nAmIB I A U n IVERS I TY OF SCIEnCE AnD TECHnOLOGY

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION: BACHELOR OF ACCOUNTING

QUALIFICATION CODE: 07BOAC LEVEL: 5

COURSE: FINANCIAL ACCOUNTING 102 COURSE CODE: FAC512S

DATE: JANUARY 2017 SESSION: Theory

DURATION: 3 Hours

l 5t EXAMINER:

2"d EXAMINER(S}:

MODERATOR:

MARKS: 100

SUPPLEMENTARY EXAMINATION

Mr. G. Jansen

Mr. P. Maliti, Mr. A. Ketjinganda and Mrs. M. Dikuua

Mr. E. Mushonga

THIS QUESTION PAPER CONSISTS OF 6 PAGES

(Excluding this front page}

INSTRUCTIONS

1. This question paper is made up of four (4} questions.

2. Answer ALL the questions and in blue or black ink.

3. Start each question on a new page in your answer booklet & show all your workings

4. Questions relating to this question paper may be raised in the initial 30

minutes after the start of the paper. Thereafter, candidates must use their

initiative to deal with any perceived error or ambiguities & any assumption

made by the candidate should be clearly stated.

QUESTION 1 (25 MARKS)

Konkar Ltd was incorporated under the Companies Act of 2004 in January 2013. The company sells

televisions and all its suppliers are registered VAT vendors. VAT is calculated at 15%.

On 31 December 2016, the current reporting date, the following balances, amongst others, appeared in

the accounting records of Konkar Ltd:

Notes Dr Cr N$ N$

Ordinary share capital {6 500 000 shares) 1 135 000 000 4% Preference share ca~(2 000 000 shares} 1 30 000 000 Retained earnings- 1 Janua~ 2016 10 500 000 Sales 20 378 900 Cost of sales 13 246 285 Share issue costs - ordinary shares 1 1 855 350 Depreciation 7 2 877 225

··------·-· Rent paid 842 369 ..

Doubtful debts 4 758 905 -------Write down of invento~ to net realisable value 78 500 Dividend income 5 1 257 500 Management fees 5 375 000 Proceeds from insurance claim on stolen vehicle 288 500

-Income tax expense 1 395 020

The 2016 financial statements of Konkar Ltd will probably be approved by the directors for distribution on 10 February 2017.

Additional information:

1. Auhtorised shares: According to the memorandum of incorporation, Konkar Ltd has an authorised share capital of 10 000 000 ordinary shares and 3 500 000 4% preference shares.

Issued shares:

At 1 January 2016 the issued shares amounted to 5 500 000 ordinary shares and 2 000 000

preference shares. On 31 August 2016 an additional 1 000 000 ordinary shares were issued for

N$25 per share. The cash for the shares was received on the same day.

2. After complying with all the requirements of the Companies Act of 2004, directors declared an ordinary dividend of 7c per share on 31 December 2016.

3. Although depreciation has been correctly accounted for, an impairment test of the property, plant and equipment revealed that an item of plant with a carrying value of N$1 0 450 000 has a recoverable amount of N$9 950 000. This information has not yet been accounted for.

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4. A review of the accounts receivables indicates that accounts receivable of N$178 500 pertaining to Abdullah Ltd will not be recovered as the company is not traceable. The financial director has authorized the write off of this receivable. Furthermore a detailed review of the remaining accounts receivables indicates that the allowance for doubtful debts should be increased by N$95 800. Neither of these has been accounted for.

5. Konkar Ltd received dividends and management fees from its subsidiary.

6. Konkar Ltd incurred interest costs of N$447 000 on their loan from Standard Bank Ltd and N$30 205 interest on an overdraft facility. The interest has not yet been accounted for.

7. Depreciation is for the following classes of assets.

N$ ---

Plant 1 436 613 Vehicles 71 930 Machinery 719 306 Buildings 649 376

2 877 225

REQUIRED:

a.) Present the statement of profit or loss of Konkar Ltd for the period ended 31 December 2016 in accordance with International Financial Reporting Standards (!FRS) . (20)

b.) List the considerations according to the Companies Act of 2004 for the directors to declare the dividend in point 2. (5)

Note:

-Amounts must be presented next to the correct line item and under the correct heading. -Show the calculations of all the line items. -Where applicable, round off amounts to the nearest Dollar. -The accounting policy notes are not required.

