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    15 views7 pages

    Conceptual Framework+presentation

    Uploaded by

    Noma Vio

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 7
    GAAP: Graded Questions “The Conceptual Framework for Financial Reporting Question 2.9 ‘The Crusty Bakery is a small business in Umhlanga, a town in South Africa, which makes a range of breads and cakes that it sells to coffee shops in and around Umhlanga. The business rents a building in Umhlanga Business Park from a landlord under a shor'-term lease at a cost of €20 000 per month. Part of the building is sublet by The Crusty Bakery to The Coffee Cup, an artisanal coffee outlet, for C3 000 per month under a short-term lease. Subletting part of the building has been ‘successful in encouraging customers to come and buy cakes to have with their coffee. Consider the following four unrelated scenarios relating to The Crusty Bakery rental agreements during December 20XS: Act Rent of C20 000, owed to the landlord for rent ofthe bulding during December 20X5, was sill payable atthe end of December 20XS, 'A-2__ Paid cash of C60 000 on 20 December 20XS to the landlord in respect of rent forthe building forthe perio from 1 January 20XG to 31 March 20X6 B+1 Rent of C3.000, due from the tenant (The Coffee Cup) for rent of part of the building during December 20XS, was sil receivable atthe end of December 20XS. B-2 _ Received cash of C9 000 at the end of December 20X5 from The Coffee Cup in respect Orent fr the sublease of pat of the building from 1 January 20X6 to 31 March 20%6. ' YEU! Required! ce For each of the scenarios listed above, and assuming the recognition eiteria are met a) Indicate the journal entry to be recorded for each transaction. ) Explain, with reference to the relevant definitions in the Conceptual Framework, whether the transaction results in an asset, liabilly, income or expense being recognised in the financial statements of The Crusty Bakery for the year ended 31 December 20X5. &, Question 3.6 Loads of Luggage Limited is @ national retailer of travel goods and accessories. ‘The following is the trial balance of the company for the year ended 31 December 20X3: LOADS OF LUGGAGE LIMITED _TRIAL BALANCE AT 31 DECEMBER 20X3, a tenet 6 Debit Credit Sales 41.650 000, Rental income 50 000 Cost of sales 990 000 Depreciation 80.000 Salaries and wages 4100 000 Other expenses 20 000 Interest income 40.000 Interest expense 22.000 Tax expense 65200 Dividends 50 000 Property, plant and equipment: Carrying amount 4.200 000, Loans and other investments 500 000 ‘Accounts receivable 528 000 Accounts payable 280 000 Rent income received in advance: 1 January 20X3 5.000 Internet expense payable: 1 January 20X3 3.000 Borrowings 550 000 ‘Current tax payable 65200 Share capital +500 000 Retained earnings: 1 January 20X3 732000 Bank 420 000 71697 5901697 590_ The following additional information is relevant: ‘+ The primary source of revenue is the sale of goods to customers. ‘+ Loads of Luggage Limited also earns rental income from letting a small section of its administration buildings to independent consultants. Rent income received in advance at 31 December 20X3 is C6 000. «Internet expense payable at 31 December 20X3 is C4 000. Internet expenses are included in other expenses on the trial balance. Chapter 3 oar: vied Questo ividends declared on 12 February ‘+The dividends of C50 000 on the trial balance relate to divider 12 Fab 20% inrespect ofthe year ended 31 December 20X2. Dividends of C60 000 were deciared ‘on 14 February 20X4 in respect ofthe year ended 31 December + Tha interest income was earned on loans and investments. +The company classifies its expenses accorting to function. The functions Wentiied are sales, administration and dstriution. ‘+ Depreciation is allocated as flows: = 60% on factory plant (used to make Inventory); al of which has been sold = 10% on office computers (used for administration purposes). = 30% on company cars (used by sales representatives) ‘+ Salaries and wages are allocated 60% to the administration function and 40% to the Gstrioution function. + Other expenses are allocated 70% tothe administration function and 30% tothe distribution function + There are no components of other comprehensive income, Required: '), Process all adjusting journal entes required to finalise the nancial statements forthe year fended 31 December 20%3, (Closing transfer entries are not required. Ignore deterred tax. b) Prepare a statement of profit or loss of Loads of Loads of Luggage Limited forthe year fended 31 December 20X3 using the function method, in conformity with International Financial Reporting Standards Comparatives are not required. Ignore deferred tax. ‘) Prepare a statement of changes in equity of Loads of Loads of Luggage Limited for the year ended 31 December 20X3 in conformity with Intemational Financial Reporting Standards, 4) Prepare the note to ‘profit from operations Question 3.7 ‘Abracadabra Limited is @ company retailing in oriental spices. The bookkeeper has prepared the folowing drat trial balance at 28 February 20X8: “RBRACADABRA LiMiTED TRIAL BALANCE AT 28 FEBRUARY 20x Debit Greait Lane 80000 Equipment (Carving amount) 40000, ‘Vehicles (Carying amount) 30000 Inventories 129.000 Bank 3.000 ‘Accounts receivable 150.000, lectricty and water propald ~ 19720x8 "1000 Costof sales expanse 142500, Depreciation expense 100 000 Salaies and wages expense 20,000 Ect and water expense 28000 Rates expense 10.000 Interest expense 16 ae ero Chapters GAAP: Graded Questions Presentation of fancial statements Income ta expense Revenue rom ses share capil Retaned earings ~ 1:20%8 Revaluaton elu on and = 137208 Longe oan ‘Curent ax payable ‘Aecourts payable ‘Salores and wages payable ~ 1920%8 oN ‘The following additional information has not yet been taken into account: «The company classfes ils expenses according to function. The functions idented are sales, administration, distibution and operations. 1s are to be split between administration, distribution and operations ‘of C500 have bean paid to employees in respect of + Salaries and wage 0na375:2537,5 basis. Advances the folowing year’s wages. 1s Rates shouldbe allocated between administration, astibuton and operations on the Dosis of floor area used: the administraion department uses 25% of the lor area, the

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