Question 3 Journals Debit Credit

Dr Ordinary dividends (SCE) 67 500 (450000*,15)

Cr Shareholders for Dividends (SFP) 67 500

Dr Preference dividends/ Finance cost (SPL) 27 200 (120000+220000)*8%

Dr Interest on debentures/ Finance cost (SPL) 90 000 (750 000*,12)

Cr Accrued expenses (SFP) 117 200

Proceeds on sale of plant and machinery

Dr (SPL) 38 000
Cr Asset Disposal (SPL) 38 000
Asset Disposal
Dr Asset Disposal (SPL) 28 333 P&E 70 000 Acc depr 36 000
Dr Depreciation: Plant and Machinery (SPL) 5 667 C1 Profit 9 667 Depr 5 667
Accumulated Depreciation: Plant and
Dr Machinery (SFP) 36 000 Bank 38 000
Cr Plant and Machinery (SFP) 70 000 79 667 79 667

Dr Asset Disposal (SPL) 9 667

Cr Profit on sale of Plant and Machinery (SPL) 9 667

Dr Depreciation: Plant and Machinery (SPL) 235 500 C1

Accumulated Depreciation: Plant and
Cr Machinery (SFP) 235 500
Dr Depreciation: Buildings (SPL) 72 000 (1800 000*4%)

Cr Accumulated Depreciation: Buildings (SFP) 72 000

Dr Prepaid expenses (SFP) 5 000

Cr Profit for the year (SPL) 5 000

Dr Accounts receivable (SFP) 34 500

Dr VAT output (SFP) 4 500 (34500*15/115)
Cr Profit for the year (SPL) 30 000 (34500-4500)

Dr Allowance for bad debts (SFP) 2 750 (31500-28750)

Cr VAT input (SFP) 359 (2750*15/115)
Cr Bad debts (SPL) 2 391 (2750-359)
C1 Calculation of depreciation: Depr
Plant and Equipment
Sold
Cost 70 000
Acc Depr (36 000)
34 000
Depr for the year (8 months) (5 667) 5 667
28 333
New
Cost 48 000
Depr (1 month) (1 000) 1 000
47 000
Held for the whole year
Cost (1200 000-48 000-70 000) 1 082 000
Acc Depr (188000-36000) (144 000)
938 000
Depr for the year (234 500) 234 500
703 500
235 500
b) Calculation of profit for the year
Profit before depreciation 1 159 000
Depreciation
Plant and Equipment (241 167) (235500+5667)
Buildings (72 000) (1 800 000*.04)
Preference dividends (27 200)
Interest on debentures (90 000)
Profit on sale of machinery 9 667
Stationery on hand 5 000
Sale not recorded 30 000
Bad debts 2 391
775 691
C2 Calculation of PPE (Or see note)
PPE Land Buildings PE
Cost 900 000 1 800 000 1 130 000
Acc Depr (216 000) (379 500)
900 000 1 584 000 750 500 3 234 500
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Question 3

CARLIE LIMITED
STATEMENT OF FINANCIAL POSITION ON 31 DECEMBER 20.19
ASSETS
NON-CURRENT ASSETS 3 234 500
Property plant and equipment 3 234 500 C2

CURRENT ASSETS 2 560 250

Inventories 1 268 200
Trade and other receivables 1 278 250 (1267500+5000+34500-31500+2750
Cash and cash equivalents 13 800 (13500+300)

TOTAL ASSETS 5 794 750

EQUITY AND LIABILITIES

EQUITY 3 489 691
Issued share capital 2 703 500 (1590000+1113500)
Retained earnings 786 191 (78000+775691-67500)
Other components of equity

NON-CURRENT LIABILITIES 340 000

Redeemable preference shares 340 000 (120000+220000)
Interest bearing borrowings

CURRENT LIABILITIES 1 965 059

Trade and other payables 713 059 (510000+117 200+81000+4500+359)
Bank overdraft 89 500
Current portion of interest bearing borrowings 750 000
Dividends payable 67 500
Tax payable 345 000

