-------------------------------------------------------------------------------------------------------------
University of the Witwatersrand, Johannesburg
Course or topic No(s)
ACCN 1010
Course or topic name(s)
Paper number & title
Financial Accounting I
Examination/Test* to be
held during month(s) of
(*delete as applicable)
November 2023 Mock Exam
Year of Study
(Arts & Science leave blank)
First
Degrees for which this course
is prescribed
BACHELOR OF ACCOUNTING SCIENCE
Faculty presenting
candidates
COMMERCE LAW and MANAGEMENT
Internal examiner(s)
and telephone extension
number(s)
Left blank intentionally
External examiner(s)
Special materials required
Time allowance
Instructions to candidates
Examination booklets
Course
Nos.
ACCN 1010
Hours
3 hours
30 minutes
Reading time of 30 minutes is included in the time
allowance above.
You may NOT write in your answer books during the
reading time.
Answers must be written in pen, you may NOT write in
pencil.
Question 1
Question 2
Marks
72
48
120
Time
108 min
72 min
180 min
Financial Accounting 1_ACCN 1010_Mock Exam 2023
General information
1. Read the instructions carefully and follow them precisely.
2. This paper consists of 9 pages, plus 2 additional blank pages.
3. There are 2 questions. Please answer the questions on paper and clearly label each question.
Please submit your scanned answer as an attachment to the assignment. Your submission should
be named as follows: StudentNumber_Mock
4. Candidates will forfeit marks for:
• the use of tippex (do not use tippex)
• the use of non-standardised abbreviations
• over-writing of figures
• foreign items
• incorrect/incomplete headings.
5. All answers must be written in blue or black ink, including workings.
6. Show ALL workings in order for part marks to be allocated.
7. Use the information given in the table below as a guide when answering the questions and try not
to deviate from the allocated time.
Question
Marks
Time
1
72
108 minutes
2
48
72 minutes
TOTAL
120
180 minutes
© Copyright, School of Accountancy, University of the Witwatersrand
2
QUESTION 1
(72 marks; 108 minutes)
Ignore VAT
Question 1 consists of 2 unrelated parts
Part A
(54 marks; 81 minutes)
Whisk Ltd (Whisk) is a listed company that sells kitchen appliances to various customers across Africa. The
company has a 30 June year-end and prepares their financial statements in accordance with International
Financial Reporting Standards (IFRS).
The company is in the process of finalising its financial statements for the year ended 30 June 2018. The
following balances were extracted from the company’s accounting records as at 30 June 2018:
Account description
Notes
Debit/(Credit)
(R)
Ordinary share capital (225 000 shares)
1
Retained earnings (1 July 2017)
(1 500 700)
(4 500 800)
Revaluation surplus
2
(300 000)
Debentures
3
(2 625 000)
Current tax receivable/(payable)
4
1 952 575
Other income
5
(500 445)
Dividends payable
6
??
Dividends tax payable
6
??
Sales
7
(8 125 750)
Operating expenses
8
6 384 375
The following information needs to be considered when preparing the financial statements:
1. Ordinary share capital
On 30 November 2017, the company announced a rights issue of 1 additional share for every 2 held to its
existing shareholders at R10 per share.
•
•
•
•
2.
The rights issue was underwritten by Rand Bank for a 1% underwriter’s commission.
The company had also paid rights issue costs of R105 500 (excluding underwriter’s commission)
on 20 December 2017.
It is the policy of the company to set-off costs to issue shares against retained earnings.
All transactions relating to the rights issue and costs were correctly recorded in the accounting
records of Whisk.
Revaluation surplus
The Revaluation surplus relates to owner occupied land that was revalued on 30 June 2018. It is the
company’s policy to revalue land every 3 years. Land was originally bought on 1 July 2011. The carrying
amount and fair value of the land on 30 June 2018 were R380 000 and R550 000 respectively. The
revaluation was correctly recorded.
