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FAC511S - Financial Accounting 101 - June 2017 1st Opp. |
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I
I'lFHTllBlFI UNIVERSITY
OF SCIEl‘lCE nnD TECHNOLOGY
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BOAC
LEVEL: 5
COURSE CODE: FAC5115
COURSE NAME: FINANCIAL ACCOUNTING 101
SESSION: JUNE 2017
PAPER: THEORY
DURATION: 3 HOURS
MARKS: 100
EXAMINER(S)
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
Mr. G Jansen, Mr. C Mahindi and Mr. A Ketjinganda
MODERATOR:
“45- J Van va
INSTRUCTIONS
This question paper is made up of four (4) questions.
P941”?
Answer ALL the questions and in blue or black ink.
Start each question on a new page in your answer booklet.
Questions relating to this examination may be raised in the initial 30 minutes after the start of
the paper. Thereafter, candidates must use their initiative to deal with any perceived error or
ambiguities & any assumption made by the candidate should be clearly stated.
THIS QUESTION PAPER CONSISTS OF 7 PAGES (Including this front page)
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GENERAL
The names of people and businesses used throughout this examination paper do not reflect the reality
and may be purely coincidental.
QUESTION 1
This question consists of two independent parts.
(30 MARKS)
PART A
(15 MARKS)
a) List one (1) primary user of financial statements as per Conceptual Framework for Financial
Reporting and also explain for what purpose they could use the financial statements.
(2)
b) List six (6) Qualitative Characteristics of Financial Statements.
(6)
0) Explain what the underlying assumption of going concern means.
(1)
d) Define the element liability as per Conceptual Framework for Financial Reporting.
(3)
e) Explain the difference between input VAT and output VAT.
(2)
f) What does the abbreviation VAT stands for?
(1)
PART B
(15 MARKS)
CATERNAM (Pty) Ltd supplies fine dining catering services for high end functions and events in all
regions of Namibia. While at the Hage Geingob Soccer Cup final match on 30 May 2017, the owner Mr.
Baloyi bumped into an old university friend, Ms. Masango who owns an events management company,
Events Today (Pty) Ltd.
While they chatted, Ms. Masango indicated that she would like CATERNAM (Pty) Ltd to provide
catering services for some of her company’s events. CATERNAM (Pty) Ltd would prepare fine dining
meals with invoicing based on the number of people attending each event. Events Today (Pty) Ltd
would provide the number of guests to be catered for at each event. Invoices would be paid within 30
days from the date of receipt of the invoice by Events Today (Pty) Ltd. The two parties agreed on the
terms and shook hands. In addition it was also agreed that Ms. Masango would send a written contract
by the end of the business on 7 June 2017 for signatures by both parties.
At the end of the Hage Geingob Soccer Cup final match, Ms. Chabalala, who had overheard the
conversation between the two, called Mr. Baloyi aside. She alerted him to the fact that she had recently
provided catering services for Events Today (Pty) Ltd but not all payments were received as the
company is experiencing some financial difficulty.
REQUIRED:
Determine whether the arrangement between Mr. Baloyi and Ms. Masango satisfies the requirements
of a contract in terms of IFRS 15 Revenue from contracts with customers in the records of CATERNAM
(Pty) Ltd on 30 May 2017.
(15)
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QUESTION 2
(25 MARKS)
Beer Pressure Limited brews their own beer in central Windhoek, where they rent a property from Broll
and list Namibia (Pty) Ltd. The reporting period of Beer Pressure Limited ends on 31 December 2017.
The chief accountant of Beer Pressure Limited has always expressed explicit and unreserved
compliance with International Financial Reporting Standards (IFRS) in its annual financial statements.
The following information relates to the property, plant and equipment of Beer Pressure Limited.
SPECIAL FACTORY PLANT
Beer Pressure Limited purchased a special factory plant on 1 January 2017. Details of the cost incurred
to acquire the plant are as follows:
Purchase price (including VAT of 15%)
Initial operating loss
Delivery costs
import duties (non-refundable)
Staff training to use plant
Installation costs
Proceeds from sale of samples produced during testing
Testing to ensure plant is fully operational
Inauguration function to introduce the plant
N$
1 140 000
70 000
90 000
200 000
24 000
60 000
26 000
84 246
28 000
Additional information:
1. The initial operating loss was incurred as a result of having to dump unsold “bad beer" since the
colour of this sample was dark orange.
2. Beer Pressure is a VAT vendor.
3. All amounts are stated exclusive of VAT unless stated othenrvise.
MOTOR VEHICLES
The following information is obtained from the books of Beer Pressure Limited on 31 December 2016 in
respect of motor vehicles:
Motor vehicle
2015 Nissan
2016 Toyota Carola
Cost Price
N$ 100 000
N$ 140 000
Date of purchase
1 July 2015
1 Sept 2016
On 1 July 2017 the 2015 Nissan was traded in for N$40 000 (excluding VAT) for a GWM single cab
which cost N$150 000 (excluding VAT). Beer Pressure provides for depreciation at 20% per annum on
the reducing balance method.
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REQUIRED:
a) Calculate the cost at which the special factory plant will be recognised by complying with IAS 16
Property, Plant and Equipment.
(10)
b) Prepare the following general ledger accounts for the reporting period ended 31 December 2017:
i) Motor vehicles
(5)
ii) Accumulated depreciation; motor vehicles
(6)
iii) Disposal of motor vehicles
(4)
Note: Show all your workings.
Round off all amounts to the nearest Dollar.
QUESTION 3
(15 MARKS)
Dimensions Data was established in 2015 by Mr. Angula. The organisation sells computers and its
main market is young professionals. Dimensions Data purchase its computers from a local supplier,
Business Connexions (Pty) Ltd, which is a VAT registered vendor. Dimensions Data is also a registered
VAT vendor. The price of one computer bought from its supplier, Business Connexions (Pty) Ltd
amounts to N$10 350 (VAT inclusive).
