FAC2601
FINANCIAL ACCOUTNING FOR COMPANIES
Presented by:
Andre Eysele
FAC 2601 LECTURERS:
CONTACT DETAILS:
Frank Montgomery (ML): (012) 429 4537:
Andre Eysele: (012) 429 4343
Fazana Aboo: (012) 429 4973
Moshupi Mokgobinyane: (012) 429 6991
Chris Mkefa: (012) 429 4843
montgf@unisa.ac.za
eysela@unisa.ac.za
aboof@unisa.ac.za
mokgomv@unisa.ac.za
cmkefa@unisa.ac.za
Module Course Number: (012) 429 4238
Module E-mail: fac2601@unisa.ac.za
PLEASE CONTACT US AT THE ABOVE DETAILS
Topics to be presented:
FASSET – CLASS 6TH
MEMORANDUM EXP:
MAY 2020 – Q1 & Q2
MEMORANDUM – Q1 (May 2020)
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
STEPS TO FOLLOW FOR ANY GIVEN QUESTION:
STEP 1: You always read the required first, so that you know what is expected of you.
STEP 2: Read the information in the scenario.
STEP 3: Make sure you provide the correct format and disclosures.
STEP 4: Show all your calculations and reference to your calculations.
STEP 5: Ensure you know the financial year end of the entity and what dates are provided.
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 1:
Which one of the following statements describes the role of substance over form in
determining if information is useful to the users of financial information?
3) The economic substance of transactions and events must be recorded in the financial
statements rather than just their legal form in order to present a true and fair view of the affairs
of the entity. (Theory – Conceptual Framework Tut Letter 103 par 3.2)
QUESTION 2:
Which factors should NOT be considered in selecting a measurement basis for an asset,
liability, income and expense when preparing financial statements that are useful to
investors, lenders and other creditors?
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 2:
Which factors should NOT be considered in selecting a measurement basis for an asset,
liability, income and expense when preparing financial statements that are useful to
investors, lenders and other creditors?
3) The information provided must be relevant and faithfully represented what it purports to
represent but the information provided, does not and should not have to be comparable,
verifiable timely nor understandable. (Theory – Conceptual Framework – Tut Let 103 par
3.6.3)
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 3:
The following list of balances appear, amongst others, in the accounting records of Trail
Ltd on 29 February 2020:
Ordinary Share Capital (shares issued at R5,50 each)
Proceeds of ordinary shares issued on 31 July 2019
R
5 500 000
550 000
(Shares issued at R2,75 each)
8% Preference Shares issued on 1 September 2019
100 000
(Shares issued at R4,00 each)
The following decision was taken by the board of directors and has not yet been recorded in
the accounting records of Trail Ltd as at 29 February 2020:
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 3:
The following decision was taken by the board of directors and has not yet been recorded in
the accounting records of Trail Ltd as at 29 February 2020:
The directors decided on a capitalisation share issue of 1 share for every 4 shares held as at
31 August 2019 at R3,50 per share. Which one of the following options represents the Rand
value of the shares that have to be capitalised:
1) R 980 000
2) R1 050 000
3) R1 071 875
4) R1 150 000
Be careful about this
statement if not yet
recorded: Amount of
shares / 4
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 3:
Shares (Number)
Ordinary Shares: R5 500 000 / R5,50
1 000 000
Proceeds of ordinary shares: (R550 000 / R2,75)
200 000
Total amount of shares in issue at 31 August 2019
1 200 000
Capitalization Issue: (1 200 000 / 4 x R3,50)
R1,050,000
Option 2 – R1,050,000
IF already recorded: Divide amount
of shares by (1+4) = 5
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 4:
Soll Ltd provided a loan to Fargo Ltd on 1 November 2016 of which the capital portion is repayable in
eleven equal annual installments starting on 1 July 2017. Interest on the loan is calculated at 10%
per annum and is payable at the end of each financial year.
The year-end of Soll Ltd is 31 December.
The outstanding balance on the loan, as at 31 December 2019, amounts to R540 000
Which one of the following options represents the amount of interest received by Soll Ltd for the year
ended 31 December 2019?
1) R27 000
2) R30 375
3) R57 375
4) R67 375
How many
years has
lapsed?
What is the
F/Y/D - Entity
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 4:
Loan commenced – 1 November 2016 (First payment though 1 July 2017)
11 Equal Payments – 1 July 2017 – 1 July 2019 (within our financial year end = 3)
Thus the opening balance at the beginning of 1 January 2019 = R540’/(11 -3) = R607 500
R540 000/8 = R67 500 + R540 000 = R607 500 (3 Years passed) (11 – 3 = 8)
Therefore:
R607 500 x 10% x 6/12 (First 6 months) + Second R540 000 x 10% x 6/12
R540 000 because a PMT was made on the 1 July 2019.
