FAC2601
EXAM PACK
, FAC2601/102
ANNEXURE A: ADDITIONAL QUESTIONS AND SOLUTIONS
QUESTION 1 (30 marks) (36 minutes)
The following list of balances on 31 December 19.9 appeared in the accounting records of
All Ltd:
Additional
Info R
Inventories ............................................................................................... 1 & 2 240 000
Loans ....................................................................................................... 4 110 000
Trade and other receivables ................................................................... 36 000
Trade and other payables ....................................................................... 25 000
Provisional tax payments ........................................................................ 9 30 000
Dividends payable ................................................................................... 5 000
Deferred taxation (Cr) ............................................................................. 2 000
Bank (Dr) ................................................................................................. 75 000
Retained earnings (31/12/19.9) .............................................................. 120 000
Long-term loan ....................................................................................... 150 000
Land at valuation ..................................................................................... 5 400 000
Buildings at cost ...................................................................................... 5, 6 & 7 420 000
Machinery and equipment at cost (31/12/19.9) ...................................... 5, 6 & 7 250 000
Motor vehicles at cost (31/12/19.8 – R280 000) ..................................... 5, 6 & 7 310 000
Accumulated depreciation (31/12/19.9)
- Machinery and equipment .................................................................... 5, 6 & 7 55 000
- Motor vehicles (31/12/19.8 – R80 000) ................................................ 5, 6 & 7 119 500
Investments ............................................................................................ 8 136 000
Additional information:
1. Inventory is valued at the lower of cost or net realisable value.
2. Inventory consists of: R
- Raw material ...................................................................................................... 100 000
- Finished products ................................................................................................ 50 000
- Consumables ....................................................................................................... 30 000
- Work in progress .................................................................................................. 60 000
3. The long-term loan was incurred on 31 August 19.3 at an interest rate of 20% per annum
payable monthly in arrears. The capital portion is repayable in five equal annual
instalments of R30 000 each beginning on 28 February 19.7. The loan is secured by a
first mortgage bond over land and buildings.
4. Loans consist of the following: R
- Loan to Tram Ltd 20 000
This loan was granted on 30 June 19.9 at an interest rate of 15% per
annum and no security was provided.
- Loan to parent Tol Ltd 90 000
The loan was granted on 1 January 19.5 at an interest rate of 12% per
annum payable monthly in arrears. Tol Ltd provided security for the loan.
The loan fluctuated between R70 000 and R100 000 during the year. No
fixed terms of repayment was agreed upon.
3
,QUESTION 1 (continued)
5. Land and buildings are owner occupied and consist of land situated on Erf 10, Pretoria
West, with a factory building and a shopping centre thereon. The land was acquired on
1 March 19.4 for R240 000 and was revalued for the first time during April 19.9 by Mr. Pal,
a sworn appraiser. The buildings were erected during October 19.9 at a cost of R420 000
and was completed on 31 October 19.9. The buildings were brought into use on
1 November 19.9. No depreciation is written off on land, but it is company policy to revalue
land every three years at market value.
6. Other non-current assets are depreciated at the following rates and methods:
Buildings – 2% per annum using the diminishing balance method.
Machinery and equipment – 15% per annum using the straight-line method.
Motor vehicles – 25% per annum using the diminishing balance method.
7. The only other transaction regarding non-current assets apart from the transaction in
note 5, is the following:
On 2 January 19.9, a motor vehicle which originally cost R40 000 and on which
depreciation of R24 000 was already written of, was traded in on a new vehicle costing
R70 000.
8. Investments consist of the following:
- 60 000 Ordinary shares in Tram Ltd at a cost of R60 000. The issued share capital of
Tram Ltd consists of 80 000 ordinary shares. The market value of the investment was
R60 000 on 31 December 19.9.
- 20 000 Preference shares in Trok Ltd at a cost of R46 000, purchased for speculative
purposes. The issued share capital of Trok Ltd consists of 200 000 ordinary shares
and 40 000 preference shares. The shares of Trok Ltd are traded on the JSE and the
market value of the preference shares on 31 December 19.9 amounted to R2,30 per
share.
- 30 000 Ordinary shares in Lorry (Pty) Ltd at a cost of R30 000. The issued share
capital of Lorry (Pty) Ltd consists of 400 000 ordinary shares. The directors valued the
shares at R1,00 each on 31 December 19.9. These shares are classified as assets at
fair value through other comprehensive income (not held for trading).
