Suggested solution Calculations:

R Marks
QUESTION 1 1. Carrying amount of property, plant and equipment
1.1 Sewing and cutting machinery
1. R480 000^ / (800 000 – 280 000 units)^^ x (800 000 – 280 000 406 154 3,0
Track & Suit Traders - 80 000)^^^ units =
Statement of financial position as at 28 February 20X8 ^ or
Assets Calcs R Marks (R480 000 x 800 000 units)^^ / (800 000 – 280 000 units)^^= 738 462 2,0
^Non-current assets 2 972 901 (R738 462 / 800 000 units)^ x (280 000 + 80 000)^ units = (332 308) 1,0
^Property, plant and equipment 1. 2 954 901 8,5 406 154
^Other financial assets 2. 18 000 1,5 or
^480 000 0,5
^Current assets 287 930 (R480 000 x 80 000 units)^^ / (800 000 - 280 000)^^ units = ^(73 846) 2,5
^Inventories 4. 11 072 7,0 406 154
^Trade debtors 7. 26 525 3,0
^Other current assets 3. 105 333 2,0 1.2 Computers
^Cash and cash equivalents 8. 145 000 2,0 R88 000^ x 75%^ = 66 000 1,0
or
3 260 831 R88 000^ – (R88 000 x 25%)^ = 66 000 1,0

Owner’s equity and liabilities 1.3 Land and building

Owner’s equity 3 099 811 Let land and building cost = X
Capital (balancing figure) 3 099 811 Land 20%X and building therefore 80%X
Building accumulated depreciation up to 28 February 20X7
Total liabilities = 0,8X^ / 35 years^ x (5 years and 10/12 months)^ 1,5
Non-current liabilities = 0,8X x 5,83333 years / 35 years
= 0,13333X
Therefore X^ – 0,13333X = R2 550 000^ 1,0
^Current liabilities 161 020 X = R2 942 310^ (total cost) 0,5
^Trade and other payables 6. 161 020 1,0 Carrying amount on 28 February 20X7 ^2 550 000 0,5
(R2 942 310 x 80%^) / 35 years^ = (67 253) 1,0
3 260 831 2 482 747
Presentation marks 5,5 or
[30,5] Land (R2 942 310 3 marks from above X 20%) 588 462 3,0
Buildings (R2 942 310 x 80%^) x (420 – 82)^ months/ 420 1 894 287 1,5
2. A branch is either a geographically separate business^ or just a separately managed business months^ =
apart from the head office^, but it is part of one entity^. It is normally used to expand 2 482 749
operations^. If it is an independent branch, it does its own accounting^ and then reports to or
head office. It may or may not purchase its own inventories and set its own prices^. It may or 0,2X^ + 0,8X^ / 420 months^ x (420 – 70)^ months left to
may not do its own administration function^. It has its own general ledger and trial balance^ depreciate = R2 550 000^
which is consolidated into the entity for financial reporting purposes^. X = (rounding difference) Land and building cost ^2 942 308 3,0
(max 3 marks) Less building depreciation (R2 942 308 x 80%^) / 35 years^ x (459 560) 1,5
(6 years and 10/12 months)^ =
2 482 748

Total PPE at carrying amount on 28 February 20X8 2 954 901 [8,5]

