FACULTY COMMERCE, MANAGEMENT AND LAW

DEPARTMENT SCHOOL OF ACCOUNTING

PROGRAMME B. ACC CHARTERED ACCOUNTANCY (12BCHA)

SUBJECT FINANCIAL ACCOUNTING 1B

SUBJECT CODE AFI 3512

DATE 17 OCTOBER 2022 TIME 14:30

TOTAL DURATION 1 HOUR & 30 MIN MARKS 50

READING TIME 15 MIN WRITING TIME 1 HOUR & 15 MIN

Examiner: Mr. K. Mujende (UNAM)

Sick Test

Students will obtain the test paper at the start of the reading time of 0.3 minutes per mark (50 x 0.3
= 15 minutes reading time). Students may NOT start writing in their answer books during the
reading time, but may make notes on the question paper. Thereafter, answer books will be handed
out and students will obtain 1.5 minutes per mark of writing time (50 x 1.5 = 75 minutes writing
time).

INSTRUCTIONS TO STUDENTS:
1. You are reminded that answers may NOT be written in pencil or erasable pen.
2. The marks shown against the requirement(s) for each question should be taken as an
indication of the expected length and the required depth of the answer.
3. Answer the questions using:
• Appropriate arrangement and presentation;
• Clarity of explanation;
• Logical argument; and
• Clear and concise language.
Marks will be awarded for the above.
4. Non-programmable calculators are allowed.
5. No smart watches are allowed.
6. All books must be handed in.
7. Clearly show all calculations.
8. Round all amounts to the nearest rand and all percentages to two decimal places.
9. Assume that all amounts are material except where the contrary is stated.
10. Your answer must adhere to the provisions of IFRS.

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AFI3512 Test 3 2022 | Full-time

Disclaimer: All names of persons, places and business entities mentioned in this examination paper
are fictitious and any resemblance to real persons, living or dead, places and business entities is
purely coincidental.

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AFI3512 Test 3 2022 | Full-time

QUESTION 1 (30 marks, 45 minutes)

You have been provided with the financial statements of Gerlind Limited.

GERLIND LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
2022 2021
R R
ASSETS
Non-current assets 7 295 450 6 000 450
Land and buildings cost 4 200 000 4 000 000
Equipment costk 1 695 450 590 450
Accumulated depreciation: buildings (1 080 000) (1 065 000)
(125 000
Accumulated depreciation: equipment (130 000)
)
Investment properties 2 610 000 2 600 000

Current assets 666 000 640 050

Inventories 430 000 290 050
Trade receivables 210 000 135 000
Cash and cash equivalents 26 000 215 000

TOTAL ASSETS 7 961 450 6 640 500

EQUITY AND LIABILITIES

Capital and Reserves 5 920 450 3 733 950
Ordinary share capital 3 300 000 2 800 000
Preference share capital 1 600 000 -
Retained earnings 1 020 450 933 950

Non-current liabilities
Loans 1 847 500 2 550 000

Current liabilities 193 500 356 550

Trade payables 149 000 225 000
Accrued Expenses 6 000 9 500
Taxation Payable 31 500 109 500
Shareholders for dividends (including withholding
7 000 12 550
Tax)

TOTAL EQUITY AND LIABILITIES 7 961 450 6 640 500

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AFI3512 Test 3 2022 | Full-time

GERLIND LIMITED
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
R R
Sales 1 807 286 1 100 000
Cost of Sales (800 000) (550 000)
Gross Profit 1 007 286 550 000
Other Income 135 000 10 000
Operating expenses (588 000) (207 500)
Profit before taxation 554 286 352 500
Tax Expenses (155 200) (98 700)
Profit for the period 399 086 253 800

GERLIND LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022
Ordinary Preference Retained
Share Capital Share Capital Earnings
Balance at the beginning of the year 2 800 000 - 933 950
Shares issued 500 000 1 600 000 -
Profit for the year - - 399 086
Dividends declared - - (312 586 )
Balance at end of the year 3 300 000 1 600 000 1 020 450

Additional information:
1. 70% of all sales are on credit.
2. Included, amongst others, in Operating expenses for 2022 are the following items:
Inventory write down R75 000
Depreciation R110 000
Credit losses R7 300
Loss on sale of buildings R5 000
Finance charges R88 000
Other income consists of the following:
Rental Income R75 000
Dividends received R60 000
3. Buildings with an original cost price of R500 000, purchased on 1 July 2018, was
disposed of at a loss on 31 December 2022. Further buildings and equipment were
acquired to maintain operations. The plant (building) is depreciated over its useful life
of 25 years to a zero residual value on a straight line basis.
4. No equipment was disposed of during the year.
5. Authorised Share Capital consists of:
 10 000 000 ordinary share of R2 each
 2 500 000 8% non-redeemable preference shares of R10 each
6. A loan that was due on 30 June 2022 was paid and no further loans were raised.

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AFI3512 Test 3 2022 | Full-time

 MARKS
REQUIRED Sub-
Total
total
(a) Prepare the statement of cash flows of Gerlind Limited in compliance
with IAS 7 Statement of cash flows, for the year ended
31 December 2022 using the direct method. Cash received from
customers and cash paid to suppliers and employees must be
calculated separately and may not be calculated as balancing figures.
Comparative figures are not required. 19

Communication skills – presentation and layout 1 20

(b) Prepare the note for the “reconciliation of profit before tax with the
cash generated from operations”, that would be included in the Notes
to the financial statements of Gerlind Limited for the year ended 31
December 2022. Comparative figures are not required. 9

Communication skills – presentation and layout 1 10

TOTAL MARKS 30

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AFI3512 Test 3 2022 | Full-time

QUESTION 2 (20 marks, 30 minutes)

Lisa and her two daughters, Grace and Nicola, have been operating as a partnership for the
past 15 years. They run a successful family business called Ubuntu dolls, which was the first
to produce south african black dolls. Over the past few years, there have been more and
more african dolls makers opening in town giving the Ubuntu dolls more competition. The
sisters feel that they need to expand and make dolls representing various cultures in the
broader Africa rather than mainly focussing South African dolls, as that seems to be the
current trend.
Lisa is getting on in years and spends less time actually working at the business. Lisa
developed schizophrenia a mental illness which made her suffer from persistent delusions,
hallucinations, disorganised thinking, highly disorganised behaviour, and extreme agitation,
on 30 June 2022, Lisa finally decided it was indeed time to retire from the business. At the
time of her retirement, Lisa, Grace and Nicola were sharing profits in the ratio 2:5:3.
The following information has been extracted from the financial records on 30 June 2022,
after the current accounts, drawings and reserves had been closed off to capital.
Dr Cr
R R
Capital: Lisa 231 000
Capital: Grace 620 000
Capital: Nicola 370 000
Equipment: cost price 680 000
Accumulated depreciation: Equipment 424 000
Loan from Nicola 22 000
Loan to Lisa 7 500
Profit for the period 180 000

Additional information:
1. An appraisal of the assets was undertaken and the partners agreed that the market
value of the equipment was R310 000.
2. It was agreed that the loan to Lisa would be transferred to her capital account.
3. Lisa requested a pay-out of R325 000 for her share of the partnership and the two
daughters felt this was fair. She would be paid R40 000 in cash and the remainder as a
loan payable over the next 5 years.
4. Grace and Nicola will continue to share profits in their current profit-sharing ratio.
5. Goodwill will not be disclosed in the books of the new partnership.

MARKS
REQUIRED
Sub-total Total
Prepare the general journal entries to record the retirement of Lisa and
the entries for the decision Nicola and Grace took for the new
partnership after Lisa’s withdrawal. Statement indications are required.
Journal narrations are not required. 19

Communication skills – presentation and layout 1 20

TOTAL MARKS 20

End of Paper
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AFI3512 Test 3 2022 | Full-time