University of Fort Hare Together in Excellence NKUHLU DEPARTMENT OF ACCOUNTING Selected questions for revision for ACCOUNTING 3/ADA supplementary Entrance exam/Conversion exam From FINAL ASSESSMENT OPPORTUNITY NOVEMBER 2015 and 2016 ADAPTED FOR JAN 2018 Use the final assessment November 2017 In addition: Question 8 Sharkies Limited Exam Question 3 2016 - Propfin Limited Exam Question 2 2015 ~ Ballyhoo Exam Question 3 2015 — New Vision Consulting Exam Question 4 2015 — Cassanova ‘These questions cover the following topics: Presentation of financiel statements Financial instruments Deferred tax PPE Impairment Forex and hedging Revenue Leases Investment property Provisions, ‘These questions are provided as an additional resource but are NOT intended to be comprehensive. Please ‘study all of the topics that are included in the scope of the examination in detail,Accounting 3 1. Conversion exam — if you passed General Accounting 3 in 2017 and want to register for Accounting 3 in 2018 you need to write the conversion exam for Accounting 3 (2"4 semester only): a) Between 15-26 January (date to be confirmed) b) With the Accounting 3 supp students ) At 8:30 (be seated by 8:00) ) This is a 3 hour exam ) You may bring your IFRS books into the exam. f) Students that obtain 50% or more in this exam will be allowed to register for ACC300E in 2018. Cc d é 2, Entrance exam — if you passed General Accounting 3 in 2017 and have been provisionally accepted for Advanced Diploma in Accounting in 2018 you will have been notified that you need to write the entrance exam: a) Between 15-26 January (date to be confirmed) b) With the Accounting 3 supp students c) At 8:30 (be seated by 8:00) d) This is a 4 hour exam e) You may bring your IFRS books into the exam.Examinable topics — January 2018 Accounting 3 CONVERSION exam 1. Presentation of financial statements (IAS 1) 2. Consolidations (including acquisitions and disposals) (disposals of subs were not covered in ACG 3 — new work) 3. Consolidated CFS (IAS 7) (including disposals of subs not covered in ACG 3 - new work) 4. Business combinations (IFRS 3) (theory and practical) 5, Non-current assets (disposal groups) held for sale (IFRS 5) (you may ignore discontinued operations) (disposal groups were not covered in ACG 3 — new work) . Financial instruments (IFRS 9) . Deferred tax (IAS 12) . PPE (IAS 16) (limited scope) . Impairment (IAS 36) 0. Forex and hedging (IAS 21 and IFRS 9) (accounting for a firm commitment as a fair value hedge not covered in ACG 3 — new work) 11. Revenue (IFRS 15) 12. Leases (IFRS 16) 13. Investment property (IAS 40) (limited scope) 2 OAND The following topics are excluded: 1. Employee benefits 2. Borrowing costs 3. Discontinued operations 4, Eamings per share (IAS 33) (basic and diluted) The following topics are not completely excluded from the scope but there are no detailed questions on any of these topics: 1. Provisions 2. Intangible assetsExaminable topics — January 2018 ACC300E AND ACC301E SUPPLEMENTARY EXAM and ADA ENTRANCE exams 1. Presentation of financial statements (IAS 1) 2. Consolidations (including acquisitions and disposals) (disposals of subs were not covered in ACG 3 — new work) 3. Consolidated CFS (IAS 7) (including disposals of subs not covered in ACG 3 — new work) . Business combinations (IFRS 3) (theory and practical) . Non-current assets (disposal groups) held for sale (IFRS 5) (you may ignore discontinued operations) (disposal groups were not covered in ACG 3 — new work) . Financial instruments (IFRS 9) . Deferred tax (IAS 12) . PPE (IAS 16) . Impairment (IAS 36) 0. Forex and hedging (IAS 21 and IFRS 9) (accounting for a firm commitment as a fair value hedge not covered in ACG 3 — new work) 11. Revenue (IFRS 15) 12. Leases (IFRS 16) 13, Investment property (IAS 40) an 2 OOND The following topics are excluded: 1. Employee benefits 2. Borrowing costs 3. Discontinued operations 4. Eamings per share (IAS 33) (basic and diluted) The following topics are not completely excluded from the scope but there are no detailed questions on any of these topics: 1. Provisions 2. Intangible assetsQUESTION 8 70 MARKS (84 MINUTES) You are the auditor of Sharkies Limited, a company that manufactures sporting equipment. The company started business on 1 January 1998. You are currently busy with the financial statements for the year ended 31 December 2001. It is also your responsibility to perform the company's taxation calculations. ‘The company’s profit before tax for the current year is R20 000 000. The following information regarding the company’s assets and liabilities is available: Assets: 1. The company owns plant that was bought on 1 January 1999 for R500.000. The company depreciates plant at 20% per annum on the straightline method. SARS grants a Section 12C-capital allowance of 25% per annum on the cost price of the plant. The plant was brought into use on 31 March 1999. 