ADJUSTMENTS AND VAT (30 marks) Use the information given to provide the most relevant answer Write only the question number and the letter, e g 1 16 A 1 1 The amount for rent income on the Pre adjustment Trial balance on 28 February 2021 (year end) is R79 800 This includes the rent for March 2021 Rent increased by 10 on 1 January 2021 Calculate the income received in advance regarding the rent for March 2021 R6 000 b R6 138 c R6 600 dR7 150 1 2 The following is information regarding the loan Balance on 1 March 2020 R480 000 Interest Monthly repayments R4 800 Balance on 28 February 2021 R450 000 Interest will be capitalised Calculate the interest expense that will appear on the Statement of Comprehensive Income for the year ended 28 February 2021 R25 200 b R57 600 c R30 000 d R27 600 1 3 An amount appeared on the Pre adjustment Trial balance on 28 February 2021 regarding insurance It consists of TWO insurance policies Policy 1 Annual premium of R12 000, paid on 1 June 2020 Policy 2 Monthly premium of R2 500 until 1 December 2020 There after it increase by 10 for the next period The premium for March 2021 was prepaid Calculate the total prepaid expense regarding the insurance for the financial year ending 28 February 2021 R5 750 b R3 000 c R2 750 d R14 500 1 4 An employee was left out on the Salaries Journal for February 2021 The information regarding this employees salary includes the following Gross salary R16 500 SARS (PAYE) R4 125 Pension fund 8 of gross salary UIF R145 The employer contributes R2 for every R1 contributed by the employee regarding pension fund and R1 for every R1 contributed to the UIF Calculate the amount that will appear as Creditors for salaries in the Trade and other payable notes to the Statement of Financial Position on 28 February 2021 R8 125 b R16 500 c R12 230 d R10 910 1 5 The following amounts regarding debtors appeared in the Pre adjustment Trial balance on 28 February 2021 (year end) Debtors control R35 880 Provision for bad debts R780 Adjustments regarding debtors G Grou owed R900 An amount of R600 was received and the balance will be written off as bad debts B Bouth a debtor was charge with an interest on his overdue account R20 Provision for bad debts is calculated at 2 of the outstanding debtors Calculate the amount that will appear as provision for bad debts adjustment on the Statement of Comprehensive Income for the year ended on 28 February 2021 Under operating income R74 b Under operating expenses R80 c Under operating income R80 d Under operating expense R700 1 6 The following information regarding the dividend policy appeared in the records of the company 28 February 2020 and 28 February 2021 Dividend per share 2020 25 cents, 2021 52 cents and Earnings per share 2020 60 cents, 2021 50 cents Which of the following comments regarding the dividend pay out policy is NOT correct The percentage paid out on dividends for 2021 was 27 cents per share higher than 2020 In 2020 42 of the earnings per share were paid out as dividends and in 2021 104 earnings per share were paid out as dividends The company used the unappropriated profit of 2020 to pay out more dividends in 2021 More money was retained in 2021 and not declared as dividend 1 7 When the financial manager analyse and interprets the gearing and the risk of the company, he she will refer to the following indicators Return on total shareholders equity Debt equity ratio b Solvency Return on total capital employed c Return on total capital employed Debt equity ratio d Current ratio Return on total shareholders equity 1 8 When the financial manager analyse and interprets the liquidity of the company, he she will refer to the following indicators Debtors collection period Acid test ratio Solvency b Current ratio Period stock on hand Acid test ratio c Profit mark up on cost of sales Solvency Current ratio d Creditors payment period Solvency Debtors collection period 1 9 When the external auditor states in the audit report the following In our opinion, except for the effect of the unauthorised expenditure described in the Basis for Qualification, the annual financial statement present fairly, in all material aspects the audit opinion is seen as the following Qualified audit report b Unqualified audit report c Questionable audit report d Disclaimer audit report 1 10 Which of the following statements is an example of the Historical Cost Principle Land and buildings is recorded in the Statement of Financial Position as R480 000 even though it was recently valued at R800 000 A vehicle purchased by the owner and registered in his own name will not be regarded as a Vehicle item in the Statement of Financial Position even though the owner sometimes uses the vehicle for business purposes Depreciation on fixed assets will be regarded a separate expense on the Statement of Comprehensive Income and not as part of sundry expenses The value of fixed assets will recorded indicating that the business intends to do business in future 1 11 The definition Assumption that only transactions that affect the business and not the owners private transactions will be recorded refers to which GAAP principle Materiality b Going concern c Business Entity d Historical cost 1 12 The following information regarding the inventory is provided Balance in the Pre adjustment Trial Balance on 28 February 2021 amounts to R145 600 Adjustments which was not yet taken into account Trading stock with a sales price of R5 900 was donated to the local primary school (profit mark up is 100 on cost of sales) Trading stock with a cost price of R8 000 was returned by a debtor After heavy rain falls some of the trading stock was damaged The total amounts to R15 000 Insurance will pay out 80 of the damaged goods According to a physical stock taking, trading stock to an amount of R133 900 was on hand Calculate the trading stock deficit or surplus R1 750 deficit b R1 200 surplus c R2 100 deficit d R4 730 deficit 1 13 What term does the following definition refer to Invitation to the public to buy shares in the Company Memorandum of Incorporation b Audit report c Prospectus d Companies Act of 2008 1 14 Separation of ownership is a term that refers to The owners and directors cannot be the same people b The shareholders are the owners and the directors manage the owners money c Different people is doing different tasks d One person is handling the petty cash, for example, and another person is checking him to prevent fraud 1 15 Limited liability refers to the following Shareholders are liable for all the companys losses b Shareholders can only loose the amount of money invested c Employees of the company is liable for part of the debts of the company d Only a limited amount of shareholders can be held liable for the debts of the company (15 x 2) 30

