QUESTION 1 (45,5 marks)

SUGGESTED SOLUTION CALCULATIONS

PART A (35 marks) 1. Profit on sale of asset R Marks
AGRIFARM TRADERS Carrying amount as at 01/04/20X16 (given) 62 500^ 0.5
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Depreciation : up to 31/08/20X16
FOR THE YEAR ENDED 31 MARCH 20X17 ^p (R125 000/5)^ x 5/12^ (10 417) 1.0
R Marks Carrying amount: 31/08/20X16 52 083
Revenue Calc 5 3 423 810 7.5 Proceeds on sale of vehicle (R62 500^ + R2 500^) (65 000) 1.0
Cost of sales Calc 6 (2 943 533) 6.5 Corrected profit 12 917 [2.5]
Gross profit ^p 480 277 Recorded profit 2 500
Other income ^p 89 385 Adjustment 10 417
- Gain on re-measurement to fair value Calc 3.1 46 000 2.0
- Profit on sale of asset Calc 1 12 917 2.5 Correcting journal entry:
- Adjustment for allowance for expected credit losses^p Dr Depreciation (P/L) 10 417
(R25 218^ – R23 500^) 1 718 1.0 Cr Profit on sale of asset (P/L) (10 417)
- Dividend income Calc 3.2 28 750 1.0
2. Depreciation R
Other expenses (1 146 682) Vehicles: [R464 800 ^– (R332 000^ – R62 500^) + R10 417^] 205 717 2.0
- Bank charges (R2 585^ + R235^) 2 820 1.0 Machinery: (R110 000 – R66 000)^ 44 000 0.5
- Credit losses Calc 5.1 1 500^ 0.5 Computer equipment: (R42 500 – 14 167)^ 28 333 0.5
- Depreciation Calc 2 278 050 3.0 278 050 [3.0]
- Insurance (R11 583^ + R975^) 12 558 1.0 Adjusting journal entry:
- Other expenses 218 306^ 0.5 Dr Depreciation 267 633
- Salaries and wages Calc 7 633 448 2.0 Cr Accumulated depreciation on vehicles
(R205 717 – R10 417) (195 300)
p
Cr Accumulated depreciation on machinery (44 000)
Net finance income^ 4 232 Cr Accumulated depreciation on computer equipment (28 333)
Finance income Calc 4 4 232 3.5
3. Investments: R
Loss for the year^p (572 788) 32.0
^Other comprehensive income: 3.1. Re – measurement to fair value
Items that will not be reclassified to profit or loss: Existing shares: (50 000 – 15 000)^ 35 000 0.5
Gain on revaluation of land and buildings - Change in value from beginning of year
^Total comprehensive loss for the year (572 788) (R2,75 - R1,65)^ 1,10 0.5
Presentation 3.0 Change in fair value of existing shares at 31/03/20X17 38 500
Total marks 35.0 (35 000 x R1,10)
^Total of 4.0 presentation available, but limited to 3
New shares: 15 000^ 0.5
Change in value since date of purchase
(R2,75 – R2,25)^ 0,50 0.5
Change in fair value of new shares at 31/03/20X17
(15 000 x R0,5) 7 500

Total change: R38 500 + R7 500 46 000 [2.0]

Alternative solution:
50 000 shares^ x R2,75^ 137 500 1.0
Carrying amount per trial balance (given) 91 500^^ 1.0 *** Students could have left the R42 300 out completely– answer would have been
Adjustment 46 000 [2.0] the same

