Pearson Institute of Higher Education Faculty of Commerce and Law Financial Accounting 2B COFA221 Test 2 - September/October 2017 Marking Memorandum Internal Examiner: Mrs Claris Mhike Total Marks: 55 Duration: 2 Hours Instructions to markers: 1. Please award marks as indicated in the MEMO TEST 2 COFA221 Sep/Oct 2017 Page 1 of 6 Pearson Institute of Higher Education Formerly Midrand Graduate InstituteSection A IAS 7 Statement of Cash Flows 30 Marks QUESTION ONE WONDER LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 Award one mark for each correct amount or component calculation of amount. Maximum 30 marks R Profit before tax : 2178 000 Adjustments for: y Legal claims provision i ~~ T80 000 Depreciation 84000 Development expenditure amortisation 30 000 Finance costs S 30 000 Loss on disposal on non-current-assets 42 000 ‘Operating cash How before changes in working capital 2414 000 Decrease in inventories (000 000 892 000) 8000 inorease in trade and other (620 600 760 000) (140-000) receivables, increase in trade and other (300 000— 190 000) 710 000 payables, | Cash. generated from operations 2392 000 Interest paid (40 000 + 30 000 - 20 (60 000) 000) Taxation paid (60 000) ‘Net cash generated from operating activities 1 782.000 Cash flows from investing activities MEMO TEST 2 COFA221 Sep/Oct 2017 Page 206 Pearson Institute of Higher Education Formerly Midrand Graduate InstitulePurchase of property, plantand [62000 + 460000 + (734 000) equipment 212.000 Proceeds from sale of property, | 90 000— 68 000-12 70 000 plant and equipment 000 Proceeds from disposal of Brand Names Development expenditure 20.000), Net cash ) investing activities (724 000) Cash flows from financing activities Pp Proceeds from issue of shares | (7 200 000 — 600 000). | ~ Repayment of long term (200 000 — 500,001 borrowing & _ Dividends paid 846000 1618000" (7 160 000) 1304000 | (660 000) 178 000 ‘Cash and cash equivalents at the, begir (40 000) | Cash and cash equivalents at.the end of period 738 000 MEMO TEST 2 COFA221 Sep/Oct 2017 Page 3 of 6 Pearson institute of Higher Education Formerly Midrand Graduate InstitueSection B Share Capital Transactions 25 Marks QUESTION ONE Award half a mark for each correct amount with correct detail, for each correct calculation shown and for each correct narration. Maximum 10 marks. 2 March 2017 Legal fees (P/L) Given Bank (A) Start-up costs (legal fees) expensed ‘4 March 2017 A Bank (A) 2000x4xR10 180 000 Ordinary share capital (equity) 80 000 Issue oF2 000 shares to each oF 6% directors af R10 each Ordinary share capital (equity) | | Given! 7000 Bank (A) — 7000 Share Issue costs set-off against the shares issued 3 June 2017 a, P Bank)» a (75000 RI2 | 900 000 Application account. 900 000 Receipt of fuhds received from applications for shares S June 2017” Application account 300 600 Ordinary share capital (equity) | 50 000 x R72 800 000 Bank (A) (75 000 - 50 300 000 000) x R12 Allotment of 50 000 shares and refund of the balance of cash received 5 June 2017 Ordinary share capital (equity) _) Given 6000 MEMO TEST 2 COFA221 Sep/Oct 2017 Page 4 of 6 Pearson Institute of Higher Education Formerly Midrand Graduate InstituteBank (A) 6 000 ‘Share issue costs set-off against the shares issued QUESTION TWO Award 1 mark for each correct amount calculated. Maximum 6 marks. Redemption 76 000 preference shares Cash needed for the redemption 75 000 x 2 150 000../| Cash available through: = Cash in bank Given - New debenture issue 10 000 x 1 = New bank foan Balancing up to 40 000 = New share issue Balancing 4 =(58 000) Cash shortage/ (surplus) Aw, 0 Shares to be issued 5800075" 77 600 calculation shown and for each’cort Maximum 9 marks. Debit Credit Preference shares (non-cbrrent liabilily) 750 000 Preference shares (ciirent liabiily) 750 000 Preferénce shares to,be redeemed 75 000x2 | Bank (A), 72.000 Debentures lability (L) 72000 [sSue of Uebentures 12 000 x 7 Bank (A) Pree 45 000 Loan liability (L) 5 000 Loan raised Bank (A) 58 000 Ordinary share capital 58 000 Tssue oF ordinary shares (11 600 x RB) Preference shares (current liability) 750 000 MEMO TEST 2 COFA221 Sep/Oct 2017 Page 8 of 6 Pearson institute of Higher Education Formerly Midrand Graduate instituteBank (A) 150 000 Preference shares redeemed SUBTOTAL [25] MEMO TEST 2 COFA221 Sep/Oct 2017 Page 6 of 6 Pearson Institute of Higher Education Formerly Midrand Graduate institute