Professional Documents
Culture Documents
CACC031 Mock Test 1 SS
CACC031 Mock Test 1 SS
QUESTION 1
a) IFRS 15 Revenue from Contracts with Customers stipulates a 5-step revenue model for the
recognition and measurement of revenue.
• Step 1: Identify a contract
• Step 2: Identify the performance obligations
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations identified in step 2
• Step 5: Recognise revenue for satisfied performance obligations
1|Page
• The contract has • (1)
commercial substance. The contract has commercial substance as
the electricity generating system and related
service contract are promised in exchange
for consideration payable by the customer
and it is thus expected that the transaction
will cause a change in future cash flow.
2|Page
CACC031 MOCK TEST 1
3|Page
As per step 2 above, the contract entails two
(1)
performance obligations namely the electricity
generating system and the four-year service
contract.
The R4 987 500 must therefore be allocated (1)
between these two performance obligations.
Allocation is made according to stand-alone
selling prices.
(1)
4|Page
CACC031 MOCK TEST 1
There are three criteria applicable for Application (only need to motivate criteria one or
performance obligations to be satisfied two – rest included for completeness)
over time:
5|Page
The use of the asset is not limited, therefore (1)
• the entity’s performance does not
criteria 3 is not met.
create an asset with an
alternative use for the customer
Conclusion:
The revenue must therefore also be recognised (1)
The performance obligation in relation
over time.
to the service contract is therefore
satisfied over time.
The performance obligation in relation (1)
to the electricity generating system is The customer obtains control on the day that the
satisfied at a point in time. electricity generating system is delivered to the
customer.(1) On that date the customer obtains
control of the asset. Therefore, the R4 239 375
revenue must be recognised on 1 March 2022,
the date of the transfer of the electricity
generating system to the customer.
The progress towards complete The total cost for Lights On Limited to supply the (1)
satisfaction of the performance service over the four year period amounts to
obligation must be measured. R500 000 and at the 31 May 2022 year end, no
costs have been incurred.
Therefore as at 31 May 2022, no revenue can
be recognised in terms of the service contract
and the full amount of R748 125 must be
6|Page
CACC031 MOCK TEST 1
7|Page
QUESTION 2
Tax reconciliation:
Applicable tax rate 28%
Tax effect of:
Profit before tax (849 166 x 28%) 237 766 (1.0)
Tax effect of non-taxable/non-deductible items
9 707
Calculations:
849 166
Corrected profit before tax
30 June 2022
Property, plant & equipment 60 667 C3.1 56 000 C3.2 4 667 (0.5) (1 307) (0.5)
Prepaid insurance (120 000 / 12 x 4) 40 000 (1.0) 0 (0.5) 40 000 (0.5) (11 200) (0.5)
Revenue received in advance (10 000) (0.5P) 0 (0.5) (10 000) (0.5) 2 800 (0.5)
Calculation 3.1
Carrying value of the printer at 30 June 2022: = R280 000 / 300 000 (0.5) X (300 000 – 235 000) (0.5)
= R60 667
Calculation 3.2
Tax base of the printer at 30 June 2022 = R280 000 X (40% - 20%) (1.0)
= R56 000
Calculation 4 (Movement for 2022): = 34 667(0.5P) – 71 332 (given) (0.5)
= 36 665
AVAILABLE MARKS: [21.5]
MAXIMUM MARKS: [19]
COMMUNICATIONS SKILLS: [1]