VAVIKA LTD - FINANCIAL ACCOUNTING SOLUTIONS
a) Journal Entries for Lecture Venue - Year Ended 31 December 2024
Step 1: Calculate Carrying Amount at 1 October 2024
Description Calculation Amount (R)
Cost (1 Oct 2022) 8,650,000
Depreciation per year R8,650, years 346,000
Depreciation (15 months
R346,000 × 15/12 -432,500
to 31 Dec 2023)
Impairment (31 Dec
-500,000
2023)
Carrying amount after
R8,650,000 -
impairment (31 Dec 7,717,500
R432,500 - R500,000
2023)
Depreciation (9 months
R346,000 × 9/12 -259,500
to 30 Sep 2024)
Carrying amount (1 Oct R7,717,500 -
7,458,000
2024) R259,500
Step 2: Apply IFRS 5 - Held for Sale
Criteria met on 1 October 2024
, Item Calculation Amount (R)
Fair value less costs to R7,000,000 -
6,500,000
sell (FVLCTS) R500,000
Value in use 5,000,000
Higher of FVLCTS and
Recoverable amount 6,500,000
VIU
Carrying amount 7,458,000
R7,458,000 -
Impairment loss 958,000
R6,500,000
Step 3: Journal Entries
Date Account Description Debit (R) Credit (R)
30/09/2024 Depreciation (P/L) 259,500
Accumulated
depreciation - Building 259,500
(SFP)
Depreciation up to
reclassification date
1/10/2024 Impairment loss (P/L) 958,000
Accumulated
impairment - Building 958,000
(SFP)
Impairment on
reclassification as
held for sale
, Non-current asset held
1/10/2024 6,500,000
for sale (SFP)
Accumulated
depreciation - Building 692,000
(SFP)
Accumulated
impairment - Building 1,458,000
(SFP)
Building (SFP) 8,650,000
Reclassification as
held for sale
Note: No further depreciation after classification as held for sale.
b) Email to Junior Accountant - Revenue Recognition for Online Course (IFRS 15)
To: Junior Accountant
From: [Your Name]
Date: 31 December 2024
Subject: Revenue recognition for new online accounting course
Dear Junior Accountant,
Regarding the new online accounting course launched in January 2024, the revenue recognition
should be guided by IFRS 15 as follows:
1. Identify the Contract
, The agreement with students is a contract with two distinct performance obligations:
Delivery of textbook
Provision of online course access
2. Determine Transaction Price
Description Calculation Amount (R)
R7,600 per student ×
Total upfront fee 11,400,000
1,500 students
3. Allocate Transaction Price Based on Standalone Selling Prices (SSP)
Component SSP at 31 Jan 2024 (R)
Textbook 1,500
Course 7,700
Total SSP 9,200
Allocation:
Component Calculation Amount per Student (R)
Textbook (1,,200) × 7,600 1,239.13
Course (7,,200) × 7,600 6,360.87
4. Recognize Revenue When (or As) Performance Obligations Are Satisfied
a) Journal Entries for Lecture Venue - Year Ended 31 December 2024
Step 1: Calculate Carrying Amount at 1 October 2024
Description Calculation Amount (R)
Cost (1 Oct 2022) 8,650,000
Depreciation per year R8,650, years 346,000
Depreciation (15 months
R346,000 × 15/12 -432,500
to 31 Dec 2023)
Impairment (31 Dec
-500,000
2023)
Carrying amount after
R8,650,000 -
impairment (31 Dec 7,717,500
R432,500 - R500,000
2023)
Depreciation (9 months
R346,000 × 9/12 -259,500
to 30 Sep 2024)
Carrying amount (1 Oct R7,717,500 -
7,458,000
2024) R259,500
Step 2: Apply IFRS 5 - Held for Sale
Criteria met on 1 October 2024
, Item Calculation Amount (R)
Fair value less costs to R7,000,000 -
6,500,000
sell (FVLCTS) R500,000
Value in use 5,000,000
Higher of FVLCTS and
Recoverable amount 6,500,000
VIU
Carrying amount 7,458,000
R7,458,000 -
Impairment loss 958,000
R6,500,000
Step 3: Journal Entries
Date Account Description Debit (R) Credit (R)
30/09/2024 Depreciation (P/L) 259,500
Accumulated
depreciation - Building 259,500
(SFP)
Depreciation up to
reclassification date
1/10/2024 Impairment loss (P/L) 958,000
Accumulated
impairment - Building 958,000
(SFP)
Impairment on
reclassification as
held for sale
, Non-current asset held
1/10/2024 6,500,000
for sale (SFP)
Accumulated
depreciation - Building 692,000
(SFP)
Accumulated
impairment - Building 1,458,000
(SFP)
Building (SFP) 8,650,000
Reclassification as
held for sale
Note: No further depreciation after classification as held for sale.
b) Email to Junior Accountant - Revenue Recognition for Online Course (IFRS 15)
To: Junior Accountant
From: [Your Name]
Date: 31 December 2024
Subject: Revenue recognition for new online accounting course
Dear Junior Accountant,
Regarding the new online accounting course launched in January 2024, the revenue recognition
should be guided by IFRS 15 as follows:
1. Identify the Contract
, The agreement with students is a contract with two distinct performance obligations:
Delivery of textbook
Provision of online course access
2. Determine Transaction Price
Description Calculation Amount (R)
R7,600 per student ×
Total upfront fee 11,400,000
1,500 students
3. Allocate Transaction Price Based on Standalone Selling Prices (SSP)
Component SSP at 31 Jan 2024 (R)
Textbook 1,500
Course 7,700
Total SSP 9,200
Allocation:
Component Calculation Amount per Student (R)
Textbook (1,,200) × 7,600 1,239.13
Course (7,,200) × 7,600 6,360.87
4. Recognize Revenue When (or As) Performance Obligations Are Satisfied