2. The company also owns land that was bought on 1 June 1998 for R250 000. The land was sold on 30 June 2001 for R350000. The profit from the sale of the land is included in the profit before tax for the year. 3. The company owns an administrative building that was brought into use on 1 January 2000. The building has a cost price of R'1 500 000 and is depreciated at 10% per annum on the slraightline method. SARS grants no wear-and-tear allowance on this building 4, The company sold @ machine with a cost price of R300 000 on 30 June 2001 for R280 000. ‘The machine was brought into use on 1 January 2000 and is depreciated at 20% per annum on the straight-line method. SARS grants a Section 12C-capital allowance of 25% on the cost price of the asset. Liabilities: 4, Included in the current liabilities of the company for the current year is incame received in advance of R50 000. The income relates to an amount of money that was paid by a client in advance as a deposit. Although the income is taxed on recgipt, it may only be recognised in the income statement for the year ending 31 December 2002. Other items: 1. The company has an assessed loss of R200000 that relates to the year ended 31 December 2000. The company raised the full deferred taxation asset on the assessed loss on 31 December 2000. 2. The company also reosived a notice from SARS in the current year that the current taxation in respect of the year ended 31 December 2000 has been assessed at an amount of R10 000 higher than the amount that was calculated by the company for current taxation. 3. The company received dividends to the value of R70 000 during the year in cash. The dividends received are included in the profit before taxation for the year. 4. The company also made donations of R10 000 to @ welfare organisation during the year. ‘The donations have been taken into account in the calculation of the profit before taxation for the year.SSMT-2009-ACC3A -10- QUESTION 8 (CONTINUED) 5. 10. The company increased the provision for doubtful debts from R100 000 in 2000 to R150 000 in 2001. The increase has been taken into account in the calculation of the profit before taxation for the year. SARS allows 25% of the provision for doubiful debis as a deduction for taxation purposes. The company taxation rate remained unchanged at 28% for the past five years. 66.6% of capital gains are included in taxable income. ‘The company provides for deferred taxation on the comprehensive basis according to the liability method. ‘The enterprise entered into a lease agreement during 2000 to purchase specialised packing machinery. The journal entry on 1 July 2000, the date of acquisition, was as follows: R R Dr Machinery 300 000 Cr Long term loan 300 000 The journal entry on 30 June 2001 was as follows: Dr ” Finance lease payments (V/S) 120 306,03 Cr Bank 120 306,03 No adjustments were made to the tax calculation in terms of the finance lease payment as the South African Revenue allows the instalment as 2 deduction. According to the agreement, 4 instalments of R120 306,03 are payable annually an 30 June at an interest rate of 22%. There is no residual value. Due to the negligence of the auditors this transaction was accounted for in the published income statement for 2000 as it was recorded in the journal entry. The auditors were subsequently fired, The enterprise provides depreciation on other similar machinery at 20% per annum on the straight line method. Il of the above information (except any adjustments for taxation and the lease) has been taken into account in the records of the company for the current year. Assume all amounts to be material YOU ARE REQUIRED TO: a) b) calculate the company’s current taxation for the year ended 31 December 2001 (use the income statement method); (22) calculate the company's deferred taxation (income statement and balance sheet amounts) for the year ended 31 December 2001 by using the balance sheet method of calculation; (16) prepare all relevant disclosure in the notes to the financial statements for the year ended 31 December 2001 (Please note: Accounting policies and Comparative figures are not required) (32)EXAMQ3-2016-ACC3 FOR SUMMER SCHOOL PURPOSES, -5- QUESTION 3 63 MARKS (95 MINUTES) Propfin Limited ("Propfin’) is a diversified company incorporated in South Africa and its ordinary shares are listed on main board of the JSE Limited. The company’s financial year ends on 30 June. The operating profit for the year ended 30 June 2016 is R2 876 125, ‘The effects of the following items have not yet been recorded in the operating profit given above. There are no items of other comprehensive income other than those that may arise from the information provided below, Additional information: 1. Propfin revalues its equipment