RICHFIELD GRADUATE INSTITUTE OF TECHNOLOGY (PTY) LTD
HIGHER EDUCATION AND TRAINING
FACULTY OF COMMERCE
ACCOUNTING 621
1st SEMESTER NATIONAL FINAL EXAMINATION
DURATION: 2 HOURS
MARKS: 100
EXAMINER: CARL VELUSAMY
DATE: 10 JULY 2019
MODERATOR: FREEDOM VEZI
This paper consists of 5 questions and 7 pages including this page.
PLEASE NOTE THE FOLLOWING:
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2) You are obliged to enter your student details on the answer booklet. The answer booklets
provided are the property of the Richfield Graduate Institute Of Technology and all extra
booklets must be handed to the invigilator before you leave the examination room.
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writing on parts of your body, tissue, pencil case, desk etc., your answer booklet will be taken
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you for violating the code of conduct of Richfield Graduate Institute of Technology Examinations
Board. Therefore, if any of these materials are in your possession you are requested to hand these
over to the invigilator before the official commencement of this paper.
4) The question paper consists of 3 sections.
a. Sections A and B are compulsory.
b. Section C comprises of 3 questions, you are required to answer any 2 questions.
NUMBERS
SUGGESTED TIME REQUIRED TO ANSWER THIS QUESTION PAPER
QUESTIONS
MARKS
TIME IN MINUTES
SECTION A: MULTIPLE CHOICE QUESTIONS COMPULSORY
1
2
3
4
5
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Question One
30
30
SECTION B: SHORT QUESTIONS COMPULSORY
Question Two
20
SECTION C: ANSWER ANY TWO QUESTIONS
Question Three
25
Question Four
25
Question Five
25
TOTAL
100
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Dr Muni Kooblal
Mr J Ramnundlall
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20
20
20
120
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SECTION A: MULTIPLE CHOICE QUESTIONS
QUESTION ONE
1.1 When valuing inventories at a lower of cost or net realisable value, which one of the following
conventions is being applied?
(1)
A. Matching
B. Consistency
C. Objectivity
D. Prudence
1.2 If DBA Ltd has issued 250 000 ordinary shares of R1 and an ordinary dividend of 5 cents per
share is paid, the dividend paid would be_____.
(2)
A. R12 500
B. R250 000
C. R125 000
D. R50 000
1.3 Blanc (Pty) Ltd has 200 000 4% R1 preference shares and 600 000 R1 ordinary shares in issue. If
the company pays an ordinary dividend of 6 cents per share during the year ended 31 December
2012, the total dividends payable that year would be________.
(2)
A. R68 000
B. R36 000
C. R8 000
D. R44 000
1.4 Issa (Pty) Ltd issues 30,000 R1 shares at R1.30 for each share. Which of the following statements
is true?
(3)
A. Ordinary share capital will increase by R30 000 and share premium will increase by R39000.
B. Ordinary share capital will increase by R39 000 and share premium will increase by R9000.
C. Ordinary share capital will increase by R39 000 and share premium will be unaffected.
D. Ordinary share capital will increase by R30 000 and share premium will increase by R9 000.
1.5 Twisters Ltd made a profit for the year ended 31 March 2017 of R30 000. During that year the
company had paid preference dividends on 100 000 5% preference shares. In addition, an
ordinary dividend of 4 cents per share was paid on 200 000 ordinary shares. What was the
retained profit for the year ended 31 March 2017?
(3)
A. R22 000
B. R17 000
C. R25 000
D. R30 000
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1.6 Which one of the following would not be included in a full set of company financial statements?
(1)
A. The cash budget
B. The statement of financial position
C. The statement of changes in equity
D. The income statement
1.7 If a company issues 1 million R1 shares at R1.30 per share, what will be the effect on the
statement of cash flows?
