ACCC 121 2020 - FIRST OPP

QUESTION 1: PPE

Soft Skin (Pty)Ltd

Notes to the financial statements for the year ended 30 September 2020

2 Property, plant and equipment

Machinery &
Land & Buildings Motor vehicles Equipment
R R R

Carrying value 1 October 2019 2,500,000 494,900 calc 1.1 5,600,000 given
Cost 2,500,000 980,000 8,000,000 5600 000/.70
(500 000 * 5)
Accumulated depreciation 0 (485,100) (2,400,000) 8 000 000 * 30%

Movements during the financial year

Revaluation 3,100,000
Additions at cost 1,540,000 calc 2.2
Disposals at carrying value (792,000) calc 2.1
Depreciation (224,000) (1,160,333) (944 000 (0.5) + 88 000 (0.5P) + 128 333(1.5))
calc 2.1 calc 2.2
Carrying value 30 September 2020 5,600,000 270,900 5,187,667
Cost / Valuation 5,600,000 980,000 8,340,000 (8 000 000(0.5) - 1 200 000(0.5) + 1 540 000 (0.5P))
Accumulated depreciation 0 (709,100) (3,152,333) ([2 400 000 +1 160 333](0.5P) - [320 000 + 88 000] (0.5))

- - -
 QUESTION 1: PPE

Calculations:

1 Vehicles OLD NEW Difference

Cost price 980,000 2.00 P

Acc depreciation (485,100) 0.50 P
(980 000 - 494 900)
Carrying value 30 September 2019 494,900 494,900 0.50 P
(given)
Depreciation (176,400) (224,000) 1.00 (47,600) 0.50 (given) 2.00 Depreciation
(980 000 * 90%(0.5))/200 000(0.5) * 40 000(0.5) (176400 (0.5P) + 47600 (0.5)
Carrying value 30 September 2020 318,500 270,900

1.1 Cost price of vehicles

494 900(0.5) = x - [ (x * 90%)/200 000 (0.5) * 110 000(1.0)] 150000-40000 = 110 000km
494 900 = 0.505x
x = 980 000

2 Equipment
2.1 Equipment sold
Cost 1 May 2018 1,200,000 0.50
Acc depreciation to 30 Sept 2018 (100,000) 0.50
(1200 000 * 20% * 5/12)
Acc depreciation to 30 Sept 2019 (220,000) 0.50
(1200 000 - 100 000(0.5) * 20%
Carrying value at 1 Oct 2019 880,000
Depreciation up to 1 April 2020
(880 000 (0.5) * 20% * 6/12(0.5) (88,000) 1.00
Carrying value at 1 Apr 2020 792,000 2.50
Proceeds (balancing) 800,000
Profit (given) 8,000 0.50

2.2 Cost price of new equipment

(800 000 (0.5) + (750 000 - 10 000)(0.5) 1,540,000 1.00
Depreciation : 1.50
(1 540 000 (0.5P)* 20% * 5/12(1.0)) (128,333) 1.50
Carrying value 30 September 2020 1,411,667

2.3 Depreciation : old equipment 944,000 given

Question 2 (inventory question) Su

PART A
Work in progress
Opening balance Given 4,502,600 0.50 Finished goods (200 400 + 2 500) 15,510,700 0.50
Raw material Calc 1 3,338,300 3.50
Indirect material Given 840,000 0.50
Packaging material Calc 3 or R1 866 862 1,866,800 2.50
Direct labour costs (2060000-23600+25900) 2,062,300 1.50
Other manufacturing overheads Given 2,900,700 0.50 Closing Balance 0
15,510,700 9.00 15,510,700 0.50 9.50

Calc 1: Raw material Alternative:

OB 825,000 0.50 Raw material
Opening balance 0.50 825,000 Cost of sales 0.50 15,600
Purchases 3,550,000 0.50 Purchases 0.50 3,550,000 WIP 3,338,300
Trade discount (30,500) 0.50 Trade discount 0.50 (30,500) (balancing)
Settlement discount (18,500) 0.50 Settlement discount 0.50 (18,500)
Delivery cost 12,900 0.50 Delivery cost 0.50 12,900 Clos balance 0.50 985,000
Close off to cost of sales (15,600) 0.50 2.50 4,338,900 1.00 4,338,900
Closing balance (985,000) 0.50
3,338,300 3.50

Calc 2: Packaging material

(600*265= 159000)(0.5) + (6000*355=2130000)(0.5) + (1750*405=708750)(0.5)2,997,750 1.50
600+6000+1750 8,350 0.50

WA 359
5200 * 359 1,866,800 0.50 2.50
WIP (2.5 marks as above) Alternative:
Issued: 5200 * 359 1,866,800 Packaging material
Opening balance 0.50 159,000 Oheads /WIP 0.50 1,866,862
PART B: SOFP: (1.5 marks) (600 * 265) (5200*359)
Closing balance: (8350(0.5) - 5200(0.5)) * 359(0.5) 1,130,850 Purchases 0.50 2,130,000
(6000 * 355)
Purchases 0.50 708,750
(1750 * 405) Closing balance 1,130,888
8,350 0.50 2,997,750 2,997,750
WAC 2997 750/8350 359
2.00 0.50
PART B
Calc 3: Finished goods Alternative:
Finished Goods
Opening balance 0.50 684,000 Cost of sales 0.50 14,284,046
(9 000 * 76) (186 900 * 76)
WIP P 0.50 15,510,700
(202 900 * 76)
Opening balance FG units 9,000 0.50 Closing balance 0.50 1,910,654
Manufactured 202,900 1.00 211,900 0.50 16,194,700 P 16,194,700
Units sold 186,900 0.50 WAC 16194700/211900 76
Closing balance units 25,000 0.50 3.00

Weighted average cost per unit

Units WA Total
9,000 76 684,000
202,900 76 15,510,700
211,900 0.50 76 0.50 16,194,700
P
2.50 0.50
NRV per unit
Sales price 102 0.50
Cost to sell 3 0.50
NRV 99

Cost R76, NRV R99 no write down 0.50 P 4.50

1.50

Part B
Notes to the financial statemenst of PHP Cement Ltd for the year ended 31 January 2020
Accounting policy note
Inventories are shown at the lower of cost or net realisable value. 0.50
The weighted average method is used to value inventory. 0.50

2020 Alternative 2019

Inventory R R
Finished goods (25000*76) P 1,900,000 1.00 1,910,654 684,000 0.50
Work in progress 0 0 4,502,600 0.50
Raw material 985,000 0.50 985,000 825,000 0.50
Packaging material Calc 1 P 1,130,850 1.50 1,130,888 159,000 0.50
4,015,850 3.00 4,026,541 1.00 6,170,600 2.00 6.00

TOTAL 20.00
 COMPANIES & IAS 1 MEMO

(a) Isipho Ltd

Statement of changes in equity minus 2 marks if redeemable preference share capital was shown in SOCE
for the year ended 30 September 2020 1.0 Heading and layout

8%
Convertible
Ordinary stated preference Retained
share capital share capital earnings
R R R
Balance as at 1 October 2019 P 1.0 12,180,000 1.0 4,000,000 0.5 8,650,000
(balancing /4 = 3 045 000 shares) (2 000 000/0.50)
Capitalisation issue 1.5 337,500
(67 500 shares)
Conversion of preference shares : 31 December 2019 0.5 2,000,000 1.0 ( 2,000,000)
(2 000 000/5 = 400 000 shares) (4 000 000 * 50%)
Issue of shares: 30 June 2020 1.0 6,000,000
(1 000 000(0.5) * 6 (0.5))
Share issue costs: 30 June 2020 1.0 ( 180,000)
(6 000 000(0.5) * 3%(0.5))
Premium on the redemption of preference shares 2.0 ( 450,000)
(Calc 2.1)
Net profit 7.0 3,081,867
(Calc 4)
Dividends P 0.5 ( 2,456,250)
6.0 (Calc 3)

Balance as at 30 September 2020 0.5 20,337,500 0.5 2,000,000 8,825,617

5.5 2.5 17.0 Total 25.00
 CALCULATIONS
1 Capitalisation issue
Outstanding amounts
- Shareholders for dividends 0.5 472,500
- Dividend withholding tax 0.5 90,000
Outstanding dividend 562,500

Cash dividend = 40% 225,000

Capitalisation issue = 60% * 562 500 0.5 1.5 337,500
Price per share 5
Number of shares (337 500/5) 67,500

