Exam (elaborations)
FAC2601 EXAM PACK
- Institution
- University Of South Africa (Unisa)
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,Fac2601 OCTOBER 2017This paper consists of 9 pages
N.B.:
1. This paper consists of THREE (3) questions.
2. All questions must be answered.
3. Basic workings, where applicable, must be shown.
4. Ensure that you are handed the correct examination answer book (blue colour for
accounting) by the invigilator.
5. Each question attempted must be commenced on a new (separate) page.
6. PROPOSED TIMETABLE:
Question Time in
No Subject Marks minutes
1 Statement of comprehensive income 32 38
2 Statement of changes in equity 28 34
3 Statement of financial position 40 48
100 120
, FAC2601
QUESTION 1 (32 marks) (38 minutes)
The following information amongst others was obtained from the books of
Games Manufacturers Limited for the financial year ended 30 September 2017:
Note R
Income consists of:
Sale of toy trains on credit (including 14% VAT) ....................................... 1 798 000
Sale of toy trains for cash (including 14% VAT) ........................................ 1 1 140 000
Services rendered to clients (including 14% VAT) .................................... 1 456 000
Rental income from machinery (including 14% VAT) ................................ 399 000
Interest received – Bank account.............................................................. 8 360
– Loan to Chris Limited .................................................. 2 11 540
Expenses consist of:
Cost of sales ............................................................................................. 3 ?
Administrative expenses ........................................................................... 4 300
Audit fees .................................................................................................. 4 13 400
Salaries and wages .................................................................................. 5 596 000
Depreciation on machinery ....................................................................... 6 36 500
Distribution cost ........................................................................................ 17 530
Interest paid .............................................................................................. 8 ?
Income tax expense .................................................................................. 72 742
Additional information:
1. Income:
1.1 The inexperienced accountant neglected to reverse the VAT on sales.
1.2 The main business activity of Games Manufacturers Limited is the sale and
servicing of toy trains.
1.3 Merch Games, a debtor, that owed R34 200 to Games Manufacturers Limited, was
entitled to a 10% settlement discount if she pays her account before
15 October 2017. Merch Games paid the outstanding amount on
29 September 2017 and the discount must still be accounted for.
1.4 On 15 October 2017 a contract worth R1 million was awarded to
Games Manufacturers Limited for the manufacturing of a range of toy trains.
2. The issued share capital of Chris Limited is R50 000 and consists of shares with a
par value of R2,50 each. Games Manufacturers Limited owns 13 000 shares in
Chris Limited that was bought for R48 750. The directors are of the opinion that the
fair value of these shares was R48 750 at year end.
3. The gross profit of the company is 25% of turnover.
, QUESTION 1 (continue)
4. Auditors‟ remuneration consist of the following:
R
- Auditors‟ remuneration .............................................................................................................. 2 000
- Fees for advice given to management ............................................................................... 7 820
- Travelling costs of auditor ........................................................................................................ 3 580
13 400
5. The following is included under salaries and wages:
R
Salaries – Mr Nel – Managing director ............................................................................. 140 000
– Mr Smit and mr Els – Two non-executive directors ........................... . 230 000
– Salaries and wages of workers ................................................................... . 125 000
– Mr Ben – Marketing manager ...................................................................... . ...60 000
Pension fund – 7,5% of salaries of directors .............................................................. . ...27 750
Directors fees for attending directors meetings
(non-executive directors) ...................................................................................................... . ..... 4 000
Entertainment allowance for managing director ........................................................ . ..... 6 000
Travelling cost – Mr Nel ........................................................................................................ . ..... 3 250
596 000
Mr Ben is also the managing director of Games Manufacturers Limited‟s subsidiary
from which he received a salary of R180 000.
6. Additional machinery was bought on 1 March 2017 for R75 000 and depreciation on
the machinery must still be accounted for. Machinery is depreciated at 20% per
annum according to the straight-line method. No other purchases or sales of
machinery occurred during the year.
7. Expenses that is not classified as administrative – or distribution costs, must be
seen as other operating expenses.
8. A long-term loan to the amount of R90 000 was acquired on 1 January 2015. The
capital portion of the loan is repayable in five equal annual instalments starting 1
September 2015. Interest is calculated at 15% per annum and is payable annually
on 1 October. Interest must still be provided for.
9. Games Manufacturers Limited owns 120 000 of the 2 500 000 issued shares in
Train Limited, purchased for R302 000. The shares of Train Limited are traded on
the Johannesburg Security Exchange and the market value on 30 September 2016
was R2,60 per share. The market value on 30 September 2017 was R3,00 per
share. No adjustments have yet been made on the increase in market value. These
shares are designated as available-for-sale.
10. Games Manufacturers Limited owns 100 000 of the 2 400 000 issued shares of Jet
Limited, purchased for R250 000. The shares of Jet Limited are traded on the
Johannesburg Security Exchange and the market value on 30 September 2016 was
R2,50 per share. The market value on 30 September 2017 was R3 per share and
no adjustment have yet been made on the increase in market value. These shares
were purchased for speculative purposes.
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