FAC1503 May/Jun 2014 exam paper — questions

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  1. Question 1 · Accounting equation · 21 marks

    Brothers Manufacturers is the entity under review. It is not registered as a VAT vendor and makes use of the periodic inventory system. During June 2013 the entity entered into the following transactions: on the 3rd it purchased inventory on credit to the value of R15 960, with the creditor offering a 10% settlement discount if paid within 30 days, and Brothers Manufacturers intends to settle this account during August 2013; on the 4th the owner paid his personal water and electricity account for May 2013 using a business cheque of R1 540; on the 7th a debtor, J Armstrong, paid R5 000 in full settlement of his account; on the 10th Brothers Manufacturers issued a credit note of R1 140 to Ms T Habana for goods previously sold to her on credit, which she returned because they were not manufactured according to the correct specifications; on the 23rd it sold 20 steel doors and 15 wooden window frames on credit to Mr U Hala for R22 800; on the 29th it paid R57 000 to Jomo Suppliers in full settlement of Brothers Manufacturers' account; and on the 31st a debtor, T Smit, who had owed the entity R13 500 since 12 June 2012, was declared insolvent, so the amount must be written off as irrecoverable. Using a tabular format with columns for date, the account to be debited, the account to be credited, and the effect on the basic accounting equation (split into Assets, Equity and Liabilities, all in Rand), analyse each of the above transactions of Brothers Manufacturers for June 2013. An example has been given showing that on 1 December the owner deposited R50 000 into the business bank account as a capital contribution, which would be recorded as a debit to Bank and a credit to Capital, with Assets increasing by +50 000, Equity increasing by +50 000, and no effect on Liabilities. Note that the columns relating to the accounting equation 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 question

  2. Question 2.1 · Financial statements and analysis · 1 mark

    The accounting records of Makoloi Traders as at 31 December 2013 produced the following trial balance figures (all in R): Sales 350 000 (credit); Purchases 212 000 (debit); Sales returns 7 000 (debit); Bank 20 000 (debit); Debtors control 7 000 (debit); Purchases returns 5 000 (credit); Inventory at 1 January 2013, 15 000 (debit); Machinery at cost 35 000 (debit); Vehicles at cost 62 000 (debit); Accumulated depreciation on machinery at 1 January 2013, 5 250 (credit); Accumulated depreciation on vehicles at 1 January 2013, 12 400 (credit); Creditors control 3 800 (credit); Insurance 2 700 (debit); Drawings 6 000 (debit); Wages 18 000 (debit); Administrative expenses 15 000 (debit); Capital 41 050 (credit); Rent expense 11 000 (debit); Repairs and maintenance 2 100 (debit); Lighting and heating 4 700 (debit). The debit and credit columns both total R417 500. Additional information: (a) Makoloi Traders uses the periodic inventory system; (b) Makoloi Traders is not registered as a VAT vendor; (c) inventory on hand at 31 December 2013 amounted to R18 000; (d) depreciation must be provided as follows - vehicles at 20% per annum on the straight-line method, and machinery at 10% per annum on the diminishing balance method. This question must be started on a new, separate page, and all calculations must be shown. For Makoloi Traders, calculate the net sales (revenue) figure for the year ended 31 December 2013.Show the full question

  3. Question 2.2 · Financial statements and analysis · 2 marks

    The accounting records of Makoloi Traders as at 31 December 2013 produced the following trial balance figures (all in R): Sales 350 000 (credit); Purchases 212 000 (debit); Sales returns 7 000 (debit); Bank 20 000 (debit); Debtors control 7 000 (debit); Purchases returns 5 000 (credit); Inventory at 1 January 2013, 15 000 (debit); Machinery at cost 35 000 (debit); Vehicles at cost 62 000 (debit); Accumulated depreciation on machinery at 1 January 2013, 5 250 (credit); Accumulated depreciation on vehicles at 1 January 2013, 12 400 (credit); Creditors control 3 800 (credit); Insurance 2 700 (debit); Drawings 6 000 (debit); Wages 18 000 (debit); Administrative expenses 15 000 (debit); Capital 41 050 (credit); Rent expense 11 000 (debit); Repairs and maintenance 2 100 (debit); Lighting and heating 4 700 (debit). The debit and credit columns both total R417 500. Additional information: (a) Makoloi Traders uses the periodic inventory system; (b) Makoloi Traders is not registered as a VAT vendor; (c) inventory on hand at 31 December 2013 amounted to R18 000; (d) depreciation must be provided as follows - vehicles at 20% per annum on the straight-line method, and machinery at 10% per annum on the diminishing balance method. This question must be started on a new, separate page, and all calculations must be shown. For Makoloi Traders, calculate the cost of sales for the year ended 31 December 2013.Show the full question

