Accounting MEMO 18 MEED June 2016
Metro East Education District
MARKS: 300
MARKING PRINCIPLES:1. / Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied.
2. / Penalties for placement or poor presentation (e.g. details/dates) are applied only if the candidate is earning marks on the figures for that item.
3. / Full marks for a correct answer. If answer is incorrect, mark the workings provided.
4. / If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer).
5. / Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or – sign or bracket is provided, assume that the figure is positive.
6. / Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates.
7. / Where penalties are applied, the marks for that section of the question cannot be a final negative.
8. / Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark.
9. / In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part.
10. / Be aware of candidates who provide valid alternatives beyond the marking guideline.
11. / Codes: f = foreign item; p = placement/presentation.
This memorandum consists of 18 pages.
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Accounting MEMO 18 MEED June 2016
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Accounting MEMO 18 MEED June 2016
QUESTION 11.1.1 / Calculate the correct bank balance on 31 May 2016. Show all workings. /
6
23 976ü - 1300ü* - 1956ü* - 2 890ü* + 1 880ü* = 19 710R (Dr)
*mark with the sign
OR BANK
ü23 976 / ü1 300
ü 1 880 / ü1 956
ü2 890
(Dr balance) = R19 710 þ
1.1.2 / Bank Reconciliation Statement on 31 May 2016
ü = layout / Alternative / Debit / Credit /
10
Balance per Bank statement / ü 10 780 / ü 10 780
Cr Outstanding deposit / ü 12 400 / ü 12 400
Dr Outstanding cheques: / Could use – signs
75 / ü (1 510) / ü 1 510
76 / ü (2 200) / ü 2 200
Incorrect debit order / üü 240 / üü 240
Balance per Bank account (see 1.1.1) / þ (19 710) / þ 19 710
Foreign items -1 (max -2) / 23 420 / 23 420
þ columns added þ
1.1.3 / State the double entries, with amounts, in the general ledger for the transaction with T. Masha.
DR / CR
Debtors Control ü R1 325ü
(NOT T. Masha)
or R1300 and R25 (1 mark) / Bank ü R1 300 ü
Discount allowedü R25ü /
6
Make TWO proposals to the business to eliminate receiving dishonoured cheques from debtors in future. /
4
Any two proposals PP PP Award part-marks for incomplete answers
For 2 marks:
· Check that the cheque was completed accurately/date/signature/words and figures match before accepting it
· Do not accept cheques as a form of payment, only cash/credit cards
· Charge penalties on dishonoured cheques
· Check with the bookkeeper/supervisor whether the debtor is creditworthy/screen debtors
1.1.4 / The bank has no record of the deposit of R12 400 being made and the money cannot be found. Provide TWO measures to be introduced to prevent a loss of this nature in the future. /
4
Any TWO measures üü üü
· Use cash in transit security services
· Ensure that two people do the depositing/go to the bank
· Ask customers to use EFTs to reduce cash in the business
· Change deposit routines/routes
1.2 / CREDITORS’ RECONCILIATION
NO / CREDITORS CONTROL / CREDITORS LIST
Debit / Credit / Debit / Credit /
10
1.2.1 / (490ü + 490ü)
OR 980 (2 marks)
1.2.2 / 150ü / 150ü
1.2.3 / (90ü + 90ü)
OR 180 (2 marks)
1.2.4 / 180ü
1.2.5 / 210ü
1.2.6 / (11760 – 11670)
90ü
1.2.7 / (251 -215)
36ü
No marks for: incorrect column entries
entries in more than one column – no marks.