3.2. Dividend income

(50 000 shares x R0,40)^ 20 000 0.5 5.2. Discount forfeited
Given 8 750^ 0.5 ASDA
28 750 [1.0] R R
Balance B/D 9 614^ 0.5
Trade Debtors
Alternative solution:
control **** 126 900 1.0
(35 000 x R0,25)^ 8 750 0.5
Trade debtors control
(50 000 x R0,40)^ 20 000 0.5
(given) 97 323^ 0.5
28 750 [1.0]
Revenue** 25 710
Balance (given) C/D 13 481^ 0.5
4. Interest on loan to Organic Technology (Pty) Ltd
136 514 136 514 {2.5}
P/YR = 4^ 0.5
**** (R3 525 000 x 60%)^ x 6%^
PV = -R55 000^ 0.5
i/yr = 9% per annum ^ 0.5
6. Cost of sales R
n = 5 years x 4 = 20 compounding periods^ 0.5
Cost of goods sold: (R3 525 000^ Calc 5 x 100/120^) 2 937 500 1.0
PMT = R3 445^ 0.5
Interest for 01/04/20X16 – 31/03/20X17: R
Adjusted for:
3^ INPUT 6^ SHIFT AMORT 1.0
Loss of inventories: 1 860
== R4 232 4 232
Artichoke seeds (200 – 198)^ x 100^ x R1,80^ 360 1.5
[3.5]
Sunflower seeds (65 – 60)^ x 100^ x R3^ 1 500 1.5
5. Revenue
Theft:
Calc 5.1 – 3.5m Loss: (R37 500 x 100/120)^ 31 250 0.5
Sales with discount: R3 525 000 x 60%^ x 94%^ 1 988 100 4.5
Claim:
Sales without discount: R3 525 000 x 40%^ 1 410 000 0.5
Insured inventory < balance on hand, thus average clause
Discount forfeited Calc 5.2 25 710 2.5
applies
3 423 810 [7.5]
R150 000^ x R31 250 (28 277) 1.0
5.1.
R165 769^
Trade Debtors Control
R R
Write down to NRV:
Balance B/D 302 650^ 0.5
(5 x 100)^ x [R24 – (R24 x 10%)]^ 1 200 1.0
Revenue ** 3 525 000 Credit loss
Total cost of sales 2 943 533 [6.5]
(R1 000^/0.4^ x
0.6^ 1 500 1.5
7. Commission paid (salaries and wages) R
Bank: 3 543 260
Given per TB 623 190^ 0.5
R3 500 960 +
Accrual: 01/04/20X16 (18 293)^ 0.5
R42 300***)^ 0.5
Accrual: 31/03/20X17 R23 412^/0.82^ 28 551 1.0
ASDA* 97 323^ 0.5
633 448 [2.0]
Balance***
c/d
(R227 867 –
R42 300)^ 185 567 0.5
3 827 650 3 827 650 {3.5}