  4. Question 2.3 · Financial statements and analysis · 1 mark

    The accounting records of Makoloi Traders as at 31 December 2013 produced the following trial balance figures (all in R): Sales 350 000 (credit); Purchases 212 000 (debit); Sales returns 7 000 (debit); Bank 20 000 (debit); Debtors control 7 000 (debit); Purchases returns 5 000 (credit); Inventory at 1 January 2013, 15 000 (debit); Machinery at cost 35 000 (debit); Vehicles at cost 62 000 (debit); Accumulated depreciation on machinery at 1 January 2013, 5 250 (credit); Accumulated depreciation on vehicles at 1 January 2013, 12 400 (credit); Creditors control 3 800 (credit); Insurance 2 700 (debit); Drawings 6 000 (debit); Wages 18 000 (debit); Administrative expenses 15 000 (debit); Capital 41 050 (credit); Rent expense 11 000 (debit); Repairs and maintenance 2 100 (debit); Lighting and heating 4 700 (debit). The debit and credit columns both total R417 500. Additional information: (a) Makoloi Traders uses the periodic inventory system; (b) Makoloi Traders is not registered as a VAT vendor; (c) inventory on hand at 31 December 2013 amounted to R18 000; (d) depreciation must be provided as follows - vehicles at 20% per annum on the straight-line method, and machinery at 10% per annum on the diminishing balance method. This question must be started on a new, separate page, and all calculations must be shown. For Makoloi Traders, calculate the depreciation on vehicles for the year ended 31 December 2013, given that vehicles cost R62 000, accumulated depreciation at 1 January 2013 was R12 400, and the depreciation rate is 20% per annum on the straight-line method.Show the full question

  5. Question 2.4 · Financial statements and analysis · 1.5 marks

    The accounting records of Makoloi Traders as at 31 December 2013 produced the following trial balance figures (all in R): Sales 350 000 (credit); Purchases 212 000 (debit); Sales returns 7 000 (debit); Bank 20 000 (debit); Debtors control 7 000 (debit); Purchases returns 5 000 (credit); Inventory at 1 January 2013, 15 000 (debit); Machinery at cost 35 000 (debit); Vehicles at cost 62 000 (debit); Accumulated depreciation on machinery at 1 January 2013, 5 250 (credit); Accumulated depreciation on vehicles at 1 January 2013, 12 400 (credit); Creditors control 3 800 (credit); Insurance 2 700 (debit); Drawings 6 000 (debit); Wages 18 000 (debit); Administrative expenses 15 000 (debit); Capital 41 050 (credit); Rent expense 11 000 (debit); Repairs and maintenance 2 100 (debit); Lighting and heating 4 700 (debit). The debit and credit columns both total R417 500. Additional information: (a) Makoloi Traders uses the periodic inventory system; (b) Makoloi Traders is not registered as a VAT vendor; (c) inventory on hand at 31 December 2013 amounted to R18 000; (d) depreciation must be provided as follows - vehicles at 20% per annum on the straight-line method, and machinery at 10% per annum on the diminishing balance method. This question must be started on a new, separate page, and all calculations must be shown. For Makoloi Traders, calculate the depreciation on machinery for the year ended 31 December 2013, given that machinery cost R35 000, accumulated depreciation at 1 January 2013 was R5 250, and the depreciation rate is 10% per annum on the diminishing balance method.Show the full question

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