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ADJUSTMENTS AND VAT (30 marks) Use the information given to provide the most relevant answer. Write only the question number and the letter, e.g. 1.16

ADJUSTMENTS AND VAT (30 marks)

Use the information given to provide the most relevant answer. Write only the question number and the letter, e.g. 1.16 A.

1.1 The amount for rent income on the Pre-adjustment Trial balance on 28 February 2021 (year-end) is R79 800. This includes the rent for March 2021. Rent increased by 10% on 1 January 2021. Calculate the income received in advance regarding the rent for March 2021.

R6 000 b.R6 138 c.R6 600 dR7 150

1.2 The following is information regarding the loan.

Balance on 1 March 2020: R480 000

Interest: ?

Monthly repayments: R4 800

Balance on 28 February 2021: R450 000

Interest will be capitalised. Calculate the interest expense that will appear on the Statement of Comprehensive Income for the year ended 28 February 2021.

R25 200 b.R57 600 c.R30 000 d.R27 600

1.3 An amount appeared on the Pre-adjustment Trial balance on 28 February 2021 regarding insurance. It consists of TWO insurance policies.

Policy 1: Annual premium of R12 000, paid on 1 June 2020.

Policy 2: Monthly premium of R2 500 until 1 December 2020. There after it increase by 10% for the next period. The premium for March 2021 was prepaid. Calculate the total prepaid expense regarding the insurance for the financial year ending 28 February 2021.

R5 750 b.R3 000 c.R2 750 d.R14 500

1.4 An employee was left out on the Salaries Journal for February 2021. The information regarding this employees salary includes the following:

Gross salary: R16 500
SARS (PAYE): R4 125
Pension fund: 8% of gross salary
UIF: R145

The employer contributes R2 for every R1 contributed by the employee regarding pension fund and R1 for every R1 contributed to the UIF.

Calculate the amount that will appear as Creditors for salaries in the Trade and other payable notes to the Statement of Financial Position on 28 February 2021.

R8 125 b.R16 500 c.R12 230 d.R10 910

1.5 The following amounts regarding debtors appeared in the Pre-adjustment Trial balance on 28 February 2021 (year-end).

Debtors control: R35 880
Provision for bad debts: R780

Adjustments regarding debtors:

G. Grou owed R900. An amount of R600 was received and the balance will be written off as bad debts.
B. Bouth a debtor was charge with an interest on his overdue account R20.
Provision for bad debts is calculated at 2% of the outstanding debtors.

