nAm I 8 lA UnIVERSITY

OF SCIEnCE AnD TECHnOLOGY

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION: BACHELOR OF MARKETING and BACHELOR OF ACCOUNTING

QUALIFICATION CODE: 07BMAR I
LEVEL: 7
07BACG

COURSE CODE: FAC511S COURSE NAME: FINANCIAL ACCOUNTING 101

SESSION: NOVEMBER 2016 PAPER: THEORY AND CALCULATIONS

DURATION: 3 HOURS MARKS: 100

FIRST OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER(S} C. MAHINDI and L. WALE .

MODERATOR: E. MUSHONGA

INSTRUCTIONS
1. Answer ALL questions in blue or black ink only
2. Write clearly and neatly.
3. Start each question on a new page and number the answers
clearly.
4. No programmable calculators are allowed.
5. Questions relating to this paper may be raised in the initial 30
minutes after the start of the paper. Thereafter, candidates must
use their initiative to deal with any perceived error or ambiguities
& any assumption made by the candidate should be clearly stated.

THIS QUESTION PAPER CONSISTS OF 7 PAGES (Excluding this front page}

Question 1 (10 marks)
Multiple choice questions

1. The application of the core principle in IFRS 15 is carried out in five steps. The first
step is:
a. Identify separate performance obligations
b. Determine the transaction price
c. Allocate the transaction price to performance obligations
d. Identify the contract

2. Which of the following accounting equations is incorrect?

a. Assets- Liabilities = Capital
b. Capital- Liabilities =Assets
c. Assets = Capital + Liabilities
d. Assets- Capital = Liabilities

3. Which of the following should not be called sales?

a. Goods sold, to be paid for in one month's time
b. Goods sold, cash being received immediately
c. Item previously included in purchases, now sold on credit
d. Sale of a truck no longer required

4. Of the following, which best describes a trial balance?

a. Is the final account in the books
b. Shows all the asset balances
c. Is a list of ledger account balances
d. Discloses the financial position of a business

5. Inventories should be stated at:

a. Lower of cost or fair value
b. Lower of cost or net realisable value
c. Lower of cost or nominal value
d. Lower of cost or net selling price

6. Depreciation is:
a. the part ofthe cost of the non-current asset consumed during its period of
use by the business
b. The cost of a current asset wearing away
c. The cost of replacement of a non-current asset
d. The salvage value of a non-current asset plus its original cost

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7. An allowance for credit losses is created:
a. To provide for possible credit losses
b. To write of credit losses
c. When receivables become bankrupt
d. When receivables cease to be in business

8. When is it compulsory for an entity to register for VAT in Namibia?

a. When the value of all the entity' s supplies exceed N$500 000
b. When the value of an entity's taxable supplies exceeds N$200 000
c. On registration of the entity as a business
d. When the value of an entity's taxable supplies exceeds N$500 000

9. The fundamental qualitative characteristics of useful financial information are:

a. Faithful representation and comparability
b. Verifiability and understandability
c. Relevance and faithful representation
d. Relevance and comparability

10. Which ofthe following is not a contributory factor towards faithful representation
a. Freedom from error
b. Consistency
c. Neutrality
d. Completeness

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Question 2 (42 marks)

The following trial balance was extracted from the books of Mr M., a Sole trader on
December 31, 2015.

Debit Credit
N$ N$
Land and buildings 320 000
Motor vehicles 45 000
Accumulated depreciation on motor vehicles 17 580
Fixtures and fittings 23 750
Accumulated depreciation on fixture and fittings 5 250
Inventory as at 1/1/2015 18 220
Receivables 82 750
Payables 94 540
Cash balance 800
Bank 2140
Interest charged by supplier on overdue balances 340
Sales 595 710
Purchases 285 050
Purchase returns 8 220
Sales returns 19110
Discounts 840
Carriage inwards 700
Advertising and media costs 2 770
Light and heat 2 410
Telephone and internet 6140
Insurance 15 900
Rates, water charges and refuse 9 770
Wage and salaries 62170
6% long term bank loan 71750
Long term loan interest-paid 30/06/15 2150
Irrecoverable debts 3120
Drawings 7120
Accumulated losses 21550
Capital 135 560
Total 929 660 929 660

The following information which has not been accounted for above is also available:

1. The inventory count as at 31 December 2015 showed closing inventory valued at

N$21210.

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 2. During 2015, Mr M. took the following for personal use:
a. N$1 750 in inventory items
b. N$2 220 from the bank
In addition, one quarter of the insurance costs above relates to Mr M's personal
insurance.
3. A delivery of product X costing N$1 200 was dispatched to a customer on 30
December 2015. These goods were correctly treated during the inventory count on
31 December 2015. However, the sales invoice associated with the sales was not
. posted to the books and records of Mr M . as at 31 December, 2015. Mr M. has a
standard mark-up of 15% on product X.
4. N$750 of advertising and media costs included in the trail balance above is prepaid
for 2016.
5. Included in motor vehicles is a delivery van which originally cost N$15 000.
Accumulated depreciation on the delivery van as at 1 January 2015 was N$7 450. On
29 December 2015 the delivery van crashed and was written off. The insurance
company has indicated that N$6 545 will be paid out of the insurance policy. Mr M .
received the cheque from the insurance company for N$6 545 in January 2016. The
delivery van was not replaced.
6. Allowance to be made for depreciation is as follows:
a. Land and buildings: 2% straight line method
b. Motor vehicles: 10% straight line method
c. Fixtures and fittings: 10% reducing balance method
Depreciation should be calculated to the nearest whole number. Mr M. charges full
year depreciation in the year of purchase ad none in the year of disposal.
7. Unpaid interest at 31/12/2015 on the loan should be accrued.

