ACCOUNTING I Accounting reporting (ACN102N) (Module 2)

Transcription

1 ACN102N/202/2/2007 DEPATMENT OF FINANCIAL ACCOUNTING ACCOUNTING I Accounting reporting (ACN102N) (Module 2) Tutorial letter 202/2/2007 Dear student Enclosed the solution to Assignment 02/2007, the October 2005 examination paper and the memorandum thereof. The following questions or parts of questions of Assignment 02 have been marked: Question Marks 2 (1) (Admission of a partner, dissolution of a partnership) 25 3 (1) (Statement of changes in net investment of members) 9 3 (2) (Balance sheet ASSETS section) 11 4 (2) (General journal partial) It is in your own interest to work through the assignment and examination paper in conjuction with the solutions and your written answers. With kind regards Ms JA Curtayne Ms ES de Klerk Ms L Fourie Mr N Ngcobo Ms A ehwinkel LECTUES: ACCOUNTING I: Accounting reporting (ACN102N) ANNEXUE A: SOLUTION TO ASSIGNMENT 02/2/2007 ANNEXUE B: EXAMINATION PAPE AND MEMOANDUM: OCTOBE 2005

2 ANNEXUE A: SOLUTION TO ASSIGNMENT 02/ Marking scheme for all questions: = mark; = 1 mark NB: An encircled figure refers to a calculation. With each calculation, an analysis of the mark allotted is given. When assignments are marked, the calculation of an answer will only be referred to when an answer (of a calculation) is incorrect. If the answer of a calculation is correct, the full calculation marks will be given without referring to the details of the calculation. However, you must show all calculations when answering an examination paper. Full marks will not necessarily be allotted if only the answer of a calculation is shown. QUESTION 1 (30 marks) DO DI TADES INCOME STATEMENT FO THE YEA ENDED 31 MACH 20.2 evenue Cost of sales Inventory (1 April ) Purchases Delivery expenses Inventory (31 March 20.2) Gross profit Other income Profit on sale of office furniture Discount received Note ( ) (39 700) Distribution, administrative and other expenses ( ) Bad debts (4) Bank charges Delivery expenses - sales Depreciation & (10) Discount allowed Fuel and sundry vehicle expenses Maintenance and repairs office furniture Marketing fees ent expense Salaries and wages ( ) Stationery consumed Telephone expenses Finance costs (22 500) Interest on long-term loan ( ) Loss for the year ( ) (30)

3 3 ACN102N/202 QUESTION 1 (continued) Calculations evenue Sales Sales returns (7 000) (1 ) Purchases Purchases Purchases returns Drawings: D Do Bad debts (2 585) (2 500) (1 ) The closing balance of the provision for bad debts account on 31 March 20.2 must be: 5% x ( ) = (new provision) New provision old provision = amount of increase in provision for bad debts: ( ) = The bad debts that must be disclosed in the income statement is equal to: Bad debts written off + amount of increase in the provision for bad debts: = ( ) = (4) Depreciation: office furniture Calculation of the cost price of the office furniture at the beginning of the year: Cost price at the end of the year Office furniture sold - 30/9/ Office furniture purchased - 30/9/ Cost price at the beginning of the year (40 000)

4 4 QUESTION 1 (continued) Depreciation on the office furniture in possession for the whole year: ( ) = (cost price ) or ( ) = ( ) = (carrying amount) x 20% = Comment: The accumulated depreciation pertaining to the sold office furniture was journalised out of the books at the date of sale. Therefore, the amount of at 30 September pertains only to the office furniture that Do Di Traders had in its possession for the whole year, namely Depreciation on the office furniture that was sold during the year: Given: Depreciation on the office furniture that was purchased during the year: x 20% x 6 / 12 = Total amount of the (current) depreciation on the office furniture: ( ) = (7) 5 Depreciation - vehicles ( ) 10 = Stationery consumed Opening inventory Purchases Closing inventory Drawings: D Di (450) (235) (3) (2) Interest on long-term loan x 18% Less amount already paid (21 250) Amount still payable (as shown in income statement) (from list of balances) is included in Trade and other payables in the Balance Sheet. (1 )