annually at the beginning of the financial year. The equipment was all purchased on 2 July 2012 for R1 600 000. The original estimates were of a useful life of 10 years and a nil residual value. During the 2016 financial year there were indicators of impairment and the directors provided the following information regarding the equipment at 30 June 2016: 1.1. Fair value less costs to sell of R950 000 1.2, Pre-tax cash flows of R200 000 per annum for the remainder of the useful life after which the equipment will be scrapped. Assume a pre-tax discount rate of 12% and that the cash flows occur at the end of the year. 2. Propfin owns a building which is rented out to various tenants. This building originally cost Rt 250 000 ten years ago and is accounted for at fair value in terms of /AS 40 investment Property. Assume that the value of the land is immaterial. The fair value of the building was as follows © 0June 2015 1 960.000 © 0June2016 2195 000 3. Anew processing plant was ordered from a supplier in South America for $220 000 ~ this price is a price for the plant to be delivered duty paid (DP). The order was placed on 1 July 2015 which gave rise to a firm commitment on that date, The plant was shipped from the foreign port on 15 September 2015 and arrived in the South African port and was cleared through customs on 1 October 2015. The plant was installed by local engineers who also trained the plant operators. The plant was ready for use on 1 November 2015, ‘The cost of installing the plant was R165 000 and the cost of training R75 000. Propfin paid the foreign supplier in full on 1 December 2016. ‘A forward exchange contract (FEC) was entered into on 1 July 2015 to cover the purchase ‘of $220 000 on 1 December 2015. The FEC was accounted for as a fair value hedge throughout. Assume the hedge was effective throughout. ‘The processing plant will be dismantled at the end of its useful life. At 1 November 2015 Propfin estimated that the useful life of the plant is 10 years, that the straight line method of depreciation is appropriate, and that the expected cost of dismantling the plant at the end ofEXAMQS-2016-ACC3 FOR SUMMER SCHOOL PURPOSES “6+ QUESTION 3 (continued) its useful life will be R500 000. An appropriate discount rate is 11%. Plant is accounted for on the cost model in terms of IAS 16. The following exchange rates apply: Date ‘Spot rate | Forward rate 1 July 2015 73.50 13.85 15 September 2015 | _ 14.00 14.78 1 October 2015 74.50 14.85 1 November 2075 74.60 14.68 1 December 2015 14.70 : 4. Propfin holds investments in various financial instruments of other companies, which it accounts for in terms of IFRS 9 Financial instruments: Recognition and Measurement. 4,1. Investment in GLAM Limited bonds ~ this investment is held in a business model to collect contractual cash flows although Propfin often sell such investments to realise gains in fair value. The bonds were issued by GLAM Limited on 1 July 2016 at their face value of R400 000 and pay interest annually in arrears at 15%. The bonds are redeemable at a 10% discount on 30 June 2021. Propfin incurred related costs of R7 500 on acquisition of all the bonds of GLAM Limited. Propfin received the full interest payments on 30 June 2015. There has never been a need to provide for credit losses on this investment. The fair value of the bonds was R413 500 on 30 June 2016. (On 30 June 2016 Propfin sold all the bonds at their fair value. 4.2. Investment in BAM Limited bonds ~ this investment is held in a business model to collect contractual cash flows. The carrying amount of these bonds was R250 000 at 30 June 2015 (it was not considered cradit-impaired at this date), Interest of R31 250 is paid annually on 30 June each year and the bonds will be redeemed in full on 30 June 2018, The effective interest rate (correctly calculated) is 12.5%. BAM Limited started experiencing severe liquidity problems and Propfin calculated the loss allowance on 1 July 2015 based on the following renegotiated terms of the bond BAM Limited will: * Make no payment on 30 June 2018 © Pay R25 000 on 30 June 2017 * Make a final payment of R187 500, in full and final settlement of the bonds, on 30 June 2018 5. Propfin issued 60 000 shares convertible preference shares with a par value of R50 each These 10% preference shares were issued at par value on 2 January 2016 and are convertible, at the option of Propfin, into ordinary shares on 2 July 2021. The conversion rate is 5 ordinary shares for every 1 preference share. The dividends are cumulative and non-discretionary. The market related rate for a similar preference share without the conversion option is 12%EXAMQ3-2016-ACC3 FOR SUMMER SCHOOL PURPOSES 6. Taxation related information: ‘© The South African normal tax rate for companies is 28% and 80% of capital gains are included in taxable income © The inclusion rate for capital gains changed during the 2016 financial year. The inclusion rate for capital gains was 66.6% in prior periods. SARS allows a section 12 C capital allowance on the plant and equipment. SARS does not allow any deductions in respect of the cost of the building for normal tax purposes. Dismantling costs are deductible when paid. Assume that the investments in various financial assets are not capital assets for tax purposes and that tax treatment is the same as the accounting treatment. «There are no other differences between accounting profit and taxable income other than is evident from the information provided. REQUIRED: a) Prepare the Statement of profit and loss and other comprehensive Income of Propfin Limited for the year ended 30 June 2016. (50) ‘The first line of the Statement should be Profit before tax. Propfin has elected to use the one statement approach in terms of IAS 1 + Propfin presents items of other comprehensive income separately from their tax effect on the face of the statement © Comparatives are not required, «Notes are not required unless specified below. b) Prepare the tax rate reconciliation that would appear in the note to the tax expense for the year ended 30 June 2016 (10) Note: you are NOT required to prepare a full tax expense note Presentation (3) Round all amounts to the nearest R1. Round percentages to 3 decimal places. ADDITIONAL REQUIRED FOR SUMMER SCHOOL PURPOSES: 4) Prepare all the journal entries to correctly account for the plant in point 3 above.EXAMQ2-2018-ACC3 FOR SUMMER SCHOOL PURPOSES -6- QUESTION 2 64 MARKS (96 MINUTES) You are the auditor of Ballyhoo (Pty) Ltd (Bellyhoo). The financial accountant has asked you to assist her with the preparation of the taxation calculation for the year ended 28 February 2016. Before any of the following items were taken into account the preliminary profit before taxation for the year ended 28 February 2015 was R662 857. Included in profit before tax was dividends received of R75 000 and non-deduotible fines of R25 000, The investment property which originally cost R550 000 was valued on 28 February 2014 at R765 000 and on 28 February 2015 at R805 000. The investment property is not deductible for tax purposes. The plant was acauired on 1 September 2012 for R800 000. It has a useful life of 5 years and is depreciated using the straight line method to a nil residual value. The company carries plant on the cost model, The plant was not previously impaired but on 1 March 2014 it’s recoverable amount was calculated as R500.000. SARS allows a s12C (40:20:20:20) allowance on plant (hot apportioned). All the motor vehicles were purchased on 4 March 2013 for R470 000, Ballyhoo depreciates the cost of the motor vehicles on a straight line basis over 4 years. Motor vehicles also have a nil expected residual value. SARS applies the s11(e) wear and tear allowance at a rate of 20% per annum to all motor vehicles. On 1 March 2014 Ballyhoo sold a motor vehicle which had originally cost R120 000 to Playhouse (Pty) Ltd for R110 000. The warranty provision which was R60 000 at 28 February 2014 was increased to R80 000 at 28 February 2018 as sales had increased significantly during the 2015 financial year. During the 2014 financial year Ballyhoo had suffered sizeable losses resulting in an assessed loss of R200 000 st 28 February 2014. At this date the directors of the company were certain that sufficient future taxable profit would be earned to utilize the assessed loss in future, ‘The corporate tax rate is 28% and 66.6% of capital gains are included in taxable income. There are no differences between accounting profit and taxable income other than those that are evident from the information provided above.EXAMQ2-2015-ACC3 FOR SUMMER SCHOOL PURPOSES -7- QUESTION 2 (continued) REQUIRED: a) Calculate the taxable income of Ballyhoo (Pty) Ltd for the year ended 28 February 2015. Identify permanent and temporary differences separately. (29) HINT: Calculated an adjusted profit before tax before calculating taxable income b) Prepare the Tax expense note (including a tax rate reconciliation) to the statement of profit or loss and other comprehensive income of Ballyhoo (Pty) Ltd for the year ended 28 February 2015. (8) ©) Calculate deferred tax using the balance sheet method at 28 February 2014 AND 28 February 2015, AND Prepare the journal entries to correctly account for the movement in deferred tax for the year ended 28 February 2015. (25) Presentation (2) NOTE: Accounting policy notes and comparatives amounts are not required. Show your workings clearly. Work to the nearest R. Your answer should comply International Financial Reporting Standards.EXAMQS.2016-ACC3 FOR SUMMER SCHOOL PURPOSES -8- QUESTION 3 New Vision Consulting (Pty) Ltd (NVC) is a management consulting firm