3. Debentures
The debentures recognised in the trial balance presented above consist of 15 000 5% debentures with a
par value of R175 each. The debentures were issued at par on 1 April 2018 and are redeemable on
31 March 2021 at a 3% premium. Coupon payments on the debentures are made annually in arrears. The
following is the only entry that was processed in the accounting records of Whisk:
Dr Bank
R2 625 000
Cr Debentures
R2 625 000
(Proceeds from debenture issue)
4. Current tax receivable/ (payable)
The current tax receivable/ (payable) comprises the balance payable to SARS on 1 July 2017 of R55 005
and provisional payments made during the year, of R2 007 580.
The income tax expense still needs to be calculated and recorded in the accounting records for the year
ended 30 June 2018. The tax rate for companies in South Africa is 28%.
The 2017 SARS tax assessment was received on 30 April 2018 and reflected taxable income of R4 821 428
for the 2017 year of assessment. Whisk’s financial statements for 2017 reflected an income tax expense
of R1 220 060.
5. Other income
Included in other income amount is dividend income of R150 000.
6. Dividends
On 25 June 2018, the board of directors declared a final dividend of 50 cents per share to shareholders.
Neither the final dividend, nor the tax consequences have been recorded, nor paid.
All dividends are subject to a dividend withholding tax of 20%.
7.
Kitchen appliances sales
The following information relates to sales of kitchen appliances during the year:
Whisk purchases its entire inventory from The High Appliances Company; the appliances are sold at a
mark-up of 100% on cost.
Whisk uses the perpetual inventory system to record inventory.
The costs of sales in respect of appliances sold during the year have all been recorded in the operating
expenses account.
During June 2018, Whisk had a special offer to sell appliances to their customers at a discount of 5% on
the normal selling price. 1 050 appliances with a cost of R750 each were sold, on credit, during this special
sale. None of the invoices for the 1050 appliances sold during the special offer have been processed by
the accountant.
On 25 May 2018, 35 appliances with a cost of R1 400 each were sold to Amakitchen Inc., on credit.
Amakitchen Inc. were offered a 7.5% settlement discount, should their account be settled by
15 June 2018; however, this account was only settled on 30 June 2018. On 25 May 2018 it was expected
that Amakitchen would pay this amount within the settlement period, based on how they have conducted
their account in the past. The only journal entry recorded by the accountant was to debit bank and credit
accounts receivable with the amount received from Amakitchen.
Loot (Pty) Ltd, one of Whisk’s regular customers, ordered 50 appliances from Whisk on 28 June 2018 and
paid R205 000 on the same day. The 50 appliances are expected to be delivered to Loot (Pty) Ltd on 10 July
2018. This transaction was recorded as a sale transaction in the 2018 financial year’s accounting records
with the sales and cost of sales accounts being affected.
8.
Operating expenses
Included in the operating expenses account on the trial balance is an amount of R50 000 that was paid in
respect of the rent for the warehouse. This amount is in respect of rent for the fifteen months ending
30 September 2018.
PART B
(18 marks; 27 minutes)
This part is unrelated to PART A
A friend of yours, Lerato is considering investing in Whisk Ltd. She has asked you to assist her in making
the decision. She has provided you with the following ratios, which she had calculated correctly:
Ratio
Whisk 2018
Whisk 2017
Industry
2018
Net Profit percentage
20%
18%
25%
Debt ratio
0.48
0.40
0.30
Price-earnings ratio
5.50
5.25
4.20
Dividend yield
1.50%
0.85%
0.75%
QUESTION 2
(48 marks; 72 minutes)
Batlo-Hurda 2.0 (BH2) is a successful bed and breakfast (B&B) establishment situated in Tickyline village
in Limpopo. BH2 has a 31 December year end and prepares its financial statement in accordance with
International Financial Reporting Standard. BH2 and all its suppliers are registered VAT vendors unless
otherwise stated. All amounts include VAT unless otherwise stated. A VAT rate of 15% is applicable
throughout the period
The asset register of BH2 includes items of property, plant, and equipment. The following information
related to the property, plant, and equipment was extracted from the fixed asset register of BH2 on 31
December 2017. All of the amounts are deemed to be correct:
Additional
Information
Debit (R)
Land
1
1 500 000
Building – cost
2
2 500 000
Accumulated depreciation and impairment:
Building (31 Dec. 2016)
Vehicles – cost
?
3
Accumulated depreciation and impairment:
Vehicles (31 Dec. 2016)
Proceeds from sale of vehicle A
3
Plant– cost
4
Accumulated depreciation and impairment:
Plant (31 Dec. 2016)
Credit (R)
1 200 000
570 000
149 500
?
?
Additional information:
Except where specified, the following transactions have not been recognized in the accounting records
of BH2. No other transactions relating to property, plant and equipment occurred in the reporting
period ended 31 December 2017 other than those mentioned in the paragraphs below.
1. Land
Land is measured on the revaluation model and is not depreciated. The fair value of the land was
determined to be R1720 000 on 31 December 2017.
2. Building
It is the accounting policy of BH2 to depreciate the building on a straight line basis over its estimated
useful life of 25 years. The building has a residual value of 15% of its cost. Construction of the building
commenced on 1 January 2013 and was completed and ready for occupation on 30 June 2013.
However, the building was occupied and officially opened on 31 December 2013 when the first group
of guests arrived at the establishment.
3. Vehicles
The following information pertains to the vehicles included in the asset register of BH2:
R
R
R
R
Vehicle A
Vehicle B
Vehicle C
Total
Cost
350 000
400 000
450 000
1 200 000
Accumulated depreciation (31
December 2016)
(150 000)
(240 000)
(180 000)
(570 000)
Carrying amount
200 000
160 000
270 000
630 000
All the vehicles above are used for delivery purposes and the accounting policy of BH2 is to
depreciated vehicles on a straight-line basis over a 5 year period. The vehicles have no residual value.
Vehicle A was sold for cash on 30 September 2017. The only journal that was passed was to debit
Bank and credit proceeds from sale of vehicle A with the full amount received for the sale.
Vehicle B was traded in for Vehicle D, a new delivery vehicle on 31 March 2017. The vehicle was
ready for use on the same date. The invoice price of Vehicle D amounted to R517 500. The balance
was settled with a bank loan. This has not been accounted for during the current financial year.
On 1 January 2017, it was determined that the total useful life of Vehicle C should be revised to 7
years.
4. Plant
BH2 purchased plant Kobyo on 31 December 2014 at a purchase price of R1 200 000. R10 000 was
incurred to transport the plant to BH2’s premises. Transport was paid to Deliver Best, not a
registered vat vendor. Installation costs of R30 000 were incurred on 31 December 2014. BH2
incurred costs of R14 000 during the month of January 2015 to train their employees to use the plant.
On acquisition date the useful life of the plant was assessed to be 10 years with no residual value.
The plant would be depreciated on the straight-line basis using its useful life. Plant is carried on the
cost model.
On 31 December 2017 the plant operator engaged the plant whilst intoxicated, which resulted in the
plant being damaged. The fair value of the plant on this date was R 1 094 737 and the cost to sell
were R350 000. The present value of all future cashflows (excl VAT) from using the plant were
calculated to be R700 000.
BH2’s accountant was unsure of how to treat the plant in the accounting records of BH2 since the
acquisition of the plant.
5. Seshebo Patent
BH2 has a research and development unit that specialize in developing new recipes. On 20 December
2017 a new recipe was developed called “seshebo” and was patented on 25 December 2017. The
contract to patent the recipe was signed on the same day. The total cost associated with the
development of this recipe amounted to R 700 000. Market research has already indicated that there
is a great demand for the Seshebo recipe that has been created by BH2. BH2 plans to sell the recipe
indefinitely. BH2’s accounting division has correctly identified that the patent meets the definition
of an asset.
This page has been left blank for your analysis and may not be handed in –
This page will not be marked
© Copyright, School of Accountancy, University of the Witwatersrand
10
This page has been left blank for your analysis and may not be handed in –
This page will not be marked
© Copyright, School of Accountancy, University of the Witwatersrand
11