2 Redeemable preference shares:

2.1 Premium on redemption
Closing balance 30 Sept 2020 1,250,000
Equals 25% of the original share capital .
Original capital amount (1 250 000/.25) 1.0 5,000,000
Number of shares = 5 000 000/5 0.5 1,000,000
Premium = (1 000 000 *75%)(0.5) * .60 0.5 450,000
2.0

2.2 Interest on redeemable preference shares

5 000 000(0.5P) * 10% * 11/12 (0.5) 1.0 458,333
1 250 000 (0.5) *10% * 1/12(0.5) 1.0 10,417
2.0 468,750
3 Dividends 2020
Ordinary:
Opening balance
(12 180 000(0.5P)/4 (0.5)= 3 045 000 shares) P 1.0 3,045,000
Capitalisation issue (calc 1)
(337 500(0.5P)/ 5(0.5) 1.0 67,500
Converted preference shares
(2 000 000(0.5P)/5(0.5) = 400 000 shares) P 1.0 400,000
New shares issued 0.5 1,000,000
Total ordinary shares 4,512,500
Dividend per share 0.5 0.50 If time based dividend was calculated - 1 mark
Ordinary dividend declared 2,256,250

8% Convertible preference shares

4 000 000(0.5P) * 8% * 3/12(0.5) P 1.0 80,000
2 000 000(0.5) * 8% * 9/12(0.5)) 1.0 120,000
Total preference dividend 200,000

Total dividends 6.0 2,456,250

4 Profit calculation:
Sales 21,580,900 0.5
Cost of sales ( 8,032,360) 0.5
Gross profit 13,548,540
Dividend income 30,000 0.5
Selling and distribution expenses ( 2,029,830) 0.5
Admin expenses (2,297,490) 0.5
Operating expenses (4,511,510) 0.5
Finance costs (468,750) 2.0 Calc 2.2
Profit before tax 4,270,960
Tax (1,189,093) 2.0
Profit after tax 3,081,867 7.0

Income tax
Net profit before tax P 0.5 4,270,960
Less: Dividend income 0.5 (30,000)
Add: Traffic fines 0.5 5,800
Taxable income 4,246,760
Tax @ 28% 0.5
2.0 1,189,093

12.00 48%
7.50 30%
5.50 22%
25 100%
ACCC 121 2020 First OPP
QUESTION 4 (Cash flow statement)

Layden Building Supplies (PTY) Ltd

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020
Layout and presentation: For headings, sub
1.00 headings and currency, having a total

for allocation of marks see

calculation worksheet

R
2,020
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 1,100,875 W1 3.00
Cash paid to suppliers and employees (34,375) W2 9.00
Cash generated from operations 1,066,500
Dividend income 22,000 given 0.50
Interest paid (65,000) given 0.50
Dividends paid (156,500) W3 4.00
Tax paid (296,910) W4 2.00
Net cash inflow from operating activities 570,090

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in share investments (48,000) (486 000 - 438 000) 0.50
Purchase of land for expansion (265,000) W5 2.00
Purchase of motor vehicles for replacement (221,000) W6 2.00
Proceeds on sale of motor vehicles 48,000 0.50
Net cash outflow from investing activities (486,000)

total 25.00
Solution Question 4 - Workings

W1: Cash received from customers

Marks Marks
Trade Receivables
Opening balance 206,000 0.5
Credit loss 7,125 1.00 (9500 (0.5) *.75 (0.5)
Cash received from customers 1,100,875
Sales 1,002,000 0.5 Closing balance 100,000 1.00 (85000 (0.5) + 15000 (0.5) 3
1,208,000 1.0 1,208,000 2.00 3.0