based in Johannesburg that sells and implements information systems solutions for manufacturing entities. NVC obtained the exclusive distribution rights from a company in the United Kingdom, Prevision UK ple, whereby they distribute an enterprise resource planning (ERP) system called Prevision to manufacturing entities in Southern Africa NVC’s financial year end is 28 February. NVC was involved in two separate projects with a certain customer, Yarndle Limited (Yarndle), during 2014 and 2015: 4* project: FOR REVISION PURPOSES IGNORE CONTRACT 4 ‘On 15 January 2014 NVC did a presentation to the directors of Yarndle Ltd, a highly successful manufacturing entity with a high profile in the Eastern Cape. NVC had not previously operated in the Eastem Cape and inorder fo market itself in the area it offered to do a two month project reviewing Yarndle's current operating systems and processes to identify areas where Yamdle could save on its operating costs. Yarndle did not have to pay for the project unless NVC found cost savings opportunities of more than R750000 per annum. If NVC did find cost saving opportunities for Yarndle in excess of R750 000 then Yarndle would pay NVC R150 000 for the project, on presentation of the findings. Yarndle accepted this offer and NVC started the project on 1 February 2014, On 4 April 2014 NVC presented its findings to the directors of Yarndle. NVC had identified cost savings of R900.000 which the directors of Yamdle accepted and agreed to make a payment of R150 000 to NVC for the initial two month project. 2° project: On 4 April 2014 Yamdle agreed to purchase the Prevision system from NVC and to engage NVC to implement the system. The implementation of the system will require moderate customization of the Prevision system as well as adjustments to Yarndle's operations. As NVC has the exclusive right to distribute the Prevision system in Southem Africa, Yarndle could not ‘obtain other quotes for the cost of the system and there were no other companies that were able to undertake the implementation project. Yarndle did however compare the costs to other popular ERP systems and decided that the Prevision system was the appropriate system for its business. In terms of the exclusive distribution rights and the licencing agreement, Yamdie may either enter into an agreement for support services with NVC or directly with Prevision UK plc. The support services are charged at a standardized rate. It was expected that the implementation of the Provision system would take 8 months to complete. On 1 September 2014 NVC installed the software and started the implementation of the system. The terms of the agreement were that Yarndle would pay NVC R14 million for the following: * Purchase of the Prevision system licence ‘+ Implementation of the system + Two year support services.EXAMQ3-2015-ACC3 FOR SUMMER SCHOOL PURPOSES. -9- QUESTION 3 (continued) Payment would be split, R275 000 being payable on the date that implementation starts and the software is installed at Yarndle’s premises, and the balance payable on the successful completion of the implementation. if Yamndle were to terminate the contract for reasons other than NYC's failure to perform as promised, the contract requires Yamdle to compensate NVC for its costs incurred plus @ 20% profit margin. Ignore any financing component to this transaction. Ignore VAT. REQUIRED: FOR REVISION PURPOSES IGNORE CONTRACT 1 a) Discuss-whether,-at-4-February-2044, there_is-a_contract for the 4" project with: ‘Yarndle_that meets the-criteria_in-terms-of /FRS-15-Revenue-from-—contracts-with b) Assuming that the contract between NVC and Yamdle entered into for the 2” project does meet the criteria for a contract in IFRS 15: Discuss, and identify, the performance obligations in the contract. (13) Presentation (language, logic and neatness) (3) NOTE: Your answers should comply with IFRS 15 Revenue from contracts with customers. ADDITIONAL REQUIRED FOR SUMMER SCHOOL: ¢) Discuss whether each of the performance obligations will be satisfied at a point in time or over time. Give reasons for your answers. (10)EXAMQ4-2015-ACC3 FOR SUMMER SCHOOL PURPOSES -10- QUESTION 4 Cassanova Limited (Cassanova) is a supply chain management service provider that offers global trade solutions to companies throughout South Africa. It is listed on the Johannesburg Securities Exchange. ‘The profit for the financial year ended 31 December 2014 was R37 785 000, before accounting for the following information: Ignore all forms of taxation. 