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Financial Accounting An Introduction to Concepts Methods and Uses 14Th Ed by Roman L Weil Katherine - Test Bank
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EXAM Questions and answers for FAC1502 – Financial Accounting Principles, Concepts and Procedures
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FACULTY OF COMMERCE, ADMINISTRATION AND LAWDEPARTMENT OF ACCOUNTING AND AUDITING
FINANCIAL REPORTING 1A
PPE – TUTORIAL PACK
1
,Chapter 11
11.1 Objective test A (Level A)
Question A
Assume a Vat rate of 15% and that all parties are VAT vendors
Moving Forward Fast (Pty) Ltd has a year-end of 31 July 2021. The company purchased an item
of machinery on 30 June 2021 for R862 500 (VAT inclusive) on credit from a local supplier.
You are required to:
1. Prepare the general journal entry that would have been processed by Moving Forward Fast
(Pty) Ltd to process the purchase of the machinery on 30 June 2021.
2. Show how machinery would appear in the statement of financial position of Moving Fast
(Pty) Ltd on 31 July 2021 assuming that the supplier of the machinery is registered as a
VAT vendor and Moving Fast (Pty) Ltd is NOT registered as a VAT vendor.
3. Explain WHY you have chosen to report the machinery at the amount that you have in your
answer to (2) above.
Question B
Ignore VAT
Moving Forward Fast (Pty) Ltd purchased a vehicle on 1 March 2021 for R632 000. The vehicle
was ready for use on this date. The vehicle had a residual value of 15% of the cost and is
depreciated evenly over 5 years.
You are required to:
Prepare the adjusting general journal entry that would be processed by Moving Forward Fast (Pty)
Ltd at 31 July 2021 in respect of the information provided.
2
, 11.1 Objective test A solution (Level A)
Question A
1.
30/6/2021 Dr PPE: Machinery (A) (1) 750 000 (½)
(R862 500 x 100/115)
Dr SARS (VAT) (A) (1) 112 500 (½)
(R862 500 x 15/115)
Cr Trade payables (L) (½) 862 500
2.
Statement of financial position of Moving Forward Fast (Pty) Ltd as at 31 July 2021 (½)
Assets (½)
Non- current assets
PPE: Machinery (½) 862 500 (1)
3.
Machinery would be reported on at R862 500, the VAT inclusive amount (½). Moving Forward
Fast (Pty) Ltd is not a registered VAT vendor and therefore VAT paid could not be claimed back
from SARS (½) and would form part of the cost (½) of the machinery.
Question B
31/7/2021 Dr Depreciation expense (P/L) (1) 44 767
Cr Accumulated depreciation: PPE: 44 767
Vehicle (-A) (1)
R632 000 x 85/100 (½)= 537 200/5 (½)
x 5/12 (½)
11.2 Objective test B (Level A)
Ignore VAT
Pools for Pleasure (Pty) Ltd has a year-end of 30 September. On 1 June 2019, the business
purchased a digging machine for R2 300 000. It was reliably estimated that the machine had a
residual value of R540 000 and is expected to be used evenly over a period of 5 years. The
digging machine was ready for use on 30 June 2019 after safety and licensing costs totalling
R18 600 had been incurred.
On 1 March 2021, Pools for Pleasure (Pty) Ltd sold the digging machine for R1 700 000 cash.
3
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