9

ACCE 312
PRACTICAL READER
(EXAMPLES, HOMEWORK & ASSIGNMENTS 2019)

STUDY UNIT 4
Financial Accounting of Companies: Financial statements: Statement of
Comprehensive Income and Statement of Financial Position
Work through the following examples:
ACCE 312: STUDY UNIT 4
EXAMPLE 4: STAR TRADERS
You are the accountant of STAR TRADERS LTD, a public company with an
authorized share capital of 2 000 000 ordinary shares. In the past five years, Star
Traders issued a total of 1 000 000 ordinary shares at different issue prices.
During the current year the shareholders were not happy with the current situation
and complained that the company has flooded the market and that the profits are
now shared by too many shareholders. On 31 August 2014, the directors bought
back 50 000 shares at R2 above the average price. This was correctly recorded in
the books of the business and posted to the General ledger.
REQUIRED:

Prepare the Income statement for the year ended 28 February 2015.

INFORMATION:
Extract from the
PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2015
Debit Credit
Ordinary Share Capital (R3 000 000 – R150 000) 2 850 000
Retained Income (1 March 2014) 320 000
Land and buildings 6 000 000
Equipment 500 000
Vehicles 900 000
Accumulated depreciation on equipment 200 100
Accumulated depreciation on vehicles 300 000
Fixed deposit 400 000
Trading stock 250 000
Consumable stores on hand: Packing material 10 000
(1 March 2014)
Debtors’ control 140 000
Bank overdraft 66 000
Creditors’ control 75 000
SARS (PAYE) 80 000
Pension fund 50 000
Creditors for Salaries 45 000
Mortgage bond: ABC Bank 500 000
SARS (Income tax) (dr.) 75 000
Provision for bad debts 7 400

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 1
 Debit Credit
Sales 8 620 000
Cost of sales 3 500 000
Debtors allowances 55 000
Rent income 254 600
Salaries and wages 350 000
Pension fund contributions 35 500
Bad debts 30 000
Interest on fixed deposit 31 400
Packing material 40 000
Insurance 55 000
Interest on overdraft 6 000
Audit fees 90 000
Directors’ fees 800 000
Repairs and maintenance 20 000
Discount allowed 35 000
Discount received 45 000
Sundry expenses 180 000
Telephone 80 000
Bank charges 23 000
Water and electricity 120 000
Depreciation: Vehicles 30 000
Dividends on ordinary shares 360 000
13 444 500 13 444 500

Adjustments and additional information:

1. A physical stock taking on 28 February reflected the following:

Trading stock on hand: R240 000

2 2.1 The accountant has neglected to reverse the stock of packing material
on hand at the beginning of the accounting period.

2.2 After a physical count at the end of the current financial year, the
packing material in stock, R8 000.

3. The following amounts are owed at the end of the accounting period:

3.1 Three directors are owed an additional R20 000 each in terms of their
contracts.

3.2 Audit fees, R30 000

4. The following was paid or received in advance during the financial

year:

4.1 The rent for one month has been received in advance (the rent
was increased by 10% on 1 December 2014)

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 2
 4.2 An advertisement for R4 000 will appear in the newspaper in
March 2015. Take into account that Advertising falls under
Sundry expenses.

5. An internet payment of R7 500 was erroneously paid to another

creditor, GG Traders, instead of JJ Traders, in settlement of a debt of
R7 800. The creditor, JJ Traders, refused to grant the discount
claimed. No entry has been made for the correction.

6. The bank statement was received after the trial balance was
prepared. The following items have not yet been recorded:

6.1 Service fees for February R200

6.2 Cash handling fees R800
6.3 Interest on overdraft R600
6.4 Stop order in favour of Sanlam for the insurance premium,
R5 000

7. Bad debts of R3 500 must be written off and the provision for bad debts must
be adjusted to 5% of the book debts

8 Provide for depreciation on equipment at 10% p.a. according to carrying

value method. Take into account that new equipment for
R30 000 was bought exactly halfway through the accounting period and
recorded.
Vehicles are depreciated at 20% p.a. at cost price.

