FAC1601 Assignment 2 (COMPLETE ANSWERS) Semester 2 2023 - DUE 11 September 2023.

FAC1601 Assignment 2 (COMPLETE ANSWERS) Semester 2 2023 - DUE 11 September 2023.Detailed working, solutions, memo, notes & explanations............. Greg and Sheniz are in a partnership trading as Sugar Rush, a new, up-and-coming pastry shop. They share profits and losses in the ratio of 5:3 respectively. The following information was obtained for the financial year ending 31 August 2023: The partnership agreement stipulates the following: 1. Interest on capital must be calculated at 7% per annum on the opening balances of the Capital Accounts. 2. The partnership must create separate drawings and current accounts for each partnership. 3. Interest on current accounts must be calculated at 17.5% per annum on the opening balances of the current accounts. 4. At the end of the financial year, the Drawings accounts must be closed off against the applicable current accounts. Additional Information The following information has not yet been accounted for: 1. A settlement discount of 3% on total Purchases for the year was received. Inventory on hand at 31 August 2023 amounted to R16 000. 2. The mortgage was obtained from The Baking Bank on 01 November 2022 and bears interest at a rate of 15% per annum. Interest for the current year must still be provided for. 3. The closing balance of the allowance for credit losses account must be increased with R3 800. 4. Depreciation is accounted for as follows: a. Vehicles: Straight line method, no residual value. The expected lifespan of each vehicle is estimated to be 15 years. A new Ford bakkie was purchased on the 30 November 2022 for R680 000. There were no disposals during the year. b. Office furniture: 15% per annum on the diminishing balance method, no residual value. Office Furniture with a cost of R65 000 was sold on the 31 December 2022 for R50 000, the furniture was acquired on the 1 October 2021 5. Drawings: 9/9/23, 1:46 PM Assessment 2 (page 1 of 5) Question 2 Answer saved Marked out of 1.00 Question 3 Answer saved Marked out of 1.00 a. Greg - Inventory R5 000 b. Sheniz - Inventory R360 6. The monthly salary expense for existing staff amounts to R48 000 per month. Sugar Rush brought in two new employees on January 1, 2023, both receiving a monthly wage of R18 000 each. 7. A new insurance contract was entered into by Sugar Rush on 1 March 2023. The monthly insurance premiums are R750 with a total annual payment being made on 1 of March every year. The current years premium was not recorded in the books of Sugar Rush. QUESTION 1 Which one of the following alternatives represents the correct Revenue amount recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R653 334 B. R659 200 C. R660 934 D. R482 500 E. R432 220 Clear my choice st Which one of the following alternatives represents the correct Purchases amount of Sugar Rush for the year ended 31 August 2023? A. R501 840 B. R517 440 C. R508 040 D. R502 836 E. R505 050 Clear my choice Which one of the following alternatives represents the correct Allowance for Credit Losses balance amount to be recorded in the financial statements of Sugar Rush for the year ended 31 August 2023? A. R4 850 B. R8 650 C. R3 650 D. R3 800 E. R4 250 Clear my choice 9/9/23, 1:46 PM Assessment 2 (page 1 of 5) Question 4 Answer saved Marked out of 1.00 Question 5 Answer saved Marked out of 1.00 Question 6 Answer saved Marked out of 1.00 Assuming a Purchases amount of R360 000, which of the following alternatives represent the correct Cost of Sales amount recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R470 520 B. R330 840 C. R485 000 D. R404 640 E. R309 850 Clear my choice Which of the following alternatives represent the correct interest on the mortgage amount to be recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R42 000 B. R38 500 C. R35 000 D. R37 450 E. R36 000 Clear my choice Which of the following alternatives represent the correct profit/loss on sale of office furniture to be recorded in statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R3 259 (loss) B. R3 800 (profit) C. R3 259 (profit) D. R3 800 (loss) E. R3 570 (loss) Clear my choice 9/9/23, 1:46 PM Assessment 2 (page 1 of 5) Question 7 Answer saved Marked out of 1.00 Question 8 Answer saved Marked out of 1.00 Question 9 Answer saved Marked out of 1.00 Which one of the following alternatives represents the correct Depreciation of Vehicles amount recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R78 000 B. R68 000 C. R55 000 D. R76 000 E. R42 000 Clear my choice Which one of the following alternatives represents the correct Carrying Value of Vehicles amount recorded in the statement of financial position of Sugar Rush for the year ended 31 August 2023? A. R1 425 000 B. R1 525 000 C. R630 000 D. R1 310 000 E. R1 150 000 Clear my choice Which one of the following alternatives represents the correct Interest on Capital and Current Accounts of Greg for the year ended 31 August 2023? A. Capital: R33 250; Current: R10 590 B. Capital: R33 600; Current: R11 900 C. Capital: R33 500; Current: R11 250 D. Capital: R32 800; Current: R10 580 E. Capital: R38 750; Current: R10 650 Clear my choice 9/9/23, 1:46 PM Assessment 2 (page 1 of 5) Question 10 Answer saved Marked out of 1.00 Question 11 Answer saved Marked out of 1.00 Question 12 Answer saved Marked out of 1.00 Which one of the following alternatives