Question 1 (30 Marks)

Mudzari Manufacturers provided the following trial balance on 28 February 2022, the last day of the financial year:
Pre-adjustment trial balance for the year ending 28 February 2022

Additional information:
1. A physical stocktake was performed on 28 February 2022. The value of the stock on this date was R26 955.
2. Depreciation must be provided for as follows:
Vehicles at a rate of 25% using the straight-line method Furniture at a rate of 15% on the diminishing balance
3. After consideration of the trade receivables (debtors), it was decided to raise an allowance for credit losses, being 2% of outstanding debtors. The entity has not previously had an allowance for credit losses.
4. The rent for March 2022, R3 650, was received and banked before 28 February 2022.
5. The interest on the fixed deposit for the current year still needs to be taken into account. The fixed deposit has already been made in the previous financial year. No additional amounts have been deposited in the account throughout the financial year.
6. The loan from SA Bank was received on 1 December 2021. The interest on the loan must still be recorded.
7. The telephone account for February 2022 was received after the trial balance had been prepared and has not been paid yet, R1 974.

Required:
Use the information provided to prepare a statement of profit or loss and other comprehensive income for the period ended 28 February 2022. Include the trading, and profit and loss accounts, clearly showing the gross and net profits, respectively.
Show all your calculations.

Question 2 (26 Marks)

The following information was taken from the books of Mazatlan Traders on 31 December 2021, the last day of the financial year of Mazatlan Traders:

Partial pre-adjustment trial balance for the year ending 31 December 2021

Additional information not yet considered:
1. A physical stocktake was performed on 31 December 2021. The value of the stock on this date was R56 955.
2. Depreciation must be provided for as follows: Vehicles at a rate of 20% on the diminishing balance
Equipment at a rate of 10% using the straight-line method
3. Notification was received that a debtor, owing R489, had been declared insolvent. The amount owed should be written off as irrecoverable.

4. After consideration of the trade receivables (debtors), it was decided to raise an allowance for credit losses, being 2% of outstanding debtors.
5. An of R156 900 for the financial investments done on the last day of the year was not recorded under assets.
6. The final profit for the year after all the adjustments amounts to R160 085.

Required:
Prepare a statement of financial position as at 31 December 2021. Show all your calculations.

Question 3 (29 Marks)

Anne and Bindu have been in partnership for some years. Previously they had both been sole traders.

On 1 March 2016, the balances on their current accounts were as follows:

Anne R5 000 debit

Bindu R3 000 credit

The partnership provides for the following:

Interest on capital of 10% per annum A partnership salary for Ann R4 000
Profit and losses to be shared between Anne and Bindu in a ratio 3:2.

The following additional information is available:

Capital accounts 1 March 2016 Anne R30 000
Bindu R25 000 For the year ended 28 February 2017:
Profit for the year R24 500
Drawings Anne R12 500
Bindu R10 000
State one reason why a current account is maintained for each partner. (1)
Prepare the partnership appropriation account for the year ended 28 February 2017. (10)
Prepare the partners’ current accounts for the year ended 28 February 2017. Balance the accounts
and bring down the balance on 1 March 2017. (18)

Question 4 (15 Marks)

Bostar Stationers main line of business is the sale of books and stationery. The following information
of the business’ financial statements is provided to you.

Statement of Comprehensive and Other Income for the year ended 30 November 2021:

Items extracted from the statements of financial position of Bostar Stationers:

*This amount includes inventory valued at R21 800.

Explain why ratios analysis is important for business organisations Bostar Stationers. (3)

Calculate the following ratios for the year ended 30 November 2019, and in each case state whether the ratio means to the business. Express answers to two decimal places.
Net profit margin (4)

Return on assets (4)

Acid test ratio (4)

NB: Write the formula first for each ratio. Marks are awarded for the formula.

Answers to Above Questions on Financial Accounting

Answer 1: The statement of profit or loss and other comprehensive income for the period ended 28 February 2022 of Mudzari Manufacturers are prepared as follows: