FACULTY/COLLEGE College of Business and Economics

SCHOOL School of Accounting

DEPARTMENT Commercial Accounting
CAMPUS(ES) SWC
MODULE NAME Financial Accounting
MODULE CODE FAC11A1
SEMESTER First
ASSESSMENT OPPORTUNITY, Exam 3
MONTH AND YEAR June 2023

ASSESSMENT DATE 5 June 2023 SESSION

ASSESSOR(S) Ms. M. Carter, Mr. H. Coovadia and Mr. N. Ebrahim
MODERATOR(S) Mrs. C Chetty
DURATION 3 hours TOTAL MARKS 100

NUMBER OF PAGES OF QUESTION PAPER (Including cover page) 9

INFORMATION/INSTRUCTIONS:
___________________________________________________________________________
• This is a closed-book assessment.
• Read the questions carefully and answer only what is required.
• Number your answers clearly and correctly as per the question paper.
• Write neatly and legibly on both sides of the paper in the answer book, starting on the first page.
• Show all workings
_________________________________________________________________________

DETAILS TOPIC MARKS TIME

Question 1 Introduction to Accounting 30 54

Question 2 Inventory 25 45
Question 3 Accounts Payable 15 27
Question 4 Financial Statements 30 54
100 180 minutes

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 QUESTION 1 (30 MARKS)

Section A (12 MARKS)

Uncle Joe is the owner of Fashion Furniture based in Johannesburg. The business is a
registered VAT vendor that buys and sells furniture with a financial year end of 30 June
2023. On 10 May 2023 Uncle Joe ordered tables and chairs to the value of R80 000
(excluding VAT) from Eco Furniture, based in Durban. Eco Furniture stock has become very
popular as there is a waiting list and clients are willing to pay extra for environmentally
friendly produced furniture. Eco Furniture dispatched the tables and chairs on 31 May 2023,
and it was delivered to Fashion Furniture on 1 June 2023. Fashion Furniture will pay 40%
of their account to Eco Furniture on 30 June 2023 and the remainder will be settled on 30
July 2023.

REQUIRED:

1.1 On which date can Fashion Furniture recognise the inventory as an 1 Mark
asset?
1.2 Discuss why the furniture should be recognised as an asset on this 6 Marks
date by defining and applying the asset definition and recognition
criteria as detailed in the conceptual framework for financial reporting.
1.3 Record the trade payables account in the general ledger of Fashion 5 Marks
Furniture for the period ending 30 June 2023.

Section B (18 MARKS)

Beyoncé is the owner of Queen B beauty and hair services which is a registered VAT vendor.
The following transactions took place during February 2023.

Transactions:

15 Queen B bought 5 hairdryers for R1 250 (excluding VAT) in total and paid R1 000 cash
and the outstanding amount was on credit.

20 Queen B paid R6 900 (including VAT) for the telephone account.

22 Queen B received R4 600 (including VAT) from one of their customers, Miley C in
settlement of their account.

28 Queen B provided beauty services of R20 000 (excluding VAT) on credit. Ignore the cost
of service.

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.
REQUIRED:

1.4 Prepare the accounting equation of Queen B for the above 18 Marks
transactions by using the table below. Round all amounts to the
nearest Rand.

ASSETS = EQUITY + LIABILITIES

Day Account Sign and Dr/Cr Account Sign and Dr/Cr Account Sign and Dr/Cr
name amount name amount name amount

QUESTION 2 (25 MARKS)

You are the accountant for Tech Guys (Pty) Ltd. Tech Guys (Pty) Ltd are a start-up company
that specialises in laptops and computers. Tech Guys (Pty) Ltd is a registered VAT vendor
and receives revenue from the sale of laptops and desktop computers, as well as the
upgrading and the repairs of them. The following transactions took place during the month
of June 2022

PART A

On 1 June 2022 the company purchased 2 desk computers for a total amount of R 36
000 excluding VAT. These laptops will be to keep record of stock purchased as well as
record day to day transactions. The owners are of the opinion that these computers should
be recognised as inventory as computers are their primary business.