5 5 ACN102N/202 QUESTION 1 (continued) The statement of changes in equity, the balance sheet and the notes to the financial statements were not required, but are included in the solution, should you be interested in preparing it. DO DI TADES STATEMENT OF CHANGES IN EQUITY FO THE YEA ENDED 31 MACH 20.2 Capital Current accounts Appro- D Do D Di D Do D Di priation Total Balances at 1 April (27 500) Loss for the year ( ) ( ) Salary to partner (15 000) - Interest on capital (46 750) - Interest on current accounts (4 125) Partners share of loss ( ) ( ) Drawings (67 500) (70 235) ( ) Balances at 31 March ( ) ( ) Calculations Partners share of loss Calculation of loss: Loss as per income statement ( ) Salary to D Di (15 000) Interest on capital: D Do (25 500) D Di (21 250) Interest on current accounts: D Do D Di (2 250) Loss to be appropriated ( ) When the ratio according to which the profits/losses between the partners must be appropriated is not given, the partners capital contributions are used to calculate the ratio: Therefore: Capital: D Do : Capital: D Di : D Do s share is x = (shown to the nearest rand)

6 6 QUESTION 1 (continued) D Di s share is x = (shown to the nearest rand) Drawings D Do D Di Balance as per trial balance Salary: D Di Trading inventory/stationery inventory DO DI TADES BALANCE SHEET AS AT 31 MACH 20.2 ASSETS Non-current assets Note Property, plant and equipment Current assets Inventories ( ) Trade and other receivables ( ) Total assets EQUITY AND LIABILITIES Total equity Capital * ( ) Current accounts * ( ) ( ) Total liabilities Non-current liabilities Long-term loan (unsecured) Current liabilities Bank overdraft Trade and other payables ( ) Total equity and liabilities * See statement of changes in equity.

7 7 ACN102N/202 QUESTION 1 (continued) DO DI TADES NOTES FO THE YEA ENDED 31 MACH Accounting policy 1.1 Basis of presentation The annual financial statements have been prepared on the historical cost basis to comply with Generally Accepted Accounting Practice, appropriate to the business of the partnership. The following principal accounting policies, which are consistent with those of previous years, were applied: 1.2 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation on assets is written off at a rate deemed to be sufficient to reduce the carrying amount of the assets over their estimated useful life to their residual value. The depreciation rates are as follows: Office furniture: 20% per annum according to the diminishing-balance method. Vehicles: According to the straight-line method. 1.3 Inventories Inventories are valued at the lower of cost and net realisable value. 1.4 evenue evenue consists of the total net invoiced sales excluding value-added tax. The revenue from sales is recognised when the ownership of the inventory of the business is transferred to the customer. 2. Property, plant and equipment Carrying amount: Beginning of year Cost Accumulated depreciation Additions Disposals ( ) Depreciation for the year Office furniture Vehicles Total (80 400) (11 520) (20 640) (10 800) - - (18 000) (91 200) (11 520) (38 640) Carrying amount: End of year Cost Accumulated depreciation (92 560) (28 800) ( )

8 8 QUESTION 1 (continued) Calculations Dr Accumulated depreciation: office furniture Cr ealisation account (Total amount Balance b/d * of depreciation written back) Depreciation (sold furniture) Balance (30/9/) c/d * Balancing entry Total amount of depreciation written back Carrying amount of sold office furniture + Profit on sale of office furniture = Selling price Carrying amount = ( ) = Cost price - Accumulated depreciation (AD) = Carrying amount AD = AD = Accumulated depreciation: office furniture ( ) =

9 9 ACN102N/202 QUESTION 2 (43 marks) 1. A AND B TADING AS: AB TADES GENEAL JOUNAL Feb 28 * Furniture and equipment ( ) Inventories ( ) Valuation account Adjustments to the balances of the assets to that of their valuations in preparation for the admission of C * Valuation account Provision for bad debts ( x 5%) Providing for bad debts in preparation for the admission of C Valuation account Capital: A ( 5 / 8 x ) Capital: B ( 3 / 8 x ) Closing off the balancing amount in the valuation account to the capital accounts of A and B in their profit-sharing ratio. Goodwill Capital: A ( 5 / 8 x ) Capital: B ( 3 / 8 x ) ecording goodwill in preparation for the admission of C. Transferral account Furniture and equipment Goodwill Inventories Trade debtors Bank Closing off the balances of the assets accounts to the transferral account to record the dissolution of the partnership. Capital: A ( ) Capital: B ( ) Trade creditors Provision for bad debts Transferral account Closing off the balances of the equity, liability and provision accounts to the transferral account to record the dissolution of the partnership Debit Credit (25)

10 10 QUESTION 2 (continued) Comment *Alternatively the first two (2) journal entries can be shown as one entry, as per the study guide and the prescribed textbook. Feb 28 Furniture and equipment ( ) Inventories ( ) Provision for bad debts ( x 5%) Valuation account ecording the valuation adjustments Calculation Goodwill Selling price of the net assets of the new partnership is: x 5 ( 100 / 20 ) = (Fair value of net assets) Fair value Total of equity accounts = purchased goodwill [( ) + ( ) ] = = The general ledger is shown for explanatory purposes. A AND B TADING AS: AB TADES GENEAL LEDGE Debit Credit (25) (2 ) Dr Furniture and equipment Cr Feb 28 Balance b/d Feb 28 Transferral account Valuation account Dr Goodwill Cr Feb 28 Capital: A ( 5 / 8 x ) Capital: B ( 3 / 8 x ) Feb 28 Transferral account

11 11 ACN102N/202 QUESTION 2 (continued) Dr Inventories Cr Feb 28 Balance b/d Feb 28 Transferral account Valuation account Dr Trade debtors Cr Feb 28 Balance b/d Feb 28 Transferral account Dr Provision for bad debts Cr Feb 28 Transferral account Feb 28 Valuation account Dr Bank Cr Feb 28 Balance b/d Feb 28 Transferral account Dr Capital: A Cr Feb 28 Transferral account Feb 28 Balance b/d Valuation account Goodwill Dr Capital: B Cr Feb 28 Transferral account Feb 28 Balance b/d Valuation account Goodwill

12 12 QUESTION 2 (continued) Dr Trade creditors Cr Feb 28 Transferral account Feb 28 Balance b/d Dr Valuation account Cr Feb 28 Provision for bad debts ( x 5%) Capital: A ( 5 / 8 x ) Capital: B ( 3 / 8 x ) Feb 28 Inventories ( ) Furniture and equipment ( ) Dr Transferral account Cr Feb 28 Furniture and equipment Feb 28 Capital: A Goodwill Inventories Trade debtors Bank Capital: B Trade creditors Provision for bad debts

13 13 ACN102N/202 QUESTION 2 (continued) 2. A, B AND C TADING AS: ABC TADES GENEAL JOUNAL Mar 1 Furniture and equipment ( / x ) Goodwill ( / x ) Inventories ( / x ) Trade debtors ( / x ) Bank ( / x ) Trade creditors ( / x ) Provision for bad debts ( / x 1 000) Capital: A ecording the contribution of A Furniture and equipment ( / x ) Goodwill ( / x ) Inventories ( / x ) Trade debtors ( / x ) Bank ( / x ) Trade creditors ( / x ) Provision for bad debts ( / x 1 000) Capital: B ecording the contribution of B Bank Capital: C ecording the contribution of C The general ledger is shown for explanatory purposes. A, B AND C TADING AS: ABC TADES GENEAL LEDGE Debit Credit (18) Dr Furniture and equipment Cr Mar 1 Capital: A Capital: B

14 14 QUESTION 2 (continued) Dr Goodwill Cr Mar 1 Capital: A Capital: B Dr Inventories Cr Mar 1 Capital: A Capital: B Dr Trade debtors Cr Mar 1 Capital: A Capital: B Dr Provision for bad debts Cr Mar 1 Capital: A Capital: B Dr Bank Cr Mar 1 Capital: A Capital: B Capital: C