TOTAL MARKS
40
QUESTION 2
GENERAL LEDGER OF ASTRO LTD
2.1.1 / ASSET DISPOSAL
2015
Dec / 31 / Vehicles / contra+amount ü
110000 / 2015
Dec / 31 / Accumulated depreciation on Vehiclesü / (33 000ü + 16500üü)
þ
49 500 /
9
Profit on sale of asset ü / ü
6 000 / (dr - cr)
Directors fees ü / þ
66 500
116 000 / 116 000
-1 if closed off with a "balance"
(110000 – 77000) (110000 x 20% x 9/12)
33 000 + 16 500
2.1.2 / ACCUMULATED DEPRECIATION ON VEHICLES
2015
Dec / 31 / (see 2.1.1) ü
Asset disposal / þ
49 500 / 2015
Apr / 1 / Balance b/d / ü
100 000 /
11
2016
Mar / 31 / (Cr – Dr)
Balance c/o / þ
145 000
OR 167000 / 2015
Dec / 31 / (see in 2.1.1)
Depreciation ü / þ
16 500
2016
Mar / 31 / Depreciationü / üü
78 000
OR 100 000
194 500
216 500 / þ both totals / 194 500
216 500
2016
Apr / 1 / (correctly b/d)
Balance b/d / þ 145 000
OR 167 000
-1 (Max) for incorrect/no dates
(500000 – 110000)
390000 x 20% = R78000
OR (Alternative interpretation of Information C)
500 000 x 20% x 1 = R100 000
2.2 / FIXED ASSET NOTE ON 31 MARCH 2016
Mark only ONE alternative for Vehicles per column
VEHICLES / Vehicles
(Alternative interpretation) / EQUIPMENT
(operations)
Carrying value – 1 April 2015 / þ400000 / 510 000 / þ 30 000
Cost / ü500000 / 610 000 / (150000 – 50000)
ü 100 000
Accumulated depreciation / (100000) / (100 000) / (70000)
Movements
Additions at cost / ü50000
Disposals at carrying value(see 2.1.1) / (110000-49500)
þ(60500) / (60 500)
V:(see 2.1.2)
Depreciation E: see below / (16500+78000)
þþ(94500) / (116 500) / üþ(4500) /
16
(operations)
Carrying value – 31 March 2016 / þ245000 / 333 000 / þ75500
(V: 500000 – 110000)1
Cost (E: 100000 + 50000) (operations) / þ3900001 / 500 000 / þ150000
Accumulated depreciation / (see 2.1.2)
þ(145000) / (167000) / (70000+ 4500)
þ (74500)
Equipment: Old: (100000 – 70000) x 15% = 4500 (2 marks)
(No depreciation on new equipment – bought end of year)
2.3 / Astro Ltd has no insurance on the vehicles. The CEO believes that the money he saves on insurance premiums can be used to buy more stock and make more profit. Explain why you think that having no insurance on vehicles is not good business practice. Mention TWO points. /
4
Any TWO points üü üü
· They would lose more if a vehicle is a total write off in an accident.
· Vehicle may be hijacked or get stolen – loss of total cost that has to be replaced
· Loss due to damages arising from third parties because of negligence on the part of the driver
· Losses due to an accident may be more than the saving on insurance in one financial year
TOTAL MARKS
40
QUESTION 3
3.1 / Overbay Ltd
Income Statement for the year ended 28 February 2016
Award full marks to figures in final column if correct – ignore workings in this case
Sales (3800640 - 1500ü) If amount subtracted / þ 3799140 / 6
Cost of Sales (2 375400 - 1200üü) [1500 x 100/125] / þ ( 2374200)
Gross Profit Check operation / þ 1424940
Other Income Check operation / þ 34600 / 10
Commission income (26000 +3 000ü) One part correct / þ 29000
Profit on sale of asset / ü 4000
Bad debts recovered (1200 x 0.40) / üü 480
Provision for bad debts adjustmentü (3800ü – 2680ü)
Check operation / þ 1120
Gross Income / 1459540
Operating Expenses Check operation / þ (1159290) / 22
Audit fees / 21 000
Bank charges / 6 210
Packing material (16400ü - 3400ü) / ü 13000
Bad debts / ü 3530
[50% x (350000 / 3,5)]
Directors fees (350000ü – 50000ü) One part correct / þ 300000
(12500 + 1250 + 900)
Salaries and wages (720 000ü + 14 650üü) One part correct / þ 734650
Employers’ contribution (7750ü + 1250ü) One part correct / þ 9000
Rent expense (38500ü + 3500ü) / þ 42000
Trading stock deficit (180000ü– 173600ü+1200 - 1200)
Check operation / þ 6400
Depreciation / ü 23 500
Operating profit Check operation / þ 300250 / 9
47
Interest Income / ü 2 200
Profit before interest expense Check operation / R 302450