9. The employee, S Shandu, has resigned and left the company at the end of
January 2014. His name was still in the Salaries Journal of February 2014 by
error and posted to the general Ledger. He was not paid, and the error must
be corrected.

The details of his salary are as follows:

Gross salary 20 000
PAYE deduction 25%
Pension fund deduction 2 000

The company contributes to the pension fund on a Rand-for-Rand basis

10 Interest on loan is capitalized. The Nedbank loan statement reflected the

following transactions for the financial period ended 28 February 2015.

Balance on 1 March 2014 554 000

Installment of R9 000 per month that includes the ?
interest for the year.
Interest charged ?
Balance on 28 February 2015 500 000

11 Income tax for the year, R932 210.

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 3
 12 The directors declared a dividend of 69 cents per share.

13 The Net profit after tax for the year amounts to R2 230 000.

EXAMPLE 4: STAR TRADERS

ANSWER SHEET
STAR TRADERS
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2015

Sales
Cost of Sales

GROSS PROFIT
Other Operating Income

Rent Income
Discount received

GROSS OPERATING INCOME

OPERATING EXPENSES

Salaries and wages

Pension fund contribution
Bad debts
Packing material
Insurance
Audit fees
Directors’ fees
Repairs and maintenance
Discount allowed
Sundry expenses
Telephone
Bank charges
Water and electricity
Depreciation

OPERATING PROFIT
Interest Income

Profit before interest expense

Interest Expense

Profit before tax

Income tax

NET PROFIT AFTER TAX

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 4
HOMEWORK 4.1: PENINSULA COMPUTERS LTD

The given pre-adjustment trial balance was taken from the books of PENINSULA
COMPUTERS LTD on 28 February 2016. The company buys and sells computers and
renders a service by repairing computers. The income from the repairing of computers is
credited against the 'Repair income' account.
REQUIRED:
1. With due observance of the adjustments, prepare the following accounts in the general
ledger and properly balance or close the accounts:
- Trading account
- Profit and Loss account
- Appropriation account
2. Complete the Post-Closing Trial Balance
PENINSULA COMPUTERS LIMITED
PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2016
Debit Credit
Ordinary share capital (250 000 shares) 250 000
Retained income (1 March 2015) 91 450
Loan: ST Bank 120 000
Land and buildings 330 000
Vehicles 143 000
Equipment 63 000
Accumulated depreciation on Vehicles 42 600
Accumulated depreciation on Equipment 13 000
Trading stock 71 000
Debtors’ control 34 560
Bank 49 680
Float 900
Creditors’ control 43 590
South African Revenue Service (Income tax) 43 480
Debit Credit
Sales 546 890
Cost of sales 355 960
Debtors' allowance 12 950
Repair income 143 680
Salaries and wages 48 400
Rent income 14 850
Packaging material 5 640
Advertisements 24 470
Insurance 9 750
Interest on loan 16 000
Director's remuneration 60 000
Sundry expenditure 25 470
Ordinary share dividends 10 000

1 304 260 1 304 260

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 5
Adjustments and general information:
1. A vehicle purchased on 31 August 2012 for R68 000 was sold for R25 000 cash on
31 May 2015. The only entry that was made was to debit the Bank and credit Vehicles
with R25 000.
2. Depreciation on vehicles was written off at 20% per annum against cost price, and
equipment at 15% per annum on the book value (reduced balance).
3. On 14 February 2016 a computer monitor (trading inventory) with a cost price of R750
was taken by one of the directors as part of his remuneration. This transaction has not
yet been recorded in the books of the entity.
4. A client returned a faulty computer with a selling price of R4 500. The profit increase is
50% on the cost price. The company replaced the faulty computer for the client and
returned it to the suppliers. No entry was made.
5. According to stocktaking, the value of the remaining goods amounted to R65 750.
6. The remaining packaging material amounted to R2 540.
7. An advertisement appearing in the newspaper in April 2016 was already paid, R450.
8. An office has been rented out since 1 January 2015. The company receives rent at
R1 350 per month.
9. Included in insurance is an annual insurance premium of R5 736 payable on
1 August 2015.
10. A client has already paid R350 to fix his computer. The work can only be done during
March 2016.
11. Interest on the loan was increased from 15% to 16% per annum from 1 December
2015. Make provision for the outstanding interest. Interest on loan is not capitalised.
12. The directors declared a final dividend of 10% of the value of the total shares in issue
at the end of the financial year.
13. Income tax for the year amounted to R39 275.

