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1.1 June Test 2021 QuestionPaper - final

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Instructions:
The June Test starts at 09h00 and ends at 13h00. This time should be spend as follow:
• 09h00 – 09h30: Reading time of 30 minutes. Read through the question paper,
make notes on what is asked and complete your cover page and the required details
on all subsequent pages of your written response as indicated below (the question
number can be completed as you are writing down your answer).
• 09h30 – 12h30: Writing time of 3 hours in total. Work through the question paper
and write down your solution in pen (dark blue or black pen). Typed solutions will
NOT be accepted or marked (only handwritten).
The writing time for each question is the time that is indicated next to each question’s
heading on the right in brackets and adds up to a total of 3 hours (for example
Question 1 Part A’s writing time is 15 minutes). The writing time indicated provides
guidance on how long you should spend on answering the question before moving
on to the next question. You should stop writing at 12h30.
• 12h30 – 13h00: 30 minutes granted for converting your written attempt to a scan
(PDF document) and uploading and submitting this PDF document on Ulwazi
(Canvas). Your attempt should be submitted BEFORE 13h00. It is your
responsibility as a student to prioritize and plan your time to ensure that you
submit your attempt on time.
Cover page and subsequent pages of written response – details to be completed:
The first page (cover page) of your written response should have the following details written
on the top right side of the page:
a. June Test 2021
b. Page number (i.e. Page 1 of 12)
c. Student number
d. Signature
e. ID or passport number
f. Date
Underneath the above information students must place their student card or another form
of official identification (i.e. proof of registration and ID) when scanning their attempt.
Students must ensure to leave space for this.
All subsequent pages of your written response must have the following details written on
the top right side of each piece of paper.
a. Question number (i.e. Question 1 Part A)
b. Page number (i.e. Page 2 of 12)
c. Student number
d. Signature
e. ID or passport number
f. Date
Page 1 of 12
ACCN1005A/ACCN1006A June 2021
June Test 2021
120 marks (180 minutes)
Question 1
60 marks (90 minutes)
Question 1 consists of 3 parts, Part A, B and C. These parts are not related to each other.
Part A
10 marks (15 minutes)
Reading – Appendix 1
Refer to the extract of the Mr Price Group Limited Integrated Report (Appendix 1) and
provide the answers to the questions below.
1) With the initial outbreak of Covid 19 in China, explain what Mr Price Group Limited’s
biggest concern was and briefly explain what the impact of this concern would have been
on their operations and financial results?
(2 marks)
2) Provide 3 actions taken by the Mr Price Group Limited towards its respective
stakeholders in response to Covid 19 and the lockdown implemented on 27 March 2020
and explain what the Group wanted to achieve with each action.
(3 marks)
3) Is the Mr Price Group Limited a lucrative investment choice? Substantiate your answer
with 2 reasons using quantitative data.
(2 marks)
4) What was the total cash that was generated from disposing of property, plant and
equipment for the 2020 financial year?
(1 mark)
5) Was there an increase or decrease in the 2020 trade and other receivables? What could
have been two of the reasons for this increase or decrease?
(2 marks)
Total: 10 marks
Page 2 of 12
ACCN1005A/ACCN1006A June 2021
Part B
15 marks (22,5 minutes)
“Over the past few years, we have witnessed an explosion of new technology that borders
on what we may once have deemed science fiction. From driverless cars to wireless
microneedles that can deliver a precise drug dose in personalised medicine, the world is
changing at a rapid rate. And the field of accountancy is no different”.
Readings – Appendix 2
Read the attached articles:
•
‘Now is the time for your skills set to rise to the challenge of the 4IR” – Accountancy
SA May 2021
•
‘Lifelong Learning Is What It Will Take To Be A 21st Century Accounting And Finance
Professional’ – Forbes Sept 2020
You are required to:
1) Describe briefly in your own words the following:
• why lifelong learning is important in context of the readings; and
• 2 ways in which you will ensure that you remain a lifelong learner when leaving
university in the profession you pursue.
Two to three sentences will suffice.
(2 marks)
2) Based on the articles (Appendix 2) and the knowledge you gained from the ‘Critical
Thinking Accounting I Module’, write a short essay of 200 to 250 words of whether you
agree or disagree that the fourth industrial revolution will render accountants obsolete.