Total Interest: R30 375 + R27 000 = R57 375 Option 3
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 5:
Outdoor-Track Ltd has a revenue policy intact that allow their customers to receive a 5% discount on
goods sold, when those customers purchase more than 1 250 cool bags per year. On 1 June 2018 a
regular customer already purchased 750 cool bags at R150 per cool bag. Outdoor-Track Ltd expects
that this customer will purchase more than 1 250 cool bags during the year. The financial year end of
Outdoor-Track Ltd is 28 February 2019.
Which one of the following options represents the correct amount of revenue recognized in
the statement of profit or loss and other comprehensive income on the 1 st of June 2018?
1) R 5 625
2) R106 875
3) R112 500
4) R178 125
MEMORANDUM – Q1
MAY EXAMINATION Q1 & Q2 – FIRST SEMESTER 2020
QUESTION 5:
Revenue Recognised (P/L): (750 x 150 x 95%) = R106,875 Option 2
Revenue recognized at the moment the entity is expected to be entitled to.
MEMORANDUM – Q2
MAY EXAMINATION Q2 – FIRST SEMESTER 2020
(STEP 1): - READ THE REQUIRED FIRST
PREPARE THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME AND THE DIRECTOR’S REMUNERATION NOTE OF FABLES LTD FOR THE
FINANCIAL YEAR ENDED 28 FEBRUARY 2019. YOUR ANSWER SHOULD COMPLY WITH
THE REQUIREMENTS OF IFRS.
STEP 2: DRAW UP THE STATEMENT AND NOTE DISCLOSURE
STEP 3: READ THE INFORMATION IN THE SCENARIO AND NOTE THE DATES
MEMORANDUM – Q2 (May 2020)
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
Revenue
Cost of sales
Gross Profit
Other income
Distribution costs - Given
Administrative expenses - Given
Other expenses
Finance cost
R
MEMORANDUM – Q2
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
Profit before tax
Income tax expense - given
Profit for the year
Other comprehensive income for the year
Gain on revaluation of land
Fair value adjustments on financial assets through OCI
Total comprehensive income for the year
R
MEMORANDUM – Q2 (May 2020)
QUESTION 2 – MEMORANDUM EXPLAINED
ADDITIONAL INFORMATION:
1. Fables Ltd maintained a gross profit percentage of 70% on sales during the
year: Cost of sales: (100 – 70) = 30%
NOTES
Revenue (8 395 000 x 100/115) – VAT Inclusive of 15%
Cost of sales (7 300 000 x 30%)
Gross Profit (7 300 000 x 70%)
R
7 300 000
(2 190 000)
5 110 000
2 - 5. The Key personnel are as follows:
Draw up the Remuneration note as per disclosure format as required by IFRS:
PRACTICAL APPLICATION – Q2
FABLES LTD
NOTES FOR THE YEAR ENDED 28 FEBRUARY 2019
Pensions paid out by
entity – not
contributions
1. REMUNERATION OF DIRECTORS AND PRESCRIBED OFFICERS
PRACTICAL APPLICATION – Q2
FABLES LTD
NOTES FOR THE YEAR ENDED 28 FEBRUARY 2019
1. REMUNERATION OF DIRECTORS AND PRESCRIBED OFFICERS
2. 40% is paid by the company’s – Hence R50 000 x 40% & R25 000 x 40%
MEMORANDUM – Q2 (May 2020)
QUESTION 2 – MEMORANDUM EXPLAINED
Additional Information:
6 - 8. On 30 November 2018, machinery with a cost price of R100 000 and accumulated deprectiation
of R40 000 at the beginning of the current financial year was sold for R70 000 (On the face of the
Question – Other Income).
THEREFORE WE KNOW THAT WE CANNOT RECORD THE SELLING PRICE BUT THE PROFIT
THUS R70 000 IS GIVEN – R70 000 AND THEN CALCULATE THE PROFIT.
NOTES
R
Revenue (8 395 000 x 100/115)
7 300 000
Cost of sales (7 300 000 x 30%)
(2 190 000)
Gross Profit (7 300 000 x 70%)
Other income [(70 000 – 70 000) + 25 000 (Calc 1) + (1 000 x 3) (calc 2)
5 110 000
28 000
MEMORANDUM – Q2
QUESTION 2: CALCULATION – OTHER INCOME
Other Income – Given 70 000 (Represents the Selling Price) Additional Information 6.
