FAC1503 May/Jun 2011 paper — every question, as asked

Free sample

Question 1 · Accounting equation · 20 marks
PK Traders carried out the following transactions during April 2011. The entity uses a periodic inventory system and is not registered as a VAT vendor. During April 2011 PK Traders recorded the following transactions: on day 1 a business cheque of R2 580 was paid for a printer bought for the owner's son; on day 3 a debtor, B Kenyeza, who owed R1 480, had paid R1 200 on 15 May 2011 in full settlement of his account, but this cheque was returned on 3 April 2011 marked R/D, and no entries had yet been made to record the returned cheque; on day 6 the entity's telephone account of R1 560 was paid by cheque; on day 8 a delivery vehicle was bought on credit from Auto Motors for R85 000, with an immediate deposit of R35 000 paid and the remaining balance still owing to Auto Motors; on day 12 it was discovered that inventory bought from LA Traders for R975 had mistakenly been posted to the repairs account; on day 14 a cheque for R2 375 was received from M Moyo, whose debt had been written off as irrecoverable in December 2010; on day 15 an invoice was received from ST Suppliers for stationery ordered, amounting to R1 450; and on day 18 inventory was sold on credit to M Maluleka for R1 400. You are required to analyse each of these transactions of PK Traders in a tabular format showing, for every transaction, the date, the account to be debited, the account to be credited, and the effect of the transaction on the basic accounting equation under the headings Assets, Equity and Liabilities (an example is given for 1 April, where the owner deposited R50 000 into the business's bank account as his capital contribution, debiting Bank and crediting Capital, with Assets and Equity both increasing by R50 000). Note that the accounting-equation columns must not be totalled, each amount must be preceded by a plus sign for an increase or a minus sign for a decrease, and all calculations must be shown.Show the full questionShow less
Question 2.1 · Cash journals, bank and reconciliation · 10 marks
Optical Solutions Ltd is registered as a VAT vendor and uses the periodic inventory system; its VAT period ends on even months. At 31 March 2011 the trial balance showed the following balances: Capital R90 000 (credit); Bank R85 717 (debit); VAT Input R1 610 (debit); VAT Output R1 745 (credit); P Heyns R1 580 (debit); Piper Traders R2 100 (credit); M&M Wholesalers R1 850 (credit); R Kriel R2 171 (debit); Salaries and wages R17 400 (debit); Water and electricity R36 000 (debit); Sales R149 550 (credit); Purchases R90 200 (debit); Sundry expenses R10 567 (debit); totals of R245 245 on both sides. During April 2011 the entity entered into the following transactions, all 14% VAT inclusive where applicable: on 1 April the owner, B Boloyi, increased his capital contribution by R12 500; on 4 April merchandise was purchased on credit from M&M Wholesalers for R3 534; on 7 April an invoice was issued to P Heyns for goods sold to him of R1 140; on 8 April a cheque of R1 815 was issued to Piper Traders in full settlement of the entity's account; on 12 April a credit note of R228 was issued to P Heyns for an overcharge on the invoice of 7 April 2011; on 14 April cash sales of merchandise amounted to R2 394; on 20 April a cheque of R2 000 was received from debtor R Kriel in full settlement of his account; on 26 April cash purchases of merchandise amounted to R1 026; on 29 April a cash cheque of R4 500 was drawn, of which R3 000 was for wages and the remainder for the owner's personal use; and on 30 April interest of R285 was received on the entity's favourable bank balance. You are required to record only the applicable transactions of Optical Solutions Ltd for April 2011 in the subsidiary journals specified below; in each journal do not total the columns, and show all calculations. For Optical Solutions Ltd, prepare the cash receipts journal for April 2011, using the following columns: day, details, bank, debtors control, settlement discount granted, sales, VAT output, VAT input and sundry accounts. Enter only the applicable transactions from the list of April 2011 transactions and do not total the columns.Show the full questionShow less
Question 2.2 · Cash journals, bank and reconciliation · 9 marks
Optical Solutions Ltd is registered as a VAT vendor and uses the periodic inventory system; its VAT period ends on even months. At 31 March 2011 the trial balance showed the following balances: Capital R90 000 (credit); Bank R85 717 (debit); VAT Input R1 610 (debit); VAT Output R1 745 (credit); P Heyns R1 580 (debit); Piper Traders R2 100 (credit); M&M Wholesalers R1 850 (credit); R Kriel R2 171 (debit); Salaries and wages R17 400 (debit); Water and electricity R36 000 (debit); Sales R149 550 (credit); Purchases R90 200 (debit); Sundry expenses R10 567 (debit); totals of R245 245 on both sides. During April 2011 the entity entered into the following transactions, all 14% VAT inclusive where applicable: on 1 April the owner, B Boloyi, increased his capital contribution by R12 500; on 4 April