GENERAL LEDGER OF PENINSULA COMPUTERS LTD.

FINAL ACCOUNT SECTION:
TRADING ACCOUNT F1

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 6
 PROFIT & LOSS F2

APPROPRIATION F3

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 7
POST-CLOSING TRIAL BALANCE ON 28 FEBRUARY 2016
BALANCE SHEET ACCOUNT SECTION: DEBIT CREDIT

HOMEWORK 4.2: BOOTIES LTD

Use the given information of BOOTIES LIMITED and complete the following:
- The Statement of Comprehensive Income (Income statement) for the year ending
28 February 2016.
- The Statement of Financial Position (Balance sheet) as at 28 February 2016.
Show all calculations in brackets next to the items

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 8
 BOOTIES LIMITED
PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2016
Debit Credit
Balance sheet accounts section
Ordinary share capital 300 000
Retained income (1 March 2015) 12 800
Mortgage loan: Nedbank 70 000
Land and buildings 249 000
Vehicles 75 000
Equipment 48 000
Accumulated depreciation on Vehicles 27 000
Accumulated depreciation on Equipment 36 000
Debtors’ control 38 380
Trading stock 63 240
Bank 12 050
Petty cash 150
Provision for bad debts 3 080
Creditors’ control 48 300
South African Revenue Services (Income tax) 59 540
South African Revenue Services (PAYE) 5 680
Medical fund 1 040
Nominal accounts section
Sales 408 900
Cost of sales 250 240
Rent income 11 200
Salaries and wages 78 980
Medical fund contributions 3 100
Consumable stores 720
Sundry expenditure 25 860
Insurance 470
Discount allowed 2 350
Ordinary share dividends 4 500
Interest on mortgage loan 12 420

ADDITIONAL INFORMATION & ADJUSTMENTS:

1. All the equipment was obsolete and was exchanged on 1 February 2016. Depreciation
is provided at 10% per annum on the cost price. The equipment was exchanged for
R7 000. The new equipment costs R56 400. The net amount owed to Auto print will
be paid on 31 March 2016. No entry was made for the exchange or the purchase of
the equipment.
2. The 150 000 shares were issued by the company by 28 February 2015, which
amounted to 75% of the authorised share capital.
3. An attorney's letter was received from a debtor in which the company was notified that
the debtor is insolvent and could only pay 70c in the Rand. The debtor owes the
company R780. The uncollectable debt must be written off.
4. M Mzimela, a debtor, returned faulty stock purchased at Booties Limited. The stock's
original selling price was R8 000, but 10% trading discount was granted. The cost
price was R3 900. The stock was returned to the supplier and they issued a credit
note. No entries have yet been made.