We recognize Profit on the selling price. We need to calculate the Profit.
Calculation 1 – Profit on sale of machinery
We still
need to
calc this?
Carrying amount: 100 000 – [40 000 (AccuDep) + Dep until sold (100’ x 20% x 9/12)]
100 000 – 55 000 = 45 000. Profit: R70 000 – 45 000 = 25 000 – Calc 1
MEMORANDUM – Q2 (May 2020)
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
Revenue (8 395 000 x 100/115)
Cost of sales (7 300 000 x 30%)
Gross Profit (7 300 000 x 70%)
We know that finance cost
need to be separately
disclosed therefore
deduction.
Other income [(70 000 – 70 000) + 25 000 (Calc 1) + (1 000 x 3) (calc 2)
NOTES
R
7 300 000
(2 190 000)
5 110 000
28 000
Distribution costs - Given
(1 000 000)
Administrative expenses – Given (Additional Information 9.)
(1 052 600)
Other expenses (1 960 000 – 72 600)
(1 887 400
Finance cost (calc 3)
Depreciation ???
MEMORANDUM – Q2
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
R
Profit before tax
1 125 400
Income tax expense – given (Additional Information 11)
(407 299)
Profit for the year
718 101
Other comprehensive income for the year
34 000
Gain on revaluation of land (350 000 – 320 000) – AI (12)
30 000
Fair value adjustments on financial assets through OCI (R20 – R16) AI
(13.2)
Total comprehensive income for the year
4 000
752 101
MEMORANDUM – Q2
QUESTION 2: CALCULATION – REVALUATIONS AND FAIR VALUE INVESTMENTS
ADDITIONAL INFORMATION 12:
Land Revalued: (R350 – R320) = R30 000 OCI
ADDITIONAL INFROMATION 13:
Calculation 2 – Fair value adjustments of financial assets at fair value through P/L:
AI (13.1) – R3 (R45 – R42) x 1 000 = R3 000 – Calculation 2
AI (13.2) – (R20 000 – R16 000) = R4 000 OTHER COMPREHENSIVE INCOME
MEMORANDUM – Q2
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
R
Profit before tax
1 125 400
Income tax expense – given (Additional Information 11)
(407 299)
Profit for the year
718 101
Other comprehensive income for the year
34 000
Gain on revaluation of land (350 000 – 320 000) – AI (12)
30 000
Fair value adjustments on financial assets through OCI (R20 – R16) AI
(13.2)
Total comprehensive income for the year
4 000
752 101
MEMORANDUM – Q2
QUESTION 2: CALCULATION 3 – FINANCE COST
ADDITIONAL INFORMATION 14:
R550 000/5 * = 110 000 * (8-3) 8 Installments to date 3 has lapsed, 5 remaining.
Therefore at the beginning of the year the balance was R660 000 x 12% x 6/12 = R39 600
Other 6 months after installment: R550 000 x 12% x 6/12 = R36 600
Total = R72 600 – Calc 3
MEMORANDUM – Q2 (May 2020)
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
R
Revenue (8 395 000 x 100/115)
7 300 000
Cost of sales (7 300 000 x 30%)
(2 190 000)
Gross Profit (7 300 000 x 70%)
Other income [(70 000 – 70 000) + 25 000 (Calc 1) + (1 000 x 3) (calc 2)
5 110 000
28 000
Distribution costs - Given
(1 000 000)
Administrative expenses - Given
(1 052 600)
Other expenses (1 960 000 – 72 600)
(1 887 400
Finance cost (calc 3)
(72 600)
MEMORANDUM – Q2
QUESTION 2 – MEMORANDUM EXPLAINED
FABLES LTD
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
28 FEBRUARY 2019
NOTES
R
Profit before tax
1 125 400
Income tax expense - given
(407 299)
Profit for the year
718 101
Other comprehensive income for the year
34 000
Gain on revaluation of land (350 000 – 320 000) – AI (12)
30 000
Fair value adjustments on financial assets through OCI (R20 – R16) AI
(13.2)
Total comprehensive income for the year
4 000
752 101
PRACTICAL APPLICATION – Q 2
FABLES LTD
NOTES FOR THE YEAR ENDED 28 FEBRUARY 2019
1. REMUNERATION OF DIRECTORS AND PRESCRIBED OFFICERS
PRACTICAL APPLICATION – Q 2
FABLES LTD
NOTES FOR THE YEAR ENDED 28 FEBRUARY 2019
1. REMUNERATION OF DIRECTORS AND PRESCRIBED OFFICERS
MAY EXAM Q1 & Q2
THE END