Question 1 a)
Fashion Retailers will have to use full IFRS as its reporting standard. This is because Fashio Retailers
has public accountability in the form of bonds issued on the Board Exchange of South Africa. This is a
public market, and when bonds are traded in the public market, Full IFRS must be used because the
company is listed on an exchange.
Question 1 b)
The new definition according to the Conceptual Framework for Financial Reporting of 2018 reads as
follows: "A Present economic resource controlled by the entity as a result of past events. An
economic resource is a right that has the potential to produce economic benefits."
What is meant by control, is that the entity has the present ability to decide how a resource is used,
and as a result they are able to receive an economic benefit from the control. Control also comes
from the ability to enforce legal rights.
Question 1 c)
The motor vehicle will not be classified as inventory, but rather as an asset. The reason is in the
definition of inventory according to IAS2. The vehicle does satisfy the requirement of being held for
sale in the ordinary course of business, and neither does it satisfy the requirement of being in the
form of material that is to be consumed in the rendering of a service or process of production.
Question 1 d)
The commission payable to DebtCor Ltd by Capital Brokers Ltd is not affected by the number of
shares the public actually took. This is because the underwriter (in theory) gave a guarentee that the
whole issue will be taken up. Hence, the calculation is as follows:
75000 ordinary shares x R4.50 each = R337 500.00 x 9% commission = R30 375.00 commission.
Question 1 e)
Cumulative preference shares accumulates when a company does not have sufficient cashflow to pay
dividends. As such, the accounted for amount in the statement of changes in equity is as follows:
180 000 shares x R5 each x 7% x 2 years and 1 month = R131 250.00
, Question 2 a)
Impala LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2022
Additional
2022 Information
Formula Calcs as Given
R
Revenue R 11 540 000,00 Given + (R575 .15) 2
Cost of sales R 7 501 000,00 1
Gross profit R 4 039 000,00 35% x 11540000 R 4 039 000,00 1
Profit on Sale of Motor Vehicle R 41 667,00 Calculation 2 Below 4
Other Operating Income R 308 333,00 R350 000 - R240 000 4
Administrative expenses R (3 153 000,00) Sumation of items in box
Bank Charges R (88 000,00)
Salaries and Wages R (2 450 000,00)
Advertising R (450 000,00)
Auditors Remuneration
Fees for Audit R (110 000,00)
Expenses R (55 000,00)
Distribution Costs R (45 000,00)
Lease Expense R (56 700,00) Calculation 1 Below Calculation 1 Below 3
Maintenance Cost R (25 200,00) Calculation 1 Below Calculation 1 Below 3
Other operating expenses (including finance costs and
R (768 100,00)
depreciation) R850 000- R56 700 - R25200 3
Profit before tax R 8 437 000,00
Income tax expense R 349 750,00 Given
PROFIT FOR THE YEAR R 8 087 250,00
Other Comprehensive Income:
Gains on Property Revaluation R 500 000,00 (2 000 000 - 1 800 000) + (1 800 000 - 1 500 000) 8
Rent received from Investment Property R 550 000,00 Given 8
TOTAL COMPREHENSIVE INCOME FOR THE YEAR R 9 137 250,00
Fashion Retailers will have to use full IFRS as its reporting standard. This is because Fashio Retailers
has public accountability in the form of bonds issued on the Board Exchange of South Africa. This is a
public market, and when bonds are traded in the public market, Full IFRS must be used because the
company is listed on an exchange.
Question 1 b)
The new definition according to the Conceptual Framework for Financial Reporting of 2018 reads as
follows: "A Present economic resource controlled by the entity as a result of past events. An
economic resource is a right that has the potential to produce economic benefits."
What is meant by control, is that the entity has the present ability to decide how a resource is used,
and as a result they are able to receive an economic benefit from the control. Control also comes
from the ability to enforce legal rights.
Question 1 c)
The motor vehicle will not be classified as inventory, but rather as an asset. The reason is in the
definition of inventory according to IAS2. The vehicle does satisfy the requirement of being held for
sale in the ordinary course of business, and neither does it satisfy the requirement of being in the
form of material that is to be consumed in the rendering of a service or process of production.
Question 1 d)
The commission payable to DebtCor Ltd by Capital Brokers Ltd is not affected by the number of
shares the public actually took. This is because the underwriter (in theory) gave a guarentee that the
whole issue will be taken up. Hence, the calculation is as follows:
75000 ordinary shares x R4.50 each = R337 500.00 x 9% commission = R30 375.00 commission.
Question 1 e)
Cumulative preference shares accumulates when a company does not have sufficient cashflow to pay
dividends. As such, the accounted for amount in the statement of changes in equity is as follows:
180 000 shares x R5 each x 7% x 2 years and 1 month = R131 250.00
, Question 2 a)
Impala LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2022
Additional
2022 Information
Formula Calcs as Given
R
Revenue R 11 540 000,00 Given + (R575 .15) 2
Cost of sales R 7 501 000,00 1
Gross profit R 4 039 000,00 35% x 11540000 R 4 039 000,00 1
Profit on Sale of Motor Vehicle R 41 667,00 Calculation 2 Below 4
Other Operating Income R 308 333,00 R350 000 - R240 000 4
Administrative expenses R (3 153 000,00) Sumation of items in box
Bank Charges R (88 000,00)
Salaries and Wages R (2 450 000,00)
Advertising R (450 000,00)
Auditors Remuneration
Fees for Audit R (110 000,00)
Expenses R (55 000,00)
Distribution Costs R (45 000,00)
Lease Expense R (56 700,00) Calculation 1 Below Calculation 1 Below 3
Maintenance Cost R (25 200,00) Calculation 1 Below Calculation 1 Below 3
Other operating expenses (including finance costs and
R (768 100,00)
depreciation) R850 000- R56 700 - R25200 3
Profit before tax R 8 437 000,00
Income tax expense R 349 750,00 Given
PROFIT FOR THE YEAR R 8 087 250,00
Other Comprehensive Income:
Gains on Property Revaluation R 500 000,00 (2 000 000 - 1 800 000) + (1 800 000 - 1 500 000) 8
Rent received from Investment Property R 550 000,00 Given 8
TOTAL COMPREHENSIVE INCOME FOR THE YEAR R 9 137 250,00
