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FAC511S-FINANCIAL ACCOUNTING 101-1ST OPP-NOV 2024 |
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nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF MARKETING/BACHELOR OF LOGISTICS AND SUPPLY
CHAIN MANAGEMENT
QUALIFICATION
07BLSC
CODE:
07MARB/
LEVEL: 5
COURSE CODE: FAC 511S
COURSE NAME: FINANCIALACCOUNTING 101
DATE: NOVEMBER 2024
DURATION: 3 HOURS
PAPER: THEORYAND CALCULATIONS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION PAPER
EXAMINER(S) DUMISANI R. MUZIRA
MODERATOR: CALISTUS MAHINDI
INSTRUCTIONS
1. Capture your full name, student number and assessment number on the first page
2. Answer ALL the questions and manage your time properly.
3. Number each page correctly
4. Write clearly and neatly.
5. Do not write in pencil and do not use tip-ex, as this will not be marked.
6. The names of people and businesses used throughout this assessment do not reflect
the reality and may be purely coincidental.
7. SHOW ALL WORKINGS!
THIS QUESTION PAPER CONSISTS OF 4 PAGES (including this front page)
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Question One:
(30 Marks)
The following are ledger balances of J. Mac as at 30 June 2024 after his first year of trading
Equipment rental
Insurance
Lighting and heating expenses
Motor expenses
Salaries and wages
Sales
Purchases
Sundry expenses
Lorry
Trade payables
Trade receivables
Fixtures
Buildings
Cash at bank
Drawings
Capital
N$'000'
940
1,804
1,990
2,350
48,580
382,420
245,950
624
19,400
23,408
44,516
4,600
174,000
11,346
44,000
194,272
Note: Inventory at 30 June 2024 was N$29,304,000.
Required:
a) Prepare a trial balance as at 30 June 2024 before the inventory adjustment (10)
b) Prepare a statement of Profit or Loss and Other Comprehensive Income for the
year ending 30 June 2024.
(7)
c) Prepare a Statement of Financial Position as at 30 June 2024.
(10)
d) State the purpose of the trial balance
(3)
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Question Two:
(20 marks)
You have been provided with the following transactions of David, a sole trader, for the
month of June 2024. The entity uses the periodic inventory system to account for
inventory.
a) June 1, The owner invested N$700,000 cash into the business
b) June 2, Bought goods on credit from J. Bonds N$300,000
c) June 5, Sold goods on credit to B. Kurr N$65,000
d) June 15, Purchased office furniture for N$20,000 cash
e) June 25, B. Kurr made a bank transfer of N$25,000 as part payment of his account.
f) June 28, A bank transfer ofN$50,000 was made to pay J. Bonds
g) June 30 The owner took N$30,000 cash for personal use.
h) June 30, Bought note pads for cash N$3,000
Required:
Journalise the above transactions in the general journal of David for the month of June
2024: 2.5 marks each.
Question Three:
(25 marks)
The following errors were made by Rubby's bookkeeper.
1. A cash payment of N$20,000 for purchases has been omitted from the books.
11. A sale of N$10,000 to Jone has been posted to Jonny.
m. Repairs to vehicles amounting to N$30,000 has been posted to vehicles account.
1v. A purchase ofN$21,000 from Lee Limited has been entered in the purchases journal
and posted to the ledger as N$20, 100
v. A payment of N$70,000 to a creditor, Marry, should be debited to Marry's account
and credited to the cash account, but the entries are reversed.
Required:
a) Identify the error made by the bookkeeper in each of the transactions above.
(5)
b) Prepare journal entries to correct the errors. (Journal narrations are required)
(15)
c) Explain to the bookkeeper how errors that affect the trial balance are to be dealt with
(5)
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Question 4:
Part A
(25 marks)
State which classification (capital expenditure or revenue expenditure) is applicable for the
business ofT. Butcher, a food merchant.
