FAC2601 May/Jun 2011 exam paper — questions

🔒 Scan locked
View the paper as written🔒 with a pass

  1. Question 1 · Statement of comprehensive income · 43 marks

    This question relates to One Shot Limited and uses the following information extracted from its accounting records for the year ended 28 February 2011 (all amounts in R unless stated otherwise). Trial balance extract: land at cost (see note 3) 200 000; buildings at cost (see note 3) 1 800 000; long-term loans owing to Lost it (Pty) Ltd (see note 5) 200 000 and to Abe Limited 60 000; trade and other receivables 172 000; inventory of raw materials 16 000, finished goods 484 000 and work-in-progress 40 000; machinery and equipment at cost (see note 9) 320 000; delivery vehicles at cost (see note 8) 340 000; proceeds from the sale of a delivery vehicle during the year 76 000; accumulated depreciation at 28 February 2011 on delivery vehicles (see note 8) unknown (must be calculated), on machinery and equipment (see note 9) 160 000, and on buildings (see note 3) unknown (must be calculated); short-term interest-free, uninsured loans to personnel 18 000; cash in bank 33 000; investments (see note 4) 344 000; provisional tax payments 32 400; 12% debentures of R100 each issued during the year, secured by a first mortgage over land and buildings and redeemable on 31 March 2014, 400 000; dividends received from Babe Limited 3 600 and from Cringe (Pty) Ltd 1 600; interest received from Abe Limited 5 000; ordinary share capital (see notes 1 and 2) 2 000 000; 10% non-cumulative preference share capital 220 000; 12% cumulative preference share capital 180 000; proceeds from 10 000 10% non-cumulative preference shares issued at par value on 31 August 2010 (amount not given, must be calculated); proceeds from 200 000 ordinary par-value shares issued on 31 May 2010, 420 000; share issue expenses relating to the above share issues 12 000; preliminary expenses 6 000; debenture issue expenses 8 000; trade and other payables 143 000; retained earnings at 1 March 2010, 787 600; income (VAT included at 14%) 20 520 000; VAT on income paid to SARS (see note 11) 2 020 000; distribution costs 107 200; and administrative expenses before adjustments (see note 6) 6 776 400. Additional information is as follows. (1) One Shot Limited was incorporated with an authorised share capital of 1 600 000 ordinary shares of R2 each, 200 000 10% non-cumulative preference shares of R5 each, and 100 000 12% cumulative preference shares of R4 each. (2) On 1 March 2010 the directors resolved on the following, which must still be accounted for, in this order: (2.1) a capitalisation issue to ordinary shareholders of one share for every ten shares held, funded out of retained earnings; and (2.2) the writing off of all share issue costs, preliminary expenses and debenture issue expenses with the minimum effect on distributable reserves at 28 February 2011. (3.1) The existing land, which is owner-occupied and situated at erf 90, Riviera, was purchased on 1 March 2007 for R200 000; the buildings, costing R1 800 000, were completed on 2 March 2010. On 31 August 2010 a sworn appraiser, Mr Smit, revalued the land and buildings to R400 000 and R2 400 000 respectively on the gross replacement basis, with the buildings' remaining economic life unchanged. (3.2) Buildings are depreciated at 2% per annum on the straight-line basis and this still needs to be accounted for. (4) The investments of R344 000 comprise: (4.1) Abe Limited - 40 000 ordinary shares of R3 each costing R120 000; Abe Limited's authorised share capital is 100 000 shares, of which 60 000 have been issued; the directors valued this investment at R120 000 on 28 February 2011. (4.2) Babe Limited, listed on the Johannesburg Securities Exchange and held for speculative purposes - 4 000 ordinary shares of R40 each costing R160 000; the market value on 28 February 2011 was R50 per share. (4.3) Cringe (Pty) Ltd, designated as not available-for-sale - 800 ordinary shares of R80 each costing R64 000; the directors valued this investment at R80 000 on 28 February 2011. (4.4) In previous years the fair value of these investments equalled their cost price, and no entries relating to the current valuations have yet been recorded. (5) The unsecured long-term loan from Lost it (Pty) Ltd originated on 1 March 2010 and is repayable in five equal annual instalments starting 31 August 2010; interest at the current rate of 10% for the current year must still be provided for and is payable on 5 March 2011; One Shot Limited applies settlement date accounting for its financial instruments. (6) Administrative expenses (before adjustments) include: auditors' remuneration of 9 000 (including R4 200 of travelling costs); a travelling and entertainment allowance for the managing director of 13 600; directors' remuneration for attending meetings of 7 200 for the managing director and 7 200 for the non-executive director (a further R8 000 was paid to the managing director by the subsidiary for attending meetings); salaries of 800 000 (including R280 000 paid to the managing director, and the company's pension fund contributions of 5% on gross salaries); bank charges of 2 800; interest on overdraft of 27 600; interest on debentures of 32 000; and depreciation on machinery and equipment, amount not given (must be calculated). (7) Normal company tax of R76 000 must still be provided for. On 28 February 2011 the directors declared a dividend of 5c per ordinary share that must still be provided for; no dividends were declared or paid in the previous year. (8) One Shot Limited sold its only delivery vehicle on 31 May 2010; its original cost was R140 000 and it was purchased on 1 September 2007; it was replaced on the same date with a new delivery vehicle; depreciation on delivery vehicles is written off at 20% per annum on the straight-line method, and the current year's depreciation must still be provided for. (9) Depreciation on machinery and equipment is written off at 20% per annum on the diminishing-balance method; there were no purchases or sales of machinery during the year. (10) One Shot Limited maintained a gross profit percentage of 40% during the year. (11) VAT on income for January and February 2011 has not yet been paid to SARS; input VAT must be ignored for purposes of this question. Using all the information given about One Shot Limited above, prepare the company's Statement of Comprehensive Income together with the relevant supporting notes for the year ended 28 February 2011, in compliance with the requirements of the Companies Act and Generally Accepted Accounting Practice. Accounting policy notes and comparative figures may be ignored, but all supporting calculations must be shown.Show the full question

  2. Question 2 · Statement of financial position · 25 marks

    One Shot Limited: the following figures were extracted from the accounting records for the financial year ended 28 February 2011, and are common to questions 1 to 3. Trial balance amounts (in R) include: land at cost R200 000 (see note 3); buildings at cost R1 800 000 (see note 3); long-term loan owing by Lost it (Pty) Ltd R200 000 (see note 5); long-term loan owing by Abe Limited R60 000; trade and other receivables R172 000; inventory of raw materials R16 000; inventory of finished goods R484 000; inventory of work-in-progress R40 000; machinery and equipment at cost R320 000 (see note 9); delivery vehicles at cost R340 000 (see note 8); proceeds from the sale of a delivery vehicle during the year R76 000; accumulated depreciation at 28 February 2011 on delivery vehicles is unknown (see note 8), on machinery and equipment is R160 000 (see note 9), and on buildings is unknown (see note 3); short-term interest-free, uninsured loans to personnel R18 000; cash at bank R33 000; investments R344 000 (see note 4); provisional tax payments R32 400; 12% debentures of R100 each, issued during the year, secured by a first mortgage over land and buildings and redeemable 31 March 2014, R400 000; dividends received from Babe Limited R3 600 and from Cringe (Pty) Ltd R1 600; interest received from Abe Limited R5 000; ordinary share capital R2 000 000 (see notes 1 and 2); 10% non-cumulative preference share capital R220 000; 12% cumulative preference share capital R180 000; proceeds from 10 000 10% non-cumulative preference shares issued at par value on 31 August 2010 (amount not given); proceeds from 200 000 ordinary par-value shares issued on 31 May 2010, R420 000; share issue expenses relating to the above share issues R12 000; preliminary expenses R6 000; debenture issue expenses R8 000; trade and other payables R143 000; retained earnings at 1 March 2010 R787 600; income (VAT-inclusive at 14%) R20 520 000; VAT on income paid to SARS R2 020 000 (see note 11); distribution costs R107 200; and administrative expenses before adjustments R6 776 400 (see note 6). The additional information is as follows. (1) One Shot Limited was incorporated with an authorised share capital of 1 600 000 ordinary shares of R2 each, 200 000 10% non-cumulative preference shares of R5 each, and 100 000 12% cumulative preference shares of R4 each. (2) On 1 March 2010 the directors resolved on the following matters, still to be accounted for, in the order given: (2.1) a capitalisation issue to ordinary shareholders of one share for every ten shares held, to be made out of retained earnings; (2.2) writing off all share issue costs, preliminary expenses and debenture issue expenses with the minimum effect on distributable reserves at 28 February 2011. (3.1) The existing land, owner-occupied and situated at erf 90, Riviera, was bought on 1 March 2007 for R200 000; the buildings, costing R1 800 000, were completed on 2 March 2010. On 31 August 2010 a sworn appraiser, Mr Smit, revalued the land and buildings to R400 000 and R2 400 000 respectively on the gross replacement basis; the buildings' remaining useful life is unchanged. (3.2) Buildings are depreciated at 2% per annum on the straight-line basis and this still needs to be processed. (4) The investments comprise: (4.1) Abe Limited - 40 000 ordinary shares of R3 each, cost R120 000; Abe Limited's authorised share capital is 100 000 shares of which 60 000 have been issued; the directors valued this investment at R120 000 on 28 February 2011. (4.2) Babe Limited, listed on the Johannesburg Securities Exchange and held for speculative purposes - 4 000 ordinary shares of R40 each, cost R160 000; the market value on 28 February 2011 was R50 per share. (4.3) Cringe (Pty) Ltd, designated as not available-for-sale - 800 ordinary shares of R80 each, cost R64 000; the directors valued this investment at R80 000 on 28 February 2011. The three investments total R344 000. (4.4) In prior years the fair value of these investments equalled their cost; no entries for the current valuations have yet been recorded. (5) The unsecured long-term loan from Lost it (Pty) Ltd arose on 1 March 2010 and is repayable in five equal annual instalments starting 31 August 2010; interest at the current rate of 10% for the year must still be provided for and is payable on 5 March 2011; One Shot Limited applies settlement date accounting for its financial instruments. (6) Administrative expenses include, among others: auditors' remuneration of R9 000 (including R4 200 of travel costs); a travelling and entertainment allowance to the managing director of R13 600; directors' remuneration for attending meetings of R7 200 to the managing director and R7 200 to the non-executive director (with a further R8 000 paid to the managing director by a subsidiary for attending meetings); salaries of R800 000 (including R280 000 paid to the managing director, and the company's pension fund contribution of 5% of gross salaries); bank charges of R2 800; overdraft interest of R27 600; debenture interest of R32 000; and an as-yet-uncalculated depreciation charge on machinery and equipment. (7) Normal company tax of R76 000 must still be provided for. On 28 February 2011 the directors declared a dividend of 5c per ordinary share which still has to be provided for; no dividend was declared or paid in the prior year. (8) One Shot Limited sold its only delivery vehicle on 31 May 2010; it originally cost R140 000 and was bought on 1 September 2007; a new delivery vehicle replaced it on the same date. Depreciation on delivery vehicles is written off at 20% per annum on the straight-line method, and the current year's depreciation still needs to be provided for. (9) Depreciation on machinery and equipment is written off at 20% per annum on the diminishing-balance method; there were no purchases or sales of machinery during the year. (10) The company maintained a gross profit percentage of 40% during the year. (11) VAT on income for January and February 2011 has not yet been paid; input VAT must be ignored for purposes of this question. Using all of the One Shot Limited information and notes given above, prepare the asset side of the Statement of Financial Position, together with the relevant supporting notes, at 28 February 2011, in compliance with the requirements of the Companies Act and Generally Accepted Accounting Practice. Comparative figures and accounting policy notes may be ignored, but all calculations must be shown.Show the full question

