FAC1501 May/Jun 2013 exam paper — questions

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  1. Question 1 · Accounting equation & classification · 18 marks

    Mr T Moleleng owns and runs a small stationery business trading as Everydayneeds Traders. The business is not registered as a VAT vendor and applies a perpetual (continuous) inventory system, with a mark-up of 20% on cost used to price its goods. During January 2013 the entity entered into the following transactions: on 4 January it bought stationery for resale on credit from Large Wholesalers for R5 000; on 10 January it settled, by business cheque, the carriage on the purchases made on 4 January, amounting to R62; on 12 January it bought stationery (receipt books) for R120 by business cheque for the entity's own use (not for resale); on 14 January it made cash sales of merchandise totalling R2 040; and on 15 January it paid its telephone account of R250 by business cheque. Using the format illustrated below, draw up a table and analyse each of the transactions listed for Everydayneeds Traders in January 2013 (the purchase of stationery for resale on credit on 4 January for R5 000; the payment of carriage on those purchases on 10 January for R62; the purchase of receipt books for the entity's own use on 12 January for R120; the cash sales of merchandise on 14 January for R2 040; and the payment of the telephone account on 15 January for R250). For each transaction state which account must be debited and which account must be credited in the general ledger, and show the effect of the transaction on the accounting equation by using a '+' for an increase and a '-' for a decrease in Assets (A), Equity (E) and Liabilities (L). Assume, where relevant, that the bank balance remains positive throughout. As a worked example, note that if the owner had taken stationery costing R150 for his own personal use, this would be recorded as a debit to Drawings and a credit to Inventory, decreasing Assets by R150 and decreasing Equity by R150, with no effect on Liabilities.Show the full question

  2. Question 2 · Journals & posting to the ledger · 30 marks

    Joe Blob owns a property development entity called Big Builders, which is registered as a VAT vendor and applies a periodic inventory system. During March 2013 the following cash transactions were recorded. In the Cash Receipts Journal (CRJ01): on day 3, receipt R01 from Joe Blob banked R20 000, recorded as a sundry account for Capital of R20 000; on day 11, receipt R02 from Fish Takeaways banked R5 700, comprising VAT output of R700 and a sundry account for Rental income of R5 000; on day 30, receipt R03 from Housing Development banked R20 000, with debtors of R20 570, settlement discount granted of R500 (shown as a deduction) and VAT input of R70 (shown as a deduction). The CRJ01 column totals for March were: Bank R45 700, Debtors R20 570, Settlement discount granted (R500), VAT input (R70), VAT output R700, and Sundry accounts R25 000. In the Cash Payments Journal (CPJ01): on day 3, payment 173 to Cash was R700, all for Wages of R700; on day 11, payment 174 to Buildaway was R1 140, comprising Purchases of R1 000 and VAT input of R140; on day 15, payment 175 to ME Builders was R10 000, comprising Creditors of R10 285 less a settlement discount received of R250 and VAT output of R35 (both shown as deductions); on day 30, payment 176 to Cash was R700, all for Wages of R700. The CPJ01 column totals for March were: Bank R12 540, Purchases R1 000, Creditors R10 285, Settlement discount received (R250), Wages R1 400, VAT input R140, and VAT output (R35). On 1 March 2013 the general ledger balances of Big Builders were: Debtors control account R30 000 and Creditors control account R15 000. Using the Cash Receipts Journal (CRJ01) and Cash Payments Journal (CPJ01) of Big Builders for March 2013 as described, open all the necessary ledger accounts in the general ledger of Big Builders and post the amounts from both journals to these accounts for March 2013. Thereafter, properly balance and close off the bank account in the general ledger of Big Builders for March 2013.Show the full question

  3. Question 3.1 · Bank reconciliation · 7 marks

    PG Traders has appointed you as its bookkeeper. Your first task is to compare the January 2013 cash journals with the current month's bank statement and to prepare a bank reconciliation statement. While doing this you noted the following differences between the bank statement and the cash journals: (1) on 31 January 2013, before taking into account any of the items listed below, the cash receipts journal showed a bank column total of R27 500 and the cash payments journal showed a bank column total of R13 750; (2) the bank account in PG Traders' general ledger reflected a favourable balance of R14 500 on 31 January 2013; (3) the bank statement of PG Traders reflected an unfavourable balance of R11 700 on 31 January 2013; (4) a Cape Town client, Mr S Stevens, deposited R15 000 directly into PG Traders' bank account; (5) because PG Traders' bank statement balance was unfavourable, the bank charged interest of R350; (6) a cheque for R1 720 received from client Mrs K Osman was recorded in the cash receipts journal and deposited, but was dishonoured due to insufficient funds and returned by the bank marked 'R/D'; (7) the following cheques had not yet appeared on the bank statement: cheque 1213 for R1 800, cheque 1218 for R350, cheque 1220 for R2 700 and cheque 1221 for R3 100; (8) the owner, Mr P Govender, increased his capital contribution by depositing R25 000 directly into the PG Traders bank account; (9) two deposits of R60 000 and R26 410 did not appear on the bank statement because the previous bookkeeper failed to deposit them into the bank account — they were only deposited on 4 February 2013; (10) bank charges for the month amounted to R170; and (11) cheque numbers 1207 (R750), 1208 (R1 000) and 1210 (R600) were listed as outstanding cheques on the December 2012 bank reconciliation statement, of which cheque numbers 1208 and 1210 have since appeared on the January 2013 bank statement while cheque number 1207 is still outstanding. Using the information given about PG Traders' January 2013 transactions and bank statement differences, complete the cash receipts journal and the cash payments journal of PG Traders for January 2013, showing only the details column and the bank column.Show the full question

  4. Question 3.2 · Bank reconciliation · 6 marks

    PG Traders has appointed you as its bookkeeper. Your first task is to compare the January 2013 cash journals with the current month's bank statement and to prepare a bank reconciliation statement. While doing this you noted the following differences between the bank statement and the cash journals: (1) on 31 January 2013, before taking into account any of the items listed below, the cash receipts journal showed a bank column total of R27 500 and the cash payments journal showed a bank column total of R13 750; (2) the bank account in PG Traders' general ledger reflected a favourable balance of R14 500 on 31 January 2013; (3) the bank statement of PG Traders reflected an unfavourable balance of R11 700 on 31 January 2013; (4) a Cape Town client, Mr S Stevens, deposited R15 000 directly into PG Traders' bank account; (5) because PG Traders' bank statement balance was unfavourable, the bank charged interest of R350; (6) a cheque for R1 720 received from client Mrs K Osman was recorded in the cash receipts journal and deposited, but was dishonoured due to insufficient funds and returned by the bank marked 'R/D'; (7) the following cheques had not yet appeared on the bank statement: cheque 1213 for R1 800, cheque 1218 for R350, cheque 1220 for R2 700 and cheque 1221 for R3 100; (8) the owner, Mr P Govender, increased his capital contribution by depositing R25 000 directly into the PG Traders bank account; (9) two deposits of R60 000 and R26 410 did not appear on the bank statement because the previous bookkeeper failed to deposit them into the bank account — they were only deposited on 4 February 2013; (10) bank charges for the month amounted to R170; and (11) cheque numbers 1207 (R750), 1208 (R1 000) and 1210 (R600) were listed as outstanding cheques on the December 2012 bank reconciliation statement, of which cheque numbers 1208 and 1210 have since appeared on the January 2013 bank statement while cheque number 1207 is still outstanding. Using the information given about PG Traders, prepare the bank account for January 2013 in the general ledger of PG Traders, properly balancing/closing off the bank account at the end of the month.Show the full question

