HIGHER EDUCATION PROGRAMMES
Academic Year: Past Paper 2
Summative Assessment 1: Financial Accounting Reporting
(HFAC132-1)
NQF Level, Credits: 5, 20
Weighting: 60%
Assessment Type: Examination
Pass requirement: 50%
Examiner: E Bungne
Educator E Bungne
Due Date: Past Paper
Total: 100 marks
Duration: 3 Hours
Instructions:
1. This examination script consists of 9 pages including the cover sheet. Ensure that you have
all the pages.
2. This examination consists of Essay-Type questions.
3. Answer all questions in the Assessment Answer Book provided and SHOW ALL CAL-
CULATIONS
4. No answers in pencil will be marked.
5 Ensure that you hand in the entire examination script and the answer book at the end of the
session. This script remains the property of Boston City Campus & Business College (Pty)
Ltd.
6 Good Luck!
1
For your convenience, an overview of the Assessment Rules:
1. In order to control invigilated assessments in accordance with module specific guidelines, pub-
lished rules are enforced.
2. Students must bring a valid identity document (ID or Passport) and means to disclose their
student number to all (formative and summative) invigilated assessments.
3. Students participating in assessments in the form of invigilated tests or exams must arrive and
be seated in the assessment venue fifteen (15) minutes prior to the start of the assessment.
4. Students must sign the Assessment Register on arrival and when handing in their assessment
paper before leaving the assessment venue.
5. Students who arrive fifteen (15) minutes after the start of an assessment will not be allowed to
attempt the assessment under any circumstances.
6. Students who are late for an assessment, without just cause for an application for deferral, will
not be granted another assessment opportunity and will receive a zero (0) grade for the as-
sessment.
7. Students are required to complete all the necessary information (name, surname, student num-
ber and module code) on the assessment answer sheet.
8. Students will be required to remain in the assessment venue for forty-five (45) minutes from the
start of the assessment.
9. Other than what is specified by the particular requirements of a module, no student may make
use of any form of equipment, stationery or any other materials or resources during the assess-
ment session.
10. Other than what is specified, all electronic devices must be switched OFF for the duration of
the assessment.
11. Other than what is specified, no materials or equipment nor any other resources may be taken
into the assessment venue but must be left at a designated location, which is in most instances
near the entrance of the assessment venue.
12. Tippex (correction fluid) may not be used. Any section where Tippex is used will not be marked.
13. Students are not permitted to talk or communicate whatsoever during an assessment session
or cause any form of disturbance.
14. Students may not ask the invigilator for assistance in answering questions during an assess-
ment.
15. Should a student require anything during an assessment they may only communicate this need
to the invigilator on duty usually by raising of their hand.
16. Students may not leave the assessment venue without informing the invigilator and signing out
the exit attendance register.
17. No materials may be removed from the assessment venue at the end of an assessment. This
includes question papers as they remains the property of Boston City Campus & Business
College.
18. Learners must leave all personal belongings at the front of the assessment venue. This is done
at the learner’s own risk and neither Boston City Campus & Business College nor the staff will
be held responsible for the loss, theft or damage of belongings.
19. No student will be permitted extra time to complete an assessment unless the prior permission
granted has been brought under the attention of the invigilator prior to commencement of the
assessment. It is recommended that students do take along a copy of the approved permission
slip to overcome any unforeseen situation.
20. If an invigilator finds a student in contravention of any rule governing an assessment session,
the assessment script will immediately be confiscated and inform the Academic Committee at
Head Office Orange Grove. The student may be summoned to attend a disciplinary inquiry at
Head Office.
2
QUESTION 1 (17 marks)
Arts Gate, a business based in Cape Town, has a 31 December year end.
The company has the following balances as at 31 December 2017:
Land 2 000 000
Motor vehicles 550 000
Accumulated depreciation – motor vehicles 125 000
Equipment 330 000
Accumulated depreciation – equipment 95 000
Additional information:
1. Based on an independent valuation that was done, the property has a value of
R3 250 000 as at 31 December 2018.
2. Motor vehicles are depreciated over a period of 5 years, on the straight-line
method. The motor vehicles has a residual value of R55 000.
3. Equipment is depreciated over a period of 4 years, on the diminishing balance
method.
4. Equipment to the value of R36 000 was purchased on 1 September 2018.
Required:
a.) Prepare the general journal entries to record the above transactions in the books
of Arts Gate for the year ended 31 December 2018. (13 marks)
b.) Prepare the closing entry that will go with number 1 under the additional infor-
mation. (4 marks)
3
QUESTION 2 (18 marks)
You have been provided with the following figures extracted from the annual financial
statements of Yahoo Holdings Limited (YHL) for the financial year ended 30 June
2018.
2018 2017
R’m R’m
Sales 35 227 28 604
Cost of sales 21 674 18 419
Profit before interest and tax 3 469 2 687
Finance costs 68 38
Profit for the year 2 638 2 059
Inventories 2 901 2 216
Trade receivables 668 631
Cash and cash equivalents 1 562 2 145
Current liabilities 4 376 4 296
Earnings per share 337.9 cents 269.2 cents
Headline earnings per share 340.4 cents 267.3 cents
Share price at reporting date 6 441 cents 5 039 cents
Note: calculations should be rounded to 1 decimal place. Units of measure
should be provided.
