FAC3701
OCT/NOV PORTFOLIO 2025
UNIQUE NO.
DUE DATE: NOVEMBER 2025
,Question 1
a.) JOURNAL ENTRIES
1. 27 January 2025 - receipt of cash, recognise revenue for delivered goods;
deferred unperformed maintenance services
Dr Bank (Statement of Financial Position)………………………………………41,678
Cr Revenue - Road bikes (Statement of Profit or Loss and Other Comprehensive
Income)………………………………... 40,012
Cr Revenue - Cycling shoes (Statement of Profit or Loss and Other Comprehensive
Income)……………………………….… 428
Cr Contract liability - Maintenance plan (Statement of Financial
Position)……………………………….. 1,238
(Debits = Credits = R41,678
2. 27 February 2025 - service one (satisfaction of performance obligation)
Dr Contract liability - Maintenance plan (Statement of Financial
Position)………………………………………… 310
Cr Revenue - Maintenance services (Statement of Profit or Loss and Other
Comprehensive Income)……………………… 310
(Contracts remaining at year end: Service 2 - £413 and Service 3 - £515) (Contract
liability - Maintenance plan (Balance Sheet))
b.) Calculate the corrected profit before tax (PBT) of Pedal Ltd for the year ended
30 June 2025 Given: Draft profit before tax (before adjustments) = R 1 450 000
Revenue: Sale of road bike (IFRS 15)
Road bike R 40 012
,Cycling shoes R 428
Maintenance service 1 R 309 Total revenue recognised = R 40 749
Cost of sales for these items was already correctly recorded = increase PBT R 40 749
Sale of old delivery vehicle Sale proceeds = R 87 000 Carrying amount = R 40 000
Accounting gain = 87 000 – 40 000 = R 47 000 increase in PBT
Change in inventory valuation (IAS 8)
Closing inventory (FIFO) R 630 000
Closing inventory (Weighted average) R 570 000
Difference = R 60 000 (higher closing inventory = lower cost of sales)
Increase PBT = R 60 000
Warranty provision (IAS 37 / IAS 8 change in estimate)
Computation of required closing provision:
Defect type If all units defective (R) Probability Expected cost (R)
Minor 600 000 3% 18 000
Major 1 200 000 2% 24 000
Total expected 42 000
Books currently show provision = R 53 000. Actual warranty costs paid (not recorded) =
R 48 300.
After recording payment: 53 000 – 48 300 = R 4 700 balance.
Required closing provision = R 42 000.
Top-up needed = 42 000 – 4 700 = R 37 300
expense decrease PBT = R 37 300
Computation of corrected profit before tax
, Item Effect on PBT (R)
Draft profit before tax 1 450 000
+ Revenue (bike + shoes + service 1) + 40 749
+ Gain on sale of old vehicle + 47 000
+ Inventory (FIFO vs WA) + 60 000
– Additional warranty expense – 37 300
Corrected profit before tax 1 560 449
Corrected Profit before Tax = R 1 560 449
c.) Deferred tax (statement of financial position)
Summary (final amounts)
Deferred tax liabilities (total) ........................................ R 18,900
Deferred tax liability - Inventory (SFP) ...................... R 16,200
Deferred tax liability - New delivery vehicle (SFP) ........... R 2,700
Deferred tax assets (total) ........................................... R 11,340
Deferred tax asset - Warranty provision (SFP) ................. R 11,340
Net deferred tax (Statement of Financial Position) - net deferred tax liability = R
7,560 (R18,900 − R11,340)
Workings (step-by-step digit-by-digit calculations)
Inventory - temporary difference (taxable temporary difference) Carrying amount
(accounting, FIFO) is R 60 000 higher than tax base (SARS uses weighted average).
Deferred tax liability = 27% × 60 000.
OCT/NOV PORTFOLIO 2025
UNIQUE NO.
DUE DATE: NOVEMBER 2025
,Question 1
a.) JOURNAL ENTRIES
1. 27 January 2025 - receipt of cash, recognise revenue for delivered goods;
deferred unperformed maintenance services
Dr Bank (Statement of Financial Position)………………………………………41,678
Cr Revenue - Road bikes (Statement of Profit or Loss and Other Comprehensive
Income)………………………………... 40,012
Cr Revenue - Cycling shoes (Statement of Profit or Loss and Other Comprehensive
Income)……………………………….… 428
Cr Contract liability - Maintenance plan (Statement of Financial
Position)……………………………….. 1,238
(Debits = Credits = R41,678
2. 27 February 2025 - service one (satisfaction of performance obligation)
Dr Contract liability - Maintenance plan (Statement of Financial
Position)………………………………………… 310
Cr Revenue - Maintenance services (Statement of Profit or Loss and Other
Comprehensive Income)……………………… 310
(Contracts remaining at year end: Service 2 - £413 and Service 3 - £515) (Contract
liability - Maintenance plan (Balance Sheet))
b.) Calculate the corrected profit before tax (PBT) of Pedal Ltd for the year ended
30 June 2025 Given: Draft profit before tax (before adjustments) = R 1 450 000
Revenue: Sale of road bike (IFRS 15)
Road bike R 40 012
,Cycling shoes R 428
Maintenance service 1 R 309 Total revenue recognised = R 40 749
Cost of sales for these items was already correctly recorded = increase PBT R 40 749
Sale of old delivery vehicle Sale proceeds = R 87 000 Carrying amount = R 40 000
Accounting gain = 87 000 – 40 000 = R 47 000 increase in PBT
Change in inventory valuation (IAS 8)
Closing inventory (FIFO) R 630 000
Closing inventory (Weighted average) R 570 000
Difference = R 60 000 (higher closing inventory = lower cost of sales)
Increase PBT = R 60 000
Warranty provision (IAS 37 / IAS 8 change in estimate)
Computation of required closing provision:
Defect type If all units defective (R) Probability Expected cost (R)
Minor 600 000 3% 18 000
Major 1 200 000 2% 24 000
Total expected 42 000
Books currently show provision = R 53 000. Actual warranty costs paid (not recorded) =
R 48 300.
After recording payment: 53 000 – 48 300 = R 4 700 balance.
Required closing provision = R 42 000.
Top-up needed = 42 000 – 4 700 = R 37 300
expense decrease PBT = R 37 300
Computation of corrected profit before tax
, Item Effect on PBT (R)
Draft profit before tax 1 450 000
+ Revenue (bike + shoes + service 1) + 40 749
+ Gain on sale of old vehicle + 47 000
+ Inventory (FIFO vs WA) + 60 000
– Additional warranty expense – 37 300
Corrected profit before tax 1 560 449
Corrected Profit before Tax = R 1 560 449
c.) Deferred tax (statement of financial position)
Summary (final amounts)
Deferred tax liabilities (total) ........................................ R 18,900
Deferred tax liability - Inventory (SFP) ...................... R 16,200
Deferred tax liability - New delivery vehicle (SFP) ........... R 2,700
Deferred tax assets (total) ........................................... R 11,340
Deferred tax asset - Warranty provision (SFP) ................. R 11,340
Net deferred tax (Statement of Financial Position) - net deferred tax liability = R
7,560 (R18,900 − R11,340)
Workings (step-by-step digit-by-digit calculations)
Inventory - temporary difference (taxable temporary difference) Carrying amount
(accounting, FIFO) is R 60 000 higher than tax base (SARS uses weighted average).
Deferred tax liability = 27% × 60 000.
