POLYTECHNIC OF NAMIBIA FIRST OPPORTUNITY

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1 POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING, ECONOMICS & FINANCE BACHELOR OF ACCOUNTING FINANCIAL ACCOUNTING 102 (FAC 5125) FIRST OPPORTUNITY EXAMINATION QUESTION PAPER Date: Duration: November Hours Total marks: 100 INSTRUCTIONS I NOTES 1. This examination consists of four (4) questions. 2. Answer ALL the questions and in ink. 3. Start each question on a new page in your answer booklet & show all your-workings. 4. Queries relating to this paper 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. 5. This paper consists of 6 pages excluding the cover page. EXAMINERS: D Kamotho, E Milijala and Ms Z Stellmacher MODERATOR: E Mushonga

2 Question 1 (20 marks) The Debtors Ledger control account of Ambrose Somaeb as at 31st May 2014 showed the following balances: Debit N$79,266 and Credit N$1,332. These balances did not agree with the list of debtors balances extracted on that date with N$74,790. An examination of the books of Ambrose Somaeb revealed the following: i. Ambrose Somaeb had accepted returns of N$1,200 from a customer and entered them correctly in the books. He subsequently decided that a restocking charge of 12% was to be charged to the customer. This restocking charge was posted to the credit of the customer's personal account only. ii. A credit note was sent to a customer for N$732. The only entry made in the books was N$132 debited to the customer's account. iii. Cash sales N$300 and credit sales N$ 600 posted correctly in the Sales book but both had been entered by Ambrose Somaeb on the credit of a debtors account. iv. Ambrose Somaeb had charged a customer interest on an overdue account amounting to N$279. The only entry made in the books was a credit of N$117 to the debtors account. After a discussion with the debtor and payment in full of the original balance the interest charge was reduced to N$150. No entry was made in respect of this reduction in the books. v. A cheque for N$1,200 received from a debtor in full settlement of a debt of N$1,430 had been entered in the books, however the cheque was dishonoured. No record had been made in the books regarding the dishonoured cheque. vi. Ambrose Somaeb had sent an invoice to a customer for N$1,650. This had been entered in the appropriate day book as N$1,515, when posting from this book to the ledger. No entry had been made in the personal account. You are required to show the following: a) Adjusted debtors ledger control account as at 31/05/2014 b) Adjusted schedule of debtors as at 31/05/2014 (1 0 Marks) (10 Marks) [Total 20 marks] 1

3 Question 2 (25 marks} Nam-Company manufactures and sells three products: Toto, Loto and Koto. The following information is available for the year ended 31 December 2013 (on a per unit basis): Inventory Costs Cost to Sales Costs to Units in Item Incurred Complete Price Sell Inventory N$ N$ N$ N$ Toto ,750 Loto ,080 Koto 2.00 Nil ,110 Required: a. Write a brief note on the following terms as they relate to inventory valuation in the financial statements: i. Cost ii. Net realisable value (NRV) iii. First in- first out (FIFO) iv. Average cost (AVCO). (8 Marks) b. State the principle used to value inventory items for inclusion in the financial statements of a business. (1 Mark) c. Calculate the total value of inventory for inclusion in the financial statements of Nam- Company as at 31 December (10 Marks) d. Prepare the journal entry to record closing inventory in the financial statements of Nam- Company as at 31 December (2 Marks) e. Outline in details the effect on the Statement of Profit and Loss and Statement of Financial Position if closing inventory is under-valued. (4 Marks) [Total 25 Marks] 2

4 Question 3 The trial balance fo.r Namdan enterprise as at 31 December 2013 is as follows: (30 marks) Revenue N$000 Purchases 33,120 N$000 59,200 Inventory 1 January ,560 Distribution costs 4,320 Administration costs 5,840 Land at valuation (note (iv)) 42,000 Property at cost (note (iii)) 32,000 Property accumulated depreciation as at 1 January ,520 Plant and equipment at cost (note (iii)) 51,200 Plant and equipment accumulated depreciation as at 1 January ,920 Trade receivables 16,480 Trade payables 8,960 Bank 640 Ordinary issued SOc shares Share premium account Revaluation reserve as at 1 January 2013 Retained earnings as at 1 January % loan redeemable 2112 (note (ii)) (Note that figures m the above table are m N$000s- thousands) The following notes are applicable: 56,000 16,000 12,000 12,560 8, (i) Inventory as at 31 December 2013 amounted to N$6,240,000 at cost. A review of inventory revealed the following: Items costing N$320,000 that had been included in the inventory at 31 December 2013 were found to have deteriorated. Their normal selling price was N$480,000, but even after remedial work of N$80,000, these items could only be sold for N$360,000 in early

