FINANCIAL ACCOUNTING 100/101 Extract from minutes of management meetings:

Learning Opportunity 5 ** Date: 12 April 2019

DEPARTMENT OF
Marks: 30 ** Time: 45 minutes ACCOUNTING Held on 2 July 2017
M Scheun/T van Oordt UP The second revaluation of land and buildings was performed by Nibali Valuators on
1 July 2017. The revalued amount was calculated at R500 000 for land.

Held on 1 February 2018

Question 1 (20 marks; 30 minutes) Thieves broke into the offices last night and stole the computer equipment. Luckily
the insurance representative came out today and we received an insurance pay-out
You are the newly appointed financial accountant of COOLBOX KINGS, an entity of R20 000. The full insurance proceeds were used to purchase new equipment on
trading in coolboxes. In order to compile the financial statements for the year ended 1 February 2018 with the same residual value and useful life as the previous
30 June 2018, the owner, Mr King, has provided you with the following documents: equipment.
Extract from the accounting policies: Held on 30 June 2018
The odometer of the vehicle increased by 81 250km during the financial year ended
Land and buildings: 30 June 2018. Management needs to consider selling the vehicle in the next
Land is carried under the revaluation model and are revalued every two years by an financial year. The estimated useful lives and residual values of all the entity’s assets
independent professional valuer with reference to current market prices. Land is not have remained unchanged since the date of purchase.
depreciated. Buildings are carried under the cost model.
E-mail from accounting clerk received on 1 July 2018
Equipment, machinery and vehicles:
To: Financial Accountant
Equipment, machinery and vehicles are carried under the cost model.
From: Accounting Clerk
Inventory: Date: 1 July 2018
The entity uses the perpetual inventory system. Re: Bank Reconciliation

Good day,
Extract from the asset register as at 30 June 2017:
I performed the bank reconciliation as you requested and I found the following
Land Building Computer Machinery Vehicle differences:
Equipment 1. There is a debit on the bank statement of R10 000 to K-Plus Providers for the
Purchase date 1 Jul 2013 1 Jul 2013 ? 1 Nov 2016 1 Jul 2015 purchase of jackets and trousers that will be worn by employees. There is no
Cost R240 000 R216 000 R52 000 ? R120 000 corresponding entry in the Bank General Ledger.
Previous 1 Jul 2015 n/a n/a n/a n/a 2. There is a credit in the bank general ledger of R1 500 for stationary from CPA
revaluation date Traders, which has no corresponding entry in the bank statement.
Previous ? n/a n/a n/a n/a
revalued amount Kind regards,
Accumulated ? R43 200 R31 250 ? R64 000 Accounting Clerk.
depreciation as
Computer screenshot of internet banking website:
at 30 June 2017
Carrying amount R275 000 R172 800 R20 750 R8 000 R56 000
as at
Movistar Bank Today’s date: 30 June 2018
30 June 2017 Client name: Coolbox Kings
Residual value R0 R0 R2 000 R0 R24 000 Account Original deposit Current
Useful life Indefinite ? 4 years ? 240 000 amount balance
kilometres 12 month fixed deposit R50 000 R ?
Depreciation n/a Straight- Straight- 20% Production account
method line line Reducing unit method
balance Interest rate: 8% per annum.
n/a = not applicable Original deposit date: 31 July 2017.

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FRK 100/101 Learning Opportunity 5 2019 FRK 100/101 Learning Opportunity 5 2019
Extract from trial balance as at 30 June 2018:
Account R
Sales 621 639
Cost of sales 207 213
Other sundry expenses 41 495

REQUIRED:
Calculate the profit / (loss) [including any other comprehensive income, if any] for
Coolbox Kings for the year ended 30 June 2018, in accordance with International
Financial Reporting Standards (IFRS). (20)

NOTE: - Use 4 decimals in any depreciation calculation. Round off all final
amounts to the nearest Rand.
- Ignore VAT.
- Unnecessary amounts will be negatively marked.

Question 2 (10 marks; 15 minutes)

You received the following e-mail from Mr King (the owner of Coolbox Kings):

To: Financial Accountant

From: Accounting Clerk
Date: 10 August 2018
Re: Purchase of new machine

Good day,

I want to purchase a new machine that we would want to use in the manufacturing of
a new line of coolboxes. I am not sure about the following and would appreciate your
assistance:

1. The purchase price for the machine is R50 000. But there are a lot of other costs
associated with the purchase; for example delivery, installation, day-to-day
maintenance, putting in an alarm system at our building to safeguard the machine
from thieves and the cost of my own time spent in the procurement of the
machine. Which costs are we allowed to capitalise to the cost of the machine? (5)
2. Suppose that we have figured out what the cost of the machine is going to be,
what information do you need from me to determine the annual depreciation of the
machine? (5)

Thank you for your assistance. Looking forward to see you at our braai on Friday
night.

Regards,
Mr King.

REQUIRED:
Reply to Mr King’s e-mail and address ALL the queries that Mr King raised. Your
answer should be in accordance with International Financial Reporting Standards
(IFRS). Limit your discussions to the marks available per query. (10)

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FRK 100/101 Learning Opportunity 5 2019