merchandise was purchased on credit from M&M Wholesalers for R3 534; on 7 April an invoice was issued to P Heyns for goods sold to him of R1 140; on 8 April a cheque of R1 815 was issued to Piper Traders in full settlement of the entity's account; on 12 April a credit note of R228 was issued to P Heyns for an overcharge on the invoice of 7 April 2011; on 14 April cash sales of merchandise amounted to R2 394; on 20 April a cheque of R2 000 was received from debtor R Kriel in full settlement of his account; on 26 April cash purchases of merchandise amounted to R1 026; on 29 April a cash cheque of R4 500 was drawn, of which R3 000 was for wages and the remainder for the owner's personal use; and on 30 April interest of R285 was received on the entity's favourable bank balance. You are required to record only the applicable transactions of Optical Solutions Ltd for April 2011 in the subsidiary journals specified below; in each journal do not total the columns, and show all calculations. For Optical Solutions Ltd, prepare the cash payments journal for April 2011, using the following columns: day, details, bank, creditors control, settlement discount received, purchases, VAT input, VAT output and sundry accounts. Enter only the applicable transactions from the list of April 2011 transactions and do not total the columns.Show the full questionShow less
Question 2.3 · Cash journals, bank and reconciliation · 2 marks
Optical Solutions Ltd is registered as a VAT vendor and uses the periodic inventory system; its VAT period ends on even months. At 31 March 2011 the trial balance showed the following balances: Capital R90 000 (credit); Bank R85 717 (debit); VAT Input R1 610 (debit); VAT Output R1 745 (credit); P Heyns R1 580 (debit); Piper Traders R2 100 (credit); M&M Wholesalers R1 850 (credit); R Kriel R2 171 (debit); Salaries and wages R17 400 (debit); Water and electricity R36 000 (debit); Sales R149 550 (credit); Purchases R90 200 (debit); Sundry expenses R10 567 (debit); totals of R245 245 on both sides. During April 2011 the entity entered into the following transactions, all 14% VAT inclusive where applicable: on 1 April the owner, B Boloyi, increased his capital contribution by R12 500; on 4 April merchandise was purchased on credit from M&M Wholesalers for R3 534; on 7 April an invoice was issued to P Heyns for goods sold to him of R1 140; on 8 April a cheque of R1 815 was issued to Piper Traders in full settlement of the entity's account; on 12 April a credit note of R228 was issued to P Heyns for an overcharge on the invoice of 7 April 2011; on 14 April cash sales of merchandise amounted to R2 394; on 20 April a cheque of R2 000 was received from debtor R Kriel in full settlement of his account; on 26 April cash purchases of merchandise amounted to R1 026; on 29 April a cash cheque of R4 500 was drawn, of which R3 000 was for wages and the remainder for the owner's personal use; and on 30 April interest of R285 was received on the entity's favourable bank balance. You are required to record only the applicable transactions of Optical Solutions Ltd for April 2011 in the subsidiary journals specified below; in each journal do not total the columns, and show all calculations. For Optical Solutions Ltd, prepare the purchases journal for April 2011, using the following columns: day, details, creditors control, purchases and VAT input. Enter only the applicable transactions from the list of April 2011 transactions and do not total the columns.Show the full questionShow less
Question 2.4 · Cash journals, bank and reconciliation · 2 marks
Optical Solutions Ltd is registered as a VAT vendor and uses the periodic inventory system; its VAT period ends on even months. At 31 March 2011 the trial balance showed the following balances: Capital R90 000 (credit); Bank R85 717 (debit); VAT Input R1 610 (debit); VAT Output R1 745 (credit); P Heyns R1 580 (debit); Piper Traders R2 100 (credit); M&M Wholesalers R1 850 (credit); R Kriel R2 171 (debit); Salaries and wages R17 400 (debit); Water and electricity R36 000 (debit); Sales R149 550 (credit); Purchases R90 200 (debit); Sundry expenses R10 567 (debit); totals of R245 245 on both sides. During April 2011 the entity entered into the following transactions, all 14% VAT inclusive where applicable: on 1 April the owner, B Boloyi, increased his capital contribution by R12 500; on 4 April merchandise was purchased on credit from M&M Wholesalers for R3 534; on 7 April an invoice was issued to P Heyns for goods sold to him of R1 140; on 8 April a cheque of R1 815 was issued to Piper Traders in full settlement of the entity's account; on 12 April a credit note of R228 was issued to P Heyns for an overcharge on the invoice of 7 April 2011; on 14 April cash sales of merchandise amounted to R2 394; on 20 April a cheque of R2 000 was received from debtor R Kriel in full settlement of his account; on 26 April cash purchases of merchandise amounted to R1 026; on 29 April a cash cheque of R4 500 was drawn, of which R3 000 was for wages and the remainder for the owner's personal use; and on 30 April interest of R285 was received on the entity's favourable bank balance. You are required to record only the applicable transactions of Optical Solutions Ltd for April 2011 in the subsidiary journals specified below; in each journal do not total the columns, and show all calculations. For Optical Solutions Ltd, prepare the sales journal for April 2011, using the following columns: day, details, debtors control, sales and VAT output. Enter only the applicable transactions from the list of April 2011 transactions and do not total the columns.Show the full questionShow less
