FAC2601 Assessment 2 Semester 2 2023 Questions and Answers

FAC2601 ASSESSMENT 2 SEMESTER 2 2023
Part A (20 marks)
QUESTIONS 1 - 10 USE THE BELOW INFORMATION:
The following balances were extracted from the accounting records of Stimela Ltd as
at 31 December 2022:
Debit/
(Credit)
R
Land at cost.............................................................................................. 5 000 000
Buildings at cost....................................................................................... ?
Plant and machinery at cost (1 Jan 2022)................................................... 4 750 000
Furniture and equipment at cost (1 Jan 2022)............................................. 485 000
Accumulated Depreciation
- Plant and machinery (1 Jan 2022).......................................................... ?
- Furniture and equipment (1 Jan 2022).................................................... (285 000)
10% Long-term loan.................................................................................. (1 085 000)
Trade and other receivables...................................................................... 833 500
Inventories............................................................................................... ?



Additional information:
1. Inventories

Stimela Ltd had an opening balance of inventory worth R930 000. During the current
financial year, purchases worth R850 000 of inventory were made. The cost of sales of
Lion Ltd relating to sold inventory amounted to R970 000.
2. The following information regarding property, plant and equipment is available:
2.1 Stimela Ltd purchased land on 1 January 2020 for R5 000 000. Construction of a
building on the land commenced on 1 March 2022 and was completed
on 31 July 2022. The following direct costs relating to the erection of the building
were incurred:
- Labour R985 000
- Material R2 500 000
The land and buildings were situated in Johannesburg, plot 100.
2.2 All the machinery of Stimela Ltd was purchased on 31 March 2020 for R4 500 000.
The machine was installed for a further R250 000. During the current financial year,
machinery was withdrawn from the production process to be used for the construction
of the building for a period of 4 months. No sale or additional purchases of machinery
took place during the current financial year.

, 2.3 Proceeds of R75 000 was received for furniture and equipment sold on 30 April
2022. The sold furniture and equipment had a cost of R120 000 and accumulated
depreciation of R60 000 up to the beginning of the financial year. On the same date of
the sale, replacement furniture and equipment was purchased for R90 000.
3. The company’s policy is to depreciate non-current assets as follows:
- Buildings at 2% per annum on the straight-line method
- Machinery at 20% per annum on the reducing balance method
- Furniture and equipment at 10% per annum on the straight-line method
REQUIRED:
Answer the following multiple-choice questions. Indicate your choice by only selecting
only one option from the four options given below.
Question 1:
Land will be disclosed in the PPE note as?

1.
As part of buildings.
2.
As a separate class asset with an opening balance of R5 000 000.
3.
As a separate class asset, shown as an addition of R5 000 000 in the current year.
4.
Will first have to acquire the services of an independent sworn appraiser to determine
the value.
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The correct answer is:
As a separate class asset with an opening balance of R5 000 000.
QUESTION 2 is based on the information in Part A
Question 2:
Inventory will be disclosed at the following amount in the Statement of Financial
Position as at 31 December 2022?

1.
R930 000
2.
R850 000
3.
R1 780 000
4.
R810 000
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The correct answer is: