HIGHER EDUCATION PROGRAMMES

Academic Year: Past Paper 1

Summative Assessment 1Memorandum: Financial Accounting Reporting
(HFAC132-1)
NQF Level, Credits: 5, 20
Weighting: 60%
Assessment Type: Examination
Stationery: Black/blue pen/calculator
Pass requirement: 50%
Examiner: E Bungne
Educator E Bungne
Due Date: Past Paper
Total: 100 marks
Duration: 3 Hours
Instructions:

1. This examination script consists of 12 pages including the cover sheet. Ensure that you
have all the pages.

2. This examination consists of Essay-Type questions.

3. Answer all questions in the Answer Book provided.

4. Show all calculations.

5. No answers in pencil will be marked.

6. Ensure that you hand in the entire examination script and the answer book at the end of the
session. This script remains the property of Boston City Campus & Business College (Pty)
Ltd.

7. All the best!

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For your convenience, an overview of the Assessment Rules:
1. In order to control invigilated assessments in accordance with module specific guidelines, pub-
lished rules are enforced.
2. Students must bring a valid identity document (ID or Passport) and means to disclose their
student number to all (formative and summative) invigilated assessments.
3. Students participating in assessments in the form of invigilated tests or exams must arrive and
be seated in the assessment venue fifteen (15) minutes prior to the start of the assessment.
4. Students must sign the Assessment Register on arrival and when handing in their assessment
paper before leaving the assessment venue.
5. Students who arrive fifteen (15) minutes after the start of an assessment will not be allowed to
attempt the assessment under any circumstances.
6. Students who are late for an assessment, without just cause for an application for deferral, will
not be granted another assessment opportunity and will receive a zero (0) grade for the as-
sessment.
7. Students are required to complete all the necessary information (name, surname, student
number and module code) on the assessment answer sheet.
8. Students will be required to remain in the assessment venue for forty-five (45) minutes from
the start of the assessment.
9. Other than what is specified by the particular requirements of a module, no student may make
use of any form of equipment, stationery or any other materials or resources during the as-
sessment session.
10. Other than what is specified, all electronic devices must be switched OFF for the duration of
the assessment.
11. Other than what is specified, no materials or equipment nor any other resources may be taken
into the assessment venue but must be left at a designated location, which is in most instances
near the entrance of the assessment venue.
12. Tippex (correction fluid) may not be used. Any section where Tippex is used will not be marked.
13. Students are not permitted to talk or communicate whatsoever during an assessment session
or cause any form of disturbance.
14. Students may not ask the invigilator for assistance in answering questions during an assess-
ment.
15. Should a student require anything during an assessment they may only communicate this
need to the invigilator on duty usually by raising their hand.
16. Students may not leave the assessment venue without informing the invigilator and signing out
the exit attendance register.
17. No materials may be removed from the assessment venue at the end of an assessment. This
includes question papers as they remains the property of Boston City Campus & Business Col-
lege.
18. Learners must leave all personal belongings at the front of the assessment venue. This is done
at the learner’s own risk and neither Boston City Campus & Business College nor the staff will
be held responsible for the loss, theft or damage of belongings.
19. No student will be permitted extra time to complete an assessment unless the prior permission
granted has been brought under the attention of the invigilator prior to commencement of the
assessment. It is recommended that students do take along a copy of the approved permission
slip to overcome any unforeseen situation.
20. If an invigilator finds a student in contravention of any rule governing an assessment session,
the assessment script will immediately be confiscated and inform the Academic Committee at
Head Office Orange Grove. The student may be summoned to attend a disciplinary inquiry at
Head Office.

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QUESTION 1 (20 MARKS)
Chapter 7: page 260; Chapter 9: page 314; Chapter 10: page 344.
© Calculation mark – award this mark if student calculated an answer with their
amounts used. This is a mark for applying the correct principle.
1.1 (6 marks)
Trade receivables
Balance b/d 1 1/2 1
8 665 ✓ Bank ✓ 25 430 ✓
1/2 2
Sales ✓ (25 500 × 1.15) 29 325 ✓ Balance c/d 12 560

37 990 37 990
Balance b/d 12 560

1.2 (6 marks)
Trade payables
1/2 1 1
Bank ✓ 35 200 ✓ Balance b/d 12 443 ✓
1/2
Purchases ✓ (35 000 × 2
Balance c/d 17 493 40 250 ✓
1.15)
52 693 52 693
Balance b/d 17 493

1.3 (8 marks)
SARS VAT account
1/2
1 Trade receivables ✓ 2
Balance b/d 4 412 ✓ 3 825 ✓
(25 500 × 0.15)
1/2 1 1/2 1
Bank CPJ ✓ 6 552 ✓ Bank CRJ✓ 15 446 ✓
1/2
Trade payables ✓ 2
5 250 ✓
(35 000 × 0.15)
Balance c/d 3 057
19 271 19 271
Balance b/d 3 057

The following outcomes were assesed in this question

How to prepare the the trade receivables and trade payables in the General
Ledger.

