EACC2608 Semester test 1 memorandum

Question 1 (a) 11 marks

New Beginnings should account for a contract with a customer Skills SA that is within the scope of the
standard only when all of the following criteria are met:

The parties to the contract have approved the contract and are committed to perform their respective
obligations.
On 1 May 20.22, Skills SA signed an agreement with New Beginnings to provide them with IT maintenance
services , upgrade software, and supply 50 new computers.
Skills SA made the payment in full on 30 May 20.22, it can therefore be regarded as showing their
commitment to the contract and to performing their obligations.
Based on the above it can be regarded that both parties have approved the contract.

The entity can identify each party’s rights regarding the goods or services to be transferred.
Each party's rights can be clearly identified. Skills SA has the rights to receive IT maintenance services,
upgrade software, and 50 new computers. New Beginnings has the right to receive a payment of R2 245 0
(including VAT).

The entity can identify/ determine the payment terms for the goods or services to be transferred.

The contract’s total value was R2 245 000 (including VAT). Skills SA made the payment in full on 30 May
20.22. The project will take place until 31 July 20.22. The payment terms have been clearly identified.

The contract has commercial substance

The contract has commercial substance in terms of the risk, timing or amount of New Beginnings future ca
flows.
New Beginnings will receive a payment of R2 245 000 (including VAT) for providing the service to Skills SA
from 1 May 20.22 until 31 July 20.22. The contract therefore has commercial substance (inflow).
New Beginnings will also incur expenses equal to the cost of maintenance, upgrade, and purchase of 50
computers to fulfill its obligations (outflow).

It is probable that the entity will collect the consideration to which it is entitled in exchange for
goods/services transferred to customer.
In considering the collectabilitiy the entity needs to consider the following:- ;
The customer's ability , intention to pay and past practices
Skills SA has already made payment in full for the services that will be rendered. Therefore the probability
collect consideration is met.

Conclusion
Based on above discussion all the criteria have been met. Therefore a contract does exist between New
Beginnings and Skills SA in terms of IFRS15.
Communication and clarity of expression

Avail
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EACC2608 Semester test 1 memorandum
Question 1 (b) 9 Marks

(b) STEP 4 ALLOCATION OF TRANSACTION PRICE BETWEEN PERFORMANCE OBLIGAT

The transaction price will be allocated to the performance obligations based on the stand alo

The stand-alone selling price is the price at which an entity would sell a promised good or se
Stand-alone selling price
(W1)
Computers 2,250,000
IT services 75,000

2,325,000
W1 (2 marks, see below)
W1 Calculation of Stand alone price
Computers
maintenance and upgrade
ETWEEN PERFORMANCE OBLIGATIONS
nce obligations based on the stand alone selling price of the individual items as follows:

ntity would sell a promised good or service separately to a customer.

Ratio Allocation of
transaction price
0.968 1,889,201
0.032 62,973
-
1,952,174

2,250,000
75,000
2,325,000
 the individual items as follows: 1

o a customer. 1

(2250000/2325000*1952174) 3
(75000/2325000*1952174) 3

2 245 000*100/115 1
1,952,174

Total available: 9
Maximum: 9

Total 9
For basis of allocation.

For definition of SASP.

Question 2
(a)
To: FINDirector @oilgas.co.za
From: EACC2608student@ufs4life.co.za
Date: xx/xx/2023
SubjectDo the exploration holes drilled meet the definition of an asset?

Dear Sir

Refer to Appendix A for recommendations in respect of whether the explo

asset for the year ended 28 February 20.23.

Should you have any further inquiries, please contact me on 0XX XXX XX

Yours faithfully

EACC2608 Student

Appendix A

An asset is a present economic resource controlled by the entity as a result of past

An economic resource is a right that has the potential to produce economic benefits

Discussion

Right Oil & Gas has a right over a physical object, the drill
the economic benefits from the hydrocarbons.
Potential to produce
economic benefits It does not need to be certain or even likely that the

Although the extraction of the hydrocarbons is in cha

it does not need to be certain or even likely that the

The right must already exists and would produce ec

to other parties.
 On 28 February 2023 the exploration holes were dri

The right can meet the definition of an economic re

produce economic benefits is low.

According to Mr. Molefe it is not virtually certain to fi

Controlled by the entity The drilled holes can only be used by Oil&Gas Ltd, t

It has the ability to prevent other entities from directi

Security guards and fences are provided to protect t

As a result of past events The past event is the securing of the rights to drill th
drilling of the holes.

Conclusion: The exploration holes drilled for the amount of R5 m

Framework for Financial Reporting for the year ende

(b) Object and scope of financial statements:

Provide financial information about the reporting entities assets,liabilities,equity,inco

in assessing the prospects for future net cash inflows to the reporting entity as well
assessing management’s stewardship of the entity’s economic resources.
 Information does not need to be exactly the same to

an asset?

of whether the exploration holes drilled meet the definition of an

me on 0XX XXX XXXX. 1 mark for body of email

ity as a result of past events.

uce economic benefits.

hysical object, the drilled exploration holes and will receive

e hydrocarbons.

or even likely that the right will produce economic benefits.

hydrocarbons is in challenging environmental conditions with uncertain outcomes,

or even likely that the exploration holes will produce economic benefits.

and would produce economic benefits beyond those available

oration holes were drilled and the benefit are not available to other parties.

on of an economic resource and be an asset even if the probability that it will

ow.

ot virtually certain to find oil or gas.

sed by Oil&Gas Ltd, therefore, it has the ability to direct the use of the right.

er entities from directing the use of the drilled holes.

e provided to protect the drill sites.

of the rights to drill the holes from the respective governments, including the

or the amount of R5 million meets the definition of an asset in terms of the Conceptual
rting for the year ended 28 February 20.23.

s,liabilities,equity,income and expenses that is useful to users of financial statements and

eporting entity as well as
c resources.
to be exactly the same to award marks

outcomes,
ies.

right.

he Conceptual

Total marks 17 marks

cial statements and

Total marks 3 marks

Total marks 20 marks

Question 3
Part A

Cost for 21 250 units on 28 February 20.23

(R7 670 000/65 000) x 21 250 = R2 507 500

Net realisable value of 21 250 units on 28 February 20.23

Selling price
Delivery cost
Sales commission (10%)

Net realisable value

Value of 21 250 units at NRV

R109 x 21 250

Journal entry

Inventory (SFP)
Cost of Sales/Purchases (SPL)

(b)

Cost of Sales (SPL)

Inventory (SFP)

R2 507 000 - R2 316 250

 2507500

130
(8)
(13)

109

2,316,250 With error

Debit Credit
Rand Rand
2,316,250
2,316,250

190,750 With error

190,750

9 Marks in total
Question 3
Part B

Cost of 120 refrigerators at R10 000 each

Discount (5%)
Transport
Insurance

Cost per refrigerator 1197500/120

Cost of 35 refrigerators

Net realisable value of 35 refrigerators (R8 550 x 35)

Amount written of to NRV (R349 265-R299 250)

Cost of sales (120 - 35) x R9 979

Zeni Ltd
Notes to the Statement of Financial Position on 28 February 20.23

2. Inventories

Inventories consists of the following:

Finished Products 299,250

During the year the value of inventories written of to net realisable value amounted
Inventory to the value of R250 000 serves as security for a short term loan.
Inventories to the value of R848 215 were recognised as cost of sales
 1,200,000
(60,000)
50,000
7,500
1,197,500

9,979 Mark only given if 120 units are used.

349,265

299,250
50,015

848,215.00

28 February 20.23

net realisable value amounted to R50 015

y for a short term loan.
ed as cost of sales

11 marks in total