15 15 ACN102N/202 QUESTION 2 (continued) Dr Capital: A Cr Mar 1 Trade creditors Provision for bad debts Balance c/d Mar 1 Furniture and equipment Goodwill Inventories Trade debtors Bank Mar 1 Balance b/d Dr Capital: B Cr Mar 1 Trade creditors Provision for bad debts Balance c/d Mar 1 Furniture and equipment Goodwill Inventories Trade debtors Bank Mar 1 Balance b/d Dr Capital: C Cr Mar 1 Bank Dr Trade creditors Cr Mar 1 Capital: A Capital: B

16 16 QUESTION 3 (43 marks) 1. AFI TADES CC STATEMENT OF CHANGES IN NET INVESTMENT OF MEMBES FO THE YEA ENDED 28 FEBUAY 20.2 Balances at 1 March Profit for the year Distribution to members Members contributions etained earnings ( ) Asset replacement reserve Loan from member Loan to member (50 000) Total ( ) Balances at 28 February (50 000) Non-current liability Current liability Calculation Profit for the year Profit before tax (9) Income tax expense (68 215)

17 17 ACN102N/202 QUESTION 3 (continued) 2. AFI TADES CC BALANCE SHEET AS AT 28 FEBUAY 20.2 ASSETS Note Non-current assets Property, plant and equipment Investment at fair value Current assets Inventories ( ) Loan to member Trade and other receivables ( ) Prepayments Income tax receivable ( ) Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Members contributions etained earnings Asset replacement reserve* Total liabilities Non-current liabilities Long-term loan from Aus Bank (Secured by a first mortgage over land and buildings) Loan from member (unsecured) Current liabilities Bank overdraft Trade and other payables ( ) Current portion of loan from member Profit distribution payable ( ) Total equity and liabilities (25) *Please note: The term General reserve needs to be replaced with Asset replacement reserve in all study material, with one exception. Please refer to Tutorial Letter 103/1/2007 for details.

18 18 QUESTION 3 (continued) 3. AFI TADES CC NOTES FO THE YEA ENDED 28 FEBUAY 20.2 (EXTACT) 2. Property, plant and equipment Land and buildings Equipment Total Carrying amount: Beginning of year Cost Accumulated depreciation (21 070) (21 070) Depreciation for the year - (41 250) (41 250) Carrying amount: End of year Cost Accumulated depreciation - (62 320) (62 320) QUESTION 4 (42 marks) 1. MAX4 LIMITED Allotment schedule Group Number of applications in group Total number of shares applied for Cash received Capital Premium Total (9) Cash repaid Shares allotted Capital Premium A B C Totals Calculations Group A = = x 2 = x 0,25 = = All shares allotted Group B = = x 2 = x 0,25 = = % of = x 2 = x 0,25 = Group C = = x 2 = x 0,25 = = % of = x 2 = x 0,25 = (11)

19 19 ACN102N/202 QUESTION 4 (continued) 2. MAX4 LIMITED GENEAL JOUNAL Debit Jun 1 Underwriter s commission ( x 2,25 x 3%) City Merchant Bank 3% underwriter s commission due on in terms of the underwriter s agreement Aug 1 Bank ( x 2,25) Application and allotment: Ordinary shares eceipt of application money from the public Application and allotment: Ordinary shares Ordinary share capital ( x 2) Share premium ( x 0,25) Allotment of ordinary shares of 2 each at a share premium of 0,25 per share Application and allotment: Ordinary shares Bank Application money repaid to unsuccessful applicants City Merchant Bank Bank Underwriter s commission paid 20.2 Nov 30 Bank ( x 1,70) Application and allotment: Ordinary shares eceipt of application money from the public Underwriter s commission ( x 1,70 x 4%) City Merchant Bank 4% underwriter s commission due on in terms of the underwriter s agreement Application and allotment: Ordinary shares ( x 1,70) Discount on shares ( x 0,30) Ordinary share capital Allotment of shares of 2 each at a discount of 0,30 per share * City Merchant Bank ( x 1,70) Discount on shares ( x 0,30) Ordinary share capital Allotment of shares of 2 each at a discount of 0,30 per share to City Merchant Bank * Bank ( ) City Merchant Bank Balance paid by City Merchant Bank * You will not be examined on shares issued at a discount Credit (31)