As part of your essay, also discuss two skills that will be required by accountants for the
fourth industrial revolution. Lastly, briefly discuss in two sentences the impact of COVID19 on the accounting profession and if it has impacted the skills required by accountants
for the fourth industrial revolution or not. Marks will be allocated for formatting, clear
writing, well-structured sentences and paragraphs.
(9 marks)
3) Prepare an email to your accounting lecturer in which you recommend three ways in
which universities can equip students to become proficient in some of the skills required
for the fourth industrial revolution during their studies.
(4 marks)
Total: 15 marks
Page 3 of 12
ACCN1005A/ACCN1006A June 2021
Part C
35 marks (52,5 minutes)
Grant Molepo is busy studying B.Com Accounting at Wits University. In order to become
more financially independent, he decided to start his own business with money he inherited.
Grant has always been interested in drones after having owned a few drones himself and
decided to start a business named, Drone Operator (hereafter referred to as DO) on 1 June
2019. DO sells specialised drones1 with the most up to date drone technology used for the
inspection of assets and for security surveillance.
DO’s financial year end is 31 May and IFRS for SMEs is applied in preparing the financial
statements. Grant decided to do the bookkeeping himself with his knowledge gained from
his studies. He has however struggled with the accounting of some items for the 2021
financial year and asked for your assistance and presented you with the following
information:
Drone Operator
Statement of financial position as at 31 May 2020 (correctly prepared)
R
ASSETS
Computer equipment
35 000
Inventory (drones on hand)
200 000
Accounts receivable
160 000
Bank
155 000
Prepaid expenses (Note 4)
20 000
Total assets
570 000
OWNER’S EQUITY
Capital
440 000
LIABILITIES
Accounts payable
130 000
Total owner’s equity and liabilities
570 000
1
Drones are more formally known as unmanned aerial vehicles (UAVs) or unmanned aircraft systems (UASes).
Essentially, a drone is a flying robot that can be remotely controlled or fly autonomously through software-controlled
flight plans in their embedded systems, working in conjunction with onboard sensors and GPS.
Page 4 of 12
ACCN1005A/ACCN1006A June 2021
Draft post-adjustment trial balance at 31 May 2021 (correctly prepared)
Debits
Credits
R
R
Distributions
?
Computer equipment
?
Inventory (drones on hand) (Note 1)
Accounts receivable (Note 3)
160 000
?
Bank
315 800
Call deposit
100 000
Prepaid expenses
?
Cost of sales (inventory sold)
Depreciation expense
180 000
?
Advertising expense (Note 2)
Rent expense
25 000
?
Salaries expense
180 000
Owner’s equity
435 000
Accounts payable (Note 2)
145 000
Income received in advance
?
Sales (Note 3)
550 000
Interest income
?
Notes
1. All inventory for 2021 was purchased on credit.
2. DO has an account with the Blue Cube Company that assisted them with creating social
media accounts and managing it. A bill amounted to R25 000 remains outstanding at
year-end and DO has 30 days to settle the bill. All other expenses for the year were
settled in cash.
3. 30% of all sales were on credit for 2021. 60% of all outstanding accounts were settled
during the year.
4. Prepaid expenses relate to rent that was paid in advance on 1 April 2020 for the next 12
months.
Page 5 of 12
ACCN1005A/ACCN1006A June 2021
Transactions that should still be accounted for
1. The computer equipment was purchased on the date DO was started. The estimated total
useful life was determined as 8 years on this date. DO has still to account for depreciation
for the current year.
2. Grant decided it is time to upgrade his personal drone collection and took one of the
drones in DO’s stock for himself during May 2021. The drone is being sold at R35 000
(original cost R18 000).
3. On 1 April 2021, DO paid R26 200 regarding rent for the next 12 months. The rent per
month increases with 10% on 1 May every year.
4. On 1 June 2020, DO transferred R100 000 to a call deposit account earning interest at
5% per annum.
5. DO entered into a contract to deliver 2 similar drones to a customer by the end of June
2021. The customer paid R70 000 upfront for the drones during May 2021. One of these
drones was received before year-end and delivered to the customer on 31 May 2021.
These drones have been correctly accounted for in the inventory and cost of sales
balances provided.
6. DO announced a bonus of R15 000 to be paid to the sales personnel relating to their
performance during the 2021 financial year. The bonus was paid at the end of June 2021.
