FAC3703
EXAM
PACK
2025
,FAC3703 May/June 2025 Examination -
Complete Solutions
QUESTION 1: RELATED PARTIES (12 marks)
KHULE LTD
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
Related Party Disclosures
1. Relationships
The following are related parties of Khule Ltd:
Related Party Nature of Relationship
BetaChips Ltd Associate (35% investment with significant influence)
Movers&Shakers Ltd Subsidiary (80% investment with control)
Boxies Ltd Related party (CEO is godson of Khule Ltd's executive director)
Key Management Personnel Executive directors and senior management of the group
2. Transactions with Related Parties
Related Party Nature of Transaction 2025 (R)
BetaChips Ltd Purchases of microchips 1,700,000
Boxies Ltd Purchases of packaging material 500,000
Movers&Shakers Ltd Distribution services 960,000
, Related Party Nature of Transaction 2025 (R)
Movers&Shakers Ltd Management fee charged 200,000
3. Balances with Related Parties
Related Party Nature of Balance 2025 (R)
BetaChips Ltd Trade payables 720,000
Movers&Shakers Ltd Management fee receivable 110,000
Workings:
• BetaChips Ltd payable: R1,700,000 - R980,000 = R720,000
• Movers&Shakers management fee receivable: R200,000 - R90,000 = R110,000
4. Key Management Personnel Compensation
2025 (R)
Gross salaries 26,834,500
Employee medical aid fund contribution 2,767,000
Employer contribution to pension fund 3,000,000
Bonuses 6,800,300
Total compensation 39,401,800
All transactions were entered into at arm's length terms and market-related prices.
QUESTION 2: FINANCIAL INSTRUMENTS AND
BORROWING COSTS (48 marks)
(a) Journal Entries (28 marks)
Transaction 1: SlimGrowth Fund Investment
, 1 February 2025
Dr Financial asset at FVTPL - SlimGrowth Fund 3,400,000
Dr Profit or loss (transaction costs) 25,000
Cr Bank 3,425,000
30 April 2025
Dr Financial asset at FVTPL - SlimGrowth Fund 80,000
Cr Profit or loss (fair value gain) 80,000
Working: R3,480,000 - R3,400,000 = R80,000
Transaction 2: Convertible Bonds
Calculation of component values at 1 June 2024:
Present value of liability component:
• PV of principal: R10,800,000 × (1.13)^-5 = R5,857,084
• PV of interest: R864,000 × [1-(1.13)^-5]/0.13 = R3,037,735
• Total liability component: R8,894,819
Equity component: R10,800,000 - R8,894,819 = R1,905,181
1 June 2024
Dr Bank 10,800,000
Cr Financial liability - Convertible bonds 8,894,819
Cr Equity - Conversion option 1,905,181
31 May 2025 (Interest accrual)
Dr Finance costs (8,894,819 × 13%) 1,156,326
Cr Financial liability - Convertible bonds 1,156,326
31 May 2025 (Coupon payment)
EXAM
PACK
2025
,FAC3703 May/June 2025 Examination -
Complete Solutions
QUESTION 1: RELATED PARTIES (12 marks)
KHULE LTD
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
Related Party Disclosures
1. Relationships
The following are related parties of Khule Ltd:
Related Party Nature of Relationship
BetaChips Ltd Associate (35% investment with significant influence)
Movers&Shakers Ltd Subsidiary (80% investment with control)
Boxies Ltd Related party (CEO is godson of Khule Ltd's executive director)
Key Management Personnel Executive directors and senior management of the group
2. Transactions with Related Parties
Related Party Nature of Transaction 2025 (R)
BetaChips Ltd Purchases of microchips 1,700,000
Boxies Ltd Purchases of packaging material 500,000
Movers&Shakers Ltd Distribution services 960,000
, Related Party Nature of Transaction 2025 (R)
Movers&Shakers Ltd Management fee charged 200,000
3. Balances with Related Parties
Related Party Nature of Balance 2025 (R)
BetaChips Ltd Trade payables 720,000
Movers&Shakers Ltd Management fee receivable 110,000
Workings:
• BetaChips Ltd payable: R1,700,000 - R980,000 = R720,000
• Movers&Shakers management fee receivable: R200,000 - R90,000 = R110,000
4. Key Management Personnel Compensation
2025 (R)
Gross salaries 26,834,500
Employee medical aid fund contribution 2,767,000
Employer contribution to pension fund 3,000,000
Bonuses 6,800,300
Total compensation 39,401,800
All transactions were entered into at arm's length terms and market-related prices.
QUESTION 2: FINANCIAL INSTRUMENTS AND
BORROWING COSTS (48 marks)
(a) Journal Entries (28 marks)
Transaction 1: SlimGrowth Fund Investment
, 1 February 2025
Dr Financial asset at FVTPL - SlimGrowth Fund 3,400,000
Dr Profit or loss (transaction costs) 25,000
Cr Bank 3,425,000
30 April 2025
Dr Financial asset at FVTPL - SlimGrowth Fund 80,000
Cr Profit or loss (fair value gain) 80,000
Working: R3,480,000 - R3,400,000 = R80,000
Transaction 2: Convertible Bonds
Calculation of component values at 1 June 2024:
Present value of liability component:
• PV of principal: R10,800,000 × (1.13)^-5 = R5,857,084
• PV of interest: R864,000 × [1-(1.13)^-5]/0.13 = R3,037,735
• Total liability component: R8,894,819
Equity component: R10,800,000 - R8,894,819 = R1,905,181
1 June 2024
Dr Bank 10,800,000
Cr Financial liability - Convertible bonds 8,894,819
Cr Equity - Conversion option 1,905,181
31 May 2025 (Interest accrual)
Dr Finance costs (8,894,819 × 13%) 1,156,326
Cr Financial liability - Convertible bonds 1,156,326
31 May 2025 (Coupon payment)