Calculate the amount that will appear as provision for bad debts adjustment on the Statement of Comprehensive Income for the year ended on 28 February 2021.

Under operating income: R74 b.Under operating expenses: R80 c.Under operating income: R80 d.Under operating expense: R700

1.6 The following information regarding the dividend policy appeared in the records of the company 28 February 2020 and 28 February 2021.

Dividend per share: 2020: 25 cents, 2021: 52 cents and Earnings per share: 2020: 60 cents, 2021: 50 cents

Which of the following comments regarding the dividend pay-out policy is NOT correct?

The percentage paid out on dividends for 2021 was 27 cents per share higher than 2020.
In 2020 42% of the earnings per share were paid out as dividends and in 2021 104% earnings per share were paid out as dividends.
The company used the unappropriated profit of 2020 to pay out more dividends in 2021.
More money was retained in 2021 and not declared as dividend

1.7 When the financial manager analyse and interprets the gearing and the risk of the company, he/she will refer to the following indicators:

Return on total shareholders equity; Debt/equity ratio b.Solvency; Return on total capital employed c.Return on total capital employed; Debt/equity ratio d.Current ratio; Return on total shareholders equity

1.8 When the financial manager analyse and interprets the liquidity of the company, he/she will refer to the following indicators:

Debtors collection period; Acid-test ratio; Solvency b. Current ratio; Period stock on hand; Acid-test ratio c.Profit mark-up on cost of sales; Solvency; Current ratio d.Creditors payment period; Solvency; Debtors collection period

1.9 When the external auditor states in the audit report the following:

In our opinion, except for the effect of the unauthorised expenditure described in the Basis for Qualification, the annual financial statement present fairly, in all material aspects.

the audit opinion is seen as the following:

Qualified audit report b. Unqualified audit report c. Questionable audit report d. Disclaimer audit report

1.10 Which of the following statements is an example of the Historical Cost Principle?

1. Land and buildings is recorded in the Statement of Financial Position as R480 000 even though it was recently valued at R800 000.
2. A vehicle purchased by the owner and registered in his own name will not be regarded as a Vehicle item in the Statement of Financial Position even though the owner sometimes uses the vehicle for business purposes.
3. Depreciation on fixed assets will be regarded a separate expense on the Statement of Comprehensive Income and not as part of sundry expenses.
1. The value of fixed assets will recorded indicating that the business intends to do business in future.

1.11 The definition: Assumption that only transactions that affect the business and not the owners private transactions will be recorded refers to which GAAP principle?

Materiality b.Going-concern c.Business Entity d.Historical cost

1.12 The following information regarding the inventory is provided:

Balance in the Pre-adjustment Trial Balance on 28 February 2021 amounts to R145 600.

Adjustments which was not yet taken into account:

Trading stock with a sales price of R5 900 was donated to the local primary school (profit mark-up is 100% on cost of sales).
Trading stock with a cost price of R8 000 was returned by a debtor.
After heavy rain falls some of the trading stock was damaged. The total amounts to R15 000. Insurance will pay out 80% of the damaged goods.
According to a physical stock taking, trading stock to an amount of R133 900 was on hand.

Calculate the trading stock deficit or surplus.

R1 750 deficit b.R1 200 surplus c.R2 100 deficit d.R4 730 deficit

1.13 What term does the following definition refer to: Invitation to the public to buy shares in the Company?

Memorandum of Incorporation b.Audit report c.Prospectus d.Companies Act of 2008

1.14 Separation of ownership is a term that refers to:

The owners and directors cannot be the same people. b.The shareholders are the owners and the directors manage the owners money. c.Different people is doing different tasks. d.One person is handling the petty cash, for example, and another person is checking him to prevent fraud

1.15 Limited liability refers to the following:

Shareholders are liable for all the companys losses. b.Shareholders can only loose the amount of money invested. c.Employees of the company is liable for part of the debts of the company. d.Only a limited amount of shareholders can be held liable for the debts of the company. (15 x 2) [30]