QUESTION 1 25 MARKS

Ignore Value-added Tax.

JP Security Doors Ltd (JPSD), a manufacturer that specialises in the manufacture of slam lock security doors, commenced business in 2017.

The production process involves melting down and moulding the steel into the desired lengths and into frames. All the security doors have the same inner pattern. The lengths of each door are made to customer specifications. The doors also require some bolts to attach the sliding door section to the frame. Once the sliding door section was fitted into the frame, the door is taken to the spray paint area where the doors are sprayed into the colour the customer indicated on the job card. The door takes about five hours to dry. The completed door is then bubble wrapped and placed in the warehouse for either the customer to collect, or to be delivered to the customer. The production manager is responsible for quality control and through strict supervision ensures that all the processes have been followed, according to specified standards.

One meter in length for the sliding door section, inclusive of the frame, consumes two kilograms of aluminium and one litre of paint.

The following details relate to the financial year ended 30 June 2020:

R

Raw materials aluminium (50 000 kilograms): 1 July 2019

3 750 000

Raw materials paint (10 000 litres): 1 July 2019

50 000

Work-in-progress: 1 July 2019

-

Finished goods (1 050 security doors): 1 July 2019

168 000

Raw material purchases

Aluminium (see note 2)

?

Paint (130 000 litres)

1 170 000

Delivery costs to deliver completed security doors to customers

90 000

Electricity and water factory

315 000

Salaries and wages

Factory workers (salaries are based on the number of units produced)

800 000

Production management salary

475 000

Sales and marketing personnel

200 000

Depreciation:

- Manufacturing machinery and equipment (straight-line method)

550 000

- Office building and equipment (diminishing balance method)

230 000

Repairs and maintenance plant

1 325 000

Advertising and marketing costs

320 000

Other administration costs

540 000

Other manufacturing costs inclusive of the bolts and bubble wrap used

1 479 200

Additional information:

The actual number of units produced for the year ended 30 June 2020 amounted to 180 000 security doors, totalling 120 000 in meters.

JPSD purchased aluminium twice during the year and details can be summarised as follows:

15 July 2019

50 000 kilograms bought from CR Alumni (Pty) Ltd (CR) at R80.00 per kilogram. Due to the volume purchased a cash discount of 5% were allowed by the supplier. Transport cost to deliver the goods to the premises of JPSD amounted to R5 000.

25 February 2020

160 000 kilograms bought from CR at R95 per kilogram. JPSD could only pay in cash half of the consignment, the balance after CR Alumni (PTY) Ltd granted a R5 000 settlement discount, was paid on 31 March 2020. Transport cost paid to deliver the goods to the plant amounted to R10 000.

Cost of raw materials is determined on the weighted average method of valuation and cost of finished goods is determined on the first-in-first-out method of valuation.

JPSD adopted the periodic inventory system to record inventory related transactions.

There was no opening or closing balances in the work-in-process account.

Finished goods on hand at the end of the financial year totalled a number of 6 000 security doors.

It was decided as from the beginning of the 2020 financial year to add a 20% unrealised manufacturing profit to the cost of goods produced, when completed goods are transferred from the factory to the sales department.

After year end, the sales department confirmed that the sales of security doors are declining. The expected selling price per door in the next financial year will amount to R190.50 and the estimated compulsory selling costs will amount to R20.50 per door. The cost of raw materials on hand at year end was lower than the net realisable value of these raw materials.

REQUIRED:

MARKS

Sub-total

Total

(a)

Prepare the following general ledger accounts in the financial records of JP Security Doors Ltd for the year ended 30 June 2020:

Raw Materials: Aluminium

Raw Materials: Paint

Work in progress

Finished goods

Cost of Sales

Round off cost per unit to the nearest two decimals and total cost to the nearest Rand.

8.0

3.0

4.5

7.0

2.5

25

TOTAL MARKS

25

QUESTION 2 25 MARKS

Ignore Value-added tax (VAT).

Sail-Away (Pty) Ltd (Sail), was incorporated in 2015 and has a financial year end of 30 September. The company operates daily from the Houtbay harbour and transfers tourists to Penquin Island.

The company has two well equipped catamarans. The first boat was purchased on 1 August 2018 for R2 200 000. The cost was divided into the hull costed at R1 150 000, two engines at a total cost of R350 000 and the interior furnishings and equipment at R700 000. The accounting policy adopted by the company is to write off the hull on the straight-line basis over the estimated lifetime of ten years, with an estimated residual value of R35 000. The engines are written off by using the production unit method. The estimated capacity of an engine was based on 200 000 sea miles travelled, with an estimated residual value of R10 000 per engine. Up to 30 September 2019 a total of 120 000 sea miles have been travelled and in the 2020 financial year a further 20 000 sea miles were done by these two engines. The interior furnishings and equipment are written off at 20% per annum on the diminishing balance method, with no expected residual value.