Exclusive distribution right
On 15 June 2021, DO bought the exclusive distribution right to be the only retailer to sell the
Phantom brand drones in South Africa. They paid R150 000 cash for this right.
Please note:
•
Ignore VAT and any tax consequences
•
Show all workings clearly
•
Round all amounts to the nearest Rand where applicable
Page 6 of 12
ACCN1005A/ACCN1006A June 2021
You are required to:
1) Prepare journal entries for the transactions that should still be accounted for by DO
(transactions 1 – 6) for the year ended 31 May 2021. Journal narrations are not required.
(15 marks)
2) Prepare the General Ledger accounts for ‘Inventory’ and ‘Accounts Payable’ for DO as
at 31 May 2021. You are required to close off the accounts.
(10 marks)
3) Complete the following outstanding line items in the post adjustment trial balance of DO
at 31 May 2021:
(6 marks)
• Accounts receivable
• Rent expense
• Income received in advance
4) Discuss how the distribution right should be accounted for by DO on 15 June 2021.
(4 marks)
Total: 35 marks
Page 7 of 12
ACCN1005A/ACCN1006A June 2021
Question 2
(60 marks; 90 minutes)
Question 2 consists of 2 parts, Part A and B. These parts are not related to each other.
Part A
(15 marks; 22,5 minutes)
Mr Harry Potter has a love for magic and decided to open a magical supplies store, Weasley
and Weasley (WW). WW is a sole proprietorship and Mr Potter officially opened the store
on the 26 February 2019.
WW is a registered VAT vendor and Harry is aware that he is going to have to submit a VAT
return soon. Harry does not understand VAT and he has you asked for your assistance as
he knows you have been taking Accounting I.
The following information is relevant:
• The financial year end is 28 February 2021
• On the 1st of March 2020, WW had a VAT payable balance of R13 560
• The applicable VAT rate is 15%
• Assume all relevant amounts include VAT unless stated otherwise.
• Assume all entities are registered VAT vendors unless stated otherwise.
The following information was extracted from WW analysis journals at year end and can be
considered correct, except for the transactions listed below:
Column in analysis journal
Analysis journal
(R)
Sales
VAT
Accounts receivable
Cash Receipts Journal
Cash Payments Journal
Sales Journal
230 000
60 000
724 500
Harry also mentioned that he was unsure regarding the treatment of a few transactions and
have not been recorded these in the accounting records for WW for the year ended 28
February 2021:
a) WW sells magical wands. On 16 February 2021, WW purchased 100 wands on credit
from Diagon alley superette (a non-vat vendor) @ R30 each.
b) WW had to deliver the wands to a customer at Hogwarts School and paid R690 for
petrol.
Page 8 of 12
ACCN1005A/ACCN1006A June 2021
c) Harry’s son, Dumbledore, plays quidditch2 for his school and the team needed new
broomsticks to be able to win this season. On the 28 February 2021, Harry decided
to give Dumbledore 10 brooms for his team. The cost of the brooms, per the Inventory
account, is R56 000.
d) Given it was year-end, Harry decided to treat his staff to a lunch to celebrate a good
year. The cost of the lunch was R15 000.
During March 2021, SARS launched an investigation regarding the previous VAT-return
submitted by WW (2020 financial year). As part of their finding, they noted the following tax
invoice relating to a purchase made by WW:
Hogwarts Motors
Tax Invoice
Vat registration number: 123456789
Date
Description
Amount ®
06 01 2020 1 Black Nissan Micra
200 000
Motor vehicle
Total
VAT@15%
Total including VAT
200000
30000
230000
WW had claimed the input VAT for this tax invoice.
You are required to:
Round off all answers to the nearest Rand.
1) Prepare the general journal entries to record the following transactions in the accounting
records of WW (include dates and narrations):
(6 marks)
• Transaction a
• Transaction b
2) Prepare the VAT control account for the year ended 28 February 2021 and determine
the amount receivable/ payable to SARS
(7 marks)
3) In terms of the SARS investigation, Harry has asked if you could explain to him whether
WW was correct in claiming the input VAT from SARS.
(2 marks)
Total: 15 marks
2
Quidditch is a sport of two teams each mounted on a broomstick, played on a hockey rink-sized pitch.
