FAC1601 Oct/Nov 2017 exam paper — questions

Every question, by topic

1. Question 1.1 · Close corporations · 6.5 marks

   BoomShaka CC is a trading entity operating in the Mshenguville business centre. Lebo and Thembi are the only members of the close corporation; they hold an equal interest and share profits or losses accordingly. The following balances appeared in the accounting records of the CC as at 28 February 2017, the end of the financial year: member's contribution – Lebo (1 March 2016) R50 000; member's contribution – Thembi (1 March 2016) R50 000; retained earnings (1 March 2016) R34 300; loan from member – Lebo (1 March 2016) R18 000; loan from member – Thembi (1 March 2016) R24 000; trade receivables control R1 500; bank (favourable) R136 360; trade payables control R4 000; SARS (income tax) (debit) R10 450; inventory R60 000; long-term loan (Great Bank) R35 000; land and buildings at cost R50 000; equipment at cost R15 000; furniture and fittings at cost R45 000; accumulated depreciation – equipment R5 000; accumulated depreciation – furniture and fittings R13 500. Before taking the points below into account, the bookkeeper had calculated the profit before tax for the year ended 28 February 2017 as R84 510. Additional information: (1) The bookkeeper neglected to record depreciation for the current financial year. Depreciation on equipment is provided at 25% per annum on the diminishing-balance method; on 1 February 2017 a printer was purchased on credit for R9 600 and this transaction still needs to be recorded. Depreciation of R9 000 must also be recorded on furniture and fittings. (2) On 28 February 2017 a debtor owing the business R400 was declared insolvent, but his account was not written off; on the same date another debtor, whose account had been written off as irrecoverable during the 2016 financial year, made a cash payment of R850 to settle the amount previously written off, but the cashier forgot the R850 in a drawer and did not record it. (3) The actual normal income tax for the current financial year was calculated as R24 500 and must still be recorded. (4) On 28 February 2017 the members decided to make a total profit distribution of R40 000: Lebo's portion must be added to the loan she advanced to the CC, while Thembi's portion must be paid to her in cash on 1 March 2017. (5) The long-term loan from Great Bank is secured by a mortgage over the land and buildings and is repayable in five equal annual instalments starting 1 October 2017. (6) The loans from the members are repayable on 1 April 2018. Answers must comply with the Close Corporations Act 1984 and the requirements of IFRS; notes to the annual financial statements and comparative figures are not required; all amounts must be rounded to the nearest Rand and all calculations must be shown. Calculate the profit or loss for the year ended 28 February 2017 of BoomShaka CC.Show the full questionShow less

2. Question 1.2 · Close corporations · 7.5 marks

   BoomShaka CC is a trading entity operating in the Mshenguville business centre. Lebo and Thembi are the only members of the close corporation; they hold an equal interest and share profits or losses accordingly. The following balances appeared in the accounting records of the CC as at 28 February 2017, the end of the financial year: member's contribution – Lebo (1 March 2016) R50 000; member's contribution – Thembi (1 March 2016) R50 000; retained earnings (1 March 2016) R34 300; loan from member – Lebo (1 March 2016) R18 000; loan from member – Thembi (1 March 2016) R24 000; trade receivables control R1 500; bank (favourable) R136 360; trade payables control R4 000; SARS (income tax) (debit) R10 450; inventory R60 000; long-term loan (Great Bank) R35 000; land and buildings at cost R50 000; equipment at cost R15 000; furniture and fittings at cost R45 000; accumulated depreciation – equipment R5 000; accumulated depreciation – furniture and fittings R13 500. Before taking the points below into account, the bookkeeper had calculated the profit before tax for the year ended 28 February 2017 as R84 510. Additional information: (1) The bookkeeper neglected to record depreciation for the current financial year. Depreciation on equipment is provided at 25% per annum on the diminishing-balance method; on 1 February 2017 a printer was purchased on credit for R9 600 and this transaction still needs to be recorded. Depreciation of R9 000 must also be recorded on furniture and fittings. (2) On 28 February 2017 a debtor owing the business R400 was declared insolvent, but his account was not written off; on the same date another debtor, whose account had been written off as irrecoverable during the 2016 financial year, made a cash payment of R850 to settle the amount previously written off, but the cashier forgot the R850 in a drawer and did not record it. (3) The actual normal income tax for the current financial year was calculated as R24 500 and must still be recorded. (4) On 28 February 2017 the members decided to make a total profit distribution of R40 000: Lebo's portion must be added to the loan she advanced to the CC, while Thembi's portion must be paid to her in cash on 1 March 2017. (5) The long-term loan from Great Bank is secured by a mortgage over the land and buildings and is repayable in five equal annual instalments starting 1 October 2017. (6) The loans from the members are repayable on 1 April 2018. Answers must comply with the Close Corporations Act 1984 and the requirements of IFRS; notes to the annual financial statements and comparative figures are not required; all amounts must be rounded to the nearest Rand and all calculations must be shown. Prepare the statement of changes in net investment of members of BoomShaka CC for the year ended 28 February 2017. The total column need not be disclosed.Show the full questionShow less

