REVISION CLASS MATERIAL (69 minutes)

30 May 2023
Question 1: Conceptual framework (6 marks; 9 minutes)

On 1 January 2022, Jay Traders ("Jay") made an online cash purchase of two Epson
Ecotank L6550 printers for an amount of R30 000 (Vat excl.) at Makro. The business is
expanding, and Jay believes that his record-keeping will improve as they will now be able
to print documentation relevant to the company's activities.

REQUIRED: Marks

Identify and discuss, with reference to the Conceptual Framework for Financial
Reporting, the following elements:

a) The printers purchased from Makro are in the financial records of Jay Traders. 4

b) Assuming that Jay is a registered Vat vendor, post the journal entry of the
purchase the printers on 1 January 2022. 2

Limit your answer to the discussion of the definition of the elements as per the
Conceptual Framework for Financial Reporting only.
Question 2: Adjustments/ Journals/ AFS (32.5 marks; 49 minutes)
The following pre-adjustment Trial balance of Jay Traders is provided.
Jay Traders Debit Credit
Trial Balance on 30 June 20.22 Note Rand Rand
Capital – 1 July 2021 30,000.00
Drawings 7,000.00
Office Buildings
Cost 100,000.00
Accumulated depreciation 1 30,000.00
Office equipment
Cost 50 000
(Includes new printers of R30000
bought on 1 Jan 2022)
Accumulated depreciation 1 15 000
Vehicles
Cost 260,000.00
Accumulated depreciation 1 52,000.00
Inventory 2 65,000.00
Bank 60,000.00
Trade receivables 60,000.00
Other trade payables 150,000.00
Sales 3 400,000.00
Loan from Capitec 4 ??
Commission income 5 60,100.00
Cost of Sales ??
Water and electricity 6 4 800
Depreciation 1 ??
Rent expense 24,000.00
Salaries and Wages 7 103,600.00
Stationery 2,100.00
Interest expense 5,400.00
737 100.00 737,100.00
Additional information:

The following information has not been taken into consideration in the preparation of the
trial balance above:

1. Depreciation is to be written off at the following:

• 10% on straight-line method for office buildings and office equipment.
• 5% on diminishing method for vehicles
2. The following balances appeared in the records of Jay Traders;
Rand
10 000
Inventory on hand (01 July 2022)
??
Purchases for the year @ R20,00 per unit

3. A gross profit percentage of 40% on sales is maintained.

4. A long-term term loan was obtained from Capitec Bank on 01 January 2022, with
an interest rate of 10%, and Jay Traders incurred an interest expense of R5 400,00
in the current year and .
5. Commission income of R900 is due to Jay Traders but has not yet been received.
6. The water and electricity include equal amounts until 30 September 2023.
7. Salaries remain constant monthly, except for a once-off increase of 12% on 01
January 2022. A bonus equal to 80% of the salaries of March 2023 still has to be
provided for.
8. A debtor, Mr. Mzizi, owes Jay Traders R4 500 and has been declared bankrupt
since February 2023 and, therefore, must be written off as irrecoverable.
9. Ignore all taxes.
 REQUIRED: Marks

a) Journalise adjustments 1, 5,6,7 and 8. 21.5

Indicate in each instance which financial statement will be affected by the transaction:

• Statement of Profit or Loss: (SPL) & Statement of Financial Position: (SFP)

b) For transaction 2:

• Calculate the number of units of material (inventory) purchased during the year. 4

c) Prepare the following extracts of the statement of financial position of Jay 7

Traders.

• Non-current and current assets sections

• Non- current liabilities section

Question 3: 7 marks: 11 minutes

Jay Traders has been expanding vastly, increasing the need for more capital to grow the
business further. Lately, Jay has been contemplating venturing into a partnership with
Ray, his best friend. After long consideration of this possibility, he decided to go ahead
and form a partnership under the following terms and conditions:

• Ray will be admitted to the partnership and receive 0.6/2 of future profits.
• Ray will have to deposit R100 000 into the bank account of the partnership.
• After the admission of Ray, the fair value of Buildings is R170 000, and the
inventory is valued at R61 500.

REQUIRED: Marks

a) Calculate the profit-sharing ratio of Jay. 1

b) Prepare the capital account for Jay and Ray. 6