ACC2CP2 (2023)

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FACULTY/COLLEGE College of Business and Economics

SCHOOL School of Accounting
DEPARTMENT Department of Accountancy
CAMPUS(ES) Online
MODULE NAME Accounting 22
MODULE CODE ACC2CP2
SEMESTER D3
ASSESSMENT OPPORTUNITY, Final Assessment Opportunity
MONTH AND YEAR June 2023

ASSESSOR(S) MR Z ALLY
MS T MAHMOOD
MODERATOR(S) MR G BARNES
DURATION 3hrs (180min) TOTAL MARKS 120

NUMBER OF PAGES OF QUESTION PAPER (Including cover page) 9

INFORMATION/INSTRUCTIONS:
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• This paper must be written while using The Invigilator App. See the next page for
information in this regard.
• This is an open-book assessment and it consists of 4 questions.
• Question 1, 2 and 3 need to be written or typed out and uploaded SEPARATELY
on Blackboard.
• Question 4 is a multiple choice question which must be completed on Blackboard.
Please note that there is no scenario in the question paper for this question.
• Read the questions carefully and answer only what is required.
• All the examination regulations of the UJ and the policy document for students of the
Department of Accountancy will apply during this assessment.
• Ensure that you submit your answer to the assessment timeously on 18 June 2023 at
or before 12:30pm
• Read the questions carefully and answer only what is required and show all
calculations.
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Dear student,

Please open The Invigilator App that you downloaded from the Apple App Store,
Google Play Store or Huawei App Gallery.

Sign into the application with the credentials you created when you signed up for the
app.

Just before you start your test, scan the following QR Code:

Please ensure that you leave the application open for the duration of the test. You are
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you leave the application.

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APPLICATION PLEASE CONTACT THEIR TECHNICAL HELPDESK AT 073 505
8273.

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QUESTION 1 (55 MARKS)

(83 MINUTES)

You have been presented with the following abridged financial statements of in Spiderman Ltd
and Batman Ltd for the reporting period ended 31 December 2021.

STATEMENT OF FINANCIAL POSITION FOR THE REPORTING PERIOD ENDED 31

DECEMBER 2021
Spiderman Ltd Batman Ltd
ASSETS
Buildings 2 750 000 215 560
Plant and equipment 1 880 000 859 500

Cost price 3 150 000 1 480 000

Accumulated depreciation (1 270 000) (620 500)

Investment in Batman Ltd at cost:

160 000 ordinary shares 1 000 000 -
90 000 10% preference shares 150 000 -
Investment in Batman Ltd 250 000
Inventories 125 000 625 000
Trade receivables 970 280 510 220
Bank 420 000 80 000
7 545 280 2 290 280
EQUITY AND LIABILITIES
R5 - ordinary share capital 5 250 000 1 000 000
R1 - 10% preference share capital 300 000
Loan from Spiderman Ltd 250 000
Retained earnings 1 944 280 577 280
Trade payables 351 000 163 000
7 545 280 2 290 280

Retained earnings
Spiderman Ltd Batman Ltd

Balance at 1 January 2021 1 602 750 253 200

Profit for the year 541 530 379 080

Dividend paid - Ordinary dividend (200 000) (25 000)

- Preference dividend (30 000)
Balance at 31 December 2021 1 944 280 577 280

STATEMENTS OF COMPREHENSIVE INCOME

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FOR THE REPORTING PERIOD ENDED 31 DECEMBER 2021

Spiderman Ltd Batman Ltd

Revenue 2 430 125 810 000

Cost of sales (1 337 500) (115 000)
Gross profit 1 092 625 695 000
Other income 158 000 106 000
Net operating expenses (498 500) (274 500)
Profit before tax 752 125 526 500
Tax (210 595) (147 420)
Profit for the year 541 530 379 080

ADDITIONAL INFORMATION:

1. On 1 January 2015, Spiderman Ltd acquired an interest in the ordinary shares of Batman
Ltd. On that date the equity of Batman Ltd consisted of:

Ordinary share capital (R5 shares) R1 000 000

Retained earnings R87 000

2. Since acquisition date, Spiderman Ltd purchased its entire inventory from Batman Ltd
at cost plus 25%.There was no opening Inventory for Spiderman Ltd for 2021.Total intra-
group sales for the current reporting period ended 31 December 2021 amounted to R230
000.