  3. Question 3 · Statement of financial position · 18 marks

    One Shot Limited extracted the following trial balance figures from its books for the year ended 28 February 2011: land at cost (see note 3.1) R200 000; buildings at cost (see note 3.1) R1 800 000; long-term loans owing to Lost It (Pty) Ltd (see note 5) R200 000 and to Abe Limited R60 000; trade and other receivables R172 000; inventory of raw materials R16 000, finished goods R484 000 and work-in-progress R40 000; machinery and equipment at cost (see note 9) R320 000; delivery vehicles at cost (see note 8) R340 000; proceeds from the sale of a delivery vehicle during the year R76 000; accumulated depreciation at 28 February 2011 on delivery vehicles (see note 8) unstated (must be calculated), on machinery and equipment (see note 9) R160 000, and on buildings (see note 3.1) unstated (must be calculated); short-term interest-free, uninsured loans to personnel R18 000; cash in bank R33 000; investments (see note 4) R344 000; provisional tax payments R32 400; 12% debentures of R100 each issued during the year, secured by a first mortgage over land and buildings and redeemable on 31 March 2014, R400 000; dividends received from Babe Limited R3 600 and from Cringe (Pty) Ltd R1 600; interest received from Abe Limited R5 000; ordinary share capital (see notes 1 and 2) R2 000 000; 10% non-cumulative preference share capital R220 000; 12% cumulative preference share capital R180 000; proceeds from 10 000 10% non-cumulative preference shares issued at par value on 31 August 2010 unstated (must be calculated); proceeds from 200 000 ordinary par-value shares issued on 31 May 2010 R420 000; share issue expenses relating to the above share issues R12 000; preliminary expenses R6 000; debenture issue expenses R8 000; trade and other payables R143 000; retained earnings at 1 March 2010 R787 600; income (VAT included at 14%) R20 520 000; VAT on income paid to SARS (see note 11) R2 020 000; distribution costs R107 200; and administrative expenses before adjustments (see note 6) R6 776 400. Additional information: (1) One Shot Limited was incorporated with an authorised share capital of 1 600 000 ordinary shares of R2 each, 200 000 10% non-cumulative preference shares of R5 each, and 100 000 12% cumulative preference shares of R4 each. (2) On 1 March 2010 the directors resolved on two matters that must still be accounted for, in the following order: (2.1) a capitalisation issue to ordinary shareholders in the ratio of one new share for every ten ordinary shares held, to be made out of retained earnings; and (2.2) the writing off of all share issue costs, preliminary expenses and debenture issue expenses, with the minimum effect on distributable reserves, on 28 February 2011. (3.1) The existing land (owner-occupied, situated at erf 90, Riviera) was purchased on 1 March 2007 for R200 000, and buildings costing R1 800 000 were completed on 2 March 2010; on 31 August 2010 a sworn appraiser, Mr Smit, revalued the land and buildings to R400 000 and R2 400 000 respectively on the gross replacement basis, with the buildings' economic life unchanged. (3.2) Buildings are depreciated at 2% per annum on the straight-line basis and this still needs to be accounted for. (4) Investments consist of: (4.1) Abe Limited - 40 000 ordinary shares of R3 each, R120 000, out of an authorised 100 000 shares of which 60 000 are issued, with a directors' valuation on 28 February 2011 of R120 000; (4.2) Babe Limited, listed on the JSE and held for speculative purposes - 4 000 ordinary shares of R40 each, R160 000, with a market value on 28 February 2011 of R50 per share; (4.3) Cringe (Pty) Ltd, designated as not-available-for-sale - 800 ordinary shares of R80 each, R64 000, with a directors' valuation on 28 February 2011 of R80 000; the three investments total R344 000. (4.4) In previous years the fair value of these investments equalled their cost price, and no entries regarding these valuations have yet been recorded. (5) The unsecured long-term loan from Lost It (Pty) Ltd originated on 1 March 2010 and is repayable in five equal annual instalments starting 31 August 2010; interest for the current year at the current rate of 10% must still be provided for and is payable on 5 March 2011, and One Shot Limited uses settlement date accounting for its financial instruments. (6) Administrative expenses (before adjustments) include, among others: auditors' remuneration of R9 000 (including R4 200 travelling costs); a travelling and entertainment allowance for the managing director of R13 600; directors' remuneration for attendance of meetings of R7 200 for the managing director and R7 200 for the non-executive director (an additional R8 000 was paid to the managing director by the subsidiary for attending meetings); salaries of R800 000 (including R280 000 paid to the managing director, and the company's pension fund contributions of 5% on gross salaries); bank charges of R2 800; interest on overdraft of R27 600; interest on debentures of R32 000; and depreciation on machinery and equipment (amount to be calculated). (7) Normal company tax of R76 000 must still be provided for; on 28 February 2011 the directors declared a dividend of 5c per ordinary share which must still be provided for; no dividends were declared or paid in the previous year. (8) One Shot Limited sold its only delivery vehicle on 31 May 2010; the original cost of that vehicle was R140 000 and it had been purchased on 1 September 2007; it was replaced on the same date with a new delivery vehicle; the company's policy is to depreciate delivery vehicles at 20% per annum on the straight-line method, and depreciation for the year must still be provided for. (9) The company's policy is to depreciate machinery and equipment at 20% per annum on the diminishing-balance method; no machinery was purchased or sold during the year. (10) One Shot Limited maintained a gross profit percentage of 40% during the year. (11) VAT on income for January and February 2011 has not yet been paid; input VAT must be ignored for purposes of this question. Using the information given about One Shot Limited for the year ended 28 February 2011, prepare the 'liabilities' side of the Statement of Financial Position and the relevant supporting notes at 28 February 2011, in accordance with the requirements of the Companies Act and Generally Accepted Accounting Practice. Comparative figures and accounting policy notes may be ignored, but all calculations must be shown.Show the full question