20 ANNEXUE B: EXAMINATION PAPE AND MEMOANDUM: OCTOBE 2005 (ADJUSTED ACCODING TO THE 2007 SYLLABUS) 20 PLEASE NOTE: 1. Ensure that you are writing the correct examination paper. 2. Ensure that you are handed the correct examination answer book (BLUE) by the invigilator. 3. All questions must be answered. 4. Basic calculations, where applicable, must be shown. 5. Each question must be commenced on a new (separate) page. 6. Please do not answer the paper in pencil. POPOSED TIMETABLE (try not to deviate from this) Question Subject Marks Time in minutes 1 Statement of changes in equity, balance sheet and calculations: Partnership Manufacturing cost statement and income statement: Manufacturing enterprise (CC) Profit-sharing ratio and piecemeal liquidation: Partnerships Journal entries: Share transactions (company) General ledger: Branch adjustment account TOTAL

21 21 ACN102N/202 QUESTION 1 (22 marks)(26 minutes) U Beauty and S Beast are partners in a partnership trading as Animation Traders. Piglet is their inexperienced accountant. After Piglet recorded all the year-end adjustments that he was aware of, he closed off the nominal accounts. Thereafter he prepared the following list of balances in respect of Animation Traders at 30 June 2005: Capital: U Beauty (1 July 2004) Capital: S Beast (1 July 2004) Current account: U Beauty (credit) (1 July 2004) Current account: S Beast (debit) (1 July 2004) Drawings: U Beauty Drawings: S Beast Land and buildings at cost Furniture and equipment at cost Bank (debit) Trading inventory Provision for bad debts (1 July 2004) % Long-term loan Accumulated depreciation: Furniture and equipment (1 July 2004) Trade debtors Wages prepaid Accrued administrative expenses Trade creditors Profit and loss account (profit) Additional information: On 30 June 2005, after the above list of balances was prepared, Piglet took note of the following: 1. He forgot to record the depreciation for the financial year. Depreciation is calculated on the furniture and equipment at 10% per annum according to the diminishing balance method. No furniture and equipment were sold or purchased during the financial year. No depreciation is recorded on land and buildings. 2. He forgot to adjust the provision for bad debts account. The balance of the provision for bad debts account must be equal to 5% of the balance of the trade debtors at the end of the financial year. 3. Animation Traders rents office space to Winnie. A rental contract was entered into with her for the whole financial year, and a fixed monthly fee was stipulated. Piglet recorded the monthly rental fees that were received from Winnie correctly. During the year a total amount of was received from Winnie in payment of her rental fees. No rental fee was received from her in respect of June Piglet forgot to record this receivable amount.

22 22 QUESTION 1 (continued) 4. On 1 June 2005, whilst unpacking a batch of toys that was purchased on 31 May 2005 by Animation Traders, Beast took a toy with a cost price of 200 as a birthday gift for his son. The purchase of the trading inventory (which included the gift) was correctly recorded by Piglet on 31 May Piglet applies the periodic inventory system. Piglet forgot to record that a toy was taken by Beast. On 30 June 2005 the closing balance of the trading inventory (3 000) was determined by an inventory count and recorded as such. 5. According to the terms of the partnership agreement, interest at 8% per annum on the opening balances of the partners capital and current accounts must be taken into account. The profit-sharing ratio was not stipulated in the partnership agreement. EQUIED: 1.1 Calculate the adjusted profit of Animation Traders for the year ended 30 June 2005 by taking the additional information into account. (5) 1.2 Prepare the statement of changes in equity of Animation Traders for the year ended 30 June 2005 to comply with the requirements of Generally Accepted Accounting Practice, appropriate to the business of the partnership. The total column need not be included. (10) 1.3 Prepare the ASSETS section of the balance sheet of Animation Traders as at 30 June 2005 to comply with the requirements of Generally Accepted Accounting Practice, appropriate to the business of the partnership. Notes and comparative figures are NOT required. (7) NB: Show all calculations. [22]