R406 154 + R66 000 + R2 482 747 =

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FRK 100 Year test 2 2018 solution FRK 100 Year test 2 2018 solution
 2. Share investments R Marks
((100 + 20 shares) x R150)^^^ = 18 000 [1,5] Trade creditors
R R
3. Fixed deposit and accrued interest Bank 576 000 Balance b/d 55 000
Fixed deposit maturing over 3 months but under 12 months, ^100 000 0,5 Allowance for settlement 17 814 Purchases (gross – must split 704 814
therefore other current asset discount received (realised up)
Accrued interest from 1 July 20X7 – 28 February 20X8 5 333 1,5 amount)
(R100 000 x 8%)^^ x 8/12^ = Balance c/d 166 000 Purchases (excluding settlement 683 670
105 333 [2,0] discount)
4. Inventories Allowance for settlement 21 144
Cash sales R250 000^ x 100/90^ = 277 778 1,0 discount received
Credit sales ^570 000 0,5 759 814 759 814
Summer sale R75 000^ x 100/67^ = 111 940 1,0 Balance c/d 166 000
Sales return ^(5 000) 0,5
Total gross sales 954 718 6. Trade creditors
Cost of sales R954 718 x 100/120^ = 795 598 0,5 Closing balance ^166 000 0,5
Opening inventories ^(123 000) 0,5 Allowance for settlement discount allowed (R166 000 x 3%)^ (4 980) 0,5
Purchases (calc 5) (683 670) 3,0 161 020 [1,0]
Theoretical closing inventories 11 072 [7,0]
7. Trade debtors
5 January invoice: R28 000^ x R0,30^ = 8 400 1,0
Cost of sales 1 June invoice: (Part of allowance for expected credit loss) -
R R (negative mark if included in figure)
Inventories (Opening) 123 000 Trading account (sales less 795 598 2 November invoice: Discount period expired, therefore full ^11 000 0,5
gross profit) amount still outstanding
Purchases excluding 683 670 Inventories (closing) 11 072 15 February invoice (R12 500^ – R5 000^) x 95% = 7 125 1,5
settlement discount (calc 5) 26 525 [3,0]
806 670 806 670

8. Cash and cash equivalents R Marks

5. Purchases Bank statement ^231 000 0,5
Opening creditors ^55 000 0,5 Outstanding cheques ^(165 000) 0,5
Payments ^(576 000) 0,5 Outstanding deposits ^77 000 0,5
Allowance for settlement discount received (realised) (17 814) 1,0 Bank error – will only be reversed in March 20X8 ^2 000 0,5
(R576 000 x 3/97)^^ = 145 000 [2,0]
Closing creditors ^(166 000) 0,5
Gross purchases 704 814
Less settlement discount received R704 814 x 3%^ = (21 144) 0,5
683 670 {3,0}

or
Opening creditors after discount R55 000^ x 97%^ = 53 350 1,0
Payments ^(576 000) 0,5
Closing creditors after discount R166 000^ x 97%^ = (161 020) 1,0
Net purchases ^683 670 0,5
{3,0}

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FRK 100 Year test 2 2018 solution FRK 100 Year test 2 2018 solution
QUESTION 2 2. Novak Traders
Notes for the year ended 30 September 20X17 p^

PART A
Property, plant and equipment

1. Correcting and adjusting journal entries Land Buildings Delivery Passenger Marks
vehicles vehicles
DR CR Marks R R R R
R R
Capital (SFP) ^ 19 250 0,5 Carrying amount: 01/10/20X16 1 653 125 185 680 128 250
- Cost Calc 4 p^ 650 000^ 1,5m1 725 000 470 000^ 1m 285 000 3,5
Accumulated depreciation: Passenger vehicles (SFP) ^ 19 250 1,5 - Accumulated depreciation Calc 4 - 2m (71 875) (284 320)^ 0,5m (156 750) 3,0
Calc 1.1 -1,0m
Movements for the year - 260 780 (71 680) 68 115
p^ Additions

Passenger vehicles: Cost (SFP) ^ Calc 1.2 - 1,0m 54 600 1,5 Passenger Vehicles (R140 000 x 114/100) ^ 0,5m
159 600 0,5
Buildings (R342 000 x 100/114) ^ 0,5m
VAT Output (SFP) ^ 54 600 0,5 300 000 0,5
p
^ Depreciation Calc 2 3m
(39 220) 3m
(71 680) (43 391)^ 6,5
p^ Disposal Calc 3 (48 094)^ 0,5
Depreciation (P/L) ^ Calc 2 – 3,5m 43 391 4,0
Carrying amount: 01/10/20X17 1 913 905 114 000 196 365
Accumulated depreciation: Passenger vehicles (SFP) ^ 43 391 0,5 - Cost Calc 5 p
^ 650 000^ 2 025 000^ 470 000^ 302 100^ 2,0
- Accumulated depreciation Calc 5 - (111 095)^ (356 000)^ (105 735)^ 1,5
Accumulated depreciation: Passenger vehicles (SFP) ^ 94 406 1,5 Presentation marks (p^) 3,0
Calc 3 – 1m
[21,0]
Calc 3 – 0,5m
Vehicles: Cost (SFP) ^ 142 500 1,0
Sundry/ Trade creditors (SFP) ^ ^40 000 1,0
Loss on trade-in of vehicle (P/L) ^ ^8 094 1,0
[13,0]