4. On 1 January 2019, the management of Batman Ltd sold a vehicle with a carrying
amount of R166 000 on that date for R212 000 to Spiderman Ltd. Depreciation is written
off using the straight-line method. The remaining useful life was estimated to be 5 years
on date of sale.

5. On 1 January 2018, Spiderman Ltd purchased 90 000 preference shares for R150 000
from Batman Ltd.

6. Batman Ltd declared and paid ordinary and preference dividends during the current
reporting period. Spiderman Ltd included their share of the dividends declared and paid
by Batman Ltd in “Other income”.

7. Spiderman Ltd classified the equity investment in Batman Ltd in its separate financial
statements at cost.

8. It is the accounting policy of Spiderman Ltd to measure non-controlling interest in

ordinary shares at the fair value on the date of acquisition. At that date the of acquisition
fair value of non-controlling totalled R 222 400

9. Assume that the identifiable asset acquired and the liabilities assumed at acquisition
date are shown at their acquisition-date fair values, as determined in terms of IFRS 3,
Business Combinations.

10. You may ignore tax implications

*PLEASE TURN PAGE OVER FOR REQUIRED *

REQUIRED:

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1.1 Prepare the necessary pro forma consolidation journal entries relating to the intra-
group transactions ONLY for the reporting period ended 31 December 2021. (20)

1.2 Prepare the analysis of the owner’s equity of the ordinary shares of Batman Ltd for the
reporting period ended 31 December 2021. (10)

1.3 Prepare the analysis of the owner’s equity of the preference shares of Batman Ltd for
the reporting period ended 31 December 2021. (5)

1.4 Prepare the Consolidated Statement of Comprehensive Income of Spiderman Ltd and
its subsidiary for the reporting period ended 31 December 2021. (10)

1.5 Prepare the Consolidated Statement of Changes in Equity of Spiderman Ltd and its
subsidiary for the reporting period ended 31 December 2021. (10)

PLEASE NOTE: Total columns are NOT required.

(55)

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QUESTION 2 (20 MARKS)

(30 MINUTES)
Ready Ltd is one of the largest integrated poultry producers in South Africa and has grown
substantially over the past few years. The key activities of Ready Ltd comprise of
manufacturing of animal feeds, broiler genetics, production and sale of day-old chicks and
hatching eggs.
The following is an abridged statement of comprehensive income of Ready Ltd for the
reporting period ended 31 March 2022:
2022 2021
R R
Profit before dividends and tax 5 555 000 4 890 000
Dividends received 309 000 265 000
Profit before tax 5 864 000 5 155 000
Tax expense (1 641 920) (1 443 400)
Profit for the period 4 222 080 3 711 600
Other comprehensive income
Mark-to-Market reserve 200 000 -
Total comprehensive profit for the period 4 422 080 3 711 600

The capital structure of the entity is as follows at the beginning of the current reporting
period:
Ordinary share capital of R5.00 per share
Authorised (number of shares) 2 000 000
Issued 1 April 2020 (number of shares) 900 000

11% preference shares redeemable at the option of Ready Ltd issued at

R500 000
R2.5 each on 11 August 2017

8% non-cumulative non-redeemable preference shares issued on 31

R655 000
December 2021

10% cumulative redeemable preference shares issued on 30 September

R495 000
2021

Additional Information
1. The issued ordinary share capital of Ready Ltd on 1 April 2020 was 900 000 shares of
R5 each. On 1 June 2020 the company issued 220 000 shares for cash.

2. On 1 August 2021 a capitalisation issue was made of two ordinary shares for five
ordinary shares held on that date, issued at fair value.