9. The accountant neglected to make provision for tax for the current year amounting to
R60 000.
REQUIRED:
Prepare the “Asset” section of the statement of financial position of All Ltd at 31 December 19.9,
as well as the relevant notes thereto, to comply with the requirements of International Financial
Reporting Standards (IFRS).
Ignore comparative figures and the accounting policy note.
4
, FAC2601/102
SOLUTION 1
ALL LTD
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 19.9
ASSETS Notes R
Non-current assets .............................................................................................. 1 404 100
Property, plant and equipment ............................................................................. 1 1 204 100
Investment in subsidiary ...................................................................................... 2 80 000
Financial assets ................................................................................................... 3 120 000
Current assets ........................................................................................................ 397 000
Inventories ............................................................................................................ 4 240 000
Trade and other receivables .................................................................................. 36 000
Financial assets ................................................................................................... 3 46 000
Cash and cash equivalents .................................................................................... 75 000
Total assets .......................................................................................................... 1 801 100
ALL LTD
NOTES AT 31 DECEMBER 19.9
1. Property, plant and equipment
Machinery
and Motor
Land Buildings equipment vehicles Total
R R R R R
Carrying amount 1/1/19.9 240 000 - 232 500 200 000 672 500
Cost/valuation 240 000 - 250 000 280 000 770 000
Accumulated depreciation - - (17 500) (80 000) (97 500)
Revaluation 160 000 - - - 160 000
Additions at cost - 420 000 - 70 000 490 000
Disposals at carrying amount - - - (16 000) (16 000)
Depreciation - (1 400) (37 500) (63 500) (102 400)
Carrying amount 31/12/19.9 400 000 418 600 195 000 190 500 1 204 100
Valuation/Cost 400 000 420 000 250 000 310 000 1 380 000
Accumulated depreciation - (1 400) (55 000) (119 500) (175 900)
The company has employed an accredited independent sworn appraiser, Mr. Pal, to determine
the fair value of land. The date of the revaluation was 1 April 19.9.
5
EXAM PACK
, FAC2601/102
ANNEXURE A: ADDITIONAL QUESTIONS AND SOLUTIONS
QUESTION 1 (30 marks) (36 minutes)
The following list of balances on 31 December 19.9 appeared in the accounting records of
All Ltd:
Additional
Info R
Inventories ............................................................................................... 1 & 2 240 000
Loans ....................................................................................................... 4 110 000
Trade and other receivables ................................................................... 36 000
Trade and other payables ....................................................................... 25 000
Provisional tax payments ........................................................................ 9 30 000
Dividends payable ................................................................................... 5 000
Deferred taxation (Cr) ............................................................................. 2 000
Bank (Dr) ................................................................................................. 75 000
Retained earnings (31/12/19.9) .............................................................. 120 000
Long-term loan ....................................................................................... 150 000
Land at valuation ..................................................................................... 5 400 000
Buildings at cost ...................................................................................... 5, 6 & 7 420 000
Machinery and equipment at cost (31/12/19.9) ...................................... 5, 6 & 7 250 000
Motor vehicles at cost (31/12/19.8 – R280 000) ..................................... 5, 6 & 7 310 000
Accumulated depreciation (31/12/19.9)
- Machinery and equipment .................................................................... 5, 6 & 7 55 000
- Motor vehicles (31/12/19.8 – R80 000) ................................................ 5, 6 & 7 119 500
Investments ............................................................................................ 8 136 000
Additional information:
1. Inventory is valued at the lower of cost or net realisable value.
2. Inventory consists of: R
- Raw material ...................................................................................................... 100 000
- Finished products ................................................................................................ 50 000
- Consumables ....................................................................................................... 30 000
- Work in progress .................................................................................................. 60 000
3. The long-term loan was incurred on 31 August 19.3 at an interest rate of 20% per annum
payable monthly in arrears. The capital portion is repayable in five equal annual
instalments of R30 000 each beginning on 28 February 19.7. The loan is secured by a
first mortgage bond over land and buildings.
4. Loans consist of the following: R
- Loan to Tram Ltd 20 000
This loan was granted on 30 June 19.9 at an interest rate of 15% per
annum and no security was provided.
- Loan to parent Tol Ltd 90 000
The loan was granted on 1 January 19.5 at an interest rate of 12% per
annum payable monthly in arrears. Tol Ltd provided security for the loan.
The loan fluctuated between R70 000 and R100 000 during the year. No
fixed terms of repayment was agreed upon.
3
,QUESTION 1 (continued)
5. Land and buildings are owner occupied and consist of land situated on Erf 10, Pretoria
West, with a factory building and a shopping centre thereon. The land was acquired on
1 March 19.4 for R240 000 and was revalued for the first time during April 19.9 by Mr. Pal,
a sworn appraiser. The buildings were erected during October 19.9 at a cost of R420 000
and was completed on 31 October 19.9. The buildings were brought into use on
1 November 19.9. No depreciation is written off on land, but it is company policy to revalue
land every three years at market value.
6. Other non-current assets are depreciated at the following rates and methods:
Buildings – 2% per annum using the diminishing balance method.
Machinery and equipment – 15% per annum using the straight-line method.
Motor vehicles – 25% per annum using the diminishing balance method.
7. The only other transaction regarding non-current assets apart from the transaction in
note 5, is the following:
On 2 January 19.9, a motor vehicle which originally cost R40 000 and on which
depreciation of R24 000 was already written of, was traded in on a new vehicle costing
R70 000.
8. Investments consist of the following:
- 60 000 Ordinary shares in Tram Ltd at a cost of R60 000. The issued share capital of
Tram Ltd consists of 80 000 ordinary shares. The market value of the investment was
R60 000 on 31 December 19.9.
- 20 000 Preference shares in Trok Ltd at a cost of R46 000, purchased for speculative
purposes. The issued share capital of Trok Ltd consists of 200 000 ordinary shares
and 40 000 preference shares. The shares of Trok Ltd are traded on the JSE and the
market value of the preference shares on 31 December 19.9 amounted to R2,30 per
share.
- 30 000 Ordinary shares in Lorry (Pty) Ltd at a cost of R30 000. The issued share
capital of Lorry (Pty) Ltd consists of 400 000 ordinary shares. The directors valued the
shares at R1,00 each on 31 December 19.9. These shares are classified as assets at
fair value through other comprehensive income (not held for trading).
9. The accountant neglected to make provision for tax for the current year amounting to
R60 000.
REQUIRED:
Prepare the “Asset” section of the statement of financial position of All Ltd at 31 December 19.9,
as well as the relevant notes thereto, to comply with the requirements of International Financial
Reporting Standards (IFRS).
Ignore comparative figures and the accounting policy note.
4
, FAC2601/102
SOLUTION 1
ALL LTD
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 19.9
ASSETS Notes R
Non-current assets .............................................................................................. 1 404 100
Property, plant and equipment ............................................................................. 1 1 204 100
Investment in subsidiary ...................................................................................... 2 80 000
Financial assets ................................................................................................... 3 120 000
Current assets ........................................................................................................ 397 000
Inventories ............................................................................................................ 4 240 000
Trade and other receivables .................................................................................. 36 000
Financial assets ................................................................................................... 3 46 000
Cash and cash equivalents .................................................................................... 75 000
Total assets .......................................................................................................... 1 801 100
ALL LTD
NOTES AT 31 DECEMBER 19.9
1. Property, plant and equipment
Machinery
and Motor
Land Buildings equipment vehicles Total
R R R R R
Carrying amount 1/1/19.9 240 000 - 232 500 200 000 672 500
Cost/valuation 240 000 - 250 000 280 000 770 000
Accumulated depreciation - - (17 500) (80 000) (97 500)
Revaluation 160 000 - - - 160 000
Additions at cost - 420 000 - 70 000 490 000
Disposals at carrying amount - - - (16 000) (16 000)
Depreciation - (1 400) (37 500) (63 500) (102 400)
Carrying amount 31/12/19.9 400 000 418 600 195 000 190 500 1 204 100
Valuation/Cost 400 000 420 000 250 000 310 000 1 380 000
Accumulated depreciation - (1 400) (55 000) (119 500) (175 900)
The company has employed an accredited independent sworn appraiser, Mr. Pal, to determine
the fair value of land. The date of the revaluation was 1 April 19.9.
5