Mr. Angula has informed you that he will be travelling a lot during 2017, as the world is his oyster and
he need to be on the lookout for new business opportunities all the time.
The computers are sold by Dimensions Data at a mark-up of 35%.
The accountant of Dimensions Data had the following information regarding the financial year ending
30 June 2017:
Opening Inventory
Dell computers bought
Dell computers sold
Donations to the best IT students at the Namibia University of Science and Technology
Units__
180
750
840
12
On 7 July 2017 SangHu computers established a branch in Windhoek and they sell mostly MAC Book
(computers) which are currently in high demand and Dimensions Data will have no option but to sell
their computers at N$8 400 (excluding VAT) each, in order to keep up with the competitive market.
You may assume a VAT rate of 15% is applicable.
REQUIRED:
a) Explain to Mr. Angula what the differences are between the two inventory systems and advise him
on which system would be more appropriate for his business.
(6)
b) Calculate the selling price of each Dell computer.
(2)
c) What will your answer be in (b) above, if the profit margin was 20%?
(2)
d) Calculate the value of closing inventory computers on hand on 30 June 2017 and explain to Mr.
Angula the reason(s) for using the value per item that you used in your closing balance calculation.
(5)
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QUESTION 4
(30 MARKS)
Crazzzy Store Entity's current reporting date is 31 December 2017. On 31 December 2017, the
following balances appeared in the accounting records of Crazzzy Store Entity: The entity makes use of
a perpetual inventory system.
Additional
information
DEBIT
CREDIT
Cost of sales
Salaries
Water and electricity
Office supplies — expense
insurance expense
Credit losses
Rent expense
Bank charges
Depreciation — machinery
Depreciation - furniture and equipment
interest-expense on supplier’s loan
Sales
Interest-income on favourable bank balance
Land
Machinery at cost price
Accumulated depreciation — machinery
Furniture and equipment at cost price
Accumulated depreciation — furniture and equipment
Receivables (A to l) — total of individual balances
Receivable J
Trade inventories
Bank
Office supplies on hand on 31 Dec 2016
Insurance expense prepaid on 31 Dec 2016
Capital
Retained earnings — balance on 1 Jan 2017
Drawings
Trade payables (K to P) — total of individual balances
Payable City of Windhoek
Supplier’s loan
4 140 000
1 730 000
2
328 000
3
402 000
4
39 000
52 000
6
440 000
48 200
8
0
7
76 000
8
0
9 100 000
10 500
720 000
8
900 000
8
0
950 000
7
266 000
852 000
5
24 000
1
829 000
802 000
3
32 000
4
17 800
1 500 000
810 000
560 000
355 500
2
0
8
900 000
12 942 000
12 942 000
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ADDITIONAL INFORMATION:
The following transactions and events still have to be recognised in the records of Crazzzy Store
Entity:
1. The perpetual inventory system indicates that the following two events in respect of trade
inventories still have to be recognised:
1.1 Obsolete and damaged inventory items with a cost of N$22 000 on 31 December 2017 have
to be written off. The write—off has already been authorised by the owner.
1.2 During December 2017, the owner took inventories with a cost price of N$8 000 for personal
use.
2. The statement for water and electricity for December 2017, which reflects an amount due of
N$26 500 in respect of the water— and electricity usage for December 2017, was received on
8 January 2018 from City of Windhoek and still has to be recognised.
3. Office supplies on hand on 31 December 2017 amounts to N$42 000 and still has to be
recognised. The necessary journal entry in respect of office supplies on hand on 31 December
2016 also still has to be recognised.
4. Insurance premiums are paid annually on 1 July. The annual insurance premium, which was paid
on 1 July 2017, amounted to N$39 000. The full premium was debited against the insurance
expense for 2017. The insurance premium prepaid on 31 December 2017 still has to be
recognised. The necessary journal entry in respect of the insurance expense prepaid on
31 December 2016 also still has to be recognised.
5. After numerous fruitless attempts over a period of eight months, Receivable J could not be
located. It was consequently decided to write-off the amount due by Receivable J as
irrecoverable. The write-off has already been authorised by the owner and still has to be
recognised.
6. Due to an oversight, the lease payment for December 2017 to the amount of N$40 000 was paid
only on 16 January 2018. The necessary journal entry still has to be recognised.
7. The depreciation expense on furniture and equipment for 2017 was calculated and recognised as
N$76 000. The amount should however be N$95 000. The necessary adjustment still has to be
recognised.
8. On 2 January 2017, Crazzzy Store Entity utilised a supplier’s loan for the purchase of a machine.
The written loan agreement with the supplier inter alia stipulates that the interest rate is 10% per
year and that the interest and the primary debt is repayable in one amount on 31 December 2018.
At the end of each year, the interest is added to the primary debt. The interest schedule is as
follows:
Date
2 Jan 2017
31 Dec 2017
31 Dec 2018
Detail
Primary debt
Interest
Interest
Interest at 10% per
year
90 000
99 000
189 000
Amortised cost of the loan
900 000
990 000
1 089 000
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The applicable interest-expense for 2017 still has to be recognised.
On 2 January 2017, the machine was received and put into service. The estimated useful life of the
machine is 6 years. The depreciation expense for 2017 still has to be recognised in accordance with
the straight-line method.
REQUIRED:
a) Prepare the statement of profit or loss and other comprehensive income of Crazzzy Store Entity
for the reporting period ended 31 December 2017.
(14)
b) Prepare the statement of financial position of Crazzzy Store Entity for the reporting period as at 31
December 2017.
(16)
Note: VAT must not be accounted for.
END OF EXAMINATION PAPER
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