Exam (elaborations)
Exam (elaborations) Financial Accounting
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6.1 Objective Test APART A
On 1 March 2016 Tourism Traders, a business that purchases and sells statues,
purchased 40 zebra statues on credit at R125 each from Southern Curio Suppliers in
Zimbabwe. They paid import duties of R200 and transport costs of R1 200. The
goods arrived at Tourism Traders store on 15 March 2016 and the owner, Vumile,
asked Jack, an employee hired specifically to unload and pack the statues on the
shelves. Jack is normally paid on a casual basis and was paid R2 per statue.
You are required to:
1. Calculate the total cost of one zebra to Tourism Traders. (3 marks)
PART B
During the month on May 2016, the following occurred in Leyland Ltd:
a. Inventory counted at a physical stock count (conducted at the premises) on 31
May 2016 amounted to R15 000 000.
b. Included in this is inventory costing R220 000 which is damaged and can be sold
for R210 000 if R30 000 is spent on repairs.
c. Inventory costing R500 000 was sent to Pott Ltd on consignment on 1 May 2016.
At 31 May 2016 R180 000 of this inventory remains unsold. Leyland Ltd allows a
commission of 15 % on the selling price of the goods. Pott Ltd sold the inventory
on credit for R640 000.
You are required to:
1. Refer to points (a-c) above:
Calculate the closing inventory balance for Leyland Ltd at 31 May 2016 (4 marks)
2. Prepare the journal entry that would have been recorded by Pott Ltd when the
consignment inventory was sold (see 2.1 point c above). Ignore general journal
narrations and dates.
(3 marks)
6.2 Objective Test B
Foods Delight is a South African based company that imports blenders from Italy in a range
of bright colours. The business uses the perpetual inventory recording method and allocates
the cost of inventory by applying the FIFO method. The business has a year end of 31
December
Transaction A
Foods Delight purchased 20 blenders from a supplier in Italy. Each blender cost R85 and
Foods Delight had to pay import and custom duties amounting to 7% of the cost price per
blender. Foods Delight hired workers, at a total cost of R400, to offload the blenders at the
harbour to prevent them being damaged. These costs were paid in cash. The business
spent a further R500 on an advertisement as they believed this was necessary to help sell
the blenders.
Transaction B
Foods Delight realised that all the blenders (see transaction A above) had been damaged by
rust. It is impossible to prove that the rust was due to a fault by the supplier so Foods Delight
,cannot return the blenders to their supplier. Foods Delight estimates that after spending R10
per blender on a rust spray they should be able to sell the blenders to a cooking school in
Cape Town for R90 each.
You are required to:
1. Calculate the cost per blender purchased from the supplier in Italy. See transaction A
above. (2 marks)
2. Prepare the general journal entry(ies) in the books of Foods Delight required to record
the information provided in transaction B above. (4 marks)
6.3 Objective Test C
Baby World sells moulded plastic baby chairs. The business uses the periodic inventory
recording system and the FIFO cost allocation method. During the year ended April 2016,
the business had the following transactions:
Date Quantity Cost price per unit
1 May 2016 Opening balance 50 R210
7 June 2016 Purchased 200 R240
15 July 2016 Sold for R600 each 220 ?
21 March 2016 Purchased 100 R250
30 April 2016 Closing balance 126 ?
You are required to:
1. Show how the closing inventory balance as at 30 April 2016 can correctly be calculated
as R31 240. (2 marks)
2. Prepare the adjusting journal entries required in the general journal of Baby World on 30
April 2016 in respect of inventory. Closing entries are NOT required. Ignore dates BUT
show narrations. (7 marks)
3. Explain why some businesses need a cost allocation method (1 mark)
6.4 Objective Test D
(10 marks: 12 minutes)
You Are Required To:
Show how the following events will be reflected on the statement of financial position at 31
March 2015:
Received an amount of R5 000 on 1 February 2015 from a client for consulting services to
be delivered in terms of a contract agreed with the client from the period 1 January to 30
April 2015
Purchased R30 000 worth of cleaning equipment on 15 November 2014. Cleaning
equipment worth R12 000 was still unused at 31 March 2015.
Received March electricity account of R800 on 10 April 2015.
Monthly rental for the use of the premises amounts to R1 200. The amount in the
rent account in the general ledger at 31 March was R15 600.
Example: Stationery on hand at 31 March 2015 amounted to R1 000
, Answer: Current Assets
Stationery R1 000
6.5 Objective Test E
The following transactions occurred during May 2017:
1. Inventory on hand had been R8 000 at the start of the month.
2. Inventory with a cost of R2 000 was sold on credit.
3. Purchased inventory to the value of R3 000 on credit.
4. Sold inventory for cash with a cost of R5 000.
5. When doing a physical stock count found that inventory to the value of R350 could
not be accounted for.
Required
Calculate the value of closing inventory as at 31 May 2017.
6.6 Objective Test F
On 1 June 2015, John opened a bookshop in Cavendish Square. During the month of June,
the following transactions, amongst others, took place:
1. On 1 June, John borrowed R150 000 from the bank at 10% interest per annum.
2. On 1 June, the business purchased inventory on credit for R70 000 from a local
wholesaler.
3. On 5 June, the business sold inventory to a tourist for cash R6 500 (inventory cost
R1 500).
4. On 8 June, the business purchased R1 500 stationery on credit from theWaltons
stationery shop.
5. On 28 June, the tourist returned goods to the sales value of R1 625 (inventory cost
R375) for cash.
6. On 30 June, the business had unused stationery of R1 000 on hand.
7. On 30 June, the business had paid interest of R1 000. (See point 1 above)
You are required to:
(12 marks)
1. Prepare the general journal entries that would have been processed in the books of the
business to record all the above transactions. Narrations are not required.
2. Prepare the closing journal entries that would have been processed in the books of the
business assuming that a trading and profit and loss account was prepared for the month
ended 30 June 2015.
3. Prepare the inventory asset account as it would appear in the general ledger of the
business for the month ended 30 June 2015. Balance the account if necessary.
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