UNIVERSITEITSEKSAMENS UNISA ee UNIVERSITY EXAMINATIONS, FAC1601 ctoberiNovember 2017 FINANCIAL ACCOUNTING REPORTING Duration 2 Hours. 100 Marks EXAMINATION PANEL AS APPOINTED BY THE DEPARTMENT Use of a non-programmable pocket calculator is permissible Closed book examination ‘Thus examination question paper remains the property of the University of South Africa and may not be removed from the examination venue ITURN OVER]UNIVERSITY EXAMINATIONS. UNIVERSITEITSEKSAMENS UNISA lex FAC1601 October!November 2017 FINANCIAL ACCOUNTING REPORTING Duration 2 Hous 100 Marks EXAMINATION PANEL AS APPOINTED BY THE DEPARTMENT Use of a non-programmable pocket calculator 1s permissible Closed book examination ‘Thus examination question paper remains the property of the University of South Africa and may not be removed from the examination venue This paper comprises of eight (8) pages PLEASE NOTE: Ensure that you are writing the correct examination paper Ensure that you are handed the correct exammation answer book (BLUE) by the invigilator All questions must be answered Basic calcul Where applicable, must be shown Each question must be commenced on a new (separate) page Please do not answer the paper in pencil no aare PROPOSED TIMETABLE (ry not to dewate from this) Time in Question Subject minutes Close corporations Calculation of profit or loss for the year Statement of changes in net investment of members. Statement of financial position Changes in the ownership structure of a partnership Valuation account, equipment account and calculation, of goodwill Statement of cash flows Cash flows from investing and financing activites sections Companies Share transactions and calculation of dividends TOTAL aT ITURN OVER]2 FAC1601/RFA1601 OCTINOV 2017 QUESTION 4 (39 marks)(47 minutes) BoomShaka CC 1s a trading entity, operating im Mshenguville business centre Lebo and Themb! are the only members of the corporation They have an equal interest in the Corporation and distribute profits or losses accordingly The following information appeared in the accounting records of the CC on 28 February 2017, the end of the financial year Balances as at 28 February 2017 R Member's contribution Lebo (1 March 2016) 50.000 Member's contribution Thembi (1 March 2016) 50 000 Retained earnings (1 March 2016) 34 300 Loan from member Lebo (1 March 2016) 48.000 Loan from member Thembi (1 March 2016) 24 000 Trade recewables control 1500 | Bank (favourable) 136 360, Trade payables control 4.000 SARS (Income tax) (Dr) 10.450 Inventory 60 000 | Long-term loan (Great Bank) 35.000 Land and buildings at cost 50 000 Equipment at cost 15.000 Furniture and fittings at cost 45.000 Accumulated depreciation Equipment 5.000 Accumulated depreciation Furniture and fitungs 13.500 Additional information: 1 Before the information below was taken into account, the bookkeeper calculated the profit before tax for the year ended 28 February 2017 as R84 510 11 The bookkeeper neglected to record the depreciation for the current financial year Depreciation on equipment 1s accounted for at 25% per annum according to the diminishing balance method On 1 February 2017 a printer was purchased on credit for R9 600, this transaction is stil to be recorded in the books of the business (On furniture and fittings, depreciation to the amount of R9 000 must be recorded 12 On 28 February 2007 a debtor owing the business R400 was declared insolvent but his account was not written off On the same date another debtor, whose account had been wntten off as irrecoverable during the 2016 financial year, made a cash payment of R850 to the CC in order to settle the amount that was previously wmtten off The cashier forgot the R850 in a drawer and did not record this transaction 13° The actual normal income tax for the current financial year was calculated as R24 500 and must still be recorded ITURN OVER]3 FAC1601/RFA1601 OCTINOV 2017 QUESTION 4 (continued) 2 On 28 February 2017 the members decided to make a total profit distribution of R40 000 Lebo's portion thereof must be added to the loan which she advanced to the CC Themb''s portion must be paid to her in cash on 1 March 2017 3 The long-term loan from Great Bank 1s secured by a mortgage over the land and buildings, and will be repayable in five (5) equal annual instalments as from 1 Octaber 2017 4 — The loans from the members are repayable on 1 Apri 2018 REQUIRED: Marks (a) Calculate the profit or loss for the year ended 28 February 2017 of | BoomShaka CC 6% (b) Prepare the statement of changes in net investment of members of BoomShaka CC for the year ended 28 February 2017 The total column| 7% need NOT be disclosed | (c) Prepare the statement of financial positon of BoomShaka CC as at| 25 28 February 2017 [39] z ee : | Please note. Your answer must comply with the provisions of the Close Corporations Act 1984, and the requirements of International Financial Reporting Standards (IFRS) Notes to the annual financial statements and comparative figures are NOT required Round off all amounts to the nearest Rand Allcalculations MUST be shown [TURN OVER]4 FAC1601/RFA1601 OCTINOV 2017 QUESTION 2 (21 marks)(25 minutes) Mehlo and her best frend, Mamba, are in a partnership, trading as Mehl'emamba Loans They share profits or losses of the partnership in the ratio of 32 respectively The business has recently experienced an upsurge in the demand for unsecured short-term loans The partners urgently needed an additional partner to join the partnership to assist with on capital Injection to help sustain the growth of their business Azalia, another friend of Mehio, offered to join the partnership The following information Is extracted from the accounting records of the partnership Balances as at 30 September 2017 ‘Capital Mehlo Capital Mamba ‘Current account Mehio (Cr) Current account Mamba (Dr) Revaluation surplus Vehicle at carrying amount Equipment at carrying amount Furniture and fittings at carrying amount Loan receivables (Trade receivables) Bank (Overdraft) Allowance for credit losses Additional information” 1 It was agreed that Azalia will join the partnership on 4 October 2017 and that the new partnership will trade as Grootslang Loans Mehlo and Mamba will relinquish to Azalia’s her one third share in the profits or losses of the new partnership according to their existing profit-sharing ratio On 1 October 2017 Azalia will contribute a vehicle valued at R100 000, as well as cash amounting to R75 000 for the one third share in the net assets of the new partnership 2 On 30 September 2017, in preparation of the change in the ownership structure of Mehl'emamba Loans, the assets of the partnership were valued as follows R Vehicle 45 000 Equipment 4000 Fumiture and fittings 222 100 3 The partners anticipate that a further R1 800 of loans receivable may not be recovered [TURN OVER}5 FAC1601/RFA1601 OCTINOV 2017 QUESTION 2 (continued) REQUIRED: [Marks (a) Prepare the valuation account, properly closed off, in the general ledger of Mehl'emamba Loans as at 30 September 2017 (Apply the legal 9 perspective) j (b) Prepare the equipment account, properly closed off, in the general ledger | of Mehfemamba Loans as at 30 September 2017 (Apply the legal| 3 { perspective) | (©) Calculate the goodwill of Mehl'emamba Loans as at 30 September 2017 9 CEE Ee Sree cere et | Please note: Round off all amounts to the nearest Rand | Al calculations MUST be shown [TURN OVER]6 FAC1601/RFA1601 OCTINOV 2017 QUESTION 3 (22 marks)(26 minutes) ‘The following information relates to Amazon Traders, a partnership operating in Forest Town, Johannesburg Oak and Pine are partners in the partnership shanng profit and losses in the Tatic of 32 respectively The following information appeared in the accounting records of the Partnership on 31 August 2017, the end of the financial year Balances as at 31 August 2017 2047 2016 R R Capital Oak 655000/ 320 000 Capital Pine 745 000} — 580 000 Drawings Oak 163000] 152.000 Drawings Pine 87000| 23000 Land and buildings at fair value (at cost in 2016) 802600| 335 300 Fixed deposit 51000) 32700 Vehicles 280000} 108 000 Equipment 75000) 108 500 Accumulated depreciation Vehicles 85000| 60.000 Accumulated depreciation Equipment 60000| 45.000 Inventory 96 800} 75 300 investment in Mondi Ltd at fair value 302 600} 266 400 Investment in Alpine Mist (Pty) Ltd at cost 123700} 208 000 Revaluation surplus 333 100] 176 900 Profit distnbution to partners 83000] 52000 Long-term loan Fe | 102000] 68 200 | Additional information: The following transactions took piace during the year 1 Atthe beginning of the current financial year, the land and buildings were revalued by a sworn appraiser A month later. a warehouse was sold at carrying amount for R100 000 cash During the year Oak contnbuted a building valued at R90 000 to the partnership Entries to record the valuation and the contnbution made by Oak have already been made in the books of Amazon Traders 2 On 30 June 2017, a delivery vehicle with a cost price of R89 000 and carrying amount of R33 000 was involved in an accident The vehicle was deemed to be irreparable and was consequently written off A replacement vehicle was purchased for cash 3 Dunng the year equipment was sold at carrying amount Fifty five percent (55%) of the proceeds was received in cash and the balance 1s to be received in instalments over a period of 6 months starting from 1 September 2017 4 The long-term loan is unsecured and repayable in equal annual instalments On 30 November 2016 Amazon Traders received R46 500 as an additional loan advance ‘The interest expense in respect of this loan for the current financial year amounted to R12 650 According to the loan agreement, the interest 1s capitalised [TURN OVER],7 FAC1601/RFA1601 OCTINOV 2017 QUESTION 3 (continued) 5 Dunng the year, Pine contributed cash and inventory to the partnership The value of inventory amounted to R65 000 All entnes thereto were correctly recorded in the books of the partnership REQUIRED: Marks. Prepare ONLY the CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES sections of the statement of cash flows of Amazon Traders for 22 the year ended 31 August 2017 (22) Please note: Your answer must comply with the requirements of International Financial Reporting Standards (IFRS), appropnate to the business of a partnership Notes to the cash flow statement and comparative figures are NOT required Round off all amounts to the nearest Rand All calculations MUST be shown ITURN OVER]8 FAC1601/RFA1601 OCTINOV 2017 QUESTION 4 (18 marks)(22 minutes) ‘On 1 October 2016 Gqomu Music Ltd was registered with an authorised share capital of 500 000 ordinary shares and the founders of the company subscribed to 20% of the shares at R1 per share Ail the shares offered were taken up and paid for on 2 October 2016 ‘On 15 August 2017 Ggomu Music Ltd offered 40% of the authorised share capital to the public at R2,50 per share and appointed Primary Bank as the underwniter of the share issue at a commission of 1% By 1 September 2017, the closing date for the applications, 250 000 shares were applied for On 15 September 2017 all of the offered shares were allotted by the board of directors and all the transactions with the underwriter were concluded on that date During a board meeting on 30 September 2017, the directors declared a dividend of RO,20 per share The dividends were paid on 2 October 2017 REQUIRED. Marks (a) Record all the transactions pertaining to the issue of the shares in the general journal of Ggomu Music Ltd for the period 1 October 2016 to) 15 15 September 2017 Narratives are not required (b) Calculate the divdends that were paid by Ggomu Music Ltd on} 3 2 October 2017 118} Please not Round off all amounts to the nearest Rand All calculations MUST be shown UNISA 2017