UNIVERSITY OF THE WESTERN CAPE

UNIVERSITEIT VAN WES-KAAPLAND

PROJECT 1

APRIL 2022

DEPARTMENT OF ACCOUNTING

MODULE NAME : FINANCIAL ACCOUNTING 141

MODULE CODE : FIA 141

DURATION: TOTAL TIME: 5 HOURS

3 HOURS FOR ANSWERING THE PAPER AND 2 HOURS FOR
TECNOLOGY

EXAMINERS : MRS. AB KHAN

MR. F SINGH

INTERNAL MODERATOR : MR. G ADAMS

QUESTION MARKS TIME (MINUTES)

1 39 70
2 47 85
3 14 25
TOTAL 100 180

INSTRUCTIONS TO CANDIDATES

1. The examination will be available on iKamva from 9 am on Saturday, 9 April 2022.

2. Your answers must be uploaded on iKamva on 9 April 2021, before 2 pm.
3. This examination paper consists of 6 pages (including cover sheet); please ensure that
you have all of them.
4. You will not be allowed to consult any student when completing the assignment.
5. The work you submit for marking must be your own work.
6. Any student found to be copying will be reported for disciplinary action.
7. Your answer submission must be made on iKamva on or before the deadline.
8. You will be required to use MS Word or MS Excel or similar software to submit your
answer.
9. PDF documents are allowed, however, one file must be uploaded to Ikamva.

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 10. Should you have handwritten your answers, a single scanned document must be
uploaded.
11. One Complete document must be submitted.
12. The Document name should be your student’s name and student number.
13. Each page must contain your name and student number.
14. Each Question answered must be clearly identifiable by starting each answer with
Question 1, Question 2, Question 3, Question 4, Question 5 etc.
15. All workings must be included in your answer.
16. All Questions must be answered.
17. No late submissions will be allowed.
18. Please answer all questions (unless indicated otherwise). It is in your interest to write
in a legible manner. You will not be allowed to consult any student when completing
the project.
19. No Late submissions will be allowed, and any answers emailed will not be marked.
20. Should you not follow instructions as communicated, 10% of your final mark will be
deducted.

This paper consists of 6 pages including the cover pages.

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 QUESTION 1: (39 MARKS: 70 MINUTES)
John, a friend of yours, recently started a new car eco-friendly car wash business. The business,
Eco-Bubbles Car Wash (Eco B) the franchise license was purchased by John, from the master
franchise holder, Eco Car Washes. Eco-B entered into the following transactions during the
month of February 2022:
1. To provide the necessary car was services, a special machine, which uses patented
technology and eco-friendly chemicals to wash the cars, is needed. Having a cost of
R15 000, the master franchise holder requires all franchisees to purchase this machine.
Utilising this machine, it is recommended that for each car wash, R150 for the service to
be charged to the customer. Eco-B upon the transfer of the machine from the Master
Franchise holder, will enjoy the risks and rewards of ownership. The machine was delivered
on 15 February 2022.
2. John did not have enough cash to purchase the machine, therefore, on behalf of the business
he approached Betta Bank to fund the purchase of the machine. The loan is to be settled
through the payment of 4 annual instalments of R4 000 per year. The instalment is payable
on the anniversary of the loan.
3. John located a premises from which to operate the business. The landlord requires a
monthly rental of R1 500 to be paid on the 1st of every month in arrears. John agreed to the
terms and signed the lease on 2 February 2022. On the same day, the business paid
5 months’ worth of rent to the landlord.
John, who has a little understanding of accounting and approached you.