Page 9 of 12
ACCN1005A/ACCN1006A June 2021
Part B
(45 marks; 67,5 minutes)
Ignore VAT
Sally Williams, who trades as a sole trader, owns a small cosmetics store in Cape Town,
called Hey Beauty (HB). Sally is an expert in skincare; however, she has a basic
understanding of accounting and has asked for your help in preparing HB financial
statements for the year ended 31 December 2020.
She has provided you with the following extract of the trial balance as at 31 December 2020:
Hey Beauty
Extract of Trial Balance ended 31 Notes
December 2020
Rand
Rand
Dr
Investment by the owner
1 500 000
Property, plant and equipment
Land (1/1/2020)
Buildings (1/1/2020)
Furniture (1/1/2020)
Loan – Biggy Bank
Cash Balance
Rental expense
Insurance Paid
Stationery supplies
Wages
Electricity and Water
Interest expense
Rates and Taxes
Cash Distribution to Owner
Sales
Cost of sales
Accounts payable
Page 10 of 12
Cr
Note 1
Note 1
Note 3
Note 2
Note 4
Note 5
550 000
4 000 000
21 500
400 000
300 000
175 000
95 000
6 800
65 100
12 250
?
Note 6
78 000
127 000
Note 7
ACCN1005A/ACCN1006A June 2021
1 985 250
452 200
78 000
Notes
1. Property, plant and equipment
As at 1 January 2020, the building had a remaining useful life of 25 years and furniture
has a remaining useful life of 5 years. HB depreciates property, plant and equipment
on the straight-line basis.
2. Warehouse rentals
Included in rental expense is rent paid for the HB warehouse. The warehouse is quite
large and HB decided to sublet a portion of the warehouse to TakeALittle. TakeALittle
entered into a lease agreement with HB on the 1 April 2020, and agreed lease the
space for the next 12 months. TakeALittle paid the annual rent upfront in cash and the
total of R192 000 was set off against rental expense.
3. Loan – Biggy bank
HB took up a loan from Biggy bank on the 1 July 2020 and is expected to be paid in 8
equal bi-annual instalments starting from 31 December 2020. Interest on the loan is
9% p.a. (simple interest). As at the 31 December 2020, the repayment made, as well
as the interest incurred and paid for the period, was not recorded.
Given the current Virus X pandemic, Biggy Bank started an initiative to assist small
businesses. In order to provide some cash flow relief, Biggy Bank agreed on the 31
December 2020 that the next two instalments of capital repayment could be delayed
by 3 months.
4. Insurance paid
Annual insurance premium of R95 000 relates to the insurance on the store premises
as well as the owner’s house. Premium pertaining to the owner’s house is R15 000.
The annual policy for the store premises is valid up to 30 June 2021.
5. Stationary supplies
At year-end, three quarters of the stationery purchased was still on hand.
6. Rates and taxes
On the 31 August 2020, HB paid the R78 000 rates and taxes for the next 12 months.
It was discovered that the following journal entry was recorded:
Dr
Cr
Rand
Rand
Accounts payable
78 000
Rate and taxes
78 000
Page 11 of 12
ACCN1005A/ACCN1006A June 2021
7. Sales
HB skincare has become world famous, and Sally received an order from British
Beauties in London on 1 November 2020. The order was for 150 beauty creams @
R150 each. British Beauties paid the full amount on 1 November and Sally recorded
the full amount in sales. HB is only expected to deliver the good on the January 2021.
8. Bank statement
On inspection of the bank statement received, Sally noticed a debit order payment on
25 December 2020 relating to HB telephone expense that was not recorded in HB’s
accounting records. The debit order was for R650.
You are required to:
Round off all answers to the nearest Rand. Please ignore VAT.
1) Prepare the Statement of Profit or Loss for Hey Beauty for the year ended 31 December
2020
(22 marks)
2) Write an email to Ms. Sally in which you describe how the transaction in Note 3 should
be presented in the Statement of Financial position of Hey Beauty at 31 December 2020.
Please note the following:
•
•
•
Justify your answer by referring to the current and non-current distinction.
Show all calculations to support your discussion.
You need not discuss the definitions or recognition criteria of the elements of the
financial statements.
(10 Marks)
Presentation (2 marks)
3) Prepare the Liabilities and equity section of the Statement of Financial Position for Hey
Beauty as at 31 December 2020.
(11 marks)
Total: 45 marks
END
Page 12 of 12
ACCN1005A/ACCN1006A June 2021
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