Question 3.1 · Cash journals, bank and reconciliation · 10 marks
The following details for March 2011 relate to Protea Traders. The cash journal totals at 31 March 2011 were: cash receipts journal R15 685 and cash payments journal R13 236. The favourable balance of the bank account in the general ledger at 28 February 2011 was R750, while the favourable balance according to the bank statement at 31 March 2011 was R7 493. An item that appeared on the bank reconciliation statement at 28 February 2011 but not on the March 2011 bank statement was cheque number 345, issued to creditor Dumisani Shelving on 8 September 2010, for R1 650. Items appearing in the cash journals but not yet on the bank statement include cheque number 856 (dated 28 March 2011) issued to creditor W Parnell for R2 400, cheque number 863 (dated 29 March 2011) issued to Comp-Tel for communication expenses of R1 659, and a deposit made on 31 March 2011 of R3 460 which, on enquiry at the bank, was found to have been incorrectly credited to another client's account. Items appearing on the bank statement but not yet recorded in the cash journals include bank charges of R250, a cash handling fee of R65, a deposit of R4 000 made by L Tsotsobe for rent, a cheque for R910 received from debtor H Gibbs that was returned by the bank marked R/D, interest of R200 received on a fixed deposit, a deposit of R1 000 paid directly into the bank account by debtor H Amla, and a cheque for R580 issued by G Smith, who is another client of the bank (and therefore not relevant to Protea Traders). In addition, a cheque for R1 500 issued during March as payment for cash purchases had mistakenly been recorded in the cash payments journal as only R150, and this error still needs to be corrected. Using the information given about Protea Traders for March 2011, complete the bank columns only of the cash receipts journal and the cash payments journal at 31 March 2011, taking into account all the reconciling items and the correction of the cheque recorded as R150 instead of R1 500.Show the full questionShow less
Question 3.2 · Cash journals, bank and reconciliation · 5 marks
The following details for March 2011 relate to Protea Traders. The cash journal totals at 31 March 2011 were: cash receipts journal R15 685 and cash payments journal R13 236. The favourable balance of the bank account in the general ledger at 28 February 2011 was R750, while the favourable balance according to the bank statement at 31 March 2011 was R7 493. An item that appeared on the bank reconciliation statement at 28 February 2011 but not on the March 2011 bank statement was cheque number 345, issued to creditor Dumisani Shelving on 8 September 2010, for R1 650. Items appearing in the cash journals but not yet on the bank statement include cheque number 856 (dated 28 March 2011) issued to creditor W Parnell for R2 400, cheque number 863 (dated 29 March 2011) issued to Comp-Tel for communication expenses of R1 659, and a deposit made on 31 March 2011 of R3 460 which, on enquiry at the bank, was found to have been incorrectly credited to another client's account. Items appearing on the bank statement but not yet recorded in the cash journals include bank charges of R250, a cash handling fee of R65, a deposit of R4 000 made by L Tsotsobe for rent, a cheque for R910 received from debtor H Gibbs that was returned by the bank marked R/D, interest of R200 received on a fixed deposit, a deposit of R1 000 paid directly into the bank account by debtor H Amla, and a cheque for R580 issued by G Smith, who is another client of the bank (and therefore not relevant to Protea Traders). In addition, a cheque for R1 500 issued during March as payment for cash purchases had mistakenly been recorded in the cash payments journal as only R150, and this error still needs to be corrected. Based on the corrected cash journal totals for Protea Traders, prepare the bank account in the general ledger, properly balanced, as at 31 March 2011.Show the full questionShow less
Question 3.3 · Cash journals, bank and reconciliation · 6 marks