4. Purchase of machinery from foreign supplier On 1 February 2014 Cassanova signed a non-cancellable contract to purchase an item of machinery from a supplier in the USA. The contract meets the definition of a firm commitment ‘on that date. The risks and rewards associated with the machine will transfer to Casanova on 4 December 2014. Cassanova will pay US$2 000 000 on 1 February 2015 in accordance with the suppliers normal credit terms. In order to hedge against possible fluctuations in the R/USS, ‘exchange rate, Cassanova entered into a six month forward exchange contract (FEC) on 1 February 2014 to buy US$2 000 000 at R13.12 on 1 August 2014. It is further documented in their hedge documentation that on 1 August 2014 Cassanova will enter into another FEC to buy US$2 000 000 at the then quoted forward rate on 1 February 2018. All FEC contracts are settled net in cash. Cassanova designated the full fair value of the FECs as the hedging instruments and applies cash flow hedge accounting to all hedges of firm commitments and fair value hedge accounting to recognized assets or liabilities. You may assume that the hedge relationship was effective throughout its life Date [Spot rate ($1 = Rx) Forward rate ($4 = Rx) 1 February 2014 R 13.08 R73.12 (six months) TAugust2014 R 13.40 R 18.50 (six months) | [1 December 2014 R 13.62 13.74 (Iwo months) | 31 December 2014 R13.56 R 13.63 (one month) 7 February 2016 Ri378 2. Investment in bonds Cassanova invested in the bonds of another company, Debutante Ltd, on 1 January 2012. Cassanova paid R755 000 to acquire 20 000 bonds with a par value of R40 each and a coupon rate of 11%; transaction costs amounted to R25 000, The bonds are redeemable at par on 31 December 2016. Cassanova received the coupon payments on 31 December 2012 and 31 December 2013. Cassanova has classified these bonds as subsequently measured at amortised cost.EXAMQ42015-ACC3 FOR SUMMER SCHOOL PURPOSES: -1- QUESTION 4 (continued) 3. Cassanova’s equity and liability instruments in issue Cassanova had the following instruments in issue at the end of the 2014 financial year: Instrument Issued on: Details ‘Ordinary shares See below 412 500 000 shares Preference shares At incorporation | 7 000 000 shares of R10 each; dividend rate 8% Convertible debentures [7 January 2014 [500 000 debentures at RSO each; coupon rate 10% During the year the company issued ordinary shares in terms of a rights issue whereby the existing ordinary shareholders all took up their rights to acquire 1 new share at R22.00 per share, for every 4 shares previously held, on 31 July 2014, The market price of one ordinary share was R28.00 on 31 July 2074. There were no other transactions affecting ordinary shares during the year. The preference shares are non-redeemable and preference dividends are non-cumulative and declared at the discretion of the company. The preference dividend for the year ended 31 December 2014 was declared and paid on 31 December 2014. The debentures are compound instruments in terms of /AS 32 Presentation of financial instruments and are convertible into two ordinary shares for every one debenture held on 31 December 2018, The market related rate for similar debentures without the conversion option is 12%. REQUIRED: 41 MARKS (61.5 MINUTES) a) Prepare all the journal entries to account for the transactions in point (1) for the years ended 31 December 2014 and 31 December 2015. (20) Journal narrations are not required but you are required to show your workings clearly. Work to the nearest R1. You are required to indicate clearly in your journal entries which ‘component of total comprehensive income is affected. b) Calculate the interest income for the financial year ended 31 December 2014 to be accounted for by Cassanova Limited on the investment in the bonds of Debutante Limited. ©) Round effective interest rates to four decimal places. ©) Prepare the Statement of profit or loss and other comprehensive income of Cassanova Limited for the year ended 31 December 2014. Start with Profit for the year. Ignore all forms of taxation. Comparative information is not required. (14) Presentation of basic and diluted earnings per ordinary share IS NOT REQUIRED. Notes are NOT required. Round effective interest rates to four decimal places Presentation (2)EXANQ4-2015-ACC3 FOR SUMMER SCHOOL PURPOSES, ADDITIONAL REQUIRED FOR SUMMER SCHOOL PURPOSES: a) b) Assume the following relating to point (1) above: The contract meets the definition of a firm commitment from 1 August 2016 and applies fair value hedge accounting to all hedges of fim commitments Prepare all the journal entries to account for the transactions in point (1) for the years ended 31 December 2014 and 31 December 2015. (24) Journal narrations are not required but you are required to show your workings clearly. Work to the nearest R1. You are required to indicate clearly in your journal entries which component of total comprehensive income is affected. Correcily classify the instruments in point (3) above as debt or equity instruments. Give reasons for your answers. If necessary, provide calculations in support of your answers. ( )