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FRK 100 Year test 2 2018 solution

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FRK 100 Year test 2 2018 solution
3. Theory: Calculations:
 The depreciation method for an asset that is selected by an entity shall reflect the pattern^
of how the economic benefits are going to be consumed^ by that entity. 1. Correction of error: VAT incorrectly excluded from cost price of passenger vehicles (you
may not claim VAT on passenger vehicles):
 The straight-line method^ of depreciation results in a constant charge over the useful life
if the asset’s residual value does not change^. What was done What should have Correcting journal
been done entry
 The units of production method^ results in a charge based on the expected use or output R R R
of the asset^. DR/(CR) DR/(CR) DR/(CR)
Passenger vehicles: 390 000 444 600 54 600
(R390 000 x 114/100)
Application: Cost
 The passenger vehicles are used by the medical representatives to visit potential VAT input 54 600 - (54 600)
Will be corrected via VAT
customers^ – the more customers they visit, the more the car will be used^.
output account
 The number of customers visited may not be the same every year. The cars might be used
more in one year than in another^. Passenger vehicles: (137 500) (156 750) (19 250)
(R137 500 x 114/100)
Accumulated
Conclusion: depreciation
 No^, I don’t think the straight line method is the most appropriate method of depreciation Capital Too little depreciation (19 250) - 19 250
was recorded in the past, therefore
as the straight-line usage of the vehicle does not reflect how the car is actually being used profits were higher
to generate future economic benefits^.
 Measuring depreciation based on the consumption of the vehicle by the kilometers
R Marks
travelled might give a more accurate reflection of the consumption of the vehicle in a
1.1 Adjustment to opening accumulated depreciation (excl VAT)
particular year with regards to the economic benefits generated by it, therefore the
R137 500^ x 14%^ 19 250 [1,0]
production unit method would be a more appropriate depreciation method^.
(6,0)
OR
(R68 750 x 2 vehicles)^ = R137 500 x 14%^ 19 250 [1,0]

OR
(R125 000 x 75% x 114/100 x 3,66667/5 years = R78 375^ –
(R68 750 x 2 vehicles)^ 19 250 [1,0]

1.2 Adjustment to cost price of vehicles

R390 000^ x 14%^ 54 600 [1,0]

OR
(R125 000 x 2 vehicles + R140 000)^ x 14%^ 54 600 [1,0]

2. Depreciation for the year:

R Marks
Passenger vehicles:
Mazda B:
((R125 000 x 114/100)^ x 75%^)/5 years^ x 9/12^ 16 031 2,0

Mazda A:
((R125 000 x 114/100 x 75%)^/5 years 21 375 0,5

Mazda C:
((R140 000 x 114/100) x 75%^)/5 years x 3/12^ 5 985 1,0
43 391 [3,5]