YOU ARE REQUIRED TO:

Assist him with the following questions:
a) He was told that as he uses the machine, the value of the machine decreases because of
wear and tear. Therefore, John is of the understanding that the machine must be recognised
as an expense rather than an asset. With reference to the conceptual framework and the
definition of an Asset (it is not necessary to discuss the definition of expense), discuss
whether John is correct or not. (11 Marks)
b) With reference to the loan, discuss whether the loan meets the requirements of a Liability
as defined in the conceptual framework. (12 Marks)
c) With reference to the conceptual framework, discuss how the prepaid rent at the date of the
payment would be recognised in the financial records, i.e. as an Expense, Income, Asset,
or Liability. Journal entries are not required in your discussion. (16 marks)

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 QUESTION 2: (47 MARKS: 85 MINUTES)
Brenda Brood, is an avid baker and mother who decided to start her own home base business
selling artisan bread through a business called Brenda’s Bread. The business commenced on
1 March 2020, and had a month of success. At the end of March 2020, the following balances
in respect of assets and liabilities the financial records:

Accounts R
Bank 76 500
Inventory 18 500
Accounts Payable 55 000
Loan (9% per annum) 85 000
Accounts Receivable 19 800
Vehicles 85 000
Equipment 136 000
Drawings 5 000

The following transactions took place during April 2020:

1. Brenda increased her capital contribution to R250 000, by depositing the funds in the
business bank account.

3. Made a payment for three months’ rent for the bakery space (April-June) R10 050.

4. Received R19 200 from customers for inventory sold for cash. The cost price of these items
was R8 550.

7. Bought a computer and printer from Processing Computers for R30 000 and paid two-thirds
and the balance will be settled within 6 months.

8. Invoiced customers for inventory sold, R9 750. The cost price of these items was R3 900.

9. Purchased a vehicle last month for R85 000 from V5 Motors. When purchasing this vehicle,
a deposit of R55 000 was paid and Brenda’s Bread agreed to pay the balance over the next
two months. The first payment was made towards this balance.

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 10. An assistant was appointed to help set up at markets, Brenda agreed to pay her a salary of
R3 000 for the month.

13. Brenda took inventory for her personal use, the cost of these items amounted to R900.

16. Brenda cashed in a personal investment and received R80 000. She bought inventory for
Brenda’s Bread from this cash, amounting to R25 000.

19. Made a payment to a creditor, R2 550.

22. Entered into an advertising contract with I-catch advertising at a cost of R4 800 per annum.
Advertisements will be paid from April 2020 – March 2021. Made the full payment for the
year.

23. Received part payment from clients previously invoiced on the 8th, R4 200.

26. Sold inventory for cash to customers, R7 600. The cost price of these items was R2 980.

27. Since the assistant only worked 20 days for the month of April, she agreed to accept two-
thirds of her salary. Brenda arranged to make payment on 01 May 2020.

YOU ARE REQUIRED TO:

a) Calculate the value of Capital as at the 31 March 2020. (4 marks)
b) Enter the opening balances into the Accounting Equation. (2 marks)
c) Record the above transactions in the form of the Accounting Equation for the month of
April 2020. (22 marks)
d) Prepare the financial statements of Brenda’s Bread for the period ended 30 April 2020.
a. Statement of Profit or Loss (5 marks)
b.Statement of Changes in Equity (5 marks)
c. Statement of Financial Position (9 marks)

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 QUESTION 3: (14 MARKS: 25 MINUTES)

The following accounts have been extracted from the general ledger of Marks and Sons at
31 December 2020:

Dr Capital Cr
30-Nov-20 Balance 150 000,00
01-Dec-20 Bank 25 000,00
25-Dec-20 Rent expense 7 500,00

31-Dec-20 Balance 182 500,00

Dr Inventory Cr
30-Nov-20 Balance 18 500,00 03-Dec-20 Cost of Sales 2 500,00
01-Dec-20 Accounts Payable 15 000,00 16-Dec-20 Cost of Sales 1 500,00
10-Dec-20 Bank 1 600,00 16-Dec-20 Accounts Payable 6 500,00
31-Dec-20 Balance 24 600,00
35 100,00 35 100,00
31-Dec-20 Balance 24 600,00

YOU ARE REQUIRED TO:

Provide the Journal entries that is required to capture these transactions in General Ledger. (14 Marks)

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