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QUESTION 2 (10 MARKS)
Chapter 9: page 314; Chapter 10: page 344.
© Calculation mark – award this mark if student calculated an answer with their
amounts used. This is a mark for applying the correct principle.

Trade receivables

Balance per statement 1 Invoice 136 1

42 200 ✓ 800 ✓
duplicated
Invoice No. 179 understated 1 Addition error 1
1 800 ✓ 200 ✓
Closing balance 1/2©
43 000✓

44 000 44 000

Trade payables

2018 Inv. 125 500 ✓1 2018 O/Bal 45 300 ✓1

CN045 (R1100 × 2 200 ✓ 2 Inv. 152 400 ✓1
)
2)
Closing balance 1/2©
43 000✓

45 700 45 700

The following learning outcomes were assessed in this question.

How to perform debtors and creditors reconciliation

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QUESTION 3 (23 MARKS)
Chapter 11: pages 387 – 396.

3.1 (Max 14 marks)

PPE: Machinery
1/9/17 Balance b/d 1 15/4/14 Asset 1
1 380 000✓ 375 000✓
disposal
1/6/18 Bank 190 000 31/8/13 Balance c/d 1 195 000
(178 000 + 12 000)
2
✓
1 570 000 1 570 000

Accumulated depreciation: Machinery

15/4/18 Asset disposal 86 953 1/9/17 Balance b/d 241
(33 125 [W1] x 2 [(1 380 000- 2
250✓
years = 415 000) ÷ 8 x 2
2 years ]
66 250 ✓ + 20
1
703 ✓ )
31/8/18 Balance c/d *282 660 31/8/18 Depreciation 128
expense [W2] 7
363✓
369 613 369 613

# carrying amount of machinery at 31 August 2018: 912 340 (1 195 000 – *282 660)
W1: (2 marks)
Depreciation on sold machinery: 375 000 – 110 000 = 265 000 ÷ 8 yrs = R33 125 x
7.5/12 = R20 703

Depreciation on old machinery: (7 marks)

Cost of old machinery: 1 380 000 – 375 000 = 1 005 000
Residual value of old machinery: 415 000 – 110 000 = R305 000
Depreciable amount of old machinery: 1 005 000 – 305 000 = 700 000
R700 000 ÷ 8 yrs = 87 500

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Depreciation on new part: 190 000 – R50 000 = R140 000 x 72/500 = 20 160

Total depreciation expense = R20 703 + R87 500 + R20 160 = R128 363

Alternative working:
Depreciation on old machinery up to 15 April: 1 380 000 – 415 000 = 965 000 ÷ 8
yrs = R120 625 x 7.5/12 = R75 391

Depreciation on remaining machinery after 15 April:

Cost of old machinery: 1 380 000 – 375 000 = 1 005 000
Residual value of old machinery: 415 000 – 110 000 = R305 000
Depreciable amount of old machinery: 1 005 000 – 305 000 = 700 000
R700 000 ÷ 8 yrs = 87 500 x 4.5/12 = R32 813

Depreciation on new part: 190 000 – R50 000 = R140 000 x 72/500 = 20 160
Total depreciation expense = R75 391 + R32 813 + R20 160 = R128 363 or
R128 364

3.2 (6 marks)
Statement of Comprehensive Income.
Maintenance expense 1
(98 000)✓
Depreciation expense 1©
(128 363) ✓
Loss on sale of machinery 2
(72 012)✓
(375 000 – 86 953 = 288 047 x 25/100 )
Impairment loss 2
(180 340) ✓
#912 340 - 732 000 (Recoverable amount: Higher of 732 000 and
643 000)

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3.3 (3 marks)
Statement of Financial Position.
2018 2017
1
Non-current assets ✓
2© 732 000 1 138 750
PPE: Machinery ✓

2017: 1 380 000 – 241 250 ((1380 000 - 415 000)/8 x 2 years)
2018: R1 195 000 – R282 660 – R180 340

The following learning outcomes were assessed in this question.

How to recognise PPE.
How to calculate and record depreciation/accumulated depreciation.
How to recognise impairment loss on PPE.

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QUESTION 4 (12 MARKS)
Chapter 12: page425 - 427
4.1 (7 marks)
Date √ Debit Credit
1 June – 1 July 2018 Bank✓1/2 (R5x80 000) 400 000✓
1

1/2 400 000

Application and allotment ✓

1 July 2018 1/2 1

Bank✓ (R5x 20 000) 100 000✓
100 000
1/2
Application and allotment ✓

10 July 2018
1/2
Application and allotment ✓
1
1/2 500 000✓
Share capital ✓ 500 000

4.2 (2 marks)
2
Underwriter’s commission = R500 000 x 3.5% = R17 500 ✓

4.3 (3 marks)
Date Debit Credit
31 Dec 2018 1/2 1/2 ©
Underwriter’s commission✓ 17 500✓
1/2 17 500
Trade payables✓
1/2 1/2 ©
Share capital✓ 17 500✓
17 500
1/2
Underwriter’s commission✓

The following learning outcomes were assessed in this question.

How to record share issue transactions in the books of a business

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QUESTION 5 (20 MARKS)
Chapter 12-13: pages 482-483.

5.1 (16 marks)

Appropriation
300
3 120 000
Partners’ 000✓ Profit and
+ 180 000 1
30/6/19 salaries (W2) 30/6/19 Loss 485 000✓

Interest on
Interest on Drawings
4 2
capital (W3) 138 600✓ (W1) 4 583 ✓

Current John
3
(W4) 12 746✓

Current
3
Johnson (W4) 38 237✓
1
489 583 489 583✓

W1: Interest on Drawings: (2 Marks)

Johnson: 50 000 x 0.10 x 11/12 = 4 583

W2: Partners’ salaries: (3 Marks)

John: 10 000 x 12 = 120 000
Johnson: 15 000 x 12 = 180 000
120 000 + 180 000 = 300 000

W3: Interest on Capital: (4 Marks)

John: (R750 000 x 7%) + (R120 000 x 7% x 3/12) = 54 600
Johnson: 1 200 000 x 7% = 84 000
54 600 + 84 000 = 138 600

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W4: Profit-share: (6 Marks)
485 000 + 4 583 – 300 000 – 138 600 = 50 983
John: 50 983 x 1/4 = R12 746 (round to 1 dp)
Johnson: 50 983 x 3/4 = R38 237 (round to 1 dp)

5.2 (4 marks)
1
Balance as at 30 June 2019 328 000 ✓
Less 2019 salary (120 000) ✓
Less 2019 interest on capital (54 600) ✓
Less 2019 profit-share (12 746) ✓
1/2
Balance as at 30 June 2018 140 654✓

OR
Current - John
30/6/2018 Bal c/d 140 654
Partners’
30/6/2019 salaries 120 000
Interest on
capital 54 600
Balance c/d 328 000 Appropriation 12 746
382 000 382 000

The following learning outcomes were examined in this question.

Understand the relationship between owners and the partnership
Preparation of an appropriation account of a partnership
Preparation of partners accounts

QUESTION 6 (15 MARKS)

Chapter 14: pages 529; Chapter 15: pages 591-600.

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6.1 (8 marks)
Statement of Cash Flows of Kayak Adventures Ltd (extract)
for the year ending 30 June 2018 (-½ for no title)

Operating activities (extract):

Operating profit 47 000 1
✓
Add: depreciation expense 6 000 1
✓
Add: loss on sale of PPE 3 000 1
✓
Less: interest income (5 000) ✓1

Working capital changes:

Less: increase in trade receivables (9 000) ✓1

Add: decrease in inventory 1 000 1

✓
Add: increase in trade payables 2 000 1
✓
Less: decrease in accrued (2 500) ✓1
expenses
Cash generated from operations 42 500

6.2 (7 marks)

a) (3 marks)
Gross profit X 100
Sales
2018 2017
1 1
= 88 000 x 100 = 58.67% ✓ 80 000 x 100 = 61.07% ✓
150 000 131 000
There was a decrease in the gross profit percentage of 2.40% from 2017 to 2018.
1
Though the entity made more profits, costs was still high. ✓

b) (2 marks)
Cost of sales

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Inventory

= 62 000
1 500

2
= 41.33 times ✓

c) (2 marks)
Trade receivables x 365
Sales

= 12 500 x 365
150 000

2
= 30.42 days ✓

The following learning outcomes were examined in this question.

How to prepare the cash flow statement of an entity using the indirect method.
How to calculate profitability and working capital ratios.

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