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FRK 100 Year test 2 2018 solution FRK 100 Year test 2 2018 solution
 5. Total cost and accumulated depreciation at the end of the year:
Delivery: R Mark
Toyota A: (R250 000^ x 80%^)/250 000km^ x 50 000km^ 40 000 2,0 s
Toyota B: (R220 000 x 80%)^/250 000km x 45 000km^ 5.1 Delivery vehicles
(kilometers limited to 250 000 i.e. 250 000km – 205 000km)) 31 680 1,0 Cost 470 000^ [0,5]
71 680 [3,0] Accumulated depreciation (R284 320 + R71 680)^ 356 000^ [0,5]
Buildings:
Existing: R1 725 000^ Calc 4/ 50 years^ 34 500 1,0 5.2 Passenger vehicles
Extensions: (R342 000 x 100/114)^/47,66667 years^^ x 9/12^ Cost (R390 000 – R125 000) x 114/100 302 100^ [0,5]
(50 years – 2 years and 4 months)
4 720 2,0
39 220 [3,0] OR
(R125 000 x 2) + R140 000 – R125 000) x 114/100 302 100^ [0,5]
3. Carrying amount of vehicle traded in:
R Marks OR
Cost (R125 000 x 114/100)^ 142 500 [0,5] R285 000 + R159 600 – R142 500 302 100^ [0,5]
Less: Accumulated depreciation
(R68 750 x 114/100)^ + R16 031^) (94 406) [1,0] Accumulated depreciation
(R156 750 + R43 391 – R94 406) 105 735^ [0,5]
OR
OR (R68 750 x 114/100) + R21 375 + R5 985 105 735^ [0,5]
(R125 000 x 75% x 114/100 x 3,6667/5 years)^ = R78 375 +
R16 031^ 94 406 [1,0] 5.3 Buildings
Cost (R1 725 000 + R300 000) 2 025 000^ [0,5]
Carrying amount at date of trade-in 48 094
Accumulated depreciation (R71 875 + R39 220) 111 095^ [0,5]
4. Opening cost and accumulated depreciation at the beginning of the year:
R Marks
Passenger vehicles:
Cost: (R125 000 x 2)^ x 114/100^ 285 000 [1,0]

OR
(R390 000 – R140 000)^ + R35 000^ 285 000 [1,0]

Accumulated depreciation: R137 500 x 114/100^ 156 750^ [0,5]

OR
R137 500 + R19 250 156 750^ [0,5]

Buildings:
Cost: Total given 2 016 660^ 0,5
Less: Branding of building (50 160)^ 0,5
Total cost of building (incl. VAT) 1 966 500

Total cost of building (excl. VAT)

(R1 966 500 x 100/114^) 1 725 000 0,5
[1,5]

Accumulated depreciation:
(R1 725 000/50 years)^^ x 2 years and 1 month^^ (2,08333 years) 71 875 [2,0]

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FRK 100 Year test 2 2018 solution FRK 100 Year test 2 2018 solution
QUESTION 3

a) Sustainability report

According to the Global Reporting Initiative framework, an item will be included in the
sustainability report of an entity if it is considered important for reflecting the entity’s economic,
environmental and social impact, or influencing the decisions of stakeholders^^. {1,0}

The in-store promotions do not have a significant impact on society, the environment, or on the
economy^^. {1,0}

The cost of the in-store promotions therefore does not need to be reported^ in the sustainability
report. {0,5}
[2,5]

b) Integrated report

The student could have argued yes or no:

If yes:

An item should be included in an entity’s integrated report if it substantively affects the

organization’s ability to create value^^ over the short, medium and long term. {1,0}

The promotion of the new mobile phone could drive sales^ and lead to significantly higher value
creation^. {1,0}

Or any other valid reason that is well argued.

Therefore the cost of the in-store promotions should be reported^ in the integrated report. {0,5}
Total: [2,5]

If no:

An item should be included in an entity’s integrated report if it substantively affects the

organization’s ability to create value^^ over the short, medium and long term. {1,0}

The promotion of the new mobile phone could drive sales. However, the promotions are only in
South Africa and not the rest of the world. This brings into question the significance of the impact.
South Africa is a small market given Samfone’s international footprint, and the increase in sales
because of these promotions might not be significant in the bigger scheme of things^^^. {1,5}

Or any other valid reason that is well argued.

Note: More marks are awarded to the student who argues no as an argument for this answer
requires an in depth understanding of integrated reporting.

Therefore the cost of the in-store promotions should not be reported^ in the integrated report.
{0,5}

Total: [3,0]

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FRK 100 Year test 2 2018 solution