revision_solutions3

Financial Reporting & Regulatory Frameworks




Revision
Solutions


Study phase 3



Revision question 1 (Topic: Multiple choice questions)


1.1 A

1.2 C

1.3 B

1.4 B

1.5 D

1.6 A

1.7 C

1.8 A

1.9 A

1.10 B




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,Financial Reporting & Regulatory Frameworks Revision Solutions Study Phase 3




Revision question 2 (Topic: Leases)


Present value of lease payments:

Annual lease payment (R) Discount factor Present value (R)

Year 1: 3 250 × 12 39 000 1/1.121 = 0.893 34 821
Year 2: 39 000 × 1.10 42 900 1/1.122 = 0.797 34 200
Year 3: 42 900 × 1.10 47 190 1/1.123 = 0.712 33 589
Year 4: 47 190 × 1.10 51 909 1/1.124 = 0.636 32 989
Year 5: 51 909 × 1.10 57 100 1/1.125 = 0.567 32 400
Year 6: 57 100 × 1.10 62 810 1/1.126 = 0.507 31 822
Total present value of the lease payments 199 821


Year Opening balance Interest Payment Closing balance

1 199 821 199 821 × 12% = 23 979 39 000 199 821 + 23 979 – 39 000 = 184 800
2 184 800 184 800 × 12% = 22 176 42 900 184 800 + 22 176 – 42 900 = 164 076
3 164 076 164 076 × 12% = 19 689 47 190 164 076 + 19 689 – 47 190 = 136 575
4 136 575 136 575 × 12% = 16 389 51 909 136 575 + 16 389 – 51 909 = 101 055
5 101 055 101 055 × 12% = 12 127 57 100 101 055 + 12 127 – 57 100 = 56 082
6 56 082 56 082 × 12% = 6 730 62 810 56 082 + 6730 – 62 810 = 2


Journal entries: 1 March 20.12 to 28 February 20.13

Doc. No. Date Details Fol. Debit (R) Credit (R)

1 Mar Right-of-use asset 199 821
Lease liability 199 821




Doc. No. Date Details Fol. Debit (R) Credit (R)

28 Feb Lease liability(SOFP) 39 000
Bank 39 000




Doc. No. Date Details Fol. Debit (R) Credit (R)

28 Feb Finance charges(P/L) 23 979
Lease liability(SOFP) 23 979




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, Financial Reporting & Regulatory Frameworks Revision Solutions Study Phase 3




Doc. No. Date Details Fol. Debit (R) Credit (R)

28 Feb Depreciation(P/L) 29 973
Accumulated depreciation: right-of-use asset 29 973


Depreciation is calculated by: R 199 821 × 15% = R 29 973




Revision question 3 (Topic: Revenue)


Cuthbert (Pty) Ltd
Extract from the statement of profit or loss and other comprehensive income for the year ended
31 December 20.7

R’000

Revenue (W1) 14 400
Cost of sales (W2) (11 570)
Gross profit 2 830



Cuthbert (Pty) Ltd
Extract from the statement of financial position as at 31 December 20.7

R’000

ASSETS
Current assets
Contract asset (W3) 2 155



Workings

W1: Revenue

Contract 1 Contract 2 Contract 3 Total
R’000 R’000 R’000 R’000
Expected revenue 12 000 9 000 4 500
% completion 75% 50% 20%
Revenue for the year 9 000 4 500 900 14 400




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