3. On 31 November 2021 Ready Ltd decided to buy back 177 000 ordinary shares at the
fair value of R6.50 per share.

4. On 31 December 2021 the company secretary proposed a share split of R6 ordinary

shares into R3 ordinary shares.

5. No provision was made for the dividends on the 10% cumulative preference shares in
the 2022 reporting period.

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6. The preference dividends on the 11% redeemable preference shares and the 8% non-
cumulative preference shares were declared on 31 March for both periods. No entry
had been recognised in the accounting records and no cash had been paid yet.

REQUIRED:
2.1 Present and disclose the Earnings per share (EPS) in the financial statements of Ready
Ltd for the reporting period ending 31 March 2021 and 31 March 2022 to comply with
the minimum requirements of the Companies Act and IFRS.
Note: Show all necessary calculations.
Comparative figures are required. (20)

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QUESTION 3 (35 MARKS)

(53 MINUTES)

Woodken Ltd is a manufacturer and retailer of air fryers. The senior accountant responsible
for the preparation of the end of year management accounts is on leave therefore the financial
director has approached and requests your assistance to finalise the reporting period year-
end accounts.
The following balances appeared in the records of Woodken Ltd on 30 June 2022:
Note R
Machinery 1 ??
Inventories 2 ??
Receivables 4 160 840
Bank 5 175 000

ADDITIONAL INFORMATION:
1. A machine that is used in the manufacturing process was purchased and put into use on
01 October 2019 at a purchase price of R971 750 (incl. VAT). During the board meeting
held on 16 June 2022, management decided to change the depreciation method on the
machine from the straight-line method over 10 years, to the units of production method.
The total number of units over the total expected life of the machine is 500 000 units. For
this purpose, the following information was collected by the production manager:

Reporting Period Units produced

30 June 2020 18 000
30 June 2021 23 500
30 June 2022 50 325

2. Inventories on hand consist of:

Cost Net realisable

value
Raw materials R835 000 R850 000
Work in progress R320 000 R318 750
Finished products ? ?

2.1 The following information is provided with respect to finished products:

Costs R
Manufacturing cost per unit 1 080
Administration cost 100
Storage cost 50
VAT 162
Abnormal wastage per unit 10
Selling price per unit 1 800

2.2 Woodken Ltd had no air fryers at the beginning of the year, the time to produce and
assemble each unit was much faster this year with all operations resuming back to
normal and as a result 50 325 floodlights were produced of which 48 500 was sold
during the year.

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2.3 The selling agents’ commission is 15% of the selling price.

2.4 Woodken Ltd values its inventories at the lower of cost, measured on the first-in-first-
out basis, or net realisable value.

3. The financial director noticed that the senior accountant did not recognise the write down
to net realisable value after measuring inventories in accordance with their accounting
policy of measuring inventories at the lower of cost and net realisable value. The write
down to net realisable value in the 2021 financial year was R128 325. However, he is
unsure how to account for this oversite for the previous year.

4. On 11 July 2022 it was discovered that the senior accountant had not recognised bad
debts of R54 639 for the 30 June 2022 reporting period.
5. Cash on hand amounted to R20 500. Woodken maintains a current account with BNF
Bank Limited. As at 30 June 2022, the account with BNF Bank Ltd had a favourable
balance of R175 000.
6. A meeting will be held on the 31 August 2022 to authorise the current period’s financial
statements for issue.
7. Assume a VAT rate of 15%.

REQUIRED:

3.1 Present only the assets section as it should appear in the Statement of Financial Position
for Woodken Ltd for the reporting period ended 30 June 2022. (5)

3.2 Disclose the following notes to the Statement of Financial Position for Woodken Ltd for
the reporting period ended 30 June 2022 to comply with International Financial Reporting
Standards (IFRS).

• Property, plant and equipment

• Inventory
• Change in accounting estimate
• Prior period errors
(30)
Please note:
- Only the notes in relation to the assets are required.
- Notes on the accounting policy are not required.
- Comparative figures are not required.
- Shows all your calculations clearly.

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