QUESTION 1 (SUGGESTED SOLUTION)

PART A
Step 3
The transaction price is R3 500 per kit. In total, 20 makeup kits were sold to Nelly. The total
transaction is price R70 000 (2).
Step 4
The allocation of the transaction can be done as follows:

Transaction Stand-alone
Item Allocation Price Allocated Price Total
Price selling price

Cosmetics 2 990/5 640 x 3 500 R1 855,50 R37 110 (1)

R2 990 (1)
Makeup Case
32-Piece 450/5 640 x 3 500 R279,25 R5 585 (1)
Makeup Brush R450 (1)
Set
3 x Eyeshadow 1 800/5 640 x 3 500 R1 117,02 R22 340,40
Palette R1 800 (1) (1)

Case of 5D Stick 400/5 640 x 3 500 R248,23 R4 964,60

on Eyelashes R400 (1) (1)

R3 500 R5 640 R70 000 (1)

1 mark for discussing the theory of step 3 and 4 (1)

PART B
a)

Definition of Investment Application – Old Building

Property
Investment property is:
- Land (½) The building does not qualify as land (½)
- A building (½) It is a building (½)
- Part of a building (½) It is block of flats and not part of a building (½)
That is held for:
- Earning rentals (½) Ranchester will collect rental from students who will (½)
occupy the units
- Capital appreciation (½) The building will not be used for capital appreciation (½)
because it will be rented out to students and there will
be flow of economic benefits