The following details for March 2011 relate to Protea Traders. The cash journal totals at 31 March 2011 were: cash receipts journal R15 685 and cash payments journal R13 236. The favourable balance of the bank account in the general ledger at 28 February 2011 was R750, while the favourable balance according to the bank statement at 31 March 2011 was R7 493. An item that appeared on the bank reconciliation statement at 28 February 2011 but not on the March 2011 bank statement was cheque number 345, issued to creditor Dumisani Shelving on 8 September 2010, for R1 650. Items appearing in the cash journals but not yet on the bank statement include cheque number 856 (dated 28 March 2011) issued to creditor W Parnell for R2 400, cheque number 863 (dated 29 March 2011) issued to Comp-Tel for communication expenses of R1 659, and a deposit made on 31 March 2011 of R3 460 which, on enquiry at the bank, was found to have been incorrectly credited to another client's account. Items appearing on the bank statement but not yet recorded in the cash journals include bank charges of R250, a cash handling fee of R65, a deposit of R4 000 made by L Tsotsobe for rent, a cheque for R910 received from debtor H Gibbs that was returned by the bank marked R/D, interest of R200 received on a fixed deposit, a deposit of R1 000 paid directly into the bank account by debtor H Amla, and a cheque for R580 issued by G Smith, who is another client of the bank (and therefore not relevant to Protea Traders). In addition, a cheque for R1 500 issued during March as payment for cash purchases had mistakenly been recorded in the cash payments journal as only R150, and this error still needs to be corrected. Prepare the bank reconciliation statement of Protea Traders as at 31 March 2011, beginning with the balance as per the bank statement of R7 493, and accounting for all outstanding and reconciling items listed.Show the full questionShow less
Question 4.1 · Short theory questions · 3 marks
It must be started on a fresh, separate page in the answer book. Identify three (3) different expenses of an attorney's practice that the interest earned on a trust bank account may be applied towards.Show the full questionShow less
Question 4.2 · Short theory questions · 4 marks
It must be started on a fresh, separate page in the answer book. List four (4) factors that the partners of a law practice should consider when deciding on a compensation (remuneration) system for the partners.Show the full questionShow less
Question 4.3 · Short theory questions · 5 marks
It must be started on a fresh, separate page in the answer book. Provide any five (5) items that ought to be included in a written partnership agreement.Show the full questionShow less
Question 4.4 · Short theory questions · 6 marks
It must be started on a fresh, separate page in the answer book. For the different forms of business ownership under which a legal practice may operate, explain the distinctions between them in terms of (a) legal personality, and (b) liability for income tax.Show the full questionShow less
Question 5.1 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the acid test ratio as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less
Question 5.2 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the profit for the year percentage as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less
Question 5.3 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the creditors' payment period as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less
Question 5.4 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the inventory turnover rate as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less
Question 5.5 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the return on assets, based on profit for the year, as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less
Question 5.6 · Financial statements and analysis · 3 marks
The scenario concerns Bingo Traders. Its abbreviated statement of comprehensive income for the year ended 28 February 2011 shows revenue of R1 600 000 and cost of sales of R782 250, made up of opening inventory at 1 March 2010 of R212 600, purchases of R860 000 and closing inventory at 28 February 2011 of R290 350; this yields a gross profit of R817 750. Other income amounted to R18 510, while distribution, administrative and other expenses came to R519 270, giving a profit for the year of R316 990. There was no other comprehensive income, so total comprehensive income for the year is also R316 990. The statement of financial position as at 28 February 2011 reflects non-current assets of R454 000 (all property, plant and equipment) and current assets totalling R749 850, comprising inventories of R290 350, trade receivables of R385 000 and cash and cash equivalents of R74 500, giving total assets of R1 203 850. On the equity and liabilities side, equity (capital) amounts to R654 850, and total liabilities amount to R549 000, split between non-current liabilities of R360 000 (a long-term mortgage) and current liabilities of R189 000 (trade and other payables), giving total equity and liabilities of R1 203 850. Additional information states that credit sales represent 65% of total sales (revenue) and that credit purchases represent 45% of total purchases. Using this information, and giving all formulas used, calculate the ratios requested below for Bingo Traders as at 28 February 2011, rounding each answer to two decimal places. For Bingo Traders, calculate the solvency ratio as at 28 February 2011, showing the formula used and rounding your answer to two decimal places.Show the full questionShow less