A. Cash flows from financing activities will increase by R1.3 million.
B. Cash flows from investing activities will increase by R1.3 million.
C. Cash flows from investing activities will increase by R1.0 million.
D. Cash flows from financing activities will increase by R1.0 million.
1.8 Which one of the following would be categorized as a cash flow from investing activities?
A. Increase in inventory held
B. Proceeds of a loan issue
C. Proceeds from sale of equipment
D. Dividends paid
(2)
(1)
1.9 Which one of the following would reduce the cash balances of a business and not reduce the
profit for the year?
(1)
A. Interest paid
B. Distribution costs
C. Wages paid
D. Dividends paid
1.10
A.
B.
C.
D.
The descending order in which current assets must be shown in the balance sheet is:
Cash, Trade Receivables, Inventory
Inventory, Trade Receivables, creditors
Trade Receivables, Inventory, Cash
Inventory, Trade Receivables, Cash
(1)
1.11 Given figures showing: Sales R8 200; Opening stock R1 300; Closing stock R900; Purchases
R6400; Carriage inwardsR200, the cost of goods sold figure is:
(2)
A. R8 200
B. R7 000
C. R6 800
D. R6 200
1.12 Identify the statement that is incorrect about close corporations.
A. A close corporation can take legal actions against its members
B. Can buy back member’s interest
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C. Liabilities of the close corporation may be claimed from personal belongings of members of
the close corporation but limited to the extent to which a member contributed to the close
corporation.
D. Annual General Meeting is not required
1.13 A new shopping centre has been built across the road from a laundromat, which has
increased the value of surrounding business properties. It has been decided to revalue the land
and building from R50 000 to R70 000. The land and building were acquired in the previous
accounting period.
The journal entry to record the transaction relating to the revaluation of the land and buildings
is:
(2)
A. Dr Property, plant and equipment 20 000 Cr Revaluation surplus 20 000
B. Dr Bank 20 000; Dr Property, plant and equipment 50 000; Cr Revaluation surplus 70 000
C. Dr Revaluation surplus 20 000; Cr Property, plant and equipment 20 000
D. Dr Property, plant and equipment 70 000; Cr Bank 20 000; Cr Revaluation surplus 50 000
1.14 The following are reasons that may give rise to conversion of a close corporation to a
company except:
A. The close corporation (CC) has grown.
B. The close corporation wants to compete with bigger companies in the same market.
C. The close corporation has growth aspirations.
D. The members of the close corporation want to avoid paying personal income tax.
(1)
1.15 Identify the statement that is false about the close corporation.
(2)
A. Every corporation shall have in the Republic a postal address and an office to which all
communications and notices to the corporation may be addressed.
B. An undertaking by a member to make an initial or an additional contribution to a
corporation shall be enforceable by the corporation in legal proceedings.
C. Where a corporation has been deregistered, the Registrar shall give notice to that effect in
the Gazette, and the date of the publication of such notice shall be deemed to be the date of
deregistration.
D. A natural or juristic person in the capacity of a trustee of a trust inter vivos may be a
member of a corporation provided that a juristic person shall directly or indirectly be a
beneficiary of that trust
1.16 Profit generated from normal activities before taking into account financing costs is referred
to as___________.
(1)
A. Operating profit
B. Profit for the year
C. Gross profit
D. Net profit
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ACC621
Dr Muni Kooblal
Mr J Ramnundlall
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1.17
A.
B.
C.
D.
______ profit is the difference between sales revenue and cost of sales.
Net
Gross
Sales
Operating
(1)
1.18 If the level of inventory alters during a period, the cost of sales for that period cannot equal
______.
(1)
A. inventories held at the year end
B. inventories available for resale
C. sales
D. purchases
1.19 Jutland plc intends to change its accounting policies regarding inventory valuation for the
forthcoming year. It intends to switch from the weighted average method to the FIFO method of
inventory valuation. It is expected that during the forthcoming year, prices of goods purchased
will rise. If this is the case, what will be the effect of the change in inventories’ valuation
method?
(1)
A. An increase in profit and an increase in the value of closing inventories held
B. A decrease in profit and a decrease in the value of the closing inventories held
C. An increase in profit and a decrease in the value of the closing inventories held
D. A decrease in profit and an increase in the value of the closing inventories held
1.20 The ______ convention deals with what expenses are charged in the income statement for a
particular period.