represents the correct Interest on Capital and Current Accounts of Sheniz for the year ended 31 August 2023? A. Capital: R32 850; Current: R9 650 B. Capital: R25 850; Current: R12 580 C. Capital: R12 500; Current: R11 850 D. Capital: R36 800; Current: R14 560 E. Capital: R38 500; Current: R9 625 Clear my choice Assuming Sugar Rush made a profit of R220 000, which of the following alternatives represents Sheniz’s share of the profits available for distribution for the year ended 31 August 2023? A. R82 500 B. R63 550 C. R88 200 D. R73 600 E. R78 800 Clear my choice Assuming Sugar Rush made a loss of R13 500, which of the following alternatives represents Greg’s share of the loss for the year ended 31 August 2023? A. R8 737.50 B. R8 500.60 C. R8 437.50 D. R9 850.40 E. R7 800 Clear my choice 9/9/23, 1:46 PM Assessment 2 (page 1 of 5) Question 13 Answer saved Marked out of 1.00 Question 14 Answer saved Marked out of 1.00 Question 15 Answer saved Marked out of 1.00 Which of the following alternatives represents the correct amount for salary expense to be recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R864 000 B. R752 000 C. R950 000 D. R680 000 E. R576 000 Clear my choice Which of the following alternatives represents the correct amount for insurance expense to be recorded in the statement of profit / loss and other comprehensive income of Sugar Rush for the year ended 31 August 2023? A. R9 000 B. R8 500 C. R4 500 D. R7 600 E. R13 000 Clear my choice Which of the following alternatives represents the correct amount for prepaid insurance to be recorded in the statement of financial position of Sugar Rush for the year ended 31 August 2023? A. R6 330 B. R7 250 C. R3 400 D. R9 000 E. R4 500 Clear my choice Previous activity Assessment 1 Jump to... Next activity Assessment 3 9/9/23, 1:48 PM Assessment 2 (page 2 of 5) Question 16 Answer saved Marked out of 1.00 Question 17 Answer saved Marked out of 1.00 Question 18 Answer saved Marked out of 1.00 QUIZ Which one of the following alternatives is correct? A. Goodwill is not an intangible asset when compared to property, plant, and equipment. B. In terms of South African common law, a partnership is a separate legal entity. C. When recording the valuation adjustments, if the value of a liability is decreased, the valuation account credited with the amount of a decrease. D. The selling price of a partnership is determined by the value of its assets. E. To ensure that compliance is followed, the financial statements of a partnership must be prepared according to IFRS. Clear my choice True / False: The balancing amount of a valuation account is closed off to the drawings account of each existing partner by apportioning the balancing amount to the partners according to their profit-sharing ratio. True False Which one of the following alternatives is incorrect? A. A transferral account is used to close off the accounting records of the existing partnership. B. Goodwill is subsequently measured at cost less impairment. C. When recording the valuation adjustments, if the value of an asset decreases, the valuation account is debited with the amount of a decrease. D. The change in the ownership structure of the partnership is effectively the same as the liquidation. E. Revaluation enables the value of assets and liabilities to be adjusted to reflect their fair value instead of their cost or carrying amounts. Clear my choice Time left 1:27:11 9/9/23, 1:48 PM Assessment 2 (page 2 of 5) Question 19 Answer saved Marked out of 1.00 Which one of the following alternatives is correct? A. The fair value of the assets of a partnership is equal to the total equity of a partnership. B. When recording the valuation adjustments, the depreciation amount of an asset is recorded on the debit side of the valuation account. C. The legal perspective is the only accounting perspective that can be adopted to record the change in the ownership structure of a partnership. D. A change in the ownership structure of a partnership only occurs when a new partner is admitted to a partnership. E. A valuation account is used to close off the accounting records of the existing partnership. Clear my choice Previous activity Assessment 1 Jump to... 9/9/23, 1:48 PM Assessment 2 (page 3 of 5) Question 20 Answer saved Marked out of 1.00 QUIZ Given the following information for questions 20-24 Willow and Aiden are partners in a construction business trading as WillAid Construction. The partners are sharing profits and losses in the ratio 2:3 respectively. On 31 July 2023 the following information was extracted from the accounting records of the partnership: Additional information: Willow and Aiden decided to admit Layla from 1 August 2023. Layla will contribute the following for a 1/3 interest in the net asset share of the partnership: Cash…........................................................................R120 200 Construction equipment worth…..............................R56 200 Willow and Aiden agreed to relinquish a portion of their interest in the profits or losses to Layla according to their profit-sharing ratio. All other assets were revalued before admitting Layla to the partnership. A valuation loss was correctly calculated at R15 800 QUESTION 20 Which one of the following alternatives represents the new profit-sharing ratio after the admission of Layla into the new partnership? A. 4 : 6 : 5 B. 3 : 2 : 1 C. 6 : 4 : 2 