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Mancosa Concepts of financial reporting past papers
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lOMoARcPSD|23479258MAIN ONLINE SUMMATIVE ASSESSMENT
PROGRAMME Bachelor of Commerce in Accounting
MODULE Financial Accounting 2A
INTAKE January 2022
DATE 05 July 2022
TOTAL MARKS 100
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SECTION A [40 Marks]
Read the case study below and answer ALL the questions that follow.
ANGLO ENDS 2021 ON A HIGH WITH A ROSY OUTLOOK FOR THE FUTURE
Anglo American expects its strong performance this year will gain momentum in 2022 and beyond as
the global mining company expects 35% growth over the next decade. In an update to investors ahead
of the year-end, Anglo CEO Mark Cutifani said the company has proved "resilient and agile" and is
expected to continue to deliver sector-leading growth into the future. Key to Anglo’s rosy outlook is its
flagship Quellaveco project in Peru, which is on track and on budget despite having lost six months to
Covid-19-related disruptions. The group now plans to create additional value having increased it early
copper production plans for the project. Among Anglo American’s highlights for the year is a 7%
increase in production, bolstered by higher diamond demand as well as a strong performance by its
Platinum Group Metals business, Anglo American Platinum.
Under the leadership of CEO Natascha Viljoen, Amplats on Friday announced it has approved a R3.9
billion project to extend the life of its Mototolo platinum mine by 30 years. The project, Viljoen said, is an
example of the high-quality, low-cost expansion options that the business has in its portfolio of assets
that will allow it to continue delivering industry-leading returns to shareholders. Another Anglo
subsidiary in South Africa, Kumba Iron Ore, said its production is expected to be 7% higher than that in
2020, demonstrating its "operational resilience and ability to manage through external challenges" such
as Covid-19-related supply chain disruptions and rising input costs.
Anglo also responded to climate concerns this year by disposing of its South African coal assets while
also committing to operate carbon neutral mines by 2040. Climate change, Cutifani said, is "the defining
challenge of our time", and Anglo has a crucial role to play in supporting the transition to a low carbon
economy by producing many of the metals and minerals that enable decarbonised energy and
transport.
"Anglo American offers an increasingly differentiated investment proposition centred around sustainable
performance and high quality, responsible growth," Cutifani said. "Combined with our integrated
approach to technology in pursuit of the safer and more sustainable supply of materials essential to the
energy transition and growing consumer demand patterns, we are well positioned to meet the
expectations of our full breadth of stakeholders across society."
Extracted from: https://www.news24.com/fin24/companies/anglo-ends-2021-on-a-high-with-a-rosy-
outlook-for-the-future-20211210
Answer ALL questions in this section.
Question 1
1.1 In the context of Anglo American, discuss the components and purposes of financial statements.
(20 Marks)
1.2 Anglo CEO Mark Cutifani said the company has proved "resilient and agile" and is expected to
continue to deliver sector-leading growth into the future and make significant improvements to its
operating cycle. In light of this statement discuss what he means by operating cycle and describe the
measures that can be adopted in improving Anglo American’s operating cycle. (20 Marks)
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SECTION B [60 Marks]
Answer ALL the questions in this section.
Question 2 (20 Marks)
Refer to the information about the vehicles and assume that Autos Unlimited uses the FIFO cost
allocation method and periodic method to record inventory: Prepare ALL the journal entries required to
account for the vehicles for the month of December 2013 in the general ledger of Autos Unlimited.
Include dates, but narrations and closing entries can be ignored.
Autos Unlimited is a vehicle dealership that buys and sells vehicles. It operates from a premise that it
owns in Salt River. The financial year-end is 31 December.
Vehicles
During December 2021 Autos Unlimited had the following transactions relating to its vehicles:
1 December There were 12 vehicles on the showroom floor at a total cost of R900 000.
2 December Purchased 10 vehicles at a total cost of R800 000 on credit.
10 December The salesmen sold 8 vehicles as a fleet to a business, at a sales price of R125 000
per vehicle for cash.
19 December A further 5 vehicles were purchased at a cost of R84 000 each for cash.
28 December Another fleet sales transaction occurred, where a business bought 11 vehicles at a
sales price of R119 000 each on credit.
31 December The owner of Autos Unlimited decided to use 1 of the vehicles on hand as the
sales managers’ vehicle, instead of selling it.
31 December An inventory count revealed that the correct number of vehicles were on hand,
however 1 of the vehicles was damaged, and would require repairs costing
R5 000, before it could be sold for R75 000.
- It is expected that the vehicle for the sales manager will be used evenly for a period of 3 years,
and the residual value is reliably expected to be R35 000.
- Ignore VAT
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Question 3 (20 Marks)
You have just received the following e-mail from Ben, a friend of yours who works at Building
Together Pty (Ltd), a construction company based in Woodstock. You are required to answer
questions asked by Ben in the mail.
Hi Tshego. The construction manager that I report to has asked for feedback on a number of
issues relating to the treatment of PPE for the year ended 31 July 2013. I really need your help
as I am a little uncertain where to start with answering her questions. So here goes......
3.1 On 1 August 2012, Machine A was delivered to the premises of Building Together Pty (Ltd). On
this date the machine was recognised at an amount of R1 800 000. On 31 July 2013, the business paid
the supplier R2 070 000. The payment period was longer than normal credit terms. Please explain why
the business recognised Machine A at a different amount to the amount paid to the supplier on 31 July
2013. (5 marks)
3.2 Building Together Pty (Ltd) ordered Machine B from a supplier in Gauteng on 2 July 2013. The
purchase price of Machine B amounted to R765 000. The contract indicated that the machine would be
sent by truck, FOB shipping point, on 28 July 2013 and would be paid for in full on the date of delivery.
The machine is expected to be delivered to our business premises on 21 August 2013. The bookkeeper
has already recognised the machine and the amount of R765 000 is already sitting in the PPE:
Machinery account. How can this be? It is not physically on the business premises AND it has not been
paid for! Please provide the general journal entry/ies that would be processed on the dates underlined.
If no journal entry is required, please provide a reason for this. (5 Marks)
3.3 The construction manager indicated that delivery costs for Machine B (in question 3.2 above)
will amount to R15 600 and installation costs will amount to R36 000. I need to tell her where to record
these costs and why. Am I correct in saying these costs should be debited to the delivery expenses and
installation expenses accounts in the general ledger? Please indicate whether or not I am correct, in
either case please be clear as to HOW these costs should be treated and why they should be treated in
this way. (5 Marks)
3.4 On 1 October 2011, Building Together Pty (Ltd) purchased an eight-wheeler truck for delivery of
sand and stone. The truck was ready for use on the purchase date. The truck had a purchase price of
R870 000 and a residual value of R160 000 and was expected to be used evenly over 6 years. On 28
February 2013, the business purchased and installed an additional unit to the truck that sweeps excess
stone and sand off the back of the truck. The total cost of the unit (including installation) amounted to
R195 000. It is expected that the new unit will be disposed of on the same date as the truck. The new
unit has a residual value of R35 000. Please calculate the depreciation expense for the year ended 31
July 2014. (5 Marks)
Question 4 (20 Marks)
You have been requested to provide a critical evaluation of the Du Pont Analysis to a team of financial
accounting interns. Highlight the contents of your response.
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