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HFAC130 1 Jan Jun2023 Supp SA 1 GC V3 03072023
Financial Accounting (Boston City Campus)
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HIGHER EDUCATION PROGRAMMES
Academic Year 2023:
January – June
Supplementary Summative Assessment 1:
Financial Accounting Reporting
(HFAC130-1)
NQF Level, Credits:
5, 20
Weighting:
50%
Assessment Type:
Examination
Pass requirement:
50%
Examiner:
G. Chipaumire
Educator:
L. v Niekerk
Due Date:
12 July 2023
Total:
100 marks
Duration:
3 hours
Instructions:
1. This examination script consists of 8 pages including the cover sheet. Ensure
that you have all the pages.
2. This examination consists of Essay-Type questions.
3. No answers in pencil will be marked.
4. Show all calculations. Where applicable, round to two decimals.
5. The HE Invigilated Assessment Event Rules are applicable. This is a Paper
Based Invigilated Assessment Event - you must submit a handwritten answer
sheet. We have provided an Assessment Answer Book. If you cannot print this,
you may use it as a template to guide you and/or to replicate in your handwritten
answer sheet. You may not type your answers in the Assessment Answer Book.
6. Good Luck!
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QUESTION 1
(26 marks)
Fare Cape (Pty) Ltd is a company that produces dairy products. The company uses
industrial machinery required to pasteurize and process milk. Usually when the
company purchase new machinery, they will sell older machinery to local farmers.
The following are extracts from the General Ledger of Fare Cape (Pty) Ltd for the year
ended 30 June 2022:
DR
Date
Machinery at Cost
Details
1 July Balance b/d
R
Date
Details
336 300
31
Asset disposal
March
(Asset
2022
on 1 July 2019)
2021
1 Jan
CR
Creditors
49 560
Bank/Installation
3 540
R
59 000
bought
2022
costs
1 May Bank
28 320
2022
30 June Balance c/d
358 720
2022
417 720
1 July Balance b/d
417 720
358 720
2022
DR
Accumulated depreciation: Machinery
Date
Details
R
Date
31
Asset disposal
?
1
October (Asset bought on
2022
Details
July Balance b/d
CR
R
75 668
2021
1 July 2019)
30 April Depreciation
?
2022
30 June Depreciation
?
2022
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Additional information:
•
All assets are measured on the cost model.
•
Depreciation on machinery is calculated on a straight-line basis at 10% p.a.
•
The machinery purchased on 1 May 2022 (see GL) was brought into use on 1 June
2022 as that is when it was delivered by the supplier. The delay was due to the
supplier being temporarily out of stock.
•
The rest of the machinery was all used from the day it was purchased.
•
The fair value of all machinery together was estimated to be R225 000 on 30 June
2022.
REQUIRED:
Prepare the Property, plant and equipment note to the financial statements as at 30
June 2022. The notes on the accounting policy are not required. The total column is
also not required. Show all workings.
(26 marks)
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QUESTION 2
(30 marks)
BGS is a retailer buying and selling leather handbags. The following information
relates to the month ended 31 October 2022.
Date
No. of units
Cost per unit
1 Oct
Opening inventory
45
R80.24
5 Oct
Credit purchase
75
R88.50
8 Oct
Purchase return
8
R88.50
25 Oct
Credit purchase
38
R82.60
The only sale during the month of October 2022 was a sale of 62 units on 15 October
2022.
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REQUIRED:
2.1
Determine the cost of closing inventory on the FIFO cost allocation method.
(4 marks)
2.2
Prepare the cost of sales and inventory accounts in the General Ledger of BSG
for the month ended 31 October 2022, using the FIFO cost allocation method,
assuming the periodic recording system was used. (Adjusting and closing entries should be included.)
(10 marks)
2.3
Prepare the cost of sales and inventory accounts in the General Ledger of BSG
for the month ended 31 October 2022, using the FIFO cost allocation method,
assuming the perpetual recording system was used. (Adjust and closing entries should be included.)
(10 marks)
2.4
Assume that the inventory on hand on 31 October 2022 had a net realisable
value of R82.60 per unit. Briefly explain the effect that this will have on the value
of the inventory in the records of BSG.
(6 marks)
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QUESTION 3
(16 marks)
Gymtrak is a local manufacturer of sports equipment. The entity’s current year ended
on 31 December 2022.
The following information relates to a new machine acquired during the year in order
to manufacture soccer balls:
1 February: The machine was purchased FOB destination point from an overseas
supplier for USD55 696. The destination was Gymtrak’s premises. The
exchange rate on 1 February 2022 was USD1 : R19. The payment for
the machine was made on this day.
28 February: The machinery arrived at the premises of Gymtrak.
1 March:
The machinery was installed and installation fees paid in cash on this
date amounted to R8 354. The machine was then brought into use on
this day when the manufacturing of soccer balls commenced.
The machinery has a useful life of 5 years and is depreciated using a straight-line
basis. It was estimated that the residual value of the machine is R13 924.
REQUIRED:
Prepare the general journal entries of Gymtrak for the year ended 31 December 2022
to account for the machine. Ignore closing off journals. Show all dates and workings.
(16 marks)
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QUESTION 4
(28 marks)
Dabull Ltd is a retailer of furniture and fittings that allows customers to buy on credit.
The pre-adjusted trial balance of Dabull Ltd as at 31 October 2022 showed a trade
receivables balance of R1 560 000.
It is Dabull Ltd’s policy to reinstate debtors who were previously written off if they repay
their debts thereafter.
The following additional information relates to the trade receivable cycle that was not
yet taken into account in the accounting records for the 2022 financial year:
1. A debtor, Mr X. Huang who had a debt of R6 700 was untraceable. It was thus
decided to write off his debt as irrecoverable.
2. A credit note of R2 500 for goods returned had been incorrectly entered in the
records on 15 October 2022 as if it were an invoice.
3. A credit sale to debtor, Mr D. Barry amounting to R750 was recorded incorrectly to
debtor, Mr P. Barnard in the Debtors’ Ledger on 18 October 2022.
4. The October 2022 bank statement reflected a dishonoured (R/D) cheque for an
amount of R35 400. This cheque had been received on 3 October 2022 from debtor
Mrs L. Singh and had been deposited in the bank account on the same day and
correctly recorded in the cash receipts journal on that day.
5. A settlement discount of R1 800 had been completely omitted from the records.
6. On 25 October 2022, an amount of R6 700 was received by Mr X. Huang. Mr X.
Huang explained that he was visiting his remote hometown in Korea and had completely forgotten about his debt owed and remembered only once returned.
7. Debtor, Mrs. T. Zolani was declared insolvent during 2022. The total debt owed by
her on 31 October 2022 was R38 600. Mrs. T. Zolani’s lawyer confirmed that Dabull
Ltd would receive 15c for each Rand owed. On 31 October 2022, a payment was
received from Mrs. T. Zolani’s lawyer. The remainder of Mrs. T. Zolani’s debt was
written off as irrecoverable.
8. A credit sale transaction of R43 500 and a sales return transaction of R 7 900 that
occurred on 31 October 2022 were omitted from the respective journals.
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REQUIRED:
4.1
Prepare the Trade Receivables account in the General Ledger of Dabull Ltd for
the year ended 31 October 2022. Show all workings. Ignore VAT.
(25 marks)
4.2
There are risks to investing in working capital. State what the consequences
are of the risks mentioned below:
4.2.1 Where criteria for deciding whether to allow customers to purchase on
credit are too strict.
4.2.2 Where levels of inventory are too high.
4.2.3 Where cash levels are too high.
(3x1 = 3 marks)
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