* ASDA = Allowance for settlement discount allowed

** balancing amount
PART B (10,5 marks) QUESTION 2 (39.5 marks)
1. Calculation of the Rand amount of the purchase: R Marks 1. Calculation of profit or loss for the year
R Marks
6,70565 btc^ x R18 641^ 125 000 1.0 Sales Calc 5 5 546 421 2.5
R125 000/500^ 250 0.5 Cost of sales Calc 6 (4 266 477) 1.0
[1.5] Depreciation:
- Buildings Calc 2.1 (413 477) 3.5
- Sold vehicle: Vendido Calc 3.1 (17 150) 1.5
Marks - Old vehicle: Entrega Calc 3.2 (41 940) 2.5
2. Theory: - New vehicle: Nuevo Calc 3.3 (18 780) 3.0
An element can be recognised in the financial statements of an entity Loss on sale of vehicle Calc 3.1 (67 940) 2.5
if: Finance costs Calc 4 (17 500) 1.0
- it meets the definition^ of an element; and 0.5 Other expenses (786 672)^ 0.5
- it meets the recognition criteria Loss for the year (83 515) 18.0
(-^) deducted if prior period error is included in the profit
Definition of an asset: calculation
- a resource^; 0.5
- controlled by the entity^; 0.5 2. Statement of financial position
- as a result of past events^ ; 0.5
- from which future economic benefits^ are expected to flow to^ the KINGSLEY TRADERS
entity. 1.0 STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20X17^p
R Marks
Recognition criteria: Assets ^p(bonus)
- it is probable^ that future economic benefits^ will flow to the entity; 1.0 Non – current assets^p
and Property, plant and equipment Calc 7 14 976 435 3.5
- the item has a cost or value^ that can be measured reliably^. 1.0
Current assets^p
Application: Inventories Calc 8 221 054 2.0
Definition: Total Assets 15 197 489
- The solar cells can be used by the entity to generate monthly
rental income / it is a source of passive income for the entity^ 0.5 Owners interest and liabilities^p
- The solar cells are under the control of the entity, as the entity can Owners interest 12 103 349
choose to sell the cells to another party when they wish^; 0.5 Capital ( 8 068 364^ - 83 515^Part 1 + 40 500 Calc 1-2 marks) 8 025 349 3.0
- the past event is the purchase^ of cells by the owner on ^p Other components of owners’ interest Calc 2.2 4 078 000 1.5
5 April 20X17^ ; 1.0
- Economic benefits^ in the form of rental income^ will flow to the 1.0 Total liabilities^p(bonus) 3 094 140
entity.
Non-current liabilities 201 151
Long-term borrowings Calc 4 201 151 1
Recognition criteria:
- Since 93% of the cells have already been sold^, it is likely that this
Current liabilities^p(bonus) 2 892 989
project will take place^; 1.0
^p Current portion of long-term borrowings Calc 4 39 642 1.0
- the cost of the item can be measured reliably at an amount of
Trade and other payables (R149 736 + R378 492)^ 528 228 0.5
R125 000^. 0.5
Bank overdraft 2 325 119^ 0.5
Conclusion:
The solar cells purchased should be recognised^ as an asset^ by 1.0 Total equity and liabilities 15 197 489 13.5
Agrifarm Traders in the financial statements for the year ended Presentation 3.0
31 March 20X18. Total 16.5
Bonus Presentation marks 1.5
MAX 9.0
3. Calculation of VAT paid to SARS
2. Land and buildings
R Marks Land Buildings Total Marks
Opening Balance 412 855 0.5 2.1 Depreciation R R R
Input VAT on purchases Cost 3 920 000 7 650 000^ 11 570 000 0.5
(96 550 cases x 40,8 x 14 /114)^ (483 766) 0.5 Accumulated depreciation (648 000)^ 0.5
Output VAT on allowance for settlement discount received: Carrying amount: 01/ 03/20X16 3 920 000 7 002 000 10 922 000
(96 550 – 3 670)^ x [(R40,80 x 14/114)^ x 10%]^ 46 538 1.5 Revaluation
Input VAT on vehicle purchased 1
Land: R4 078 000 x 30%
(R268 292 Calc 3.3 x 14/100)^ (37 561) 0.5 2
Buildings: (R4 078 000 x 70%) √ 1 223 4001 2 854 6002 4 078 000 1.0
Input VAT on other expenses
(R786 672 x 14/100)^ (110 134) 0.5 5 143 400 9 856 600 15 000 000^ 0.5
Output VAT on sales Depreciation: Current year
(R5 546 421 Calc 5 x 14/100)^ 776 499 0.5 (R9 856 600 – R450 000)^/ (25 – (413 477) (413 477) 1.0
Output VAT on vehicle sold 2,25)^
(R40 000 x 14/100)^ 5 600 0.5 5 143 400 9 443 123 14 586 523 [3.5]
Less: Closing balance (378 492) 0.5
VAT paid 231 539 5.0 2.2 Revaluation R Marks
Carrying amount 01/03/20X16:
R3 920 000^ + R7 002 000^ 10 922 000 1.0
CALCULATIONS Revalued amount 15 000 000^ 0.5
4 078 000 [1.5]
1. Prior period error R Marks
2.3 Carrying amount (to calc 7)
Accumulated Depreciation: Incorrect 688 500^ 0.5
R5 143 000^ + R9 443 123^ 14 586 523 {1.0}
Accumulated Depreciation: Correct
(R7 650 000 – R450 000)√ / 25^ x 2.25^ (648 000) 1.5
3. Vehicles R Marks
Adjustment to Capital balance 40 500 [2.0] 3.1 Vendido – vehicle sold
Correcting journal: Loss on sale of asset
Dr Accumulated depreciation (Opening balance) 40 500 Cost 140 000^ 0.5
Cr Capital (Opening balance) (40 500) Accumulated depreciation up to date of sale:
Comparison between how depreciation was incorrectly R140 000^/200 000^ x 45 800^ (32 060) 1.5
accounted for and how it should have been correctly Carrying amount at date of sale 107 940
accounted for Proceeds (40 000) 0.5
Error Correct Difference Loss on sale of asset 67 940 [2.5]
R R R
Cost 7 650 000 7 650 000 - Depreciation: (R140 000/200 000)^ x (45 800^ – 21 300^) 17 150 [1.5]
Accumulated 7 650 000 / (7 650 000 –
3.2 Entrega – Old vehicle
Depreciation 25 X 2.25 450 000) / 25
Depreciation:
(1/12/20X13 – x 2.25
Cost of all vehicles (given) 500 000^ 0.5
28/2/20X16) 688 500 648 000 40 500
Less: Vehicle sold (140 000)^ 0.5
Carrying 6 961 500 7002 000 (40 500)
Cost – Entrega 360 000
amount
(28/2/2016)
R360 000/200 000^ x (122 000 – 98 700)√ 41 940 1.5
[2.5]
Carrying amount: 28/02/20X17 (to calc 7) 7. Property, plant and equipment R Marks
Cost 360 000^ 0.5 Land and buildings Calc 2.3 14 586 523 1.0
Accumulated depreciation Vehicles: 389 912
360 000/200 000^ x 122 000^ (219 600) 1.0 - Entrega Calc 3.2 140 400 1.5
Carrying amount 28/02/20X17 140 400 {1.5} - Nuevo Calc 3.3 249 512 1.0

