Accounting English Paper 2 2015 Questions and Answers Part 2

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Question 2:

Inventory Valuation and Internal Control (35 marks; 20 minutes)

Jankjies Electronics sells LCD flat-screen television sets. The business is owned by Jane Jankjies. As she has other businesses to run, she cannot be at the shop very often. She employs Marlan Miller to run the shop for her. The business uses the periodic inventory system and the first-in-first-out (FIFO) method to value the stock. The financial year-end is 28 February 2015.

Required

Calculate the value of the closing stock of 145 television sets on 28 February 2015 using the FIFO method.

Calculate the following:

  • Cost of sales

  • Average mark-up % achieved for the year

Refer to Information D.

  • Provide a calculation to prove whether the information given by the cleaner is true or not.

  • Jane is concerned that the final stock of 145 television sets is not appropriate for her business. Provide a calculation or figures to support her opinion and explain.

  • Jane has adjusted the selling prices during the year to attract new customers. Comment on whether or not this strategy has benefitted the business. Provide figures to support your answer.

  • Provide two points to assist Jane in improving internal control in her business.

Information

Stock Balances

Stock Balances

Number of Units

Unit Price (including carriage)

Total

1 March 2014 (inclusive of transport costs)

70

5 500

385 000

28 February 2015

145

?

?

Purchases of Television Sets During the Financial Year Ended 28 February 2015

Purchases of Television Sets During the Financial Year Ended 28 February 2015

Number of Units

Unit Price

Carriage

Total

May 2014

150

R5 000

R18 750

R768 750

August 2014

120

R4 750

R15 000

R585 000

December 2014

90

R4 450

R11 250

R411 750

Total

360

R45 000

R1 765 500

Returns to Suppliers

  • Three television sets from the August 2014 purchases were damaged.

  • The television sets were returned to the suppliers. The suppliers also reversed the carriage on these items.

Possible Theft of Television Sets

Jane has been informed by a cleaner that he suspects Marlan of giving away television sets to his family members and friends.

Sales for the Year Were as Follows

Sales for the year were as follows

Selling price

Quantity

Total

March to July 2014

R9 100

80 units

R728

000

August to November 2014

R9 800

30 units

R294

000

December 2014

R7 500

150 units

R1 125

000

January to February 2015

R9 800

16 units

R156

800

276 units

R2 303

800

Question 3

Financial Statements: Balance Sheet and Notes, Audit (75 marks; 45 minutes)

Choose a description from Column B that matches a term/concept in Column A. Write only the letter (A–E) next to the question number (3.1.1–3.1.5) in the Answer Book.

Financial Statements: Balance Sheet and Notes, Audit

Column A

Column B

A. Companies and Intellectual Property Commission

1. A guidelines for the preparation of financial statements to ensure consistency

B. Director

2. responsible for maintaining records and control of new and existing companies

C. IFRS

3. The business is responsible for its own debts and the liability of owners is

limited to the amounts they invested

D. Limited liability

4. Responsible for expressing an opinion on the financial statements of a company

E. Independent auditor

5. E an elected member of the board responsible for running the business and implementing policy

Bargain Traders Ltd is a public company listed on the JSE. The business has an authorised share capital of 1 000 000 ordinary shares.

Required

Prepare the following notes to the Balance Sheet:

1. Ordinary share capital

2. Retained income

3. Trade and other receivables

  • Complete the Balance Sheet on 30 June 2014. Where notes are not required, show ALL workings in brackets to earn part marks.

  • Calculate the net asset value (NAV) per share on 30 June 2014.

  • Comment on the price offered for the shares that were repurchased. Quote relevant financial indicators (actual figures/ratios/ percentages) to support your comment.

  • The CEO (chief executive officer), Kyle Mason, has convinced the company to repurchase a further 90 000 shares during the next financial year on 31 August 2014. Kyle Mason currently owns 315 000 shares which represents 45% of the issued shares.

  • Calculate Kyle Mason’s percentage shareholding after the proposed share buy-back on 31 August 2014.

  • As a shareholder, explain your concern regarding the proposed repurchase of shares. Provide two questions you would ask the directors at the annual general meeting.