TOTAL LIABILITIES 2 305 059

TOTAL EQUITY AND LIABILITIES 5 794 750
 Page 3

1 International Financial Reporting Standards

The annual financial statements are prepared
according to International Financial Reporting
Standards.
2 Accounting policy
The accounting policy of the company is consistent with that of the previous years, and is as follows:

2.1 Basis of Preparation

The annual financial statements have been prepared using the historical cost basis, as modified by the
revaluation of land and buildings and the fair valuing and certain financial assets and financial liabilities
as indicated. The financial statements are prepared on the going concern basis.

2.2 Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation . Land is not depreciated.
Depreciation on buildings, plant, machinery and vehicles is written off at rates deemed appropriate to
reduce the carrying amount of the assets over their expected useful lives to their estimated residual
values. The depreciation methods, estimated remaining useful lives and residual values are reviewed at
least annually.
The rates and methods are as follows:
Buildings 4% per year on the straight-line
method
Plant and Machinery 25% per year on the
reducing balance method

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 Page 3

The carrying amount of property, plant and equipment will be derecognised on disposal or when no
future economic benefits are expected from its use. Gains and losses on disposal of an item of

property, plant and equipment are determined by comparing the proceeds from disposal with the
carrying amount of the property, plant and equipment and are recognised in the statement of profit or
loss.
2.3 Inventories
Inventories are measured at the lower of cost, on a first-in-first-out basis, and net realisable value. Cost
includes expenditure incurred in acquiring, manufacturing and transporting the inventory to its present
location.

2.4 Revenue
•Revenue is recognised when all the following criteria are met:
•the parties to the contract have approved the contract (in writing, orally or in accordance with other
customary business practices) and are committed to performing their respective obliga- tions
•each party’s rights regarding the goods or services to be transferred can be identified;
•the payment terms for the goods or services to be transferred can be identified;
•the contract has commercial substance; and
•it is probable that the entity will collect the consideration to which it will be entitled.

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 Page 3

3 Property, plant and equipment

Land Buildings Machinery Total
R R R R
Carrying amount at beginning of year 900 000 1 656 000 972 000 3 528 000
Gross carrying amount 900 000 1 800 000 1 152 000 3 852 000
Accumulated depreciation (144 000) (180 000) (324 000)
Additions 48 000 48 000
Disposals at carrying amount (28 333) (28 333)
Gross carrying amount (70 000)
Accumulated depreciation 41 667
Depreciation for the year 0 (72 000) (241 167) (313 167)
Gross carrying amount 900 000 1 800 000 1 130 000 3 830 000
Accumulated depreciation 0 (216 000) (379 500) (595 500)

Carrying amount at end of year 900 000 1 584 000 750 500 3 234 500
The land and buildings secures the debentures
900 000 1 584 000 750 500 3 234 500
with a carrying amount of R750 000 per note 6.

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4 Inventories R
Inventories on hand consist of:
Raw materials XXX
Work in progress XXX
Finished goods XXX
Consumables XXX
1 268 200
5 Share capital R
Authorised
500 000 Ordinary shares
Issued
200 000 Ordinary shares already issued at
1 590 000
beginning of year
250 000 Ordinary shares issued during the year 1 113 500

450 000 Ordinary shares in issue at end of year 2 703 500

6 Long-term borrowings R
Secured
12% Debentures of R1 000 each, secured by a
first mortgage on land and buildings with
a carrying amount of R2 484 000
Repayable in full on 30/06/20.20 750 000
Less:  Instalments payable within one year,
(750 000)
transferred to current liabilities

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0
Unsecured 0
8% Redeemable preference shares.
40 000 issued at 1 January 20.18 120 000
40 000 issued at 1 January 20.19 220 000
340 000
The preference shares are redeemable at 1
January 20xy

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