Case Study

PROGRAMME Bachelor of Commerce in Accounting

MODULE Concepts of Financial Reporting
YEAR Two (2)
INTAKE January 2024 Semester 1
MARKS 30
QUESTION 1 [30 MARKS)
Kinta Baloyi Limited has an authorised share capital of 2 500 000 ordinary shares of no-par value, of which 600 000 had
already been issued by the time the trial balance was prepared. The financial director requests your accounting knowledge
in preparing the financial statements for the year ended 31 December 2021, and provides you with the following information:
Trial balance at 31 December 2021
Debit Credit
R R
Property 1 300 000
Furniture and Equipment (carrying value) 925 000
Investments 150 000
Bank 35 000
Trade receivables 222 000
Inventory 201 000
Ordinary share capital (600 000 shares) 1 200 000
Retained earnings (1 January 2021) 210 000
Revaluation surplus (1 January 2021) 225 000
14% Loan from SABA Bank 100 000
Trade payables 90 000
Current tax payable 152 000
Sales 4 900 000
Dividend income 55 000
Interest income 15 000
Profit on disposal of equipment 20 000
Cost of sales 3 020 000
Distribution costs 360 000
Operating costs 72 000
Administrative costs 330 000
Tax expense 352 000
6 967 000 6 967 000

Additional information:
1. On 31 December 2021 it was estimated that the inventory has a net realisable value of R180 000. No entries have yet
been made for this.
2. The loan from SABA Bank was acquired on 1 January 2020 and is repayable in full on 1 January 2022. The Interest is
payable annually in arrears on 1 January. Provide for the interest outstanding on the loan for the current financial
period.
 3. On 31 December 2021 the property was re-valued upwards by R300 000 using the replacement value method. This
revaluation still has to be recorded.
4. On 1 December 2021, Kinta Baloyi Ltd received cash for 125 000 shares issued at R2 each, and all the shares were
allotted on this day. This issue has not yet been recorded.
5. On 31 December 2021 the directors declared a dividend of 20 cents per share on all the issued shares, including

those issued on 1 December 2021. No entries have yet been made for this.
6. In drafting the trial balance, all the expenses of Kinta Baloyi Limited had been allocated to the following four functions:
· Cost of sales,
· Distribution costs,
· Operating costs, and
· Administration costs

7. The above costs reflected on the trial balance include the following:
· Depreciation on the sales department equipment, R55 000
· Depreciation on the office furniture and equipment, R65 000
· Salaries of the sales staff, R220 000
· Salaries of the office staff, R200 000

REQUIRED:
a). Prepare general journal entries on 31 December 2021 for additional information numbers 1, 2, 3, 4 and 5. You
are not required to prepare the closing transfers for the write down of inventory and ordinary dividends accounts. (10)
(Dates and narrations may be omitted.)
b). Prepare the statement of comprehensive income of Kinta Baloyi Limited for the year ended 31 December 2021
(6)
in conformity with International Financial Reporting Standards. (Show your calculations in brackets.)
c.) Prepare the statement of changes in equity of Kinta Baloyi Limited for the year-ended 31 December 2021 in
(7)
conformity with International Financial Reporting Standards.
d). Prepare the statement of financial position of Kinta Baloyi Limited at 31 December 2021 in conformity with
(7)
International Financial Reporting Standards. (Show your calculations in brackets.)

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