QUESTION ONE [20]

The following transactions during January 2020 relate to County Traders:

Date

January

Details Amount

(R)

01 Paid for rental of equipment. 500

04 Purchased a vehicle on credit from Sevenoaks. 24 000

06 Received partial payment from debtor, Kent. 2 000

08 The owner pays with a business cheque for personal expenses.

Withdraws money for personal use.

1 200

800

10 Paid creditors. 12 000

12 Rendered services on credit to Surrey. 4 000

15 Issued a credit note to Surrey for unsatisfactory services. 200

20 Cashed cheque 111 for:

Telephone

Wages for the month

150

900

Required:

Show the effect of the above transactions of R Red on the accounting equation. Use "+" to

denote an increase, "-" to denote a decrease and "0" to denote no change to the elements of

the equation. Present the above transactions in the following format:

No. Acc debit Acc credit Assets = Equity + Liabilities

e.g. Bank Sales +200 +200 0

3

QUESTION TWO [25]

Joel Mabena is the sole owner of a general dealer business, Joel's Bargains. The following

information was provided for the year ended 31 December 2020:

Joel's Bargains

Trial balance as at 31 December 2020.

Debit

R

Credit

R

Equipment

Accumulated depreciation

Fixed deposit

Inventory - trade goods

Stationery on hand at 1 January 2020

Debtors control

Allowance for credit losses

Bank

Long term borrowings - ABC Finance

Creditors control

Capital - Joel Mabena

Drawings

Sales

Cost of sales

Returns from debtors

Interest on fixed deposit

Profit on sale of equipment

Rental income

Credit losses

Insurance

Salaries and wages

Stationery

Sundry expenses

Interest on loan - ABC Finance

172 200

160 000

144 000

2 400

42 600

115 200

86 000

328 000

3 200

1 600

8 400

69 600

4 600

38 200

7 000

20 200

2 000

80 000

25 800

318 200

711 200

16 000

1 000

9 600

1 184 000 1 184 000

Additional information:

1. On 31 December 2020 stationery of R1 000 and trade goods of R143 400 were on hand.

2. Sifiso took out a fire insurance policy on 1 October 2020 and paid the annual premium

of R6 000 for insurance cover until 30 September 2021.

3. Employee salaries of R7 000 were not yet paid nor recorded at 31 December 2020.

4

4. A new tenant moved into office space available for rent on 1 September 2020 and

prepaid the rent for 12 months until 31 August 2021. No deposit was required. The rent

remained unchanged for the 12 month period.

5. The fixed deposit was invested for 5 years and matures on 31 December 2024. Interest

on the investment is provided for at 12% per year.

6. Provide for depreciation of equipment at 20% per year on the diminishing balance

method. No equipment was bought during the year but equipment was sold on 2 January

2020. The sale was correctly recorded in the above accounting records.

7. Credit losses (bad debts) of R600 must be written off as irrecoverable. Thereafter, adjust

the allowance for credit losses (provision for bad debts) to 5% of outstanding debtors.

8. Long term borrowings of R100 000 was obtained from ABC Finance on 1 July 2018. The

borrowing bears interest at 14% per year and the capital is repayable by five equal

annual instalments with the first instalment payable on 30 June 2020. The first instalment

was duly paid on 30 June 2020. Interest for the current year needs to be updated.

9. Sundry expenses include security fees of R2 200 that have been paid for January 2021.

Required:

Prepare the statement of profit or loss and other comprehensive income for the year ended

31 December 2020 to comply with the requirements of International Financial Reporting

Standards (IFRS) appropriate to Joel's Bargains business. Show all workings.

5

QUESTION THREE [20]

Pitso and Steve are partners operating a business Topclass Pro Services. The information

that follows is relevant to the business activities of the partnership for the year ended

30 June 2020. Pitso and Steve share in profits and losses in the ratio of 3:2 respectively.

Topclass Pro Services

Extract of relevant account balances as at 30 June 2020

Debit

R

Credit

R

Capital: Pitso

Capital: Steve

Current account: Pitso: balance at 1 July 2019

Current account: Steve: balance at 1 July 2019

Drawings for the year: Pitso

Drawings for the year: Steve

Long term loan from Pitso

Salaries paid to partners during the year:

Pitso

Steve

Profit for the year - before taking the any of the additional

information into account

76 600

68 310

43 470

144 000

126 000

270 000

270 000

52 900

110 000

765 500

Additional information:

The following has been extracted from the partnership agreement:

:

1. Interest must be calculated and recorded at the following rates at the end of each

financial period. All interest must be processed through the current accounts of the

partners. Interest rates are as follows:

1.1 Interest on capital must be calculated at 10% per year,

1.2 Interest at 10% per year on current account balances at beginning of the year,

1.3 Interest on drawings accounts balances has been calculated as follows:

Pitso R4 500

Steve R2 900

2. The following salaries are payable to the partners for the current year:

Pitso: R12 000 per month, and Steve R15 000 per month.