The first boat was converted into an upmarket fishing charter boat with the acquisition of the second boat. The conversion required that the interior furnishings and equipment of the old boat be changed somewhat to accommodate deep sea fishing. Interior furnishings and equipment bought on 1 August 2018, with a carry value of R69 600 as at 1 October 2019, was sold for R20 000 on 1 November 2019 and simultaneously new interior furnishings and equipment were purchased for R180 000.

On 1 October 2019, the two engines were re-conditioned at a total cost of R60 000. The company estimated that this re-conditioning has changed the useful estimated capacity of the engines to a total of 300 000 sea miles and it also increased the estimated residual value to R12 000 per engine. It was decided to account for the change in estimate by using the re-allocation method.

The second boat was acquired on 1 November 2019 at a cost of R6 500 000, broken down as R3 000 000 for the hull, R680 000 for the two engines and the interior furnishings and equipment at R2 820 000. The estimated residual values were R120 000 for the hull and R15 000 per engine. Interior furnishings and equipment have the same assumptions as those for the first boat, except that a residual value of R40 000 is expected. The capacity of the engines is estimated at 400 000 sea miles. A total of 30 000 sea miles were travelled by the new boat in the current financial year.

One meter in length for the sliding door section, inclusive of the frame, consumes two kilograms of aluminium and one litre of paint. The following details relate to the financial year ended 30 June 2020: R 3 750 000 50 000 168 000 ? 1 170 000 90 000 315 000 Raw materials aluminium (50 000 kilograms): 1 July 2019 Raw materials paint (10 000 litres) 1 July 2019 Work-in-progress: 1 July 2019 Finished goods (1 050 security doors). 1 July 2019 Raw material purchases Aluminium (see note 2) Paint (130 000 litres Delivery costs to deliver completed security doors to customers Electricity and water factory Salaries and wages Factory workers (salaries are based on the number of units produced) Production management salary Sales and marketing personnel Depreciation Manufacturing machinery and equipment (straight line method) Office building and equipment (diminishing balance method) Repairs and maintenance-plant Advertising and marketing costs Other administration costs Other manufacturing costs inclusive of the bolls and bubble wrap used 800 000 475 000 200 000 550 000 230 000 1 325 000 320 000 540 000 1 479 200 Additional information: 1. The actual number of units produced for the year ended 30 June 2020 amounted to 180 000 security doors totallinn 120 000 in meters e Sales department. 8. After year end, the sales department confirmed that the sales of security doors are declining. The expected selling price per door in the next financial year will amount to R190.50 and the estimated compulsory selling costs will amount to R20 50 per door. The cost of raw materials on hand at year end was lower than the net realisable value of these raw materials REQUIRED: I MARKS Sub- Total total (a) Prepare the following general ledger accounts in the financial records of JP Security Doors Ltd for the year ended 30 June 2020 Raw Materials: Aluminium Raw Materials. Paint Work in progress Finished goods Cost of Sales Round off cost per unit to the nearest two decimals and total cost to the nearest Rand. 8.0 3.0 4.5 70 2.5 25 One meter in length for the sliding door section, inclusive of the frame, consumes two kilograms of aluminium and one litre of paint. The following details relate to the financial year ended 30 June 2020: R 3 750 000 50 000 168 000 ? 1 170 000 90 000 315 000 Raw materials aluminium (50 000 kilograms): 1 July 2019 Raw materials paint (10 000 litres) 1 July 2019 Work-in-progress: 1 July 2019 Finished goods (1 050 security doors). 1 July 2019 Raw material purchases Aluminium (see note 2) Paint (130 000 litres Delivery costs to deliver completed security doors to customers Electricity and water factory Salaries and wages Factory workers (salaries are based on the number of units produced) Production management salary Sales and marketing personnel Depreciation Manufacturing machinery and equipment (straight line method) Office building and equipment (diminishing balance method) Repairs and maintenance-plant Advertising and marketing costs Other administration costs Other manufacturing costs inclusive of the bolls and bubble wrap used 800 000 475 000 200 000 550 000 230 000 1 325 000 320 000 540 000 1 479 200 Additional information: 1. The actual number of units produced for the year ended 30 June 2020 amounted to 180 000 security doors totallinn 120 000 in meters e Sales department. 8. After year end, the sales department confirmed that the sales of security doors are declining. The expected selling price per door in the next financial year will amount to R190.50 and the estimated compulsory selling costs will amount to R20 50 per door. The cost of raw materials on hand at year end was lower than the net realisable value of these raw materials REQUIRED: I MARKS Sub- Total total (a) Prepare the following general ledger accounts in the financial records of JP Security Doors Ltd for the year ended 30 June 2020 Raw Materials: Aluminium Raw Materials. Paint Work in progress Finished goods Cost of Sales Round off cost per unit to the nearest two decimals and total cost to the nearest Rand. 8.0 3.0 4.5 70 2.5 25