(6)
a) Repairs to meat slicer
b) Installing extra toilet
c) Wages for shop assistant
d) Carriage on returns outwards
e) Fire insurance premium
f) Fitting partitions in shop.
Part B
The following information pertains to Bee Company:
• Cash balance per bank, July 31, $7 263
• July bank service charge not recorded by the depositor $15
• Cash balance per books, July 31, $7 190
• Deposits in transit, July 31, $1 700
• Note for $1 000, collected for Bee in July by the bank, plus interest $36 less fee
$20. The collection has not been recorded by Bee, and no interest has been
accrued.
• Outstanding payments, July 31, $772
Required:
a. Prepare the adjusting entries at July 31 on the books of Bee company.
(8)
b. Prepare a bank reconciliation at July 31, 2024
(6)
c. Explain five steps that can be employed in managing receivables
(5)
The End
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nAmlBIA unlVERSITY
OF SCIEn CE AnD TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES, AND EDUCATION
SCHOOL OF COMMERCE AND MANAGEMENT SCIENCES
DEPARTMENT OF ECONOMICS, ACCOUNTING, AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BOAG LEVEL:?
COURSE CODE: MFN71 OS
COURSE NAME: MANAGERIAL FINANCE 320
SESSION: NOVEMBER 2024
DURATION: 3 HOURS
PAPER: THEORY AND CALCULATIONS
MARKS: 100
EXAMINERS
MODERATOR
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
Lameck Odada, Dr Moses Nyakuwanika and Laban Nashinwe
Alfred Makosa
INSTRUCTIONS
1. This examination question paper consists of FOUR (4) questions
2. Answer ALL the questions in blue or black ink only. NO PENCIL.
3. Start each question on a new page and number the answers correctly and clearly.
4. Write clearly and neatly, showing all your workings/assumptions.
5. Work with at least four (4) decimal places in all your calculations and round off only final
answers to two (2) decimal places.
6. Questions relating to this examination may be raised in the initial 30 minutes after the start
of the examination. Thereafter, candidates must use their initiative to deal with any
perceived errors or ambiguities, and any assumptions the candidate makes should be
clearly stated.
PERMISSIBLE MATERIALS
1. Silent, non-programmable calculators
THIS QUESTION PAPER CONSISTS OF _6_ PAGES (including this front page)
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QUESTION 1
[29 MARKS]
The Konigstein Capital Group (KCG) was established in 2009 as an independent unlisted
investment manager focusing on the Namibian market's private equity and venture capital
fund management. Their investment objective is to provide investors with superior and
sustainable returns from a diversified portfolio of investments. By maintaining a good corporate
governance structure that includes a balance of blue-sky thinking, risk management, and
active participation in the strategic decision-making of portfolio investments, KCG can ensure
that its investments deliver according to their potential.
KCG has allocated N$5 billion for capital expansion in the forthcoming year. The management
of KCG believes that the company must spread its risk by investing in projects with different
risk profiles and has identified two possible investments (projects A and 8). The capital
available to KCG is sufficient to invest in only one of the projects. The following information
has been made available:
Economic growth
(annual average)
Zero
3%
6%
Probability of
occurrence
0.3
0.4
0.3
Estimated return %
Project A
Project B
14
8
10
6
8
22
Existing
investments
6
12
16
Book value
N$5 million
N$5 million N$10 million
Market value
N$5 million
N$5 million N$15 million
As the accountant, the management of KCG has requested that you determine which of the
two projects should be accepted using the portfolio theory to select.
REQUIRED
Calculate the standard deviation of both projects and the existing
a)
investments
MARKS
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Which of the two projects would you advise KCG to select? Motivate your
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b)
answer with appropriate calculations.
Determine the portfolio's expected return if KCG forms a portfolio of
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c) project A and the existing investments. Should KCG invest in this
portfolio?
d) Determine the covariance of Project A and existing investments
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Determine the portfolio's standard deviation if KCG forms a portfolio of
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e) project A and the existing investments. Should KCG invest in this
portfolio?