6

Year-end adjustments:

1. On 1 January 2020 Pitso contributed another R90 000 as capital to the partnership. It

was agreed that the amount will be included in his fixed capital account. The transaction

was correctly recorded as at 30 June 2020.

2. Pitso granted an unsecured loan to the partnership on 1 January 2020. According to the

loan agreement, interest will be charged at 10% per year. The loan will be repaid in

annual installments beginning 31 December 2024. Interest on the loan is still to be

calculated and recorded in the books of the partnership.

Required:

Take the above information into account and adjust the "Profit for the year" to show the

correct amount to be shared between the partners, Pitso and Steve. Thereafter,

prepare the statement of changes in equity for Topclass Pro Services for the year ended 30

June 2020 to clearly show the distribution of profits in terms of the partnership agreement.

Show all calculations. Use the format suggested below.

(20)

Recommended format:

Topclass Pro Services

Statement of changes in equity for the year ended 30 June 2020

Capital accounts Pitso

R

Steve

R

Total

R

Balance at 1 July 2019

Additional contributions

Balance at 30 June 2020

7

Current accounts: Pitso

R

Steve

R

Appropriation

R

Balance 1 July 2019

Profit for the year

Appropriations:

Interest on capital

Interest on current a/c

Interest on drawings

Salaries due

Share of profits

Drawings

Balance 30 June 2020

QUESTION FOUR [25]

The following information was extracted from the accounting records of Mode Ltd for the

financial year ended 30 June 2020.

Extract from: Statement of Profit or loss and other comprehensive income

of Mode Ltd for the year ended 30 June 2020

R

Gross profit

Dividends received

Profit on sale of machine

Depreciation

Interest expense

Distribution, administration and other expenses

Taxation

Profit for the year after taxation

1 440 000

43 000

75 000

(15 000)

(180 000)

(403 000)

(420 000)

540 000

8

Extract from: Statement of financial position of Mode Ltd as at 30 June 2020:

ASSETS

30 June 2020

R

30 June 2019

R

Land and buildings

Machinery at carrying amount

Investments

Inventory

Trade debtors

Receiver of revenue - income tax

Bank balance

925 000

875 000

235 000

170 000

140 000

10 000

30 000

890 000

250 000

385 000

480 000

400 000

Nil

15 000

Total assets 2 385 000 2 420 000

EQUITY AND LIABILITIES

EQUITY 1565 000 940 000

Ordinary share capital

Retained earnings

745 000

820 000

480 000

460 000

LIABILITIES

820 000

1 480 000

Long term Borrowings

Trade creditors

Receiver of revenue - income tax

Shareholders for dividends

750 000

60 000

Nil

10 000

1 050 000

352 000

43 000

35 000

Total equity and liabilities 2 385 000 2 420 000

Additional information:

1. Shares were issued for cash during the year.

2. Dividends of R180 000 were declared during the current financial year.

3. On 31 October, machinery with a carrying amount of R110 000 was sold for cash. A

replacement machine as well as additional machinery was purchased for cash.

4. No long term borrowings were made during the year.

5. Investments were sold during the year. No new investments were purchased.

9

Required:

Take all the above information into account and prepare the statement of cash flows for

Mode Ltd for the year ended 30 June 2020. Use the indirect method. Your answer must

comply with the International Financial Reporting Standards (IFRS) appropriate to this type

of business.

Show all workings. Round off all workings to the nearest Rand.

(25)

QUESTION FIVE [10]

Sizwe General Dealers is a business engaged in the retail of household cleaning products.

The business is a registered VAT vendor. The perpetual inventory system is used to record

all trading stock transactions. VAT is applicable at 15%.

The following transactions took place during July 2020:

1. Purchased trading stock for R38 00 (exclusive of VAT) and paid by EFT.

2. Sold trading stock for R34 500 (inclusive of VAT) to a customer who had already paid

by EFT. The cost price of the goods sold was R20 000.

3. A Stock take revealed that trading stock on hand on 31 July 2020 was valued at

R18 600. There was no stock on hand at 1 July 2020.

4. You may assume that the above were the only trading stock transactions that took

place during July 2020.

Required:

Record the above transactions in the general journal of Sizwe General Dealers for July

2020. Show workings for all calculations. A brief narration is required.