  5. Question 3.3 · Bank reconciliation · 11 marks

    PG Traders has appointed you as its bookkeeper. Your first task is to compare the January 2013 cash journals with the current month's bank statement and to prepare a bank reconciliation statement. While doing this you noted the following differences between the bank statement and the cash journals: (1) on 31 January 2013, before taking into account any of the items listed below, the cash receipts journal showed a bank column total of R27 500 and the cash payments journal showed a bank column total of R13 750; (2) the bank account in PG Traders' general ledger reflected a favourable balance of R14 500 on 31 January 2013; (3) the bank statement of PG Traders reflected an unfavourable balance of R11 700 on 31 January 2013; (4) a Cape Town client, Mr S Stevens, deposited R15 000 directly into PG Traders' bank account; (5) because PG Traders' bank statement balance was unfavourable, the bank charged interest of R350; (6) a cheque for R1 720 received from client Mrs K Osman was recorded in the cash receipts journal and deposited, but was dishonoured due to insufficient funds and returned by the bank marked 'R/D'; (7) the following cheques had not yet appeared on the bank statement: cheque 1213 for R1 800, cheque 1218 for R350, cheque 1220 for R2 700 and cheque 1221 for R3 100; (8) the owner, Mr P Govender, increased his capital contribution by depositing R25 000 directly into the PG Traders bank account; (9) two deposits of R60 000 and R26 410 did not appear on the bank statement because the previous bookkeeper failed to deposit them into the bank account — they were only deposited on 4 February 2013; (10) bank charges for the month amounted to R170; and (11) cheque numbers 1207 (R750), 1208 (R1 000) and 1210 (R600) were listed as outstanding cheques on the December 2012 bank reconciliation statement, of which cheque numbers 1208 and 1210 have since appeared on the January 2013 bank statement while cheque number 1207 is still outstanding. Using the information given about PG Traders, prepare the bank reconciliation statement of PG Traders as at 31 January 2013.Show the full question

  6. Question 4.1 · Financial statements · 3.5 marks

    PureSurprise Traders' accounting records showed the following balances and totals as at 28 February 2013, the end of the entity's financial period: capital R97 500; drawings R30 450; land and buildings R107 826; equipment R60 000; vehicles R30 000; accumulated depreciation on equipment (as at 1 March 2012) R6 000; accumulated depreciation on vehicles (as at 1 March 2012) R10 800; debtors control R15 000; bank (debit balance) R14 350; creditors control R5 500; cost of sales R200 000; sales returns R1 500; settlement discount granted R600; water and electricity R7 500; telephone expenses R5 000; salaries R21 000; insurance R11 050; stationery R2 500; rental income R45 500; and advertising R8 524. Additional information: (1) Included in the above balances are the following - (1.1) PureSurprise Traders uses a mark-up of 75% on cost to work out its selling prices; (1.2) the entity charged rent of R3 500 per month throughout the year; (1.3) the insurance figure includes R850 relating to the insurance premium for March 2013 (i.e. the following period). (2) Depreciation still needs to be provided for the year on equipment at 10% using the straight-line method and on vehicles at 20% using the reducing balance (diminishing balance) method; no equipment or vehicles were bought or sold during the current financial year. Using the information given for PureSurprise Traders, calculate the revenue (sales) figure for the year ended 28 February 2013. Show all calculations.Show the full question

  7. Question 4.2 · Financial statements · 24.5 marks

    PureSurprise Traders' accounting records showed the following balances and totals as at 28 February 2013, the end of the entity's financial period: capital R97 500; drawings R30 450; land and buildings R107 826; equipment R60 000; vehicles R30 000; accumulated depreciation on equipment (as at 1 March 2012) R6 000; accumulated depreciation on vehicles (as at 1 March 2012) R10 800; debtors control R15 000; bank (debit balance) R14 350; creditors control R5 500; cost of sales R200 000; sales returns R1 500; settlement discount granted R600; water and electricity R7 500; telephone expenses R5 000; salaries R21 000; insurance R11 050; stationery R2 500; rental income R45 500; and advertising R8 524. Additional information: (1) Included in the above balances are the following - (1.1) PureSurprise Traders uses a mark-up of 75% on cost to work out its selling prices; (1.2) the entity charged rent of R3 500 per month throughout the year; (1.3) the insurance figure includes R850 relating to the insurance premium for March 2013 (i.e. the following period). (2) Depreciation still needs to be provided for the year on equipment at 10% using the straight-line method and on vehicles at 20% using the reducing balance (diminishing balance) method; no equipment or vehicles were bought or sold during the current financial year. Using the information given for PureSurprise Traders, prepare the statement of profit or loss and other comprehensive income of PureSurprise Traders for the year ended 28 February 2013, taking into account the additional information about the mark-up, rental income received in advance, prepaid insurance, and depreciation on equipment and vehicles. Show all calculations.Show the full question

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