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CACC011 TEST ONE 2022 - Final Suggested Solution Copy
Accounting IA (University of Limpopo)
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FACULTY OF MANAGEMENT & LAW
SCHOOL OF ACCOUNTANCY
DEPARTMENT OF ACCOUNTING
MEMORANDUM
MODULE:
CACC011
(FINANCIAL ACCOUNTING IA)
SEMESTER TEST ONE
:
2022
MARKS
:
80
INTERNAL EXAMINERS
:
MR G NYIRENDA
MR TG MALEKA
INTERNAL MODERATORS
:
MS Y OERLEMANS
THIS MEMO CONSISTS OF...7... PAGES INCLUDING COVER PAGE
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CACC011 TEST ONE APRIL 2022
QUESTION 1 [SUGGESTED SOLUTION]
[18 MARKS / 27 MINUTES]
a) PART A
ANALYSIS OF THE EXPERT STATEMENT
According to the conceptual framework for financial reporting, the objective of financial
reporting is to provide financial information about the entity that is useful to existing and
potential investors, lenders and other creditors in making decisions about providing resources
to the entity
(2.0)
Existing and potential investors need useful financial information in order to be able to make
decisions about investing money into the entity. The decisions will depend on the returns in the
form of their equity as they will receive dividends and be interested in the market price of their
shareholding.
(2.0)
Lenders and other creditors on the other hand need useful financial information in order to be
able to make a decision to provide debt to an entity. These lenders and other creditors will be
looking for returns in the form of principal repayments and interest
(2.0)
The expectation of these returns depends on the amount, timing and uncertainty of expected
future cash flows.
(1.0)
Conclusion: Therefore, the expert is incorrect and the statement is misleading.
(1.0)
AVAILABLE MARKS [8]
PRESENTATION, LOGICAL ARGUMENT AND GRAMMAR [1]
TOTAL MARKS [9]
MAXIMUM MARKS [8]
2
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CACC011 TEST ONE APRIL 2022
b) PART B
THE QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION
In case (a), the enhancing qualitative characteristic missing is Timeliness. The annual reports
of ABC Ltd are long overdue and should have been released on time.
(2.0)
The qualitative characteristic in this case to consider is relevance, which is a fundamental
qualitative characteristic. Even though the directors have included this information, it may be
considered as immaterial due the size of DEF Ltd.
(2.0)
In case (c), the qualitative characteristic to consider here is understandability, an enhancing
qualitative characteristic. Since GHI Ltd is based in Midrand South Africa, the directors should
have prepared or at least translated the annual reports in one of the official languages
understood widely in South Africa.
(2.0)
The directors of JKL Ltd have decided to manipulate the financial statements of the company
for their own personal benefits. This affects the faithful representation if the financial
statements, a fundamental qualitative characteristic. They have acted with bias and therefore
the financial information presented is not neutral and free from bias. There are also ethical
issues involved in this case.
(3.0)
In case (e), the financial information presented cannot be verified. This is an enhancing
qualitative characteristic. It may affect the decision-making of the users of the financial
information
(2.0)
AVAILABLE MARKS [11]
PRESENTATION, LOGICAL ARGUMENT AND GRAMMAR [1]
TOTAL MARKS [12]
MAXIMUM MARKS [10]
3
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CACC011 TEST ONE APRIL 2022
QUESTION 2 [SUGGESTED SOLUTION]
[42 MARKS / 63 MINUTES]
a)
BUSINESS DECISIONS MADE BY THE OWNER
In transaction 1, the owner has made a financing decision
(1.0)
In transaction 2, the owner has made an investing decision
(1.0)
In transaction 3, the owner has made an investing decision
(1.0)
In transaction 5, the owner has a made an operating decision
(1.0)
In transaction 9 the owner has made a distribution decision
(1.0)
AVAILABLE MARKS [5]
MAXIMUM MARKS [5]
4
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CACC011 TEST ONE APRIL 2022
QUESTION 3 [SUGGESTED SOLUTION]
[20 MARKS / 30 MINUTES]
b) Show the effect of the transactions 1 to 16 on the accounting equation.
INSTRUCTIONS TO MARKER:
[1 mark awarded for DEBITING and CREDITING the CORRECT ACCOUNTS; AND 1 mark for the
CORRECT EFFECT ON THE ACCOUNTING EQUATION. Half a mark for the correct date If the
ACCOUNTS are NOT correct NO marks must be awarded for the effect on the accounting equation.]