(1)
A. periodicity
B. realisation
C. going concern
D. matching
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SECTION B (COMPULSORY)
(20 MARKS)
QUESTION TWO
Use the given information for Kiara Traders to prepare the:
 Statement of Comprehensive Income for the year ended 28 February 20.6.
Ensure that the financial statement comply with the requirements of Statements of Generally
Accepted Accounting Practice (GAAP)
Kiara Traders PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 20.6
DR (R)
Balance Sheet Accounts Section
Capital
Drawings
Land and buildings
Equipment
Accumulated depreciation on equipment (1 March 20.5)
Fixed deposit: Ben Bank (12% p.a.)
Loan: Zen Bank (16% p.a.)
Trading inventory
Debtors control
Provision for bad debts
Creditors control
Bank
Cash float
CR (R)
395 700
87 000
400 000
90 000
22 000
40 000
40 000
70 220
34 420
1 900
49 600
12 480
1 000
Nominal Accounts Section
Sales
Cost of sales
Sales returns
Rent income
Interest on fixed deposit
Bank charges
Water and electricity
Telephone
Insurance
Interest on loan
Rates and taxes
Salaries and wages
Consumable stores
Advertising
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563 000
298 000
4 000
52 800
3 200
1 800
12 540
3 500
3 900
7 500
16 400
40 640
1 600
3 200
1128200
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Adjustments and additional information
1. According to a physical stocktaking the following stocks were on hand on 28 February 20.6:
Merchandise R69 000
Consumable stores R200.
2. Rates and taxes included a payment of R4 080 for the period 1 January 20.6 to 30 June 20.6.
3. Depreciation is provided annually on equipment at 10% p.a. using the diminishing balance
method:
Note: Equipment costing R30 000 was purchased on credit on 01 February 20.6. The purchase has
not
been recorded.
4. The rent for February 20.6 is still outstanding.
5. A portion of the interest on loan has been paid in advance. The unsecured loan was obtained on
28 February 20.5. Equal annual repayments of R10 000 will commence on 1 March 20.6.
6. On 28 February 20.6, a cheque of R500 was received from T. Henry whose account was previously
written off as irrecoverable. No entry has been made for this.
7. A debtor, A. Donald, who owed R800 is declared insolvent. His estate paid Kiara Traders a first and
final
dividend of 60 cents in the Rand. This has been recorded. The balance of his account must now be
written off.
8. The provision for bad debts must be adjusted to 5% of trade debtors.
9. The fixed deposit at Ben Bank was made on 1 March 20.5 and matures on 30 June 20.6. Provide
for
outstanding interest on fixed deposit.
10. Service fees according to the bank statement for February 20.6 have not yet been recorded,
R160.
11. The telephone account for February 20.6 has not yet been paid, R320
SECTION C (ANSWER ANY TWO QUESTIONS FROM THIS SECTION)
(50 MARKS)
QUESTION THREE
(25 MARKS)
The following trial balance is available for A Ltd at 31 December 20.12:
Dr
R
Share capital – issued and fully paid:
Ordinary shares
7% Redeemable preference shares
Accumulated depreciation of plant and equipment(31/12/20.11)
Accumulated amortisation of patents and trademarks
(31/12/20.11)
Plant and equipment at cost (31/12/20.11)
90 500
Land and buildings at cost
37 875
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Cr
R
50 000
15 000
8 250
1 500
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Patents and trademarks at cost (31/12/20.11)
Investment at fair value
Revenue (sales to customers, excluding VAT)
Raw material purchased
Inventory – 31 December 20.11
Selling and distribution expenses
Administrative expenses
Proceeds on sale of plant and equipment
Loss on expropriation of land
Retained earnings – 31 December 20.11
Dividends received – B Ltd
Bank overdraft
Trade and other payables
Trade and other receivables
7 500
16 500
60 250
11 750
15 500
3 800
22 200
4 500
1 000
18 750
2 700
19 500
71 525
45 350
251 975
251 975
Additional information:
1. Trade and other receivables includes provisional tax payments of R7 000.
2. Trade and other payables:
Creditors are secured by plant to the value of R35 000 (payable within one year).
