FAC2601 Assignment 02 (Semester 2 2022)

Suggested solutions
Compiled by Ruan Roodt
Please note that this is not the official set of solutions as compiled by the FAC2601
lecturers, which will be released in Tutorial Letter 202 at a later stage.
This document was shared after the portal for submission has closed on 2 September
2022 @20:00

SANKOFA LTD

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020

Assets Note R
Non-current assets 4 532 986
Property, plant and equipment 1 3 398 986
Financial assets 2 1 034 000
Investment in subsidiary 3 100 000

Current assets 652 600

Inventories 4 294 600
Trade and other receivables 220 000
Financial assets 2 90 000
Cash and cash equivalents
[23 000 + (20 000 x 1.25)] 48 000
TOTAL ASSETS 5 185 586
 SANKOFA LTD

EXTRACT FROM THE NOTES TO THE FINANCIAL STATEMENTS AT 30 JUNE 2020

1. Property, plant and equipment

Machinery
Factory and
Land Buildings Equipment Motor vehicles Total
R R R R R

Carrying amount as
at 1 July 2019 1 000 000 - 341 250 436 250 1 777 500

Cost/Valuation 1 000 000 390 000 690 000 2 080 000

Accumulated (253 750)
depreciation (48 750) (calc 6) (302 500)

325 000
Additions @cost 1 500 000 (calc 2) 1 825 000
Depreciation for the (10 181) (92 083) (140 000)
year (calc 3) (calc 4) (calc 7) (242 264)
Depreciation 27 083 (27 083)
capitalised (calc 2) (calc 2) -
*120 000
Revaluation (calc 1) 120 000

Disposal @carrying (81 250)

amount (calc 8) (81 250)

Carrying amount as
at 30 June 2020 1 120 000 1 516 902 547 084 215 000 3 398 986
Cost/Valuation 1 120 000 1 527 083 715 000 430 000 3 792 083
Accumulated (167 916) (215 000)
depreciation (10 181) (Calc 5) (calc 9) (393 097)

*The land situated on Erf 392, Limpopo, was revalued to market value on 30 June 2020 by Mr
Mkefa, an independent sworn appraiser.

If land was valued at cost, its carrying amount would be as follows:

Cost ……………………… 1 000 000

Less: Accumulated depreciation……………….. –

= Carrying amount 1 000 000

 CALCULATIONS (PPE)

1. 1 120 000 – 1 000 000

2. ONLY the new machinery purchased on 1 July 2019 was withdrawn from production between 1
August 2019 and 31 January 2020 (6 months) to erect the factory building (NOT ALL THE
MACHINERY).

Machinery is depreciated over 6 years in accordance with the straight-line method.

Depreciation capitalised = (300 000 + 25 000) x 1/6 x 6/12

= 27 083

3. Depreciation for the year (buildings) = (1 500 000 + 27 083) x 2% x 4/12

= 10 181

Buildings are depreciated at 2% p.a. using the straight-line method

Building was completed and brought into use on 29 February 2020. Therefore, depreciation is
only provided for 4 months (1 March 2020 to 30 June 2020).

4. Depreciation for the year (Machinery and equipment)

Old = 390 000 x 1/6 = 65 000

New (portion not capitalised) = 325 000 x 1/6 x 6/12 = 27 083

TOTAL = 65 000 + 27 083 = 92 083

5. 48 750 + 92 083 + 27 083

6. The cost of motor vehicles on 1 July 2019 (R690 000) consists of:

 Vehicle purchased on 1 April 2017 @R260 000

 Remaining vehicles were purchased on 1 July 2018 @R430 000 (balancing figure)

Accumulated depreciation on motor vehicles on 1 July 2019 is calculated as follows (25% p.a.
straight line method):

Vehicle purchased on 1 April 2017 Remaining vehicles purchased on 1 Accumulated depreciation on motor
July 2018 vehicles on 1 July 2019
Period 1 April 2017 – 30 June 2019 Period 1 July 2018 – 30 June 2019 146 250 + 107 500
= 253 750
= 260 000 x 0.25 x 27/12 = 430 000 x 0.25
= 146 250 = 107 500

7. Depreciation on motor vehicles for the year (25% p.a. SL)

Vehicle disposed of on 31 December 2019 = 260 000 x 0.25 x 6/12 = 32 500

Remaining vehicles = 430 000 x 0.25 = 107 500

TOTAL = 32 500 + 107 500 = 140 000

8. Disposal at carrying amount (motor vehicle)

Carrying amount of the vehicle on 1 July 2019 = 260 000 – 146 250 (see calculation 5) = 113 750

Additional depreciation written off (from 1 July 2019 to 31 December 2019) = 32 500

(see calculation 6)

Carrying amount @disposal = 113 750 – 32 500

= 81 250

9. 253 750 + 140 000 – (146 250 + 32 500)

2. Financial assets

R
1 124 000
Non-current assets
Financial assets at fair value through other comprehensive
income (not held for trading)
Unlisted investment –
70 000 ordinary shares in Ziggy (Pty) Ltd (1.2 x 70 000) 84 000

Secured loan
Loan to Kwasi Ltd 950 000

The loan was granted on 30 June 2020 and bears interest

at 13% p.a. payable monthly in arrears. The loan is secured
by a first mortgage over Kwasi Ltd's immovable property.

Current assets
Financial assets at fair value through profit or loss - held
for trading
Listed investment –
30 000 preference shares in Adam Ltd (30 000 x 3) 90 000

3. Investment in subsidiary (Nkosi Ltd)

R
100 000
Shares at fair value
(cost = R90 000) 100 000
4. Inventory

R
294 600
Raw materials
(130 000 x 0.97) 126 100
Work-in-progress 90 300
Finished goods
(85 000 x 0.92) 78 200