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 9
5. The accountant was on leave during February and has not yet paid the telephone
account of R246 for February.
6. The accountant has also forgotten to pay the supplier's wage for the last week in
February. The particulars of his wage are:
Gross wage R900
Medical fund deduction 76
PAYE tax 225
The entity contributes on a rand-for-rand basis to the medical fund.
7. Depreciation on vehicles must be provided at 20% per annum on the reduced balance.
8. Additional extensions and repairs were done to Land and buildings. The total of the
invoice amounts to R24 000 and must still be recorded. It is compiled as follows:
Architect fees R2 000
Building material 16 000
Labour and paint 5 000
Repairs to windows 1 000
9. The rent for March has already been received. The rent was increased by R200 per
month on 1 December 2015.
10. An investigation has brought to light that the following error occurred: An amount of
R560, received from a debtor whose debt was previously written off as uncollectable,
was recorded in the Debtors’ control column in the Cash receipts journal.
11. A debtor with a credit balance of R67 must be carried over to the Creditors' ledger.
12. After comparing the bank statement w2ith the entries made in the Cash Journals it was
revealed that EFT no. 211 for R2 300 in favour of a creditor, M Zondi was recorded in
the CPJ as R4 600 by mistake. The bank statement amount is correct. Correct the
error.
13. The provision for bad debts must be adjusted to R2 849.
14. Stocktaking at the end of the year showed trading stock of R61 800 on hand and
consumable stores of R270 on hand.
15. The mortgage loan is payable in annual instalments of R10 000 on 1 July. All entries
were made regarding the repayment of the loan and the interest.
16. The directors declared a final dividend of 8c per share.
17. The income tax for the year amounts to R18 417.

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 10
 BOOTIES LTD
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED ON
28 FEBRUARY 2016
Sales
Cost of sales

GROSS PROFIT
Other OPERATING INCOME
Rent income

GROSS OPERATING INCOME

OPERATING EXPENSES

OPERATING PROFIT
Interest income
Net profit before Interest expense
Interest expense
Profit before income tax
Income tax
NET PROFIT FOR THE YEAR AFTER TAX

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 11
 BOOTIES LTD
STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED ON 28 FEBRUARY 2016

Notes

ASSETS
NON-CURENT ASSETS
Fixed assets / Tangible assets

Financial assets

CURRENT ASSETS
Inventory

Trade and other debtors / receivables

Cash and cash equivalents

TOTAL ASSETS

EQUITY AND LIABILITIES

SHAREHOLDERS EQUITY
Ordinary share capital / equity

Retained income

NON-CURENT LABILITES
Mortgage bond: Nedbank

CURRENT LIABILITIES
Trade- and other payables

TOTAL EQUITY AND LIABILITIES

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 12
HOMEWORK 4.3: SCHOOL PUMA UNIFORMS LIMITED
STATEMENT OF COMPREHENSIVE INCOME & NOTES TO THE FINANCIAL
STATEMENTS
You are provided with the Pre-adjustment trial balance of SCHOOL PUMA UNIFORMS
LIMITED at the year-end. The company buys and sells school uniforms to its customers at a
mark-up of 50% on cost. They also repair uniforms for which they charge fees.

SCHOOL PUMA UNIFORMS LIMITED

PRE-ADJUSTMENT TRAIL BALANCE ON 30 JUNE 2017
DEBIT CREDIT
Ordinary share capital 140 000
Retained income (1 July 2016) 41 000
Loan: Loan bank 30 000
Land and Buildings 199 000
Vehicles 90 000
Accumulated depreciation on vehicles (1 July 2016) 34 550
Equipment 43 000
Accumulated depreciation on equipment (1 July 2016) 38 450
Debtors control 7 600
Creditors control 9 000
Provision for bad debts 400
Trading Stock 38 200
Consumable stores on hand
380
(1 July 2016)
SARS (Income tax) 37 000
Bank 6 580
Petty cash 500
Medical aid fund 730
Nominal accounts section
Sales 698 000
Cost of sales 460 000
Debtors allowances 8 000
Salaries and wages 104 390
Discount allowed 215
Consumable stores 2 700
Interest on loan 3 600
Insurance 1 900
Fee income 46 600
Rent income 19 800
Bank charges 1 440
Sundry expenses 2 010
Directors’ fees 40 000
Dividends on ordinary shares 12 000
R1 058 530 R1 058 530

Note:

Adjustments to the pre-adjustment figures must be shown in brackets in your answer so that
part-marks can be awarded.