You are required to prepare

a} The statement of profit or loss for the year ended 31 December 2015 {20 marks}
b) The statement of financial position as at 31 December 2015 (22 marks}

IGNORE VAT FOR THE PURPOSES OF THIS QUESTION

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Question 3 (20 marks)

Royalty Traders buys and sells royalty memorabilia. Royalty Traders uses the periodic
inventory method to record inventory. On 1 September 2016, Royalty Traders had a
N$49 500 (Cr) balance on its VAT account. The following transactions took place during the
month ended September 2016:

Day

5. Royalty Traders purchased furniture and equipment for N$35 000 (excluding VAT)
from Clear Design Ltd on credit. Clear Design Ltd granted a trade discount of 5 %on
the purchase price.
7. Purchased inventory costing N$136 800 from Busquets Ltd and paid by cheque.
12. The owner took inventory for his own personal use with a marked selling price of N$
28 500. The firm has consistently applied a margin on sales of 25%.
13. Made an allowance for credit losses of N$1 800.
18. The firm received N$3 450 from a receivable whose account was written off as bad
in June 2016
25. Issued a cheque for N$49 500 to the Ministry of Finance, in payment of the VAT
owing for August 2016
30. Purchased a Lexus sedan for N$614 000 from Pupkewitz Motors on by electronic
funds transfer (EFTL for use by the finance manager.

ASSUME THE VAT RATE USED CURRENTLY IN THE NAMIBIAN VAT ACT.

ALL PARTIES ARE REGISTERED VAT VENDORS AND ASSUME, WHERE NECESSARY, THAT
AMOUNTS ARE INCLUSIVE OF VAT.

YOU ARE REQUIRED TO:

a) Show the general journal accounts reflecting the above transactions. Journal
narrations are not required. Where no VAT is applicable to a transaction, provide an
appropriate reason (20 marks)

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Question 4 {15 marks)

Supreme Vehicles (SV) is a car dealership that sells all types of vehicles. SV is a registered
VAT vendor and entered into the following transactions for the year ended 31 October
2016.

1. They imported the following vehicles from Germany

• A 2016 3 Series BMW for N$517 500 (including VAT) to be used by the marketing
manager. Import duties of N$25 000 were paid to customs and freight costs of
N$34 500 (including VAT) were paid to a local company for shipping the car.
• An AUDI A8, which cost N$1950 000 (excluding VAT) to be sold to a high profile
business man. Import duties were N$29 000 and freight costs of N$46 000
(including VAT) were paid to a local company for shipping the car.
• Both cars arrived in Namibia on 31 July 2016.

2. On 1 November 2015 SV acquired a car polishing machine for N$1150 000

(excluding VAT). The machine was delivered to the premises of SV on 21 January
2016 at a cost of N$15 000 (excluding VAT). The machine has a residual value of
N$165 000 at the end of its useful life.

SV has adopted the following depreciation policy:

• Vehicles 20% on cost using the straight line method
• Equipment 10% on cost using the straight line method

Required:
a. Calculate the value at which you would record the two vehicles in the statement of
financial positon at 31 July 2016. Show all workings. (6)
b. Prepare an extract of the statement of financial position showing how the above
assets would be disclosed on 31 October 2016. Show all workings (9)

Show all workings.

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Question 5 (13 marks)

5amsung (Pty) Ltd.'s current reporting period ends on 30 June 2016 and they use the
periodic inventory system.

On 10 June 2016, 5amsung (Pty) Ltd entered into a written agreement with a customer,
Cell5hop (Pty) Ltd. The contract was signed by both parties and stipulates, inter alia, the
following:
• 300 5amsung 56 cell phones will be delivered to Cell5hop (Pty) Ltd.'s premises on
the following dates:
o 175 cell phones will be delivered on 20 June 2016; and
o 125 cell phones will be delivered on 6 July 2016.

• The sales price ofthe 300 cell phones is N$862 500 (including VAT) and it is payable
on 31 July 2016.

The sales price per cell phone is not influenced by the sales volume and the 5amsung 56 cell
phone is a distinct product.

Cell5hop (Pty) Ltd has an excellent payment record and the expectation is that the
outstanding amount will be paid before the due date.

Both companies are registered as VAT vendors in accordance with the VAT Act. A VAT rate
of 15% is applicable.

Required:
I. Determine whether this contract satisfies the requirements of IFR5 15 (Revenue
from contracts with customers) (5)
II. Provide the journal entries to recognise the revenue on the appropriate dates. (6)

END OF EXAM PAPER