W2: Cash paid to suppliers and employees

Profit before tax 404,000 0.50
Revenue (1,002,000) 0.50
(598,000)
Add back
Depreciation Vehicles 62,000 0.50
Buildings 25,000 0.50
Loss on sale (62000 (0.5) - 48000 (0.5) 14,000 1.00
Credit losses 7,125 0.50
Movement in allowance for credit losses 15,000 0.50
Inventory write down 109000 (0.5) less 103350 (1.5) 5,650 2.00 Cost pice Nett Realisable value
Dividend income (22,000) 0.50 109,000 115,000 0.5
Finance cost 65,000 0.50 0.50 (5,750) 0.5 Commission
Increase in inventory 176600 (0.5) less (182700(0.5)+5650 (0.5)) (11,750) 1.50 (5,900) 0.5 Repair cost
Increase in creditors 145000 to 548600 403,600 0.50 103,350
Cash Paid to suppliers and employees (34,375) 9.00
9.00
W3: Dividends paid
Retained income beginning of year 425,470 0.50
Profit for the year (404 000 - 86 000 ) 318,000 0.50
Share issue cost (12,500) 0.50
Shares issued (646000 - 725000 ) (79,000) 1.00
Dividends declared 141,500 Balancing
Retained income at the end of the year 510,470 0.50
Shareholders for dividends
Dividends paid 156,500 Opening balance 20,000 0.50
C/balance 5,000 0.5 Dividends declared 141,500
161,500 0.50 161,500 3.50 4.00
4.00

W4: Income tax paid

SARS Income tax

Income tax paid 296,910 Opening balance 190,530 0.50
Income tax 86,000 0.50
Closing Balance (105380 (0.5)-85000 (0.5)) 20,380 1.00 2
93,000 296,910 2.00
W5: Land and buildings acquired
Land and buildings
Opening balance 460,000 0.5
Revaluation reserve (320 -200) 120,000 0.5 Depreciation 25,000 0.50
Bank (balancing) 265,000 Closing balance 820,000 0.50
845,000 1.00 845,000 1.00 2.00

W6: Motor vehicles acquired

Motor vehicles
Opening balance 224,000 0.5 Asset disposal 62,000 0.50
Depreciation 62,000 0.50
Bank (balancing) 221,000 Closing balance 321,000 0.50
445,000 0.50 445,000 1.50 2.00

10.50 42%
10.00 40%
4.50 18%
25.00 100%
 QUESTION 5 (GROUP STATEMENTS)

(a) IFRS defines a subsidiary as an entity that is controlled by the parent. 0.50

An investor controls an investee if the investor has all of the following: 1.50
i) Power over the investee; (0.5)
ii) Exposure, or rights to, variable returns from involvement with the investee; (0.5) and
iii) The ability to use power over the investee to affect the amount of the investor's returns (0.5)
Power is defined as:
- Existing rights that gives the investor the current ability to direct the relevant activities of the
investee. 0.50
- Normally it can happen through voting rights; or 0.50
- Through material influence over the decisionmaking of the investee 0.50

Application:

- Washy does not have control over Wishy through voting rights, because they only own 20% of
the voting shares. Mr Bosch owns 24% of the voting shares. 0.50
- Although Wishy does not have a majority shareholding or controls the majority directors in the
board of directors(0.5), they have the power to appoint the managing director, who has a veto
right on all decisions taken by the board. Effectively they control the board of directors. (0.5) 1.00
- These decisions will have a direct impact on the returns of Washy and consequently on Washy's
share of those returns. 0.50

Conclusion:
Washy exercises effectively control over Wishy and therefor Wishy can be considered to be a
subsidiary of Washy. 0.50

Total 6.00
Max 5.00

(b) Analyses of owners equity of Pan Ltd

Wishy Ltd 100%

At acquisition ( 1 Oct 2020) at acquisition
Share capital 5,000,000
Revaluation surplus 150,000
Retained earnings 690,000
5,840,000
Purchase consideration 6,100,000
Goodwill 260,000

Pro forma consolidation journal entry No statement indication -0.5 mark

Debit Credit
Share capital S (SoCE) 5,000,000 0.50
Revaluation surplus (SoCE) 150,000 0.50
Retained earnings S (SoCE) 690,000 0.50
Goodwill (SoFP) 260,000 0.50
Investment in Wishy Ltd (P) (SoFP) 6,100,000 0.50
Elimination of equity against investment account 2.50

Washy Ltd Group

Consolidated statement of financial position at 31 December 2020 0.50 Heading and layout
2020
EQUITY AND LIABILITIES R
Share capital 7,000,000 0.50
Revaluation surplus 200,000 0.50
Retained earnings 1,870,000 0.50
Total equity 9,070,000
Current liabilities
Trade payables 50,000 0.50
Total equity and liabilities 9,120,000 2.50

100%