nam I 8 la UnIVERSITY

Size: px

Start display at page:

Download "nam I 8 la UnIVERSITY"

Milo Howard
5 years ago
Views:

1 nam I 8 la UnIVERSITY OF SCIEnCE AnD TECHnOLOGY FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE QUALIFICATION: BACHELOR OF MARKETING and BACHELOR OF ACCOUNTING QUALIFICATION CODE: 07BMAR I LEVEL: 7 07BACG COURSE CODE: FAC511S COURSE NAME: FINANCIAL ACCOUNTING 101 SESSION: NOVEMBER 2016 PAPER: THEORY AND CALCULATIONS DURATION: 3 HOURS MARKS: 100 EXAMINER(S} FIRST OPPORTUNITY EXAMINATION QUESTION PAPER C. MAHINDI and L. WALE. MODERATOR: E. MUSHONGA INSTRUCTIONS 1. Answer ALL questions in blue or black ink only 2. Write clearly and neatly. 3. Start each question on a new page and number the answers clearly. 4. No programmable calculators are allowed. 5. Questions 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. THIS QUESTION PAPER CONSISTS OF 7 PAGES (Excluding this front page}

2 Question 1 Multiple choice questions (10 marks) 1. The application of the core principle in I FRS 15 is carried out in five steps. The first step is: a. Identify separate performance obligations b. Determine the transaction price c. Allocate the transaction price to performance obligations d. Identify the contract 2. Which of the following accounting equations is incorrect? a. Assets- Liabilities = Capital b. Capital- Liabilities =Assets c. Assets = Capital + Liabilities d. Assets- Capital = Liabilities 3. Which of the following should not be called sales? a. Goods sold, to be paid for in one month's time b. Goods sold, cash being received immediately c. Item previously included in purchases, now sold on credit d. Sale of a truck no longer required 4. Of the following, which best describes a trial balance? a. Is the final account in the books b. Shows all the asset balances c. Is a list of ledger account balances d. Discloses the financial position of a business 5. Inventories should be stated at: a. Lower of cost or fair value b. Lower of cost or net realisable value c. Lower of cost or nominal value d. Lower of cost or net selling price 6. Depreciation is: a. the part ofthe cost of the non-current asset consumed during its period of use by the business b. The cost of a current asset wearing away c. The cost of replacement of a non-current asset d. The salvage value of a non-current asset plus its original cost -1

3 7. An allowance for credit losses is created: a. To provide for possible credit losses b. To write of credit losses c. When receivables become bankrupt d. When receivables cease to be in business 8. When is it compulsory for an entity to register for VAT in Namibia? a. When the value of all the entity's supplies exceed N$ b. When the value of an entity's taxable supplies exceeds N$ c. On registration of the entity as a business d. When the value of an entity's taxable supplies exceeds N$ The fundamental qualitative characteristics of useful financial information are: a. Faithful representation and comparability b. Verifiability and understandability c. Relevance and faithful representation d. Relevance and comparability 10. Which ofthe following is not a contributory factor towards faithful representation a. Freedom from error b. Consistency c. Neutrality d. Completeness 2

4 Question 2 (42 marks) The following trial balance was extracted from the books of Mr M., a Sole trader on December 31, Debit N$ N$ Land and buildings Motor vehicles Credit Accumulated depreciation on motor vehicles Fixtures and fittings Accumulated depreciation on fixture and fittings Inventory as at 1/1/ Receivables Payables Cash balance 800 Bank 2140 Interest charged by supplier on overdue balances 340 Sales Purchases Purchase returns Sales returns Discounts 840 Carriage inwards 700 Advertising and media costs Light and heat Telephone and internet 6140 Insurance Rates, water charges and refuse Wage and salaries % long term bank loan Long term loan interest-paid 30/06/ Irrecoverable debts 3120 Drawings 7120 Accumulated losses Capital Total The following information which has not been accounted for above is also available: 1. The inventory count as at 31 December 2015 showed closing inventory valued at N$

5 2. During 2015, Mr M. took the following for personal use: a. N$1 750 in inventory items b. N$2 220 from the bank In addition, one quarter of the insurance costs above relates to Mr M's personal insurance. 3. A delivery of product X costing N$1 200 was dispatched to a customer on 30 December These goods were correctly treated during the inventory count on 31 December However, the sales invoice associated with the sales was not. posted to the books and records of Mr M. as at 31 December, Mr M. has a standard mark-up of 15% on product X. 4. N$750 of advertising and media costs included in the trail balance above is prepaid for Included in motor vehicles is a delivery van which originally cost N$ Accumulated depreciation on the delivery van as at 1 January 2015 was N$ On 29 December 2015 the delivery van crashed and was written off. The insurance company has indicated that N$6 545 will be paid out of the insurance policy. Mr M. received the cheque from the insurance company for N$6 545 in January The delivery van was not replaced. 6. Allowance to be made for depreciation is as follows: a. Land and buildings: 2% straight line method b. Motor vehicles: 10% straight line method c. Fixtures and fittings: 10% reducing balance method Depreciation should be calculated to the nearest whole number. Mr M. charges full year depreciation in the year of purchase ad none in the year of disposal. 7. Unpaid interest at 31/12/2015 on the loan should be accrued. You are required to prepare a} The statement of profit or loss for the year ended 31 December 2015 b) The statement of financial position as at 31 December 2015 {20 marks} (22 marks} IGNORE VAT FOR THE PURPOSES OF THIS QUESTION 4