Differentiate systematic risk from unsystematic risk giving an example of
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f)
each
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QUESTION 2
[10 MARKS]
Corporate governance aims to safeguard the interests of shareholders and stakeholders while
ensuring the long-term viability of enterprises. The agency theory and the agency problem that
results from it are at the forefront of the theories that help to shape corporate governance. The
agency theory primarily focuses on the distinction between the interests of the company's
shareholders (principals) and the board of directors (agents).
The Chief Executive Officer (CEO), who is chosen by the board of directors, and senior
management of the business could find themselves in similar circumstances. In this situation,
top managers chosen by the board of directors serve as both the principals and the agents.
The agency hypothesis contends that because the principals and the agents have different
interests, this causes the agents to take actions that are at odds with the principals' objectives.
In businesses, this condition leads to agency issues. The agency problem, which results from
conflicts of interest between the principal and the agent, can have a variety of causes.
REQUIRED
Identify and discuss any five (5) causes of the agency problem
MARKS
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QUESTION 3
[31 MARKS]
When Verimark (VRK) opened its doors for the first time in 1977, it was with a staff of 2 people,
a capital base of RS 000, and a dream of building a company that would bring the best
innovations to the Southern African consumers. Currently, they employ around 1 200 people,
and the VRK brand has become one of the most recognised and trusted brands in Southern
Africa and in many other parts of the world. VRK is today ranked as the largest buyer of
television airtime and specialises in continuous and aggressive marketing of their innovative
products. VRK currently offers a VRK card to customers, which enables consumers to
purchase VRK products on credit. VRK does not currently offer any early settlement discounts.
You have also been provided with the following extracts from the VRK Integrated report as of
29 February 2024:
Trade Receivables
Inventory
Trade payables
Bank Overdraft
Note
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2024
R
61,969,784
65,580,906
25,270,622
9,929,334
2023
R
64,072,399
79,531,209
33,326,469
13,284,957
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Revenue
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Cost of Sales
Gross Profit
Operating profit before finance income and
finance expense
Finance income
Finance expenses
Profit for the year from continuing operations
Note 1
Merchandise
Merchandise in transit
Impairment of inventory
Inventory
Note 2
Trade receivables
Impairment (bad debts)
Trade and other receivables
430,798,744
(257 I 862,994)
172,935,750
17,829,811
1,785,130
(6,467,307)
9,265,281
2024
R
66,620,149
2,966,753
(4,005,996)
65,580,906
2024
R
62,611,923
(642,139)
61,969,784
415,373,764
(246,502,223)
168,871,541
18,108,223
2,376,303
(3,480,089)
11,994,013
2023
R
75,335,866
8,350,022
(4,154,679)
79,531,209
2023
R
64,176,924
(104,525)
64,072,399
The impairment allowance has been raised against trade receivables that are considered to
be impaired due to uncollectable amounts and credit claims.
Credit risk
The VRK's exposure to credit risk is influenced mainly by the individual characteristics of each
customer. The VRK's most significant customer, a domestic retailer, accounts for R50,681,081
(2023: R51, 199,656) of the trade receivables carrying amount on 29 February 2023. Even
though VRK has significant credit risk exposure to this client, it was noted that this retailer has
a great attitude towards paying their debts and currently always settles their accounts within
the credit terms as stipulated. Normal trading terms are 50 days, but not always adhered to.
Credit clients are not required to provide collateral for products purchased on credit. VRK has
policies to ensure that sales of products are made to customers with an appropriate credit
history. An established credit policy exists under which each new customer is analysed
individually for creditworthiness before the VRK's standard payment and delivery terms, and
conditions are offered. The VRK's review of creditworthiness includes external ratings when
available and, in some cases, bank references.
Note 3
27% of sales relate to cash sales, while the remaining 73% use the VRK card. VRK does not
offer any early settlement discounts currently.
