QUESTION 1 (10 MARKS)
a) Explain the conditions under which a trust may face dissolution and also explain what happens to the assets of the trust upon its dissolution. (3 Marks)
b) Identify the parties under which a trust are typically established for andon behalf of (7 Marks)
QUESTION 2 (31 MARKS)
Gwede-Zuma Traders is being sued for the violation of the Employment Equity Act of 1998 . The penalty according to the arbitrator is R 44 000.This amount should be paid within six months from the ruling date and falls within the current financial year.
a) Determine whether or not Gwede-Zuma Traders should record a liability for the penalty.Give reasons for your answer with reference to the Conceptual Framework (10 Marks).
b) You have been presented with the following information for Gwede-Zuma Traders that transpired during the month of January 2023
|01 January 2023||Purchased inventory amounting to R15 400|
|03 January 2023||Made a long term investment by acquiring shares worth
R28 560 from Mega Ventures Ltd.
|21 January 2023||Cash in the petty cash box amounted to R2 002.|
|29 January 2023||Goods sold to customers amounted to R13 160. However,
only R3 220 was received from customers by the end of the month.
Identify the asset in each of the above transactions and classify it as either current or non-current by writing the total amount of the asset in the relevant column. Answer the question by using the following format: (12 Marks)
|Date||Asset||Current (R)||Non-current (R )|
|01 January 2023|
|03 January 2023|
|21 January 2023|
|29 January 2023|
c) You are presented with the following information for Gwede-Zuma Traders for the year ending 31 January 2023.
|Motor Vehicles||140 560|
|Bank overdraft||17 220|
|Trading inventory||16 100|
|SARS payables||17 290|
|Petty cash||12 565|
|Long term loan||127 225|
|Financial assets||91 630|
Calculate the owner’s equity for Gwede-Zuma Traders for the year ending 31 January 2023. Show all your workings. Ignore questions (a) and (b) when answering this question.
QUESTION 3 (35 MARKS)
You have been presented with the following information for NobleTraders that transpired during the month of February 2023.
|1||The owner contributed an amount of R96 666 cash, as well as motor
vehicle valued at R56 666 to the business.
|3||NobleTraders purchased trading inventory for R22 666 on credit from
|5||The insurance premium of R5 714 was paid through the electronic funds
|9||A cash sale amounting to R45 714 was made, the goods were originally
purchased at a cost of R24 285.
|13||Noble Traders settled their account with Golden Suppliers Suppliers in
full by cash.
|15||Sold goods on account to a customer, Mr. Bogus for R11 214. The
goods were originally purchased at a cost of R10 142.
|18||Purchased trading inventory amounting to R15 714 for cash.|
|19||Purchased a building in cash for R107 142.|
|27||Made electronic payments for the workers’ salaries and wages
amounting to R42 000.
|30||Received a payment of R11 200 from Mr. Bogus, a debtor.|
- Show the effects of the transactions incurred by Noble Traders during the month of February 2023 on the accounting equation. Clearly indicate which account needs to be debited or credited. Ignore VAT and answer this question by using the format of the table provided on the next (26 Marks)
Example: Paid for repairs and maintenance amounting to R11 000 cash.
|Assets =||Equity +||Liabilities|
|Bank ✔||-R11 000✔|
- Show how the following transactions for February 2023 will reflect in the ledger accounts of Noble
- Purchased motor vehicle on cash for R33 600.
- Paid monthly wages amounting to R17
- Paid the monthly rent for R3 500 cash (9 marks)
QUESTION 4 (24 MARKS)
The following transactions for More Traders transpired during the month of February 2023.
|Date||Details of transactions|
|1||The owner for More Traders , contributed a delivery vehicle valued at
R 46 200 to the business. Journal voucher JV 012 was issued.
|3||The owner, for More Traders took trading inventory with a cost price of
R 400 for personal use. Journal voucher JV 013 was issued.
|6||Charged an amount of R 900 to Mr Moyo, a debtor, as interest on his
overdue account. Journal voucher JV 014 was issued.
|12||Settlement discount of R 450 was granted to C. Ngcobo, a debtor, for
early settlement of his account. Journal voucher JV 015 was issued.
|20||The bookkeeper erroneously recorded the purchases of a motor vehicle in the office equipment account. The motor vehicle was purchased for
R 34 000 by bank. Journal voucher JV 016 was issued.
|26||Mr Peters, a debtor, was declared insolvent. As a result he was not able
to pay the amount owed of R 32 000. The bookkeeper decided to treat the amount as being irrecoverable. Journal voucher JV 017 was issued.
Record the transactions (per the table above) in the general journal of More Traders for the month of February 2023. Ignore VAT and narrations are not required. (24 Marks)
Get Answers on Above Questions on Accounting Principles
Answer 1: There are many circumstances under which a trust can be dissolved. It is actually dependent on the type of trust and the governing law that is applicable to the management of the entire trust. Usually it is dissolved when there is a termination of the trust’s purpose or it can be in the circumstances whereby all the parties agree for its dissolution. A trust can also be dissolved by court order or in case of failure of a trust. There are some trusts which operate with a specific tenure and they get dissolved upon completion of the specific period.
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