How often Close corporations is asked

Where it was asked

• May/Jun 201420 marks
• Oct/Nov 201324 marks
• May/Jun 201326 marks

The questions

1. May/Jun 2014, Q320 marks

   Sbusiso and Aneziswa are the only two members of Eyethu CC, and the candidate has been appointed as the accounting officer of Eyethu CC for the year ended 28 February 2014. The list of balances as at 28 February 2014 is as follows: member's contribution Sbusiso R175 000; member's contribution Anezizwa R215 000; loan from member Sbusiso R165 000; SARS (income tax) R5 800 debit; creditors control R60 600; allowance for credit losses R2 200; inventory R66 000; land and buildings at cost R520 000; furniture and equipment at cost R64 000; accumulated depreciation on furniture and equipment as at 1 March 2013 R10 200; debtors control R49 500; sales R575 000; purchases R189 000; delivery expenses (in respect of sales) R7 300; rental income R8 100; sales returns R28 500; purchases returns R6 225; salaries and wages R257 600; telephone expenses R9 600; interest on loan from members R21 600; stationery consumed R4 950; water and electricity R10 725; insurance expenses R6 300; and advertising expenses R6 450. Additional information: inventory on hand on 1 March 2013 amounted to R29 000; on 31 August 2013 new furniture was purchased at a cost of R14 000 and this was correctly recorded in the accounting records; Mrs Ngwenya, a debtor with an outstanding account of R2 900, was declared insolvent and her debt must be written off as irrecoverable; the allowance for credit losses must be adjusted to R3 800; insurance premiums of R450 per month are payable one month in advance, and premiums have been paid up to 30 April 2014; each member is entitled to a monthly salary of R5 300, which was paid during the year and debited to the salaries and wages account; depreciation on furniture and equipment must still be provided for at 20% per annum on the diminishing balance method; and income tax for the year amounts to R33 465 and must still be provided for. Prepare the statement of profit or loss and other comprehensive income of Eyethu CC for the year ended 28 February 2014. The answer must comply with the requirements of International Financial Reporting Standards (IFRS) appropriate to the business of the close corporation. Notes and comparative figures are NOT required. All calculations must be shown.

2. Oct/Nov 2013, Q3.116 marks

   Wonderland CC was formed on 1 March 1995 when two friends, Hook and Peter, started a close corporation trading as Wonderland CC. Wonderland CC obtained the exclusive rights from a toy factory in Germany, Spielzeug Inc, to sell its toys on the South African market. To finance their operations the founders admitted an additional member, Wendy, a local millionaire, into the CC. The following information relates to the business activities of the CC for the year ended 28 February 2013. The balances as at 28 February 2013 were: member contribution Hook R468 750; member contribution Peter R468 750; member contribution Wendy R468 750; loans to member Peter R1 312 500; loans from member Wendy R562 500; land and buildings at cost R8 250 000; equipment at cost R1 781 250; accumulated depreciation on equipment at 1 March 2012 R300 000; debtors control R492 195; creditors control R467 820; retained earnings at 1 March 2012 R7 962 375; asset replacement reserve R300 000; bank (debit) R80 625; investment in Starcatcher Ltd at fair value R1 500 000; inventory at 1 March 2012 R318 750; allowance for credit losses R37 500; sales R13 120 500; purchases R4 500 000; general expenses R250 305; salaries (employees) R2 250 000; salaries (members) R1 350 000; remuneration of the accounting officer R262 500; carriage on purchases R153 750; credit losses R58 125; settlement discount received R7 875; carriage on sales R168 750; SARS (income tax) (debit) R346 125; settlement discount granted R27 570; and forfeited settlement discount granted R4 500. The following additional information must still be taken into account: provision must still be made for depreciation on equipment at 20% per annum on the diminishing balance method, and included in the equipment at cost account is a machine purchased on 1 September 2012 for R281 250 cash and put into use immediately, with no other equipment purchases or sales during the year; a debtor owing the business R23 295 was declared insolvent and his debt must be written off as irrecoverable; the allowance for credit losses must be adjusted to R23 445; interest must still be provided on the loan accounts to members at a rate of 15% per annum on the opening balances of any existing loans, with such interest capitalised, no additional loans having been granted during the year, and all loans being unsecured and immediately callable; interest is charged at 20% per annum on the opening balance of the loan from Wendy and is payable on 1 March 2013; the investment in Starcatcher Ltd consists of 50 000 ordinary shares acquired in 2012 for R1 350 000, Starcatcher Ltd being a listed company and the investment having been acquired for trade purposes, with the fair value of the investment on 28 February 2013 amounting to R1 800 000; the closing inventory amounted to R189 375 and is valued at the lower of cost or net realisable value using the first-in, first-out method; and the actual normal income tax for the financial year amounted to R1 005 630 and must still be recorded. In answering, comply with the requirements of the Close Corporations Act No 69 of 1984 and with International Financial Reporting Standards (IFRS) as appropriate to the business; notes and comparative figures are not required, and all calculations must be shown. Prepare the statement of profit or loss and other comprehensive income of Wonderland CC for the year ended 28 February 2013.