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Future growth strategy
VRK is considering opening a branch in Namibia. VRK plans to actively start marketing the
VRK card program to Namibian customers to break into the Namibian market. To remain
competitive in this market, they are pondering credit terms in line with the other related credit
providers:
• 5% early settlement discounts if accounts are settled within 7 days (corresponding to
the cooling off period for online purchase agreements). 20% of credit sales are
expected to be paid within 7 days.
• 30 days credit if not taking the discount.
• It is expected that bad debts will increase to 5% of trade receivables.
• It is expected that credit sales will increase by 10% should the VRK card be marketed
more actively, whereas cash sales will remain unaffected.
• Gross profit percentages will remain constant.
• Money market investments in Namibia currently offer 6% interest per annum. It is
expected that the increase in credit sales and a quicker debt collection period will result
in a positive cash balance in the future.
Another alternative for VRK to gain competitive advantage in the Namibian market, is to
consider factoring the company receivables with a banking institution. VRK hopes the debt
collection will improve by factoring their debtors' books.
Assumptions
• Assume all credit payments are received at the end of each month.
• Round all values to 2 decimals.
• Assume that there are 365 days in a calendar year.
• Round up all the days' calculations to the nearest full day.
REQUIRED
MARKS
Explain the five (5) factors that credit managers should consider when 10
a)
assessing a potential customer's creditworthiness.
Calculate and comment on the cash flow conversion cycle of VRK by
assessing the following ratios for 2023 and 2024:
• Debtors Days
4
b)
• Inventory Days
4
• Creditors Days
4
• Cash conversion cycle
4
Identify any five (5) advantages of factoring a debtor's book to a financial
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c)
institution from the perspective of VRK.
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QUESTION 4
[30 MARKS]
Baker Hughes Company (BHC) undertook a project involving the construction of a seawater
desalination plant near Swakopmund. The project was completed on 01 January 2024 for
N$10 000 000. The directors of BHC believe their multi-million-dollar project shall be able to
supply all the water to be consumed at some 40km into the desert. After 5 years, the company
must dismantle the equipment and restore the environment. Management of BHC has
established that the cost of dismantling and restoring the environment was N$4 000 000 on 1
January 2024. BHC would want to evaluate several investment opportunities and understand
the overall risk of their assets as perceived by the market. Accordingly, the directors have set
out to calculate the company's weighted average cost of capital (WACC).
Equity, bonds and preference shares currently finance the assets of the company. The details
are as follows:
Debt: BHC issued 10 000 bonds that are currently outstanding with a 6% annual coupon rate.
The bonds mature in eight years and have a N$1 000 face value. These bonds are currently
trading in the market for N$1 100.
Preference shares: BHC also has in issue 3% Preference shares with a par value of N$100
each amounting to 100 000 shares. These preference shares are perpetual shares that are
not redeemable at any time. The preference shares are currently selling for N$30 per share in
the market.
Equity: BHC has 500 000 shares currently selling for N$25 each in the market. The shares
have a beta of 1.5. The risk-free rate is 4%, and the expected market return is 12%. Recently,
the company paid a dividend of N$2.32 per share, and management expects the growth in
dividends to be 6% per share forever. The corporate tax rate is 20%.
REQUIRED
MARKS
a) Describe the weighted average cost of capital (WACC) in your own words.
5
Determine the market value and estimate the BHC pre-tax and after-tax
6
b)
cost of debt.
c) Calculate the BHC cost of preference shares.
3
Determine the BHC cost of equity using both the Dividend Growth Model
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d)
(DGM) and the Capital Asset Pricing Model (CAPM)
Calculate the Weighted Average Cost of Capital of BHC to the nearest
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e)
whole number. Use the least cost of equity capital
Describe investment and financing decisions and explain whether these
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f)
decisions should be considered separately or together.
END OF EXAMINATION QUESTION PAPER
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