QUESTION ONE [25]
N Sibiya is the sole owner of Sibiya’s General Dealers. At 31 March 2021 the entity had the following assets and liabilities: (show all workings):

  R
Equipment…………………………………………………………. 36 000
Inventory…………………………………………………………… 108 000
Bank (favourable)…………………………………………………. 18 000
Trade receivables control………………………………………… 84 000
Accrued expenses………………………………………………… 12 000
Trade payables control…………………………………………… 72 000

Required:
Calculate the Net Asset Value of Sibiya’s General Dealers at 31 March 2021.

Masilela Traders had, amongst others, the following five transactions during May 2021: NB: Masilela uses the periodic inventory system.

No Transaction
1 The owner brought his personal equipment valued at R40 000 into the

business.

2 Sold goods to K Chetty for R15 000 on credit.
3 Paid R6 800 from the business bank account for medical expenses incurred

by the owner’s wife.

4 Masilela has an account with a balance of R5 000 with Trade Suppliers which is 7 months overdue at 30 April 2021. Paid interest which is charged at 12%

per year.

5 Masilela donated goods valued at R3 000 to the local community centre.

Required:
Process the above transactions through an accounting table such as the one below: (10)
Example of accounting table to be used:

No Assets

R

Equity

R

Liability

R

  Account

Debited

Account

Credited

0 +1 000 +1 000 0   Bank Sales
             

*Use + for increase in value and – or (brackets) for decrease in value.
Fancy Foot, a registered VAT vendor, trades in leather goods. The entity uses the perpetual inventory system to record trading transactions. The applicable VAT rate is 15%. The following transactions took place for cash regarding a pair of shoes:
A) A pair of shoes was bought for R700, exclusive of VAT.
B) The above shoes were sold, within 3 days, for R1 840, inclusive of VAT.

Required:
Prepare general journal entries for the following:
Purchase of the shoes;
Sale of the shoes;

NB: Provide a brief narration for the journal entries.

Briefly explain and provide an example of each of the following:(8)
The entity concept. (1)
The accrual principle (3)

QUESTION TWO [30]

Zizu owns a general dealer shop. The following information was provided.

 

List of pre-adjustment balances as at 31 December 2020.

 

R

Property, plant and equipment at cost (additional information 1) Total accumulated depreciation at 1 January 2020 …………….. Fixed deposit: Third Bank………………………………………….. Inventory: Trade goods……………………………………………… Trade debtors ……………………………………………………….. Allowance for credit losses………………………………………… Bank………………………………………………………………….. Cash float……………………………………………………………. Capital-Zizu………………………………………………………….. Drawings …………………………………………………………….. Long term borrowing: DLM Finance………………………………. Trade creditors……………………………………………………….

Sales ………………………………………………………………….

398 000

25 820

100 000

117 000

10 400

600

106 200

1 200

283 400

26 480

50 000

19 100

763 580

Sales returns………………………………………………………… Rental income……………………………………………………….. Settlement discounts received…………………………………….. Interest on investment……………………………………………… Credit losses recovered…………………………………………….. Cost of sales…………………………………………………………. Credit losses ………………………………………………………… Packing materials used…………………………………………….. Insurance ……………………………………………………………. Telephone …………………………………………………………… Advertisements ……………………………………………………… Settlement discounts granted ………………………………………

Other expenses ………………………………………………………

2 400

31 200

1 300

10 000

240

330 800

1 100

9 400

4 500

2 800

4 000

760

70 200

Additional information:

1. The following information is available for Property, plant and equipment:

Type of

Property, plant and equipment

Cost at

31 Dec. 2020 – R

Accumulated Depreciation at

1 Jan. 2020 – R

Land & buildings Vehicle Equipment 300 000

80 000

18 000

N/A 22 400

3 420

Equipment at cost – R18 000: includes equipment bought for cash at a cost of R4 000 on 1 July 2020. Provide depreciation for the year for all property, plant and equipment as follows:
Equipment : 10% per year on the diminishing balance method. Vehicle : 20% per year on the diminishing balance method.

2. Results of a physical stock taken on 31 December 2020 revealed that:
Trading goods on hand was R114 500, and
Packing material on hand was R1 960.

3. Advertisement cost of R4 000 is exclusively for an advertising campaign covering the period 1 May 2020 to 28 February 2021.

4. Rental income was received from Zizu’s only tenant. The rent includes the January 2021 rental. Rent remained constant over the full period.

5. The long term borrowing was taken on 30 September 2020. Interest is payable every 6 months at a rate of 18% per year.

6. Interest on the fixed deposit at Third Bank has not yet been received for November 2020 and December 2020. Interest is calculated at 12% per year.