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 13
ADJUSTMENTS:

1. The rent for June 2017 was paid on 1 July 2017 and recorded in the CRJ for July
2017.

2. The Bank statement for June was received after the cash journals had been posted to
the ledger the following items must be brought into account:

a. Cash deposit fee, R46

b. Service fee, R84
c. Credit card charges, R235
d. Interest on favourable bank balance, R70
e. Stop-order in favour of Loan bank, R1 200 dated 30 June 2017.
f. Direct deposit from M Miller, R180. Miller is a customer whose account was
written off as a bad debt in 2016.

Note:

(i) The loan agreement stipulates that R900 of the capital sum is to be repaid monthly in
advance and interest of R300 per month is also paid monthly in advance.

3. The business depreciates their equipment at 20% p.a. on cost price. The equipment was
bought more than four years ago and will be replaced next year. Provide for depreciation
on vehicles at 20% per annum on the carrying value. Take into consideration that a new
delivery vehicle was purchased on 30 June 2016 for R30 000 and recorded in the books.

4. The following was identified after a physical count:

(i) Stock of school uniforms was counted to be R250 more than the balance in the
ledger account. This was due to an error in the physical count during the previous
year.
(ii) Stock of consumable stores on hand on 30 June 2017, R550.
Note: The bookkeeper had forgotten to adjust for consumable stores on hand at the
beginning of the year. (See Trial balance).

5. The amount for Insurance in the Trial balance includes an amount of R900 for an
annual policy which expires in 31 August 2017.

6. An employee, R. McMillan was given a 10% salary increase, effective from 1 June
2017. Unfortunately, the personnel manager forgot to pass this information on to the
salary clerk who processed his salaries without taking the increase into account

(i) His old gross monthly salary was R9 600.

(ii) With the new salary McMillan still stays in the same tax bracket and has to pay 35%
of his gross salary to income tax and 15% to the pension fund.
(iii) His monthly medical aid contribution, which will not change with his new salary, is
R850.
(iv) School Uniforms Limited contributes on a rand for rand basis to the medical aid and
pension funds.

7. Adjust the provision for bad debts to 4% of book debts.

8. There were two directors at the beginning of the accounting period. Directors’ fees
have been paid for the first half of the accounting period. On 1 April 2017 a third
director was appointed. All three directors earn the same monthly fee. Provide for
director’s fees owed at the end of the year.

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 14
9. An interim dividend of 20 cents per share was paid on 31 December 2016. The
directors have decided to declare a final dividend of 35 cents per share. Note that 10
000 new shares were issued on 1 January 2017 at R4 per share. The proceeds of the
issue of these shares were properly recorded on 1 January 2017. Show the
calculations so that part-marks can be awarded.

10. Provided for income tax due at 28% of net income. Round off your answer to the
nearest rand.

REQUIRED:

1. Complete the Statement of Comprehensive Income (Income statement) for the year

ended 30 June 2017. (30)

2. Complete the following notes to the Financial Statements:

2.1 Fixed assets/Tangible assets

2.2 Ordinary Share capital
2.3 Retained income (35)

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 15
 SCHOOL PUMA UNIFORMS LTD
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED ON
30 JUNE 2017
Sales
Cost of sales

GROSS PROFIT
Other OPERATING INCOME

GROSS OPERATING INCOME

OPERATING EXPENSES

OPERATING PROFIT
Interest income

Net profit before Interest expense

Interest expense

Profit before income tax

Income tax

NET PROFIT FOR THE YEAR AFTER TAX

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 16
NOTES TO THE FINANCIAL STATEMENTS:

3. FIXED/TANGIBLE ASSETS LAND & VEHICLES EQUIPMENT

BUILDINGS
Carrying value at the beginning of the year

Cost

Accumulated depreciation

MOVEMENTS

Additions at cost

Disposals at carrying value

Depreciation

Carrying value at the end of the year

Cost

Accumulated depreciation

7. ORDINARY SHARE CAPITAL

AUTHORISED :

ISSUED:

8. RETAINED INCOME

ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 17
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ACCE 312: Practical Reader: Study Unit 4 – Question papers & Answer sheets 19