3. Oct/Nov 2013, Q3.28 marks

   Wonderland CC was formed on 1 March 1995 when two friends, Hook and Peter, started a close corporation trading as Wonderland CC. Wonderland CC obtained the exclusive rights from a toy factory in Germany, Spielzeug Inc, to sell its toys on the South African market. To finance their operations the founders admitted an additional member, Wendy, a local millionaire, into the CC. The following information relates to the business activities of the CC for the year ended 28 February 2013. The balances as at 28 February 2013 were: member contribution Hook R468 750; member contribution Peter R468 750; member contribution Wendy R468 750; loans to member Peter R1 312 500; loans from member Wendy R562 500; land and buildings at cost R8 250 000; equipment at cost R1 781 250; accumulated depreciation on equipment at 1 March 2012 R300 000; debtors control R492 195; creditors control R467 820; retained earnings at 1 March 2012 R7 962 375; asset replacement reserve R300 000; bank (debit) R80 625; investment in Starcatcher Ltd at fair value R1 500 000; inventory at 1 March 2012 R318 750; allowance for credit losses R37 500; sales R13 120 500; purchases R4 500 000; general expenses R250 305; salaries (employees) R2 250 000; salaries (members) R1 350 000; remuneration of the accounting officer R262 500; carriage on purchases R153 750; credit losses R58 125; settlement discount received R7 875; carriage on sales R168 750; SARS (income tax) (debit) R346 125; settlement discount granted R27 570; and forfeited settlement discount granted R4 500. The following additional information must still be taken into account: provision must still be made for depreciation on equipment at 20% per annum on the diminishing balance method, and included in the equipment at cost account is a machine purchased on 1 September 2012 for R281 250 cash and put into use immediately, with no other equipment purchases or sales during the year; a debtor owing the business R23 295 was declared insolvent and his debt must be written off as irrecoverable; the allowance for credit losses must be adjusted to R23 445; interest must still be provided on the loan accounts to members at a rate of 15% per annum on the opening balances of any existing loans, with such interest capitalised, no additional loans having been granted during the year, and all loans being unsecured and immediately callable; interest is charged at 20% per annum on the opening balance of the loan from Wendy and is payable on 1 March 2013; the investment in Starcatcher Ltd consists of 50 000 ordinary shares acquired in 2012 for R1 350 000, Starcatcher Ltd being a listed company and the investment having been acquired for trade purposes, with the fair value of the investment on 28 February 2013 amounting to R1 800 000; the closing inventory amounted to R189 375 and is valued at the lower of cost or net realisable value using the first-in, first-out method; and the actual normal income tax for the financial year amounted to R1 005 630 and must still be recorded. In answering, comply with the requirements of the Close Corporations Act No 69 of 1984 and with International Financial Reporting Standards (IFRS) as appropriate to the business; notes and comparative figures are not required, and all calculations must be shown. Prepare the ASSETS section of the statement of financial position of Wonderland CC as at 28 February 2013.