3.3 Nuevo – new vehicle Total property, plant and equipment 14 976 435 [3.5]
Cost:
PMT = - R15 000^ 0.5 8. Inventories R Marks
I = 9%^ 0.5 6 455 cases^ x (R40,80 x 100/114 x 90%)^ 207 919 1.0
n = 20^ Discount forfeited: [3 670^ x (R40,80 x 100/114 x 10%)]^ 13 135 1.0
OR 5 x 4 P/YR^ 0.5 221 054 [2.0]
FV = - R45 000^ 0.5
PV = R268 292 Alternative:
3 670 cases^ x (R40,80 x 100/114)^ 131 348 1.0
Depreciation:
R268 292 /200 000^ x 14 000^ 18 780 1.0 (6 455 – 3 670)^ x (R40,80 x 100/114 x 90%)^ 89 706 1.0
[3.0] 221 054 [2.0]
Carrying amount 28/02/20X17 (to calc 7)
Cost 268 292^ 0.5
Less: Accumulated depreciation (18 780)^ 0.5
249 512 {1.0}

4. Borrowings and finance costs R Marks

(info from Calc 3.3)

Finance costs
1^INPUT 3^ SHIFT AMORT 17 500 [1.0]

Borrowings:
Short term: 4^ INPUT 7^ SHIFT AMORT = 39 642 [1.0]
Long term: === 201 151 [1.0]

Alternative:
Long term: === 201 151 [1.0]
- 8 INPUT 20 SHIFT AMORT 156 151^ 0.5
- Balloon payment 45 000^ 0.5

Alternative
1^INPUT 3^ SHIFT AMORT=== Balance 240 793^ 0.5
Less Short term portion; 4 INPUT 7 SHIFT AMORT = (39 642)^ 0.5
Long term: 201 151 [1.0]

5. Sales R Marks
132 456^ cases x R40,80^ x 100/114^ x 130/100^ x 90%^ 5 546 421 [2.5]

6. Cost of sales R Marks

132 456^ cases x (R40,80 x 100/114 x 90%)^ 4 266 477 [1.0]