Page 2 of 6

QUESTION 1 SUGGESTED SOLUTION AND MARK PLAN

MARKS
POS ACT
a) Journal entries
DR CR
R R

Right of use asset 708 563 2

Bank (1 207 + 36 876) 38 083 1½
Lease liability (W1) 670 480 ½

Interest expense (W1) 75 764 ½

Bank 182 783 ½
Lease liability (Balancing) 107 019 ½+½

Depreciation (708 563/6) 118 094 1

Accumulated depreciation: Right of use asset 118 094 ½

Provision for data recovery costs 328 000 ½

Bank 305 000 ½
Data recovery expense (685 000 - (230 000 + 127 000 + 305 000)) 23 000 ½+½

Cloud backup expense 40 000 ½

Bank 40 000 ½
a) 10½ 0
b) Disclosure of lease: AddToCart (Pty) Limited (Lessee)

ADDTOCART (PTY) LIMITED

(EXTRACT) NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2021

15. Lease note

15.1. Right of use asset

R
Acquisition of leased asset (refer to a) 708 563 ½
Depreciation (708 563 / 6) (118 094) 1
Carrying amount at 30 April 2021 590 469 ½

15.2 Maturity analysis of future lease payments

R
- in 2022 182 783
- in 2023 182 783
1
- in 2024 182 783
- in 2025 182 783
Total future lease payments 731 132
Future finance costs (Balancing) (167 671) ½
Net lease liability (W1) 563 461 ½

15.3 Other expenses related to leases

R
Finance costs - lease of Crafter Van (W1) 75 764 ½
Format ½
b) 5 0

RGV201 Mock Test 2 : May 2023

 Page 3 of 6

QUESTION 1 (CONTINUED) SUGGESTED SOLUTION AND MARK PLAN

MARKS
POS ACT

WORKINGS

W1 Lease of Crafter Van

n = 5; PMT = (182 783); FV = 0; I = 11.3%; 2

COMP PV = 670 480

Date Interest Payment Balance

1 May 20 670 480 ½
30 Apr 21 75 764 (182 783) 563 461 1

Workings 3½ 0

a) 10½ 0

b) 5 0

QUESTION 1 19 0

RGV201 Mock Test 2 : May 2023

 Page 4 of 6

QUESTION 2 SUGGESTED SOLUTION AND MARK PLAN

MARKS
POS ACT
a) TikTik Matter

To: The Accountant of Futuratech Limited

Regarding: The TikTik matter

The issue at hand is whether the court case relating to the TikTik app should be recognised as a
provision, disclosed as a contingent liability or ignored, in the financial statements of Futuratech
Limited for the year ended 30 April 2021. ½

In order for a provision to be recognised the definition of a liability needs to be met:

A liability is a :
Present obligation: exists if it more likely than not. ½
As the legal advisors are of the opinion that this case will not be successful, the present obligation
cannot be considered to be more likely than not. ½
There has been legal action instituted against Futuratech but the court is still deciding whether or
not Futuratech has an obligation. Therefore there is no current legal or constructive obligation at
year-end. ½
A present obligation does not exist at 30 April 2021. ½

As the result of a past event: violation of privacy protection laws, this occurred before the year-end. ½
½

From which the outflow of benefits is probable: As the legal advisors are of the opinion that this ½
case will not be successful, the outflow of benefits cannot be considered to be more likely than not.
½

The definition is not met therefore a provision cannot be recognised in the 2021 financial year. 1

Consideration should be given to whether a contingent liability exists: ½

Possible obligation: As the legal advisors are of the opinion that this case will not be successful, the ½
present obligation cannot be considered to be more likely than not.
Only a possible obligation appears to exist at 30 April 2021 reporting date.

As the result of a past event: as above ½

Whose existence will only be confirmed by the occurrence or non-occurrence of an uncertain future
event not wholly within the control of the entity: whether the legal action taken will result in a ½
successful case for the claimants is not within the control of Futuratech Limited. ½
The legal representatives stated that as there are no similar cases on this specific matter, it is not
entirely unlikely that the case might succeed. As the court case cannot be predicted with certainty,
the obligation cannot be considered remote. ½

The contingent liability definition is met and thus a contingent liability should be disclosed in the
annual financial statements of Futuratech Limited at 30 April 2021. 1
Disclosure should include a description of the nature and an estimate of the financial impact if
available. 1

a) Limited to 6 0

RGV201 Mock Test 2 : May 2023

 Page 5 of 6

QUESTION 2 (CONTINUED) SUGGESTED SOLUTION AND MARK PLAN

MARKS
POS ACT
b) Change in estimate and Change in Accounting Policy

FUTURATECH LIMITED
(EXTRACT) NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2021

10. Change in estimate

During the year management revised the estimate on their tablets. The useful life of a equipment was
re-estimated to a total useful life of three years from an original five years. ½

The effect on profit R

- decrease in current year (10 800-21 600) (10 800) 1
- increase in future years ((10 800 x 3) - 21 600) 10 800 1

12. Change in accounting policy

During the year the company changed its accounting policy for inventory valuation from weighted
average to FIFO. The change was made to achieve fairer presentation. 1

The effect of the change in policy is as follows:

2021 2020
R R
Statement of profit or loss
Decrease in cost of sales (W2) (100 000) (35 000) 1
Increase in profit for the year 100 000 35 000 ½

Statement of financial position

Increase in inventory (W2) 120 000 20 000 1
Increase/(Decrease) in retained earnings at beginning
20 000 (15 000) 1
of year
Increase in retained earnings at end of year (W2) 120 000 20 000 ½

Format 1
8½ 0

RGV201 Mock Test 2 : May 2023

 Page 6 of 6

QUESTION 2 (CONTINUED) SUGGESTED SOLUTION AND MARK PLAN

MARKS
POS ACT
0

WORKINGS

W1 Change in estimate
Original depreciation: (54 000) / 5 10 800 ½
Carrying amount at change in estimate: (54 000 - 10 800) 43 200 ½
New depreciation: (43 200 / 2) 21 600 1

W2 Change in accounting policy

2021 2020 2019
R R R
Cost of sales -100 000 -35 000 15 000 1½
Opening Inventory 20 000 -15 000 0 ½
Closing Inventory 120 000 20 000 -15 000 1½

Profit for the year 100 000 35 000 -15 000 ½

Retained Earnings 120 000 20 000 -15 000 1½

Workings 7½ 0

a) 6 0

b) 8½ 0

QUESTION 2 22 0

RGV201 Mock Test 2 : May 2023