7. Insurance includes an amount of R1 500 paid for a 12 month period ending on 31 October 2021.

8. The December 2020 telephone account of R330 has not yet been recorded.
9. A debtor’s account of R1 000 has long been outstanding. The debtor’s insolvent estate paid 60% of the debt. The balance needs to be written-off.

10. It was agreed that the “allowance for credit losses” account needs to be adjusted to show a balance of only R500.

Required:
Prepare the following for Zizu’s General Dealers for the financial year ending 31 December 2020:
The statement of profit or loss and other comprehensive income, and (25)
Prepare the columns for only Vehicles and Equipment as they would be shown in the Property, plant and equipment note. Columns for land & buildings and total are not required. (5)

Show all workings. Your answer must comply with the requirements of the International Financial Reporting Standards (IFRS) appropriate to this business

QUESTION THREE [25]
The following information was extracted from the accounting records of Shock Electricians for the year ended 20 February 2021. Nzuza and Scott are owners in this partnership sharing profits and losses equally.

Balances extracted from the general ledger at 28 February 2021 R
 

Profit and loss account – profit for the year…………………………

 

440 000

Capital – Nzuza………………………………………………………… 350 000
Capital – Scott………………………………………………………….. 250 000
Current account—Nzuza (Credit balance at 1 March 2020)..…… 30 000
Current account – Scott (Debit balance at 1 March 2020)………….. 20 000
Drawings – Nzuza………………………………………………………. 31 300
Drawings – Scott ………………………………………………………… 37 500

Additional information:

1. During the year partners were paid salaries of R30 000 each. This was posted to Salaries and Wages expense account and deducted to calculate profit for the year. This error needs to be corrected.

2. The following Provide for interest on capital at 10% per year. NOTE that Nzuza brought in additional capital of R50 000 on 30 November 2020. Investment of additional capital has been correctly recorded and included in the above figures. It was also decided to increase rate of interest on capital to 12% from 1 December 2020.

3. Interest must be provided at 12% per year on opening balances of current accounts.

4. Each partner is entitled to a salary of R3 000 per month.

5. Interest on drawings was calculated on daily balances and amounts to the following for the year:
– Nzuza R3 120
– Scott R3 880

6. The remaining profits must be shared equally between Nzuza and Scott.

Required:

Prepare the following general ledger accounts for the year ended 28 February 2021 to reflect all the above; (Show all workings):
Appropriation Account (13)
Current Account: Scott (9)

Nzuza and Scott do not have a partnership agreement in writing. Scott has been in many discussions with Nzuza in this regard. Scott is insisting that the partnership is not legal if there is no written partnership agreement. Provide a brief explanation of the need for a written partnership agreement. (3)

QUESTION FOUR [20]
The following information was extracted from the accounting records of Royal (Pty) Ltd for the financial year ended 31 May 2021.

Royal (Pty) Ltd

Extract: Statement of financial position as at 31 May 2021 31 May 2021 R 31 May2020 R
Property, plant and equipment:

–            Land and buildings at cost………………….

–            Equipment at carrying amount……………. Investment in shares………………………………….. Inventory……………………………………………….. Trade debtors………………………………………….. Prepaid expenses…………………………………….. Ordinary share capital………………………………… Retained earnings……………………………………. 12% Debentures……………………………………… Trade creditors………………………………………… Bank overdraft…………………………………………. Income tax payable……………………………………

Dividends payable …………………………………….

 

300 000

45 000

247 500

186 000

55 500

Nil 600 000

82 500

30 000

37 500

31 500

7 500

45 000

 

240 000

52 500

165 000

180 000

42 750

2 250

442 500

7 500

90 000

63 750

37 500

11 250

30 000

Extract: Statement of profit or loss and other comprehensive income for the year ended 31 May 2021 31 May 2021 R
 

Depreciation – equipment……………………………………………….. Dividends received……………………………………………………….. Interest expense………………………………………………………….. Profit before tax…………………………………………………………… Income tax………………………………………………………………….

Profit for the year…………………………………………………………..

 

7 500

27 000

11 250

240 000

75 000

165 000

 

Extract: Statement of changes in equity for the year ended 2021

31 May 2021 R
Dividends declared : Ordinary 90 000

Required:
Prepare the statement of cash flows for Royal (Pty) Ltd for the year ended 31 May 2021 in compliance with the International financial Reporting Standards in as much as possible for this business.

Show all workings.

Answers to Above Questions on Accounting

Answer 1: The Net Asset Value of Sibiya’s General Dealers at 31 March 2021 is calculated as follows:

answer

Get completed answers on the questions above on accounting from the accounting assignment help South Africa experts of Student Life Saviour.


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