23 23 ACN102N/202 QUESTION 2 (28 marks)(34 minutes) The following information appeared in the accounting records of Teekay CC, a manufacturing entity: Extract from balances as at 31 August 2005: Inventory - 1 September 2004 aw materials (direct)... Work-in-progress... Finished products... Purchases: aw materials (direct and indirect)... Salaries and wages: Factory... Sales department... Water and electricity: Factory... Sales department... Administrative expenses: Factory... Sales department... Depreciation: Factory machinery... Equipment: sales office... Sales... eceiver of evenue (income tax)(debit)... Interest expense: Long-term loan Additional information: 1. Inventory balances 31 August 2005: aw materials (direct) Work-in-progress Finished products Included in the purchases of raw materials are indirect materials amounting to that were issued to production and consumed during the financial year. 3. Thirty percent (30%) of the salaries and wages in the above list of balances which pertain to the factory represents indirect labour. Of this indirect labour, pertains to the salary of the factory manager. 4. At 1 September 2004 the provision for the unrealised profit in the inventory of the finished products (which is included in the finished products inventory) amounted to A constant profit percentage is added to the cost of finished products manufactured. 5. The actual normal income tax for the financial year amounted to and must still be recorded.

24 24 QUESTION 2 (continued) EQUIED: 2.1 Prepare the manufacturing cost statement of Teekay CC for the year ended 31 August (17) 2.2 Prepare the income statement of Teekay CC for the year ended 31 August Your answer must comply with the provisions of the Close Corporations Act, No 69 of 1984, as well as with the requirements of GAAP. Notes and comparative figures are NOT required. (11) NB: Show all calculations. [28] QUESTION 3 (18 marks)(22 minutes) 3.1 Al and Leon are in partnership and their profit-sharing ratio is 7:5 respectively. They decided to admit Eddie as a partner. Eddie will share in a sixth of the profits and losses of the new partnership. Al and Leon will relinquish Eddie s profit-share on an equal basis. EQUIED: Calculate the profit-sharing ratio of the partners of the new partnership. (5) 3.2 Mabuza, Ismael and Dan are in a partnership, sharing profits and losses in a ratio of 5:3:2 respectively. They decided to liquidate the partnership by disposing of the assets piecemeal. The first interim repayment will be made to the partners after the first liquidation of the assets. At the starting date of the liquidation, the following list of balances was drawn up: Capital: Mabuza Capital: Ismael Capital: Dan Asset replacement reserve Furniture and equipment at carrying amount Inventory Bank (debit) At the first liquidation of the assets, all of the inventory was sold for , cash. EQUIED: Calculate the amounts payable to the partners as a first interim repayment. Apply the loss-absorption-capacity method. (13) [18]

25 25 ACN102N/202 QUESTION 4 (18 marks)(22 minutes) On 1 January 2004 Sabi Limited was registered with the following authorised share capital: ordinary shares of no par value (NPV) %-convertible preference shares with a par value of 3 each After an initial issue of shares to the founders of the company and the public in February 2004, Sabi Limited offered a further ordinary shares during January 2005 to the public at 2,50 each. This offer was underwritten by Kudu Underwriters for a commission of 5%. Sabi Limited also offered %-convertible preference shares during January 2005 to the public at 3,50 each. This offer was not underwritten. The following transactions took place: 25/1/2005 eceived applications (cash included) for ordinary shares. 26/1/2005 eceived applications (cash included) for %-convertible preference shares. 31/1/2005 Sabi Limited allotted ordinary shares. The underwriter took up the remaining shares and paid the outstanding balance. 02/2/2005 Sabi Limited allotted %-convertible preference shares. EQUIED: ecord the above transactions (cash transactions included) with regard to the issue of the shares in the general journal of Sabi Limited for January and February Narrations (description of the reason for each general journal entry) are NOT required. NB: Show all calculations.

