for
R11 400. Delphi dealers had gone insolvent and was able to pay their creditors only 40c in the rand.
Delphi dealers was a non - VAT vendor, as they had never been able to achieve an annual turnover
of more than R412 000.
On 25 February 2017, Royalty Traders paid an outstanding invoice R28 500 for marketing expenses
which had been provided in January 2017. The tax invoice had been presented to the bookkeeper
when the service was delivered in January.
On 28 February 2017, Royalty Traders sold one of the laptops for R27 000 (Vat inclusive) and they
received interest on a fixed deposit of R2 300 on the same day.

REQUIRED – QUESTION 2 Sub-total Total

1. Prepare the VAT control account as it would appear in the general ledger 8 8
for the month of February 2017.

2. Show how the VAT control would be disclosed in the Statement of 1 9

Financial Position of Royalty Traders as at 28 February 2017.

Presentation and Layout skills 1 10

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QUESTION 3 (MARKS: 15; READING: 3 MINUTES; WRITING: 24 MINUTES)

Bushy Boys Ltd (Bushy) was established in September 2000. Bushy has several debtors and one
creditor. Bushy supplies camping hampers to many companies that organise camping week-ends and
game drives. Included in the hampers are bush takkies, boots and sandals they purchased from their
only creditor Bush Flava. It is Bushy’s policy to use the periodic inventory system. The company is a
registered VAT vendor.
Bushy supplies these hampers to the following debtors: The Wild.com, Gamedrive GP, Walk on the
wild side.org and Campup Ltd. The credit policy of Bushy states the following:

• 10% settlement discount is granted to all debtors that settle their accounts within 21 days.
• 3% trade discount for all special clients, excluding “Walk on the wild side.org”.
• Policy of the entity is to provide for an allowance for settlement discount on date of sale.
Bushy’s creditor, Bush Flava, has the following credit policy:

• 4% provision for settlement discount when each transaction takes place. Bushy Flava expects
payment within 30 days.

During the month of August 2016, the following transactions took place:
1. On 2 August Gamdrive GP purchased camping gear worth R15 000 (VAT exclusive).
2. On 3 August Campup Ltd purchased camping gear worth R21 000 (VAT inclusive) and the sale
was recorded by Bushy’s accountant. On 15 August Campup Ltd returned some of the camping
gear purchased worth R7 700 (VAT inclusive and before the trade and settlement discounts).
Included in this amount is goods Bushy Boys purchased from Bushy Flava and returned to Bush
Flava worth R2 000 (VAT exclusive and before the settlement discount for which Bushy qualified).
3. On 16 August it was found that debtor, The Wild .com, issued a cheque to Bushy. The cheque
was returned by the bank due to “Insufficient funds”. The Wild.com paid their debt of R10 840 (Vat
inclusive) with a cheque worth R10 361.
4. On 19 August Gamedrive.com (see #1) settles their account in full.

REQUIRED – QUESTION 3 Sub- Total

total
Indicate all general journal entries for the month of August 2016. 15 15
• Show all calculations.
• Journal narrations are not required.
• Round off to the nearest rand.

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QUESTION 4 (MARKS: 15; READING: 3 MINUTES; WRITTING: 24 MINUTES)

Paris & Milan (Pty) Ltd is trading in purchasing and selling of lead windows and doors. The entity sells
products at a normal gross profit of 30% (which are applied annually) on sales. During a wind storm
on 22 March 2016 inventory, with the exception of inventory to the value of R8 550 (at normal selling
prices) that was in the truck of the sales manager, was destroyed. Paris & Milan is a registered VAT
vendor (14%) and makes use of the Periodic inventory system. All amounts include 14% VAT
except where indicated otherwise.
During November 2015, the annual sale was held during which the selling price was reduced by 10%.
The proceeds from the sale amounted to R49 248, and are included in the total sales of R213 408 for
the financial year ending 28 February 2016.
The cost price of inventory on 1 March 2015 amounted to R30 000 (VAT excluded) while total
purchases for the period from 1 March 2015 to 28 February 2016 amounted to R221 616.
Normal sales for the period from 1 March 2016 to 15 March 2016 amounted to R25 650 while total
purchases for the same period amounted to R28 386.
A sale was held during March 2016 during which selling prices were reduced by 33⅓%. The proceeds
from the sale amounted to R82 080. No returns were allowed during the sale.
Inventory was insured for R30 000 (VAT excluded). The average clause applies on the insurance
contract.

REQUIRED – QUESTION 4 Sub- Total

total
1. Calculate the value of inventory that was destroyed in the fire. 13 13

2. Calculate the amount that Paris & Milan will claim against the Insurance 2 15
Company.

• Round to the nearest Rand.

• Show all calculations.

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