4. May/Jun 2013, Q2.115 marks

   Ofentse and Nasa are the members of Contacts Factory CC. The information below relates to the business activities of the close corporation for the year ended 30 June 2012. The pre-adjustment trial balance extract at 30 June 2012 shows: member's contribution – Ofentse R122 000; member's contribution – Nasa R122 000; land and buildings at cost R100 000; equipment at cost R89 000; vehicles at cost R108 000; accumulated depreciation on equipment R24 119; accumulated depreciation on vehicles R7 200; long-term loan R50 000; inventory R38 520; debtors control R35 800; creditors control R20 054; bank (debit) R12 700; retained loss as at 1 July 2011 of R28 760; profit before tax R92 807; SARS (income tax) debit balance R10 400; and an interim profit distribution of R15 000. Additional information: (i) the long-term loan was obtained from SA Bank on 2 July 2011, with interest payable bi-annually on 31 December and 30 June at 18% per annum (already provided for); the capital portion is repayable in annual instalments of R8 000 each plus a final instalment of R10 000, the first instalment falling due on 31 December 2012; (ii) during the year the close corporation advanced an interest-free loan of R38 000 to Nasa, which was incorrectly debited to the administrative expense account – the loan is fully repayable on 31 December 2012; (iii) a second-hand delivery vehicle costing R108 000 was purchased on 2 March 2012, and no other non-current assets were bought or sold during the year; (iv) depreciation for the year has already been provided as R7 209 on equipment and R7 200 on vehicles; (v) on 2 January 2012 the close corporation entered into an insurance contract with Multi Insurers under which the annual premium of R6 000 is payable in advance – the R6 000 premium was paid but this transaction has not yet been recorded; (vi) on 30 June 2012 the close corporation purchased 37 000 shares in Magriza Ltd at R5 per share (the market value on that date) for speculative purposes; and (vii) the SA normal tax for the year, amounting to R25 460, must still be recorded. All figures required for the three items below must be prepared in compliance with the Close Corporations Act No 69 of 1984 and International Financial Reporting Standards, with all calculations shown and comparative figures not required. Prepare the statement of financial position of Contacts Factory CC as at 30 June 2012.

5. May/Jun 2013, Q2.2.17 marks

   Ofentse and Nasa are the members of Contacts Factory CC. The information below relates to the business activities of the close corporation for the year ended 30 June 2012. The pre-adjustment trial balance extract at 30 June 2012 shows: member's contribution – Ofentse R122 000; member's contribution – Nasa R122 000; land and buildings at cost R100 000; equipment at cost R89 000; vehicles at cost R108 000; accumulated depreciation on equipment R24 119; accumulated depreciation on vehicles R7 200; long-term loan R50 000; inventory R38 520; debtors control R35 800; creditors control R20 054; bank (debit) R12 700; retained loss as at 1 July 2011 of R28 760; profit before tax R92 807; SARS (income tax) debit balance R10 400; and an interim profit distribution of R15 000. Additional information: (i) the long-term loan was obtained from SA Bank on 2 July 2011, with interest payable bi-annually on 31 December and 30 June at 18% per annum (already provided for); the capital portion is repayable in annual instalments of R8 000 each plus a final instalment of R10 000, the first instalment falling due on 31 December 2012; (ii) during the year the close corporation advanced an interest-free loan of R38 000 to Nasa, which was incorrectly debited to the administrative expense account – the loan is fully repayable on 31 December 2012; (iii) a second-hand delivery vehicle costing R108 000 was purchased on 2 March 2012, and no other non-current assets were bought or sold during the year; (iv) depreciation for the year has already been provided as R7 209 on equipment and R7 200 on vehicles; (v) on 2 January 2012 the close corporation entered into an insurance contract with Multi Insurers under which the annual premium of R6 000 is payable in advance – the R6 000 premium was paid but this transaction has not yet been recorded; (vi) on 30 June 2012 the close corporation purchased 37 000 shares in Magriza Ltd at R5 per share (the market value on that date) for speculative purposes; and (vii) the SA normal tax for the year, amounting to R25 460, must still be recorded. All figures required for the three items below must be prepared in compliance with the Close Corporations Act No 69 of 1984 and International Financial Reporting Standards, with all calculations shown and comparative figures not required. Prepare the note on property, plant and equipment of Contacts Factory CC for the year ended 30 June 2012.