REQUIRED:
a.) Calculate the gross profit margin for YHL for the 2017 and 2018 reporting periods.
Interpret and compare the gross profit margins for the 2 years. Round your answers
to 2 decimals. (9 marks)
b.) Calculate the days inventory on hand for YHL for the 2017 and 2018 reporting
periods. Interpret and compare the gross profit margins for the 2 years. Round your
answers to 2 decimals. Assume 365 days in a year. (9 marks)
4
QUESTION 3 (11 marks)
Ignore VAT
Genius (Pty) Ltd is a company which manufactures, sells and services computers in
Cape Town, South Africa.
For the 31 December 2018 year they had the following information on the trade
receivables:
The trade receivables account (before netting off allowance for doubtful debts) had an
opening balance of R80 000. The following took place during the year ended 31
December 2018:
R
Credit sales 620 000
Receipts from trade receivables 635 000
Bad debts: no amount is expected to be received from this debtor 11 000
Allowance for doubtful debts: allowance of 5% of trade receivables ?
outstanding at the end of the year
REQUIRED:
Prepare the trade receivables and allowance for doubtful debts accounts as it would
appear in the general ledger of Genius (Pty) Ltd for the year ended 31 December
2018. Dates are not required. (11 marks)
5
QUESTION 4 (21 marks)
Assume an income tax rate of 28%.
Extract of statement of comprehensive income of Tree Tops Ltd for the year
ended 31 December 2018
Operating profit 94 000
Finance costs (12 000)
Profit before tax 82 000
Taxation expense ?
Profit for the period ?
Extract of statement of financial position of Tree Tops Ltd as at 31 December
2018 2017
Share capital: Class A 748 000 600 000
Loans payable 230 000 110 000
SARS (Income tax payable) 8 000 11 000
SARS (Dividends tax) 5 400 4 600
Shareholders for dividends 7 000 13 000
Accrued interest expense 1 300 900
Additional information:
• Taxable income is equal to profit before tax.
• The statement of changes in equity for the year ended 31 December 2018 re-
ported dividends of R28 000.
• The business settled loans of R60 000 during the year.
6
REQUIRED:
a.) Calculate the amounts that would appear in the statement of cash flows for the
year ended 31 December 2018 for the following:
• Interest paid
• Tax paid
• Dividends paid (10 marks)
b.) Prepare the financing activities section of the statement of cash flows for the year
ended 31 December 2018. You DO NOT have to provide headings for this ques-
tion. Show all your workings. (7 marks)
c.) Identify four (4) cash inflows that one can expect in most businesses. (4 marks)
7
QUESTION 5 (13 marks)
The company Comfort Homes Ltd wants to purchase some plant and equipment to
use to expand operations. The directors have decided that the best way to finance this
investment in plant is with a share issue. They have taken a resolution to issue 50 000
Class A shares at R7 per share. The offer is made to the public on 1 April 2018. On 1
May 2018 (the closing date for the application), 40 000 Class A shares had been
applied for by members of the public. The directors issued the shares on 10 May 2018.
The directors employed the Rand Merchant Bank (RMB) to underwrite the share issue
at a 4% commission. The commission was still owing to RMB on 31 December 2018.
The underwriter’s commission was to be written off to Class A share capital. At 31
December 2018, no entries had been processed to record the commission.
An extract from the notes to the statement of financial position as at 31 December
2017 is set out below:
Authorised share capital
1 000 000 Class A shares
Issued share capital
800 000 Class A shares
REQUIRED:
Prepare all the general journal entries to record the application and issue of Class A
shares, including the underwriter’s commission. Narrations not required.
(13 marks)
8
QUESTION 6 (20 marks)
Jim and Kim have operated a successful partnership, Healthwise, since 1 July 2015.
The partnership has a year-end of 30 June. They have asked you for some guidance
relating to their financial year ended 30 June 2018. You have been provided with the
following information:
Healthwise Partnership
Extract of the post-closing trial balance as at 30
June 2018
Capital: Jim R350 000
Capital: Kim R600 000
Current: Jim R248 000
Current: Kim R370 000
Additional information:
1. The above trial balance contains all of the equity accounts of the partnership.
2. The following details are contained in the partnership agreement:
• Interest on capital accounts: 10% per annum
• Interest on current accounts: none
• Partners’ salaries: Jim and Kim are entitled to salaries of R12 000 and R18
000 per month respectively. These amounts are not paid regularly: they are ap-
propriated to partner’s current accounts if there are sufficient profits at the end
of the year.
• Interest on drawings: 15% per annum
• Profit-sharing ratio: Jim and Kim share all profit remaining after appropriations for
interest on capital, interest on drawings and partners’ salaries in the ratio 1: 3
respectively.
3. The partnership earned profits of R557 000 during the year ended 30 June 2018.
4. Jim made an additional capital contribution of R50 000 on 1 April 2018. Kim
made drawings of R30 000 on 1 August 2017.
REQUIRED:
Prepare the appropriation account as it would appear in the general ledger of Healthwise
partnership for the year ended 30 June 2018. Ignore dates. Show all workings.
(20 marks)