Date
(in order)
Account debited
Account credited
Asset (R)
Equity (R)
Liability (R)
03/01/22
Bank
Capital
+ 120 000
+ 120 000
(2.5)
04/01/22
Equipment
Capital
+ 9 000
+ 9 000
(2.5)
06/01/22
Vehicle
Bank
+- 55 000
(2.5)
10/02/22
Inventory/Purchases
Bank
+- 37 000
(2.5)
12/01/22
Bank
Sales
+ 17 000
+ 17 000
(2.5)
13/01/22
Trade receivables
Sales
+ 15 000
+ 15 000
(2.5)
15/01/22
Rent Expense
Bank
+ 3 500
- 5 250
OR ALTERNATIVELY
Receivable/Deposit
-
(5.0)
1 750
15/01/22
Rent Expense
Bank
- 1 750
- 1750
(2.5)
15/01/22
Receivable/Deposit
Bank
+- 3 500
(2.5)
17/01/22
Furniture
Payables
+ 14 500
+ 14 500 (2.5)
19/01/22
Drawings
Inventory
- 1 500
-1 500
(2.5)
19/01/22
Drawings
Bank [W1]
-1 175
-1 175
(2.5)
OR ALTERNATIVELY
19/01/22
Drawings [W2]
Inventory
-1 500
Bank [W1]
- 1 175
(5.0)
- 2 675
22/01/22
Bank
Trade Receivables
+- 11 500
(2.5)
24/01/22
Payables
Bank
- 14 500
- 14 500 (2.5)
27/01/22
Salaries and Wages
Bank
- 3 500
31/01/22
[W1]
- 3 500
No Journal entry (s) needed. The transactions will occur in the next month
(2.5)
(1.0)
[R 800 + R375]; [W2] [R 1500 + R 800 + R 375] (1.0)
AVAILABLE MARKS [37]
MAXIMUM MARKS [37]
5
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CACC011 TEST ONE APRIL 2022
a)
Anti-Darkness Traders
Statement of Profit or Loss for year ended 31 March 2022
Revenue
0,5
Cost of sales
Gross profit
1 150 000
(672 000)
478 000
0,5
0,5
Other income
Rent received
Profit on sale of asset
192 000
9 000
0,5
0,5
Expenses
Advertising costs
Asset scrapped
Bank charges
Depreciation
Commission paid
Credit losses
Interest paid – loan
Loss on sale of asset
Rent paid
Repairs and maintenance
Salaries and wages
Telephone and fax
Water & electricity
Loss for the year
(707 050)
(38 400)
(14 800)
(87 000)
(14 000)
(56 000)
(6 000)
(40 250)
(18 000)
(108 000)
(41 400)
(192 000)
(48 000)
(43 200)
(28 050)
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
AVAILABLE MARKS [9,5]
MAXIMUM MARKS [8]
b)
6
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CACC011 TEST ONE APRIL 2022
Anti-Darkness Traders
Statement of changes in equity for the year ended 31 March 2022
Retained
earnings
Capital
Total
Changes in equity for 2022
Balance at 1 April 2021
30 000
1
Additional capital contribution by owner
Loss for the year
Distribution to owner
Balance as at 31 March 2022
85 000
0,5
115 000
0,5
123 000
(28 050)
(60 000)
34 950
0.5
153 000
0.5P
0.5
85 000
(28 050)
60 000
149 950
AVAILABLE MARKS [3,5]
MAXIMUM MARKS [3]
c)
7
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CACC011 TEST ONE APRIL 2022
Anti-Darkness Traders
Statement of financial position as at 31 March 2022
R
Non-Current assets
202 000
Property, plant & equipment ( 320 000 - 104 000-14 000) 1,5
202 000
0,5
Current Assets
Inventory
Trade receivables (52 320 - 4 920)
Other current assets ( 4 000 + 7 200)
277 150
218 550
47 400
11 200
0,5
0,5
1
1
TOTAL ASSETS
479 150
EQUITY AND LIABILITIES
Capital
Retained earnings
115 000
34 950
149 950
Liabilities
Non-current liabilities
Long-term borrowings (250 000 - 50 000)
1
Current liabilities
Trade and other payables (22 200 + 9 000 + 12 000 )
Current portion of long term borrowings
Bank overdraft (24 000 - 60 000)
1,5
1
TOTAL EQUITY AND LIABILITIES
0,5
0,5
329 200
200 000
200 000
0,5
129 200
43 200
50 000
36 000
0,5
0,5
0,5
479 150
AVAILABLE MARKS [11,5]
MAXIMUM MARKS [9]
8
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