Question 1 (Marks: 10)
Q.1.1 For each of the following statements indicate the word/s that best describes the statement. In your answer booklet you need only write the number of the question with the correct word/s: (5)
| STATEMENT | WORD/S | |||||
| Q.1.1.1 | The method of depreciation where the annual depreciation is calculated as a percentage of the carrying value of the asset. | |||||
| Q.1.1.2 | Assets that are controlled by the entity for longer than one year | |||||
| Q.1.1.3 | The accounting concept that stipulates that all expenses must be assigned to the financial period in which they were incurred. | |||||
| Q.1.1.4 | The source document used to record depreciation. | |||||
| Q.1.1.5 | The document that shows the important details pertaining to a particular asset. | |||||
Q.1.2 For each of the statements below indicate if the statement is True or False. In your answer booklet you need only write the number of the question and then indicate True or False. Note for any question where more than one answer is written no marks will be awarded:
| STATEMENT | TRUE | FALSE | |
| Q.1.2.1 | Liabilities are resources controlled by the entity for less than one year as a result of a past event from which future economic benefits are expected to likely flow into the entity. | ||
| Q.1.2.2 | The account credited when recording the depreciation adjustment is accumulated depreciation. | ||
| Q.1.2.3 | Accrued expenses can be classified as a non‐ current liability. | ||
| Q.1.2.4 | Prepaid expenses occur when expenses have been paid in the current financial period, but will be incurred only in the next financial period. | ||
| Q.1.2.5 | The account to be debited when recording the creation of allowance for credit losses is debtors control. |
Question 2
The following are some of the balances in the books of Concorde Ltd on 30 June 2021:
| DR | CR | |
| Equipment | 80 000 | |
| Vehicles | 560 000 | |
| Furniture | 53 600 | |
| Accumulated depreciation: Equipment | 24 000 | |
| Accumulated depreciation: Vehicles | 192 000 | |
| Accumulated depreciation: Furniture | 18 400 |
Additional information:
• An office computer (equipment) was bought on 1 October 2021 for R20 000.
• A vehicle with a carrying value of R60 000 and accumulated depreciation of R91 400 was sold on credit to G Gundolf for R55 000 on 1 July 2021.
• Non‐current assets are depreciated as follows:
o Equipment: 33.33% per annum on cost.
o Vehicles: 20% per annum according to the diminishing balance method.
o Furniture: 15% per annum according to the diminishing balance method.
Required:
Q.2.1 Prepare the asset disposal account in the General ledger of Concorde Ltd to reflect
the sale of the vehicle on 1 July 2021. (15)
Q.2.2 Prepare the note to the financial statements that shows the movements for property, plant, and equipment for the year ended 30 June 2022.
A Total column is not required.
Round to the nearest Rand. (30)
Question 3:
The following pre‐adjustment trial balance was prepared for Astro Traders:
| ASTRO TRADERS | ||
| EXTRACT OF PRE‐ADJUSTMENT TRIAL BALANCE AS AT | ||
| 31 DEC 2022 | 31 DEC 2021 | |
| Capital | 14 650 000 | 14 650 000 |
| Loan: Premium Bank | 1 439 600 | 2 150 000 |
| Vehicles | ? | 1 546 000 |
| Equipment at cost | 722 000 | 722 000 |
| Inventory | 2 000 000 | |
| Debtors control | 382 000 | |
| Allowance for credit losses | ? | 9 800 |
| Sales | ? | |
| Cost of sales | ? | |
| Sundry expenses | 88 000 | |
| Rent income | 221 000 | |
| Salaries and wages | 6 425 000 | |
| Depreciation (on vehicle sold) | 41 250 | |
| Packaging material | 45 800 | |
| Profit on sale of vehicle | ? | |
| Credit losses | 28 800 | |
| Drawings | 672 000 | |
Additional information:
• The mark‐up achieved is 160% on cost. The correct gross profit is R14 881 600.
• Packing materials used during the financial year was R39 700.
• Received and recorded R9 750 from the insolvent estate of a debtor which paid out 65 cents in the rand. The remaining amount must be written off.
• Adjust the allowance for credit losses to R9 350.
• One of the employees was on sick leave and was omitted from the Salaries Journal for December 2022. The salary payable to this employee was R38 500.
• The premises have been rented out for the past five years. The rent receivable for January 2023 has been received and recorded. The monthly rental has remained the same for the last year.
• Loan: Wonder Bank
o Provide for interest of R212 400 for the year ending 31 December 2022. This entry has not yet been processed.
• An old delivery vehicle was sold for R88 400 cash on 30 September 2022. This has been correctly recorded. Details of the delivery vehicle sold:
o Cost price R198 000
o Accumulated depreciation on date of sale R115 500
• Provide for depreciation as follows:
o On vehicles at 25% p.a. on cost
o On equipment: R90 500
Required:
Prepare the Statement of profit or loss and other comprehensive income of Astro Traders for the year ended 31 December 2022.
Answers to Above Questions on Accounting
Answer 1:
| STATEMENT | WORD/S | |||||
| Q.1.1.1 | The method of depreciation where the annual depreciation is calculated as a percentage of the carrying value of the asset. | Declining balance | ||||
| Q.1.1.2 | Assets that are controlled by the entity for longer than one year | Fixed assets | ||||
| Q.1.1.3 | The accounting concept that stipulates that all expenses must be assigned to the financial period in which they were incurred. | Accrual accounting | ||||
| Q.1.1.4 | The source document used to record depreciation. | |||||
| Q.1.1.5 | The document that shows the important details pertaining to a particular asset. | |||||
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