2.1 According to IAS 2 , discuss whether the proposed treatment is (2 MARKS)

correct.

Provide reasons for your answer

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PART B

Tech Guys (Pty) Ltd is a registered VAT vendor and the following transactions took place
during the month of June 2022

1. On the 1st of June 2022 Tech Guys (Pty) Ltd purchased 5 laptops and 5 desktop
computers from a local supplier on credit. The purchase of these items was correctly
recorded in the General Journal. Once the laptops were unpacked Tech Guys (Pty)
Ltd noticed that 3 laptop screens were damaged and returned these 3 laptops back
to the supplier. The total cost of laptops amounted to R 50 000 included VAT and the
total cost of the desktop computers amounted to R 36 000 included VAT. The return
of the 3 laptops still needs to be recorded.

2. On the 5th of June 2022 a customer returned 2 laptops that were purchased from
Tech Guys (Pty) Ltd. The total invoice amounted to R 18 000 excluding VAT. The
cost of each laptop amounted to R 6 500 each.

3. On the 25th of June 2022, Tech Guys (Pty) Ltd settled the amount owed to a supplier
for computer parts purchased. The amount owed was R 36 000. The supplier granted
Tech Guys (Pty) Ltd a 2% settlement discount.

4. On the 30th of June 2022, one of the company’s competitors launched a new laptop
with superior speed and storage. Tech Guys (Pty) Ltd experienced a significant drop
in sales. After doing some market research it was estimated that the NRV of Tech
Guys (Pty) Ltd laptops amount to R6 500 each. 3 laptops were on hand each with a
cost price of R7 120 (excluding VAT)

REQUIRED:

2.2 Prepare the General Journal entries for all transactions for June 2022. 16 MARKS

Show all workings and round off answers to two decimal places
Journal narrations ARE required.
Classifications for each account are required (SFP/SPL)

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PART C

On 1 July 2022, Tech Guys (Pty) Ltd had 2 laptops on hand each with a cost price of R 8
200 excluding VAT
11 July 2022 Purchased 3 laptops at R 7 800 each (excl. VAT)
22 July 2022 Purchased 2 laptops at R 7 980 each (excl. VAT)
27 July 2022 Sold 4 laptops
30 July 2022 Purchased 3 tablets at R 8 050 each (excl VAT)

REQUIRED:

2.3 Tech Guys (Pty) Ltd uses the FIFO method. 3 MARKS

Calculate the value of the laptops on hand as at 31 July 2022

Show ALL workings

PART D
Tech Guys (Pty) Ltd decided to start their own brand of gaming laptops. They intended to
purchase laptops from their supplier and upgrade these laptops before they will be sold. The
following transaction took place during the year.
Tech Guys (Pty) Ltd purchased 15 laptops from a Cape Town supplier. The total of cost of
these laptops amounted to R 120 000 including VAT. The following costs were also incurred

➢ Transport cost to deliver the laptops from Cape Town to their premises amounted to
R25 500 exclusive of Vat. This amount is still owing to the delivery company,
➢ 15 high level graphics cards were purchased and installed into each laptop. Each
graphics card cost R 5 000 excluding VAT and the labour to install each card was R
R1 000
➢ Advertising cost of R60 per laptop excluding VAT was paid to market the laptop

2.4 Calculate the cost price of one gaming laptop 4 MARKS

Show all calculations

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QUESTION 3 (15 MARKS)

Need 2 Speed (Pty) Ltd is a local retailer of car spares. Need to Speed (Pty) Ltd is registered
VAT vendor. The following information appeared in the accounting records for May 2023.
Turbo Kings
Day Details Debit Credit Balance
1 Balance 21,600
5 Suppliers Invoice B 119 10,000 31,600
9 Suppliers Invoice B123 16,500 48,100
10 EFT 021 12,000 36,100
15 Debit Note 1241 4,150 31,950
16 Suppliers Invoice B125 11,000 42,950
21 Suppliers Invoice B126 13,000 55,950
22 EFT 035 14,000 41,950
28 Supplier invoice B135 8,000 49,950
30 Supplier invoice T1451 23,000 72,950
30 EFT 049 5,000 67,950