Accrued interest on debentures also forms part of creditors.
3. Administrative expenses include the following:
R
 Interest on bank overdraft
1 450
 Auditors' remuneration – for audit
1 000
 Managing director's salary – executive 1 500
 Directors' remuneration – executive
300
 Salaries and wages
12 500
 Rent paid
2 500
4. Property, plant and equipment
 Land with a cost of R15 000 was expropriated during the year. (loss on expropriation is not
tax deductible)
 During the year plant which had a cost of R6 000 was sold for R4 500. The depreciation
provided on this plant to 31 December 20.11 is R1 250. There were no other sales of plant
and equipment during the year.
 Depreciation on plant and equipment must still be provided for the year. The detail is as
follows:
R
 Depreciation from beginning of year to date of disposal of plant 1 000
 Depreciation on remaining plant and equipment
3 500
4 500
5. Patents and trademarks
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The patents and trademarks are amortised over 5 years according to the straight-line method. The
amortisation charge for 20.12 is R1 500
6. Provision must be made for the following:
 Current tax at 28%. It may be assumed that "selling and distribution expenses" and
"administrative expenses" do not include any disallowable expenditure for income tax
purposes.
 Annual preference dividend.
 Dividends proposed to ordinary shareholders of R7 500. (no tax charge)
7. Inventory
The value (lower of cost or net realisable value) of inventory at 31 December 20.12 is: R15 750
REQUIRED:
Prepare the Statement of Comprehensive Income for A Ltd for the year ended 31 December 20.12
Your answer must comply with the requirements of International Financial Reporting Standards.
Please note: Expenses must be classified by function
The implications of capital gains tax and deferred tax must be ignored
Show all your workings
QUESTION FOUR
(25 MARKS)
Red Car Incorporated, manufactures and sells motor vehicles.
The following were extracted from the list of accounts at 31 December 2016:
R
6 200
49 400
5 800
125 600
4 100
43 700
9 500
5 400
12 000
4 500
10 200
9 800
427 000
14 500
12 600
65 300
21 000
35 000
Raw materials at 1 January 2016
Raw materials purchased
Raw materials at 31 December 2016
Direct labour cost
Indirect materials
Indirect labour cost
Depreciation-factory building
Depreciation – factory equipment
Insurance – factory
Property taxes – factory
Work in process inventory at 1 January 2016
Work in process inventory at 31 December 2016
Sales
Finished goods inventory at 1 January 2016
Finished goods inventory at 31 December 2016
Sales personnel salaries
Depreciation – sales equipment
Office personnel salaries
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Depreciation – office equipment
Insurance expense for office equipment
Office supplies expense
Rent Income – Administration building
Interest revenue
Income taxes
12 000
9 000
2 400
25 400
5 100
10 675
REQUIRED:
4.1 Calculate the cost of goods manufactured
4.2 Calculate net income for the year ended 31 December 2016
(15 Marks)
(10 Marks)
QUESTION FIVE
(25 MARKS)
Trionics Business Solutions is an entity that sells electronic equipment. The entity is not registered as
a VAT vendor. The financial year-end of Trionics Business Solutions is 28 February of each year. The
following trial balance was extracted from the financial records of Trionics Business Solutions:
TRIONICS BUSINESS SOLUTIONS
Additional information
The mortgage with an interest rate of 9% p.a. is repayable over a period of 20 years. The capital that
will be repaid from 1 March 2011 to 28 February 2012 will amount to R20 000. No interest was due
at the end of the 2011 financial year.
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REQUIRED:
Prepare the statement of financial position of Trionics Business Solutions for the year ended 28
February 2011. Your answer should comply with the requirements of International Financial
Reporting Standards (IFRS)
Comparative figures are not required.
The notes to the statement of financial position are not required.
Note: Show all your calculations
TOTAL MARKS: 100
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