5 Question 3 (Cont'd.) (ii) The interest on the loan has not been paid for the year ended 31 December 2013 and must be accrued for. (iii) Depreciation is to be calculated for the year ended 31 December 2013 as follows: (a) (b) Property 2% per annum on cost Plant and equipment 15% per annum on cost Depreciation calculated for the year is to be charged 80% cost of sales, 10% distribution costs and 10% administration costs. (iv) Land is to be revalued to N$48,000,000 as at 31 December (v) (vi) Tax for the year ended 31 December 2013 is chargeable at 30% of profits for the year before receiving or paying dividends. Adjustments for accruals and prepayments are required as follows: Accruals Prepayments Distribution costs N$76,000 N$48,000 Administration costs N$28,000 N$24,000 Required: (a) Prepare in a form suitable for publication the Statement of Profit or Loss for the year ended 31 December 2013 and (15 marks) (b) The Statement of Financial Position as at 31 December 2013 for Namdan in accordance with International Accounting Standards (lass). (15 marks) Show all your workings [Total 30 Marks] 4

6 Question 4 (25 marks) Geoff, Henry and I an are in partnership sharing profits and losses in the ratio 4:2:2. The partners receive a salary of N$5,000, N$6,000 and N$7,000 each and are entitled to interest on the balance on their capital accounts at 5% per annum. I an is entitled to a guaranteed share of profits, in addition to his salary and interest on capital, of N$6,000 any deficiency to be borne by Geoff and Henry equally. The following is the draft statement of financial position of the partnership as at 31 October 2014 (before the profit for the year has been divided between the partners). Draft Statement of Financial Position as at October 2014 Cost Accumulated NBV Depreciation Non-current Assets N$ N$ N$ Premises 250,000 50, ,000 Plant and machinery 130,000 65,000 65,000 Furniture and fittings 25,000 5,000 20, , , ,000 Current Assets Inventory 30,000 Trade receivables 26,000 Bank TOTAL ASSETS 353,000 Equity and Liabilities Equity Partners' Capital Accounts Geoff 80,000 Henry 70,000 I an ,000 Partners Current Accounts Geoff 16,000 Henry (20,000) I an 10,000 6,000 Profit for the year (not yet divided between 88,000 the partners) Current liabilities Payables 26,000 Short term loan from Nambank 13, TOTAL EQUITY AND LIABILITIES 353,000 5

7 Question 4 (Cont'd.) Adjustments are required in respect of the following items: 1) Depreciation for the year has not been provided. It should be provided for as follows: Premises... N$5,000 Plant and machinery... N$26,000 Furniture and fittings... N$5,000 2) Wages and salaries for the month ending October 2014 amounting to N$14,000 have not been paid nor provided for in the above financial statements. 3) Rent amounting to N$21,000 was paid on 01 September 2014 for the three months ending 30th November You are required to prepare: a) A statement setting out the adjustments required to the profit for the year arising out of items (1) to (3) above; (5 Marks) b) A statement setting out the appropriation of the adjusted profit between the partners; (5 Marks) c) The current accounts of the partners; (5 Marks) d) The revised Statement of Financial Position as at 31 October 2014 after dealing with parts (a) to (c) above. (10 Marks) [fotal: 25 Marks] END OF QUESTION PAPER 6

POLYTECHNIC OF NAMIBIA

POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING, ECONOMICS & FINANCE BACHELOR OF ACCOUNTING FINANCIAL ACCOUNTING 102 (FAC 512S) SECOND OPPORTUNITY EXAMINATION QUESTION PAPER