3. Question 1.3 · Close corporations · 25 marks

   BoomShaka CC is a trading entity operating in the Mshenguville business centre. Lebo and Thembi are the only members of the close corporation; they hold an equal interest and share profits or losses accordingly. The following balances appeared in the accounting records of the CC as at 28 February 2017, the end of the financial year: member's contribution – Lebo (1 March 2016) R50 000; member's contribution – Thembi (1 March 2016) R50 000; retained earnings (1 March 2016) R34 300; loan from member – Lebo (1 March 2016) R18 000; loan from member – Thembi (1 March 2016) R24 000; trade receivables control R1 500; bank (favourable) R136 360; trade payables control R4 000; SARS (income tax) (debit) R10 450; inventory R60 000; long-term loan (Great Bank) R35 000; land and buildings at cost R50 000; equipment at cost R15 000; furniture and fittings at cost R45 000; accumulated depreciation – equipment R5 000; accumulated depreciation – furniture and fittings R13 500. Before taking the points below into account, the bookkeeper had calculated the profit before tax for the year ended 28 February 2017 as R84 510. Additional information: (1) The bookkeeper neglected to record depreciation for the current financial year. Depreciation on equipment is provided at 25% per annum on the diminishing-balance method; on 1 February 2017 a printer was purchased on credit for R9 600 and this transaction still needs to be recorded. Depreciation of R9 000 must also be recorded on furniture and fittings. (2) On 28 February 2017 a debtor owing the business R400 was declared insolvent, but his account was not written off; on the same date another debtor, whose account had been written off as irrecoverable during the 2016 financial year, made a cash payment of R850 to settle the amount previously written off, but the cashier forgot the R850 in a drawer and did not record it. (3) The actual normal income tax for the current financial year was calculated as R24 500 and must still be recorded. (4) On 28 February 2017 the members decided to make a total profit distribution of R40 000: Lebo's portion must be added to the loan she advanced to the CC, while Thembi's portion must be paid to her in cash on 1 March 2017. (5) The long-term loan from Great Bank is secured by a mortgage over the land and buildings and is repayable in five equal annual instalments starting 1 October 2017. (6) The loans from the members are repayable on 1 April 2018. Answers must comply with the Close Corporations Act 1984 and the requirements of IFRS; notes to the annual financial statements and comparative figures are not required; all amounts must be rounded to the nearest Rand and all calculations must be shown. Prepare the statement of financial position of BoomShaka CC as at 28 February 2017.Show the full questionShow less

4. Question 2(a) · Changes in partnership ownership and liquidation · 9 marks

   Mehlo and her close friend Mamba trade in partnership as Mehl'emamba Loans, sharing profits or losses in the ratio 3:2 respectively. Due to a recent upsurge in demand for unsecured short-term loans, the partners needed an additional partner to inject capital to help sustain the business's growth. Azalia, another friend of Mehlo, offered to join the partnership. The following balances were extracted from the partnership's accounting records as at 30 September 2017: capital Mehlo R120 700; capital Mamba R82 000; current account Mehlo (credit) R12 500; current account Mamba (debit) R16 200; revaluation surplus R25 000; vehicle at carrying amount R60 000; equipment at carrying amount R9 500; furniture and fittings at carrying amount R140 000; loan receivables (trade receivables) R23 800; bank overdraft R8 775; allowance for credit losses R525. Additional information: (1) It was agreed that Azalia will join the partnership on 1 October 2017 and that the new partnership will trade as Grootslang Loans. Mehlo and Mamba will each relinquish to Azalia a share of the one-third interest in the profits or losses of the new partnership, apportioned between themselves according to their existing profit-sharing ratio. On 1 October 2017 Azalia will contribute a vehicle valued at R100 000, as well as cash of R75 000, for her one-third share in the net assets of the new partnership. (2) On 30 September 2017, in preparation for the change in the ownership structure of Mehl'emamba Loans, the partnership's assets were valued as follows: vehicle R45 000; equipment R4 000; furniture and fittings R222 100. (3) The partners anticipate that a further R1 800 of the loan receivables may not be recovered. All amounts must be rounded off to the nearest Rand and all calculations must be shown. Prepare the valuation account of Mehl'emamba Loans, properly closed off, in the general ledger as at 30 September 2017. Apply the legal perspective.Show the full questionShow less

5. Question 2(b) · Changes in partnership ownership and liquidation · 3 marks

   Mehlo and her close friend Mamba trade in partnership as Mehl'emamba Loans, sharing profits or losses in the ratio 3:2 respectively. Due to a recent upsurge in demand for unsecured short-term loans, the partners needed an additional partner to inject capital to help sustain the business's growth. Azalia, another friend of Mehlo, offered to join the partnership. The following balances were extracted from the partnership's accounting records as at 30 September 2017: capital Mehlo R120 700; capital Mamba R82 000; current account Mehlo (credit) R12 500; current account Mamba (debit) R16 200; revaluation surplus R25 000; vehicle at carrying amount R60 000; equipment at carrying amount R9 500; furniture and fittings at carrying amount R140 000; loan receivables (trade receivables) R23 800; bank overdraft R8 775; allowance for credit losses R525. Additional information: (1) It was agreed that Azalia will join the partnership on 1 October 2017 and that the new partnership will trade as Grootslang Loans. Mehlo and Mamba will each relinquish to Azalia a share of the one-third interest in the profits or losses of the new partnership, apportioned between themselves according to their existing profit-sharing ratio. On 1 October 2017 Azalia will contribute a vehicle valued at R100 000, as well as cash of R75 000, for her one-third share in the net assets of the new partnership. (2) On 30 September 2017, in preparation for the change in the ownership structure of Mehl'emamba Loans, the partnership's assets were valued as follows: vehicle R45 000; equipment R4 000; furniture and fittings R222 100. (3) The partners anticipate that a further R1 800 of the loan receivables may not be recovered. All amounts must be rounded off to the nearest Rand and all calculations must be shown. Prepare the equipment account of Mehl'emamba Loans, properly closed off, in the general ledger as at 30 September 2017. Apply the legal perspective.Show the full questionShow less