FAC2601 Assignment 2 (COMPLETE ANSWERS) Semester 1 2026 - DUE April 2026; 100% Correct solutions and explanations.

FAC2601 Assignment 2 (COMPLETE ANSWERS) Semester 1 2026 - DUE April 2026; 100% Correct solutions and explanations.QUESTION 1 (50 marks) (100 minutes) The following balances were extracted from the accounting records of Purco Trucks Ltd, a manufacturing company of various equipment, machinery and trucks for the financial year ended 28 February 2025: Additional information R Dr/(Cr) Revenue (Including VAT at 15%) () Cost of sales 1,2,7 5 700 000 Rent expenses 1 1 128 000 Administrative expenses: 2 845 000 Bank charges 110 000 Salaries and wages 2 2 250 000 Advertising 265 000 Auditors remuneration: - Fees for audit - Expenses Distribution costs (Fuel costs) 275 000 Other operating expenses 3 890 000 Dividend income 4 (100 000) Depreciation expense: Spray painting robot 6 ? Income tax expense (after all adjustments) 110 000 Additional information: 1. Purco Trucks Ltd rent all its premises from TradersCo Ltd. Monthly payments were made from 1 March 2024 until 28 February 2025. From 1 March 2025, an annual increase of 5% was implemented. Purco Trucks Ltd paid the rent for March and April 2025 in advance, and these payments are included in the “Rent expense” line item in the balances above. The rent expense is allocated on a 20:60:20 basis to Purco Trucks Ltd’s head office, manufacturing department and distribution warehouse respectively. Note: The above lease does not constitute a lease agreement in terms of IFRS 16, Leases. 2. Two quarters of the total salaries and wages are made up of the salaries of all administrative staff and management. The manufacturing and distribution departments contributed equally to the remaining balance. 3. Included in other operating expenses is an amount of R16 000 in respect of lease payments for three photocopying machines from Xerox Ltd. The contract is a lease in terms of IFRS 16. Purco Trucks Ltd elected to apply the recognition exemption in respect of low value assets to this lease agreement. The following information is applicable to the lease contract: - The lease term is 4 years. - The lease was entered into on 1 January 2025. - The lease payments are R8 000 per month for the first 6 months and R6 000 per month for the 6 months thereafter. The lease instalments for the following two years are R5 000 per month. These monthly payments are for all three machines in total. QUESTION 1 - At the commencement of the lease Purco Trucks Ltd had the option to extend the lease for a year at R2 000 per month and it was reasonably certain that they would exercise this option to extend the lease. - 5% of every lease payment goes towards covering the maintenance costs incurred and to be paid for by Xerox Ltd. Purco Trucks Ltd accounts for lease and non-lease components separately. 4. Other operating income consists of: R Dividends received from the