D. 6 : 5 : 1 E. 1 : 3 : 1 Clear my choice rd Time left 1:26:28 9/9/23, 1:48 PM Assessment 2 (page 3 of 5) Question 21 Answer saved Marked out of 1.00 Question 22 Answer saved Marked out of 1.00 Question 23 Answer saved Marked out of 1.00 Question 24 Answer saved Marked out of 1.00 Which one of the following alternatives represents the correct journal entry for recording the capital contribution of Layla: A. Dr Capital: Layla R176 400; Cr Bank R120 200; Cr Equipment R56 200 B. Dr Bank R120 200; Dr Equipment R56 200; Cr Capital: Layla R176 400 C. Dr Bank R120 200; Cr Equipment R56 200; Cr Capital: Layla R176 400 D. Dr Equipment R56 200; Cr Bank R120 200; Cr Equipment R56 200 E. Dr Bank R176 400; Cr Capital: Layla R176 400 Clear my choice Which one of the following alternatives represents the correct balance in the capital account of Willow after the valuation of assets and prior to the admission of Layla? A. R 175 700 B. R 154 600 C. R 169 380 D. R 170 200 E. R160 250 Clear my choice Which one of the following alternatives represents the correct balance in the capital account of Aiden after the valuation of assets and prior to the admission of Layla? A. R105 800 B. R100 100 C. R95 650 D. R103 220 E. R106 220 Clear my choice Which one of the following alternatives represents the correct amount of goodwill in the accounting records of WillAid Construction after the admission of Layla? A. R25 800 B. R77 200 C. R19 600 D. R28 360 E. R25 300 Clear my choice 9/9/23, 1:49 PM Assessment 2 (page 4 of 5) Question 25 Answer saved Marked out of 1.00 QUIZ Jimmy and Bea are partners in a drone business trading as Sky-High Drones and share profits and losses in the ratio of 2:3 respectively. Because of increased demand in the farming and mining community for drones, Jimmy and Bea have decided to liquidate their partnership and move their operations into a private company which will acquire the assets of the partnership. Jimmy and Bea will expedite the process through a simultaneous liquidation on 1 September 2023. Before the liquidation entries were made, the trial balance was prepared as follows: On 1 September 2023, the following transactions took place with regard to the liquidation: The land and buildings were sold for cash of R852 000 Drone equipment with a carrying amount of R55 000 was bought by Jimmy at an agreed cash amount of R59 000. This amount was not settled immediately by Jimmy. The remaining drone equipment was sold for a cash amount of R360 000 On full settlement of the creditor’s accounts, a settlement discount of R6 200 was received. The long-term loan was paid in full. Liquidation costs paid amounted to R5 200 QUESTION 25 Which one of the following alternatives represents the correct amount that must be allocated to Jimmy as liquidation profit/loss of Sky-High Drones on 1 September 2023? A. R48 800 (loss) B. R62 300 C. R55 600 (loss) D. R72 300 E. R68 350 Clear my choice Time left 1:25:44 9/9/23, 1:49 PM Assessment 2 (page 4 of 5) Question 26 Answer saved Marked out of 1.00 Question 27 Answer saved Marked out of 1.00 Question 28 Answer saved Marked out of 1.00 Which one of the following alternatives represents the correct amount that must be allocated to Bea as liquidation profit/loss of Sky-High Drones on 1 September 2023? A. R56 230 B. R73 200 (loss) C. R18 500 D. R69 300 (loss) E. R19 200 Clear my choice Assume the correct amount of liquidation profit allocated to Bea is R63 000. Which one of the following alternatives represents the correct amount that must be paid to Bea on liquidation of Sky-High drones on 1 September 2023? A. R 441 000 B. R 562 000 C. R 789 000 D. R 643 000 E. R 580 000 Clear my choice Assume the correct amount of liquidation loss allocated is R48 000. Which one of the following alternatives represents the correct amount that must be paid to Jimmy on liquidation of Sky- High drones on 1 September 2023? A. R 296 000 B. R 148 000 C. R 625 330 D. R 723 700 E. R 850 000 Clear my choice Previous activity Assessment 1 9/9/23, 1:50 PM Assessment 2 (page 5 of 5) Question 29 Answer saved Marked out of 1.00 Question 30 Answer saved Marked out of 1.00 QUIZ Which of the following statement(s) is/are correct: A. Simultaneous liquidations are often impeded because debtors are unwilling or unable to pay their debts over a shortened time span. B. With a simultaneous liquidation, goodwill is closed off to the drawings accounts according to the profit-sharing ratio of the partners. C. More than one liquidation account is prepared in the case of a simultaneous liquidation. D. The liquidation of assets and settlement of liabilities are recorded in the partners capital account. E. When a simultaneous liquidation occurs, the capital account of a partner can never end in a debit balance. Clear my choice Which of the following statement(s) is/are incorrect: A. A piecemeal liquidation will not ensure that assets are realised at the best possible selling price. B. A piecemeal liquidation allows a partnership to continue with its activities. C. All assets and contra-assets and all liabilities are transferred to a liquidation account on the date the liquidation commences. D. After recording the amounts received/paid in the bank account a positive bank balance can be used to refund the partners' capital accounts. E. The remaining partners may bear the deficit of an insolvent partner who is unable to settle his/her deficit balance.