FAC3764 EXAM REVISION PACK 2025

FAC3764
EXAM PACK
2025

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FAC3764/2023/Study pack 1


CONTENTS

Page

1 INTRODUCTION ............................................................................................................................ 3
2 LECTURERS AND CONTACT DETAILS ...................................................................................... 3
3 INTEGRATED QUESTIONS AND SOLUTIONS............................................................................ 4




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FAC3764/2023/Study pack 1
Dear Student

1 INTRODUCTION

Within this study pack we include integrated questions and suggested solutions. These integrated
questions will help you to prepare for assessment 3.

Study pack 1, contains questions which integrates learning units 1 to 4, which includes the following
topics:

- The conceptual framework for financial reporting;
- Income taxes (IAS 12);
- Revenue from contracts with customers (IFRS 15);
- Leases (IFRS 16);
- Fair value measurement (IFRS 13),
- Property, plant and equipment (IAS 16); and
- Investment property (IAS 40).

You will notice some calculations are in brackets opposite certain items in our suggested solutions
dealing with company financial statements. These calculations are given for tuition purposes only and
consequently do not form part of the statutory disclosure requirements.

2 LECTURERS AND CONTACT DETAILS

Please use only the following e-mail address for all communication with your lecturers:









Please use only the following telephone numbers for communication with your lecturers:

Lecturers Telephone number
Marilize Els 012 429 8766

Itani Phaduli 012 429 3232

Dumazile Selela 012 429 4848

Nosipho Gumede 012 429 4633




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FAC3764/2023/Study pack 1
3 INTEGRATED QUESTIONS AND SOLUTIONS

QUESTION 1 (40 marks) (60 minutes)

Look and Find Ltd, is a fraud investigations agency in Pretoria, South Africa. The company is listed on
the JSE and has a 31 March year end. Details of the assets of the company are as follows:
Menlyn property

Look and Find Ltd owns a property in Menlyn, Pretoria which the company acquired on 1 January 20X16
for R2 500 000 (Land: R500 000; Building: R2 000 000). Look and Find Ltd conducts its operations from
these premises. On acquisition date the property was available for use, as intended by management,
and brought into use. The building has an estimated useful life of 25 years and a residual value of
R550 000 was allocated to the building.

The fair values of the land, on 31 March 20X18 and 31 March 20X20, as determined by an independent
sworn appraiser, amounted to R600 000 and R650 000 respectively. The estimated useful life and
residual value remained unchanged throughout the period.

Century City property

Look and Find Ltd acquired a property in Century City, Cape Town, on 1 June 20X19 for R3 500 000
(Land: R1 000 000; Building: R2 500 000). Look and Find Ltd decided to lease the property and
concluded lease agreements with various tenants. On request of the tenants, Look and Find Ltd modified
the building to improve access controls, prior to leasing it out. The modifications were completed on
1 August 20X19 at a cost of R100 000. The modifications are considered to be capital of nature for both
accounting and taxation purposes.

Look and Find Ltd earned rental income from 1 September 20X19, of R200 000 per month and since
acquisition of the property incurred direct operating expenses of R75 000 per month in respect of the
property.

On 31 March 20X20, an independent sworn appraiser determined the fair value of the property to be
R4 510 000 (Land: R1 510 000; Building: R3 000 000).

Equipment

On 1 April 20X19, Look and Find Ltd purchased specialised computer equipment to assist the company
to process large amounts of data collected during its investigations. The computer equipment included
finger print and voice recognition capabilities. Look and Find Ltd incurred the following costs in respect
of the equipment purchased:

R
Purchase price .................................................................... ..................................... 805 000
Trade discount received ....................................................... ..................................... 25 000
Costs of testing whether the equipment is functioning properly ................................ 15 750
Professional fees for software engineer .............................. ..................................... 55 000

On acquisition date the equipment was available for use, as intended by management, and brought into
use. The equipment has an estimated useful life of 4 years and a residual value of R155 000. The
estimated useful life and residual value of the equipment remained unchanged throughout the period.




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FAC3764/2023/Study pack 1
QUESTION 1 (continued)

Vehicles

Look and Find Ltd owns 2 similar vehicles, Vehicle A and Vehicle B, that employees use to conduct their
investigations. The vehicles were both acquired on 1 April 20X18 at a cost of R375 000 each. The
vehicles were available for use, as intended by management, as well as brought into use on acquisition
date. On acquisition date an estimated useful life of 100 000 kilometers and a residual value of Rnil was
allocated to each vehicle.

On 1 August 20X19, vehicle A was involved in an accident and had to be written off by the company.
Look and Find Ltd lodged an insurance claim for the loss of the vehicle and received an amount of
R150 000 from the insurance company.

Details of the distances travelled by Vehicle A and Vehicle B, during the respective periods, are as
follows:

Period Vehicle A Vehicle B
kilometers Kilometers
1 April 20X18 – 31 March 20X19 ...... ................ 25 000 30 000
1 April 20X19 – 31 July 20X19……………..…… 10 200 15 000
1 August 20X19 – 31 March 20X20 .. …………… - 14 500

Additional information

1. The following is an extract from the accounting policies of Look and Find Ltd:

 Owner-occupied land is accounted for using the revaluation model. It is the policy of the company
to realise any revaluation surplus upon disposal of the underlying asset. It is company policy that
revaluations will be made with sufficient regularity to ensure that carrying amounts do not differ
materially from which would be determined using fair values at the end of the reporting period.
 Owner-occupied buildings, equipment and vehicles are accounted for using the cost model.
 Investment property is accounted for in accordance with the fair value model.
 Depreciation on buildings and equipment are provided for in accordance with the straight-line
method over the estimated useful lives of the assets.
 Depreciation on vehicles is provided for in accordance with the units of production method.

2. The South-African normal tax rate is 27%. The capital gains tax inclusion rate is 80%.

3. Deferred tax is provided for on all temporary differences in accordance with the statement of financial
position approach. There are no other items causing temporary or exempt differences except those
mentioned in the question. The company will have sufficient taxable profits in the future, against
which any unused tax losses can be utilised.

4. The SA Revenue Service allows the following tax allowances:
 a 5% annual building allowance on all the buildings, according to section 13(1) of the Income Tax
Act, on the straight-line method, not apportioned for part of the year.
 a tax allowance on the computer equipment according to Section 11(e) of the Income Tax Act, in
accordance with the straight-line method over 4 years, apportioned for part of a year. Assume the
cost of the computer equipment is the same for accounting and tax purposes.
 a tax allowance on vehicles according to Section 11(e) of the Income Tax Act, in accordance with
the straight-line method over 4 years, apportioned for part of a year.




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