26 26 QUESTION 5 (14 marks)(16 minutes) The following information pertains to the Violet branch of Aristea CC: Balances of branch: Inventory on hand (selling price) at: 1 September August Transactions of branch for the year ended 31 August 2005: Inventory transferred to the branch at cost price... eturns to head office at cost price... Sales by the branch: Credit... Cash... Cash receipts from branch debtors... Discount allowed to branch debtors... Branch distribution and administrative expenses... Additional information: Inventory is purchased by the head office (Aristea CC) and supplied to Violet branch at selling price, that is at cost plus 50%. 2. During July 2005 Violet branch purchased inventory locally for 1 200, cash. The money for this purchase was obtained from cash sales that were generated by the branch, after the cash sales were recorded. It is the policy of Violet branch to sell inventory that was purchased locally at the ruling mark-up of the cash sales was embezzled. This amount is not included in the cash sales ( ) above. The CC is not insured against theft of cash. 4. Violet branch s annual sale took place during August Inventory was sold at selling price less 25%. The total proceeds, which are included in the amount of cash sales ( ) above, amounted to At 31 August 2005 there was no inventory shortage or surplus. EQUIED: Prepare the branch adjustment account of Violet branch in the general ledger of Aristea CC, properly balanced, for the year ended 31 August Each entry must indicate the correct contra ledger account. NB: Show all calculations.

27 27 ACN102N/202 MEMOANDUM: OCTOBE 2005 EXAMINATION PAPE (ADJUSTED ACCODING TO THE 2007 SYLLABUS) QUESTION 1 (22 marks) 1.1 Adjusted profit for the year ended 30 June 2005 Profit (given) Less: Depreciation (1 640) 1 Bad debts (135) 2 Add: ental income in arrears (9 900/11) Drawings - S Beast 200 Adjusted profit for the year Calculations Depreciation ( ) x 10% = x 10% = Bad debts (Adjustment of the provision for bad debts account.) Closing balance (8 700 x 5%) 435 Less: Opening balance (given) 300 Increase in provision for bad debts ANIMATION TADES STATEMENT OF CHANGES IN EQUITY FO THE YEA ENDED 30 JUNE 2005 Capital Current accounts Appro- U Beauty S Beast U Beauty S Beast priation Total Balances at 1 July (1 525) Profit for the year Interest on capital (10 000) Interest on current accounts 472 (122) (350) Partners share of profit (17 195) Drawings (13 500) (9 200) (22 700) Balances at 30 June (5) (10)

28 28 QUESTION 1 (continued) When the profit-sharing ratio of the partners is not given, the partners capital contributions are used to calculate the distribution of a profit/loss. Therefore: Capital: U Beauty : Capital: S Beast : U Beauty s share is x = S Beast s share is x = ANIMATION TADES BALANCE SHEET AS AT 30 JUNE 2005 ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables ( ) Prepayments 375 Cash and cash equivalents Total assets Calculation Property, plant and equipment Land and buildings at cost Furniture and equipment at carrying amount [ ( )] (7)

29 29 ACN102N/202 QUESTION 1 (continued) SECTION OF BALANCE SHEET NOT EQUIED: EQUITY AND LIBAILITIES Total equity Capital ( ) Current accounts ( ) Total liabilities Non-current liabilities 12% Long-term loan Current liabilities Trade and other payables ( ) Total equity and liabilities

30 30 QUESTION 2 (28 marks) 2.1 TEEKAY CC MANUFACTUING COST STATEMENT FO THE YEA ENDED 31 AUGUST 2005 Direct raw materials used Inventory: aw materials (1 September 2004) Purchases ( ) Inventory: aw materials (31 August 2005) (33 450) Direct labour ( x 70%) Primary costs Manufacturing overheads Indirect raw materials used Indirect labour [( x 30%) ] Salary: Factory manager Water and electricity Administrative expenses Depreciation Total manufacturing costs Inventory: Work-in-progress (1 September 2004) Inventory: Work-in-progress (31 August 2005) (52 460) Cost of finished products manufactured Manufacturing profit Cost of finished products manufactured transferred to the sales department Calculation Manufacturing profit = ( ) x 100 = 15% ( x 15%) = (17)