Turbo Kings
Statement of account of Need 2 Speed - May 2023
Date Details Debit Credit Balance
1 Opening Balance 21,600
5 Sales and VAT B 119 11,500 33,100
9 Sales and VAT B123 16,500 49,600
10 EFT 021 12,000 37,600
15 Credit Note 1241 1,450 36,150
16 Sales and VAT B125 12,000 48,150
21 Sales and VAT B126 13,000 61,150
22 EFT 035 14,000 47,150
26 Sales and VAT B 130 7,500 54,650
28 Sales and VAT B 135 8,000 62,650
29 Deposit 987 2,000 60,650
30 Sales and VAT B140 12,000 72,650
30 Interest 250 72,900

Additional Information
➢ Supplier Invoice B119 was recorded excluding VAT by the accountant
➢ Debit Note 1241 was incorrectly recorded as R4150
➢ Supplier Invoice B125 was incorrectly recorded without taking a trade discount into
account. The amount before discount amounted to R12 000

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 ➢ Email regarding invoice B130 was accidentally deleted and not recorded by the
accountant
➢ Deposit 987 does not relate to any payments made by Need 2 Speed. This was
incorrectly recorded against Need 2 Speed’s account.
➢ Turbo Kings charged interest of R 250
➢ Supplier Invoice T1451 relates to another supplier of Need 2 Speed, namely Turbo
Repairers and not Turbo King
➢ EFT 049 relates to payment made but not yet reflected on the supplier account
➢ Supplier invoice B140 was awaiting to be dispatched for delivery and not yet received
by Need to Speed

REQUIRED:

3.1 Prepare the correcting journal entry for Supplier Invoice T1451 2 MARKS

Journal narrations ARE required.

Classifications for each account are required (SFP/SPL)

3.2 Complete the account of Turbo Kings in the payables subsidiary ledger 7 MARKS
of Need 2 Speed for the month ended 31 May 2023.

3.3 Prepare the Payables reconciliation of Turbo Kings for the month 6 MARKS
ended 31 May 2023.

QUESTION 4 (30 MARKS)

The following is an extract from the records of Toys4all, a toy goods wholesale, on the 31
December 2022. The end of their financial reporting period is 31 December 2022. Toys4all
is a registered VAT vendor.

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 Description DR CR
Land and Buildings 757 656
Motor Vehicles 546 546
Equipment 765 765
Inventory 76 465
Trade Receivables 654 654
Bank 836 478
Trade and other Payables 429 844
Loan: ABC Bank 483 264
Vat Control 97 987
Allowance for Doubtful debts 65 484
Capital 1 240 712
Accumulated Depreciation: Vehicles 347 833
Accumulated Depreciation: Equipment 99 666
Sales 2 794 348
Cost of Sales 934 222
Water and Elec 432 467
Telephone 23 422
Wages 234 252
Packing Materials 98 383
Stationery 42 342
Salary 42 352
Bad Debts 53 454
Insurance 56 586
Rent Income 234 222
Bank Charges 42 342
5 695 373 5 695 373

The following adjustments still need to be recorded for the year end 31 December
2022

1. Depreciation must be accounted for as follows:

Vehicles, 5% on the straight-line method.
Equipment at 10% on the diminishing balance method.

2. The allowance for doubtful debts must be adjusted to R30 000.

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 3. Toys4all rents out a portion of their office space. The tenant paid the rent for
December 2022 and January 2023 equating to R35 000 per month (ex-VAT).
The accountant had recorded the full amount as income in December 2022.
4. The telephone account for the month of December 2022 was not paid or
recorded. The telephone expense for December is R 3 500(ex VAT)

REQUIRED:

4.1 Record the above adjustments in the General journal of Toys4all for 11 MARKS
the year ended 31 December 2022
Journal Narrations not required.
Journal classifications are required
4.2 Prepare the Statement of profit or loss for the year ended 31 8 MARKS
December 2022
4.3 Prepare the Statement of financial position as at 31 December 2022 11 MARKS