Interest Expense (275500 + 80 400ü - 320 900ü) One part correct / R (35 000)
Profit before Tax Check operation / R 267450
Income Tax Ignore bracket / ü (144000)
Net profit after Tax Check operation / R 123 450
Foreign items -1 (Max -2)
3.2.1 / TRADE AND OTHER RECEIVABLES
Trade Debtors (125000 – 1500ü) One part correct / þ 123 500 /
11
Provision for bad debtsü / ü (2680)
Net Trade Debtors Check operation / þ 120820
Accrued/Receivable Income (Commission) / ü 3000
Prepaid expenses (Directors fees) see I/S / þ 50 000
SARS (income tax) (160000ü – 144000ü)
Operation/One part correct / þ 16 000
Check operation / þ 189820
3.2.2 / TRADE AND OTHER PAYABLES
Trade Creditors (23200 – 1200ü) One part correct / þ 22 000 /
11
Accrued Expenses/Payables (Rent Exp) (see IS) / þ 3 500
Creditors for Salaries ü / ü 12 500
SARS (PAYE) (8000 + 900ü) One part correct / þ 8 900
Pension fund (9500 + 1250ü + 1250ü) One part correct / þ 12 000
Check operation / þ 58 900
3.3.1 / Calculate the profit margin of the business, BEFORE any adjustments. /
4
Gross profit (3800640 – 2375 400) = R1425240 ü
% Profit margin = 1425240 þ x 100
2375 400 ü
= 60% þ One part correct
3.3.2 / Give ONE possible reason why the 25% profit margin made on the goods returned by M. Mgoki, differs from your answer in 3.3.1 above. /
2
Any ONE reason üü
· Poor quality goods were sold at a reduced price
· Shop soiled goods sold cheaper than normal price
· Old stock were sold at a lower price/sale/special promotion
· Trade discount given to customer (Mgoki)
TOTAL MARKS
75
QUESTION 4
4.1.1 / Calculate the Net profit before tax for the year ended 30 June 2015 /
3
604800ü x (100/72) ü
= R 840000 R operation; one part correct
4.1.2 / Calculate the Income tax for the year ended 30 June 2015 /
3
(See above)
840000 þ x 28%ü
= R235200 þ
one part correct / OR
840 000 – 604 800
= R235 200
/ OR
604 800 x 28/72
= R235 200
4.2.1 / APPROPRIATION
2015
Jun / 30 / see 4.1.2
Income tax ü / þ
235 200 / 2015
Jun / 30 / see 4.1.1
Profit and Loss ü / þ
840 000 /
11
Dividends on # ord. shares ü / üüüþ
393 800
Retained (cr - dr) Income ü / þ
211 000
840 000 / 840 000
Closed off with a "balance" : -1
# Dividends:
Interim: 300000 x 0,44 = 132 000 (1 mark)
(300000 +120000 - 46000)
Final: 374 000 x 0,70 = 261 800 (2 marks)
Tot = 393800 (1 mark) operation; one part correct
4.2.2 / RETAINED INCOME
2015
May / 31 / (2,35ü x 46 000ü)
Bank ü / operation þ
108 100 / 2014
Jul / 1 / Balance b/d / 670 000 /
8
2015
Jun / 30 / (cr – dr)
Balance c/d / þ
772 900 / 2015
Jun / 30 / (see above)
Appropriation ü / þ
211 000
881 000 / 881 000
2015
Jul / 1 / (correctly b/d)
Balance b/d / þ
772 900
-1 (Max) for incorrect/no dates
Ave share price: 1701000 /420 000 = R4,05 (1 mark)
Diff from retained income: R6,40 – R4,05 = R2,35 (1 mark)
46000 x 2,35 = 108100 (1 mark, operation)
4.3 / ORDINARY SHARE CAPITAL
AUTHORISED
500000 ordinary shares ü
ISSUED
300000 / ordinary shares in issue on 1 July 2014 / ü 1185000 /
8
120000 / ordinary shares issued on 1 Jan 2015 @ R4.30 / ü 516000
(46000) ü / shares bought back on 31 May 2015 @ R4,05 þ
see 4.2 / þ (186300)
374000 ü / ordinary shares in issue on 30 June 2015
(374000 x R4,05) operation / þ 1514 700
4.4 / MOYA LTD
BALANCE SHEET AS AT 30 JUNE 2015
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS’ EQUITY operation / þ 2287600
Ordinary Share Capital see 4.3 / þ 1514700
Retained Income ü see 4.2.2 / þ 772900 / 4
NON-CURRENT LIABILITIES / 716400
Mortgage Loan: RC Bank ü operation; one part correct
(800 000ü + 102 000ü - 135 600ü - 50 000ü) Check that Loan is reduced / þ 716400 / 6
CURRENT LIABILITIES operation / þ 504800 / 10
Bank overdraft ü / ü 12000
Trade and other payablesü (158 000ü + 23000**ü + 261800* þ)
*may be shown separately as ‘Shareholders for Dividends’ One aspect correct / þ 442800 /
20
Current portion of loan (may be included in payables)