31 31 ACN102N/202 QUESTION 2 (continued) 2.2 TEEKAY CC INCOME STATEMENT FO THE YEA ENDED 31 AUGUST 2005 evenue Cost of sales (80 500) Inventory: Finished products (1 September 2004) Cost of finished products transferred Inventory: Finished products (31 August 2005) (63 250) Gross profit Manufacturing profit Distribution, administrative and other expenses (50 095) Salaries and wages Water and electricity Administrative expenses Depreciation Unrealised profit in inventory: Finished products Finance costs (13 260) Interest on long-term loan Profit before tax Income tax expense (42 279) Profit for the year Calculation Unrealised profit in inventory: Finished products (11) ( x 15/115 )* (existing provision) = ( ) = * [or] [ (63 250/1.15 )]

32 32 QUESTION 3 (18 marks) 3.1 Adjusted profit-sharing ratio Al: 7/12 - (1/2 x 1/6 ) = 7/12-1/12 = 6/12 = 1/2 = 3/6 Leon: 5/12 - (1/2 x 1/6 ) = 5/12-1/12 = 4/12 = 1/3 = 2/6 Eddie: 1/6 Profit-sharing ratio = 3:2:1 between Al, Leon and Eddie, respectively. (5) 3.2 First interim repayment Furniture and Capital Bank equipment Mabuza Ismael Dan (37 000) (28 200) (10 500) (26 500) (23 750) (20 250) (5 200) Calculations (13) Bank (Cash available for first interim repayment.) ( ) = (Shown for verification purposes only.) Capital account balances immediately prior to first interim repayment Formula: Capital account balance + Share of reserve Share of loss on sale of inventory Mabuza: ( x.5) ( x.5) = Ismael: ( x.3) ( x.3) = Dan: ( x.2) ( x.2) = Appropriation of the anticipated loss in respect of the unsold furniture and equipment (Application of the assumption that all unsold assets immediately prior to the calculation of the first interim repayment are worthless.) Mabuza: x.5 = Ismael: x.3 = Dan: x.2 = 5 300

33 33 ACN102N/202 QUESTION 4 (18 marks) SABI LIMITED GENEAL JOUNAL 2005 Jan 25 Bank ( x 2,50) Application and allotment: Ordinary shares eceipt of application money from the public Underwriter s commission ( x 2,50 x 5%) Kudu Underwriters 5% underwriter s commission due on in terms of the underwriter s agreement Jan 26 Bank ( x 3,50) Application and allotment: 10%-convertible preference shares eceipt of application money from the public Jan 31 Application and allotment: Ordinary shares ( x 2,50) Stated capital: Ordinary shares Allotment of * NPV ordinary shares Kudu Underwriters ( x 2,50) Stated capital: Ordinary shares Allotment of the shares not applied for by the public to Kudu Underwriters Bank ( ) Kudu Underwriters Amount owing paid by Kudu Underwriters Feb 2 Application and allotment: 10%-convertible preference shares 10%-convertible preference share capital Share premium Allotment of %-convertible preference shares of 3 each at a premium of 0,50 per share * Cannot allot more shares than applications received. Debit Credit (18)

34 34 QUESTION 5 (14 marks) AISTEA CC (HEAD OFFICE) GENEAL LEDGE Dr Branch adjustment: Violet branch Cr 2005 Aug 31 Branch inventory: Violet (Mark-up on returns) Branch inventory: Violet (Discount on sales) Balance c/d (Mark-up on closing inventory) Branch expenses: Violet (Branch gross profit for the year *) * Balancing entry Sep Aug 31 Balance b/d (Mark-up on opening inventory) Branch inventory: Violet (Mark-up on deliveries) Branch inventory: Violet (Mark-up on local purchases) Sep 1 Balance b/d (14) - for including an irrelevant entry, with a maximum deduction of 2 marks. Calculations x 50/150 = x 50% = x 50% = x 50% = 600 [( x 100/75) ] = ( ) = [or] x 25/75 = x 50/150 = ACN102N_2007_TL_202_2_E.doc