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QUESTION 2

PART A

(25 MARKS)

The bank statement of Karnic Distributors CC for the month of October 2016 is as follows

01 Oct,16 Balance 8 T. Macleod

16 Cheque 20 W.Milne 21 Cheque 31 G. Frank- EFT 31 TYF - Standing Order 31 Service fees

01 Nov 16 Cash deposit

Cash book details for October 2016 were as follows Dr Oct 16 P.Pan 292

20 C. Hook 265 31 S. O'Hare 192 31 Balance c/d 4195

5 048

REQUIRED:

Oct

DR CR BALANCE 4 200 0/D

184 4 384 0/D 292 4 092 0/D

160 4 252 0/D 369 3 883 0/D

88 3 795 0/D 32 3 827 0/D 19 3 846 0/D

1 000 2 846 0/D

Cr 01 Balance b/d 4 200

6 Macleod 184 30 W.Milne 160 30 S. Porter 504

5 048

a) Prepare an updated cash book for the month of October 2016. (5) b) Prepare a bank reconciliation as at 31 October 2016 starting with the balance as per bank

statement. (5)

PARTB

The following information was obtained from the records of Natasha Wholesalers, for the month ended 31 July 2016.

Date Details N$

1 Jul2016 Debit balances in the receivables ledger 37 475

Credit balance in the payables ledger 15 856

31 Jul2016 Total purchases according to the payables journal 46451

Total sales according to the receivables journal 85 291

Cash sales 39 883

Cash payments to payables 25 671

Cash received from receivables 64 791

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Credit losses written off 1s8o

Returns (in) (was on credit) 2 688

Returns (out) (was on credit) 2 000

Settlement discount taken (it was originally probable that the discount 1 785

would be taken)

Allowance for settlement discount 2 000

Cheques received from a receivable returned by the bank 484 -· ----

Cash received from a receivable whose account was previously written off 194

Interest raised on receivables 54

REQUIRED:

Compile the receivables and payables control account in the general ledger of Natasha Wholesalers for the month ended 31 July 2016. (15)

QUESTION 3 (28 MARKS)

The trial balance of Victoria Limited, a company involved in the manufacturing sector, had

a balance in a suspense account of N$6,571 at its year-end of 31 December 2016.

The main shareholder and bookkeeper, Mrs. Victoria, has identified the following issues:

1. The balance of N$860 on the telephone expense account has been omitted from the trial

balance.

2. The total of the purchases day book has been carried forward as N$5, 126 whereas the correct

amount was N$5,621 . The correct amount has been posted to the relevant trade payable.

3. Capital introduced by Mrs. Victoria of N$3,500 had been entered correctly to the bank but had been

debited to Sales.

4. Additions to Property, Plant & Equipment purchased and paid for by cheque on the 1 September

2016 had been expensed to the repairs and maintenance account amounting to N$12,000

(excluding VAT). Victoria Limited's depreciation policy is to depreciate on a proportionate basis

from the date of acquisition and at the rate of 5% per annum.

5. A VAT credit of N$1 ,200 on motor expenses had been incorrectly claimed.

6. An unaccounted statement for municipal ity rates amounting to N$61 0 had been discovered in the

waste basket.

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7. Discount received of N$463 in December 2016 had been for as a discount allowed.

8. A rent expense of N$2,450 paid during the year was recorded by debiting the rates account.

Victoria Limited is showing a profit of N$41 ,825 before accounting for the above issues.

REQUIRED:

a.) Prepare general journal entries for Victoria Limited to record and correct relevant transactions

from the above information for the financial statements for the year-ending 31 December

2016. (22)

b.) Calculate the revised profit or loss for Victoria Ltd for the year-ending 31 December 2016. (6)

QUESTION 4 (22 MARKS)

The abridged statement of financial position of Korixas CC is as follows on 31 December 2016.

Korixas CC Statement of financial position as at 31 December 2016 --

j N$ ASSETS I Non-current assets i 120,000 Current assets I 140,000 Total assets I 260,000 I

i EQUITY AND LIABILITIES I Member's interest I

I

Member's contribution I 100,000 Retained earnings l 60,000 Total members' interest I 160,000

I I

Non-current liabilities I I

Long- term borrowings I 40,000 Current liabilities i 60,000 Total liabilities I 100,000

- i

i Total equity and liabilities i 260,000 !

Additional information:

The percentage interest of the members is: Freyer 60%

Gariseb 30%

Hendricks 1 0%

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REQUIRED:

Prepare the statement of financial position of Korixas CC as at 31 December 2016, if: a.) Hendricks obtains one quarter of Freyer's interest for N$8,000 cash.

The money is deposited in the close corporations bank account and is considered to be a loan to the credit of Freyer; OR

b.) Hendricks resigns and sells his interest to the close corporation for N$1 02,000.

NOTES • You may assume that the Close corporation would pass the necessary tests before and

after the transaction in part b) above. • Part (a) and (b) should be treated as unrelated transactions. (22)

END OF EXAMINATION PAPER

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