6 Question 3 (20 marks) Royalty Traders buys and sells royalty memorabilia. Royalty Traders uses the periodic inventory method to record inventory. On 1 September 2016, Royalty Traders had a N$ (Cr) balance on its VAT account. The following transactions took place during the month ended September 2016: Day 5. Royalty Traders purchased furniture and equipment for N$ (excluding VAT) from Clear Design Ltd on credit. Clear Design Ltd granted a trade discount of 5 %on the purchase price. 7. Purchased inventory costing N$ from Busquets Ltd and paid by cheque. 12. The owner took inventory for his own personal use with a marked selling price of N$ The firm has consistently applied a margin on sales of 25%. 13. Made an allowance for credit losses of N$ The firm received N$3 450 from a receivable whose account was written off as bad in June Issued a cheque for N$ to the Ministry of Finance, in payment of the VAT owing for August Purchased a Lexus sedan for N$ from Pupkewitz Motors on by electronic funds transfer (EFTL for use by the finance manager. ASSUME THE VAT RATE USED CURRENTLY IN THE NAMIBIAN VAT ACT. ALL PARTIES ARE REGISTERED VAT VENDORS AND ASSUME, WHERE NECESSARY, THAT AMOUNTS ARE INCLUSIVE OF VAT. YOU ARE REQUIRED TO: a) Show the general journal accounts reflecting the above transactions. Journal narrations are not required. Where no VAT is applicable to a transaction, provide an appropriate reason (20 marks) 5

7 Question 4 {15 marks) Supreme Vehicles (SV) is a car dealership that sells all types of vehicles. SV is a registered VAT vendor and entered into the following transactions for the year ended 31 October They imported the following vehicles from Germany A Series BMW for N$ (including VAT) to be used by the marketing manager. Import duties of N$ were paid to customs and freight costs of N$ (including VAT) were paid to a local company for shipping the car. An AUDI A8, which cost N$ (excluding VAT) to be sold to a high profile business man. Import duties were N$ and freight costs of N$ (including VAT) were paid to a local company for shipping the car. Both cars arrived in Namibia on 31 July On 1 November 2015 SV acquired a car polishing machine for N$ (excluding VAT). The machine was delivered to the premises of SV on 21 January 2016 at a cost of N$ (excluding VAT). The machine has a residual value of N$ at the end of its useful life. SV has adopted the following depreciation policy: Vehicles 20% on cost using the straight line method Equipment 10% on cost using the straight line method Required: a. Calculate the value at which you would record the two vehicles in the statement of financial positon at 31 July Show all workings. (6) b. Prepare an extract of the statement of financial position showing how the above assets would be disclosed on 31 October Show all workings (9) Show all workings. 6

8 Question 5 (13 marks) 5amsung (Pty) Ltd.'s current reporting period ends on 30 June 2016 and they use the periodic inventory system. On 10 June 2016, 5amsung (Pty) Ltd entered into a written agreement with a customer, Cell5hop (Pty) Ltd. The contract was signed by both parties and stipulates, inter alia, the following: 300 5amsung 56 cell phones will be delivered to Cell5hop (Pty) Ltd.'s premises on the following dates: o 175 cell phones will be delivered on 20 June 2016; and o 125 cell phones will be delivered on 6 July The sales price ofthe 300 cell phones is N$ (including VAT) and it is payable on 31 July The sales price per cell phone is not influenced by the sales volume and the 5amsung 56 cell phone is a distinct product. Cell5hop (Pty) Ltd has an excellent payment record and the expectation is that the outstanding amount will be paid before the due date. Both companies are registered as VAT vendors in accordance with the VAT Act. A VAT rate of 15% is applicable. Required: I. Determine whether this contract satisfies the requirements of IFR5 15 (Revenue from contracts with customers) (5) II. Provide the journal entries to recognise the revenue on the appropriate dates. (6) END OF EXAM PAPER 7

FACULTY OF MANAGEMENT SCIENCES

FACULTY OF MANAGEMENT SCIENCES DEPARTMENT: ACCOUNTING ECONOMICS AND FINANCE QUALIFICATION: DIPLOMA IN ACCOUNTING AND FINANCE QUALIFICATION CODE: 06BDAF LEVEL: 5 COURSE: FINANCIAL ACCOUNTING 101 DATE: NOVEMBER