FAC3702/202/1/2017

Tutorial letter 202/1/2017

Distinctive Financial Reporting

FAC3702

Semester 1

Department of Financial Accounting

This tutorial letter contains the suggested solution to compulsory
assignment 02.

IMPORTANT INFORMATION

Please activate your myUnisa and myLife email addresses and

ensure you have regular access to the myUnisa module site for
FAC3702 as well as to your group site.

Note: This is an online module, and therefore your module is

available on myUnisa. However, in order to support you in your
learning process, you will also receive some study material in printed
format.
 CONTENTS

Page

1.  INTRODUCTION ............................................................................................................................ 3 

2.  LECTURERS AND CONTACT DETAILS ...................................................................................... 3 
3.  SUGGESTED SOLUTION TO COMPULSORY ASSIGNMENT 02/2017 ...................................... 4 
4.  PERSEVERANCE .......................................................................................................................... 6 

2
 FAC3702/202

1. INTRODUCTION

Dear Student

We attach the suggested solution to compulsory assignment 02/2017.

You will notice some calculations are in brackets opposite certain items in our suggested solutions
dealing with company financial statements. These calculations are given for tuition purposes only and
consequently do not form part of the statutory disclosure requirements.

2. LECTURERS AND CONTACT DETAILS

Please use only the following e-mail address for all communication with your lecturers:

FAC3702-17-S1@unisa.ac.za

Please use only the following telephone number for all communication with your lecturers:

012 429 4268

Lecturer Office
Mrs M Evans Room 02-55, AJH van der Walt Building
Mrs M Els Room 02-58, AJH van der Walt Building
Mr D Khumalo Room 02-50, AJH van der Walt Building
Mrs M Zulu Room 02-60, AJH van der Walt Building

3
3. SUGGESTED SOLUTION TO COMPULSORY ASSIGNMENT 02/2017

Correct answers for the multiple-choice questions are the following:

1. 5
2. 2
3. 1
4. 3
5. 3
6. 2
7. 3
8. 3
9. 2
10. 5

QUESTION 1.
R
Amortisation (2 755 000 / 10) 275 500

QUESTION 2.
R
Recoverable amount
Higher of: 1 500 989
Value in use (refer to calculation below) 1 500 989
OR
Fair value less cost to sell 1 350 000

Using HP10bii financial calculator:

Cf0 = 0
Cf1 = 560 000
Cf2 = 485 000
Cf3 = 335 000
Cf4 = 276 000
Cf5 = 229 000
Cf6 = 173 000
i = 12,5%
Comp NPV = R1 500 989

QUESTION 3.

Tax base = 2 755 000 – (2 755 000 x 5% x 4) = R2 204 000

QUESTION 4.

Research phase (2016): 1 January 2016 – 31 January 2016 = 1 month

Development phase (2016): 1 February 2016 – 31 August 2016 = 7 months

Research Development
cost cost
R R
Raw materials (425 000 / 8 x 1); (425 000 / 8 x 7) 53 125 371 875
Salaries (1 350 000 / 8 x 1); (1 350 000 / 8 x 7) 168 750 1 181 250

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 FAC3702/202

SUGGESTED SOLUTION: ASSIGNMENT 02 (continued)

QUESTION 5.

Research phase (2016): 1 January 2016 – 31 January 2016 = 1 month

Development phase (2016): 1 February 2016 – 31 August 2016 = 7 months

The question stated that consulting fees for the 2016 financial year to the amount of R216 000 was
incurred evenly during the period from 1 January 2016 to 31 March 2016.
Research Development
cost cost
R R
Consulting fees (216 000 / 3 x 1); (216 000 / 3 x 2) 72 000 144 000

QUESTION 6.

Research phase (2016): 1 January 2016 – 31 January 2016 = 1 month

Development phase (2016): 1 February 2016 – 31 August 2016 = 7 months

The question stated that the computer was used exclusively in the research and development of the
software from 1 January 2016 – 31 August 2016.
Research Development
cost cost
R R
Depreciation [(15 000 – 3 000) / 3 x 1/12]; [(15 000 – 3 000) / 3 x 7/12] 333 2 333

QUESTION 7.
R
Cost of software licence (Present value of total cost; refer to calculation below) 1 596 965
Finance cost (balancing figure) (1 735 000 – 1 596 965) 138 035
Total cost 1 735 000

Calculation of present value of software licence:

FV = R1 735 000
n =8
i = 12,5%
PV = R1 596 965

QUESTION 8.

Total useful life (in months) as given in the question (5 years x 12 months in a year) 60
Number of months from acquisition date until previous year-end (period 1 June 2014 to (19)
31 December 2015)
Number of months in current financial year (12)
Remaining useful life on 31 December 2016 29

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SUGGESTED SOLUTION: ASSIGNMENT 02 (continued)

QUESTION 9.

Options a, c and e are correct. Refer to IAS 38, Intangible assets, paragraph 28.

QUESTION 10.

Option A is correct. Refer to IAS 36, Impairment of assets, paragraph 60.

Option C is correct. Refer to IAS 36, Impairment of assets, paragraph 61.
Option E is correct. Refer to IAS 36, Impairment of assets, paragraph 55.

4. PERSEVERANCE

We would like to encourage you to attempt your studies with enthusiasm. Keep in mind that success
can only be achieved by effort and perseverance. Every year, we find that many students do not turn
up at the examination centre. You must never inflict this disservice on yourself. Remember that if you
write, you have a chance; if you don't, you have no chance at all.

We wish you a pleasant study period.

Kind regards

Accounting III (FAC3702) LECTURERS

© UNISA 2017

FAC3702_2017_TL_202_1_E.doc