  4. Question 4.1(a) · Leases · 4 marks

    This question relates to a machine that Frankan Ltd acquired under a finance lease agreement, applicable only to students registered for the 2011 examination. The lease commenced on 1 July 2007 with a cash price of R360 000 for the machine and a lease term of 4 years. Lease payments of R70 000 each are made half-yearly in arrears. The machine was available for use and brought into use on 1 July 2007, and it will be depreciated over its economical useful life of 5 years on the straight-line method. Frankan Ltd's financial year ends on 30 June. For purposes of the calculations, assume an annual nominal interest rate of 22,04% and an effective rate of 11,02%. Using the finance lease details for the machine acquired by Frankan Ltd (commencement date 1 July 2007, cash price R360 000, lease term of 4 years, half-yearly lease payments of R70 000 in arrears, annual nominal rate of 22,04% and effective rate of 11,02%), prepare an amortisation table covering the period up to and including 30 June 2008. All amounts should be rounded off to the nearest rand.Show the full question

  5. Question 4.1(b) · Leases · 10 marks

    This question relates to a machine that Frankan Ltd acquired under a finance lease agreement, applicable only to students registered for the 2011 examination. The lease commenced on 1 July 2007 with a cash price of R360 000 for the machine and a lease term of 4 years. Lease payments of R70 000 each are made half-yearly in arrears. The machine was available for use and brought into use on 1 July 2007, and it will be depreciated over its economical useful life of 5 years on the straight-line method. Frankan Ltd's financial year ends on 30 June. For purposes of the calculations, assume an annual nominal interest rate of 22,04% and an effective rate of 11,02%. Based on the same finance lease information for the machine acquired by Frankan Ltd (commencement date 1 July 2007, cash price R360 000, 4-year lease term, half-yearly lease payments of R70 000 in arrears, annual nominal rate of 22,04%, effective rate of 11,02%, and straight-line depreciation over the machine's 5-year useful life), show all the journal entries required in the books of Frankan Ltd for the financial year ended 30 June 2008. Narrations are not required.Show the full question

FAC2601 May/Jun 2011 thread

Stuck on a question, or worked one out? This thread is for this paper only. Anyone can read; sign in to post.

Nobody has posted on this paper yet. Be the first — say which question and what you got.

0/2000

The full Spot Map and the marks by year — and this paper’s scan.