FAC3702 DISTINCTIVE FINANCIAL REPORTING - JUNE
2025 SOLUTIONS
QUESTION 1 (50 marks)
Part (a)(i) - Manufacturing Plant Purchase Journal Entries
Date: 1 February 2016
Calculation of Initial Cost:
Purchase price of plant 4800000
, Delivery to Richards Bay port: 120000
Import duties (non-refundable 80000
Initial testing of machinery 60000
Total capitalizable cost 5060000
Excluded items:
Custom duties (refundable): R55,000 55000
Training costs (non-mandatory): R50,000 50000
Temporary storage cost: R35,000 35000
Present Value Calculation: Purchase price payable in installments:
R2,400,000 due 1 Feb 2017 (PV = R2,400,000 ÷ 1.0876 = R2,206,273)
R2,400,000 due 1 Feb 2018 (PV = R2,400,000 ÷ 1.0876² = R2,028,640)
Total PV of purchase price: R4,234,913
Journal Entries:
Date Account Debit (R) Credit (R) Statement
1-Feb-16 Manufacturing Plant 4,494,913 SFP
Cash 260,000 SFP
Accounts Payable 4,234,913 SFP
Part (a)(ii) - Vacant Land Journal Entries
1 January 2020 - Purchase:
Date Account Debit (R) Credit (R) Statement
2025 SOLUTIONS
QUESTION 1 (50 marks)
Part (a)(i) - Manufacturing Plant Purchase Journal Entries
Date: 1 February 2016
Calculation of Initial Cost:
Purchase price of plant 4800000
, Delivery to Richards Bay port: 120000
Import duties (non-refundable 80000
Initial testing of machinery 60000
Total capitalizable cost 5060000
Excluded items:
Custom duties (refundable): R55,000 55000
Training costs (non-mandatory): R50,000 50000
Temporary storage cost: R35,000 35000
Present Value Calculation: Purchase price payable in installments:
R2,400,000 due 1 Feb 2017 (PV = R2,400,000 ÷ 1.0876 = R2,206,273)
R2,400,000 due 1 Feb 2018 (PV = R2,400,000 ÷ 1.0876² = R2,028,640)
Total PV of purchase price: R4,234,913
Journal Entries:
Date Account Debit (R) Credit (R) Statement
1-Feb-16 Manufacturing Plant 4,494,913 SFP
Cash 260,000 SFP
Accounts Payable 4,234,913 SFP
Part (a)(ii) - Vacant Land Journal Entries
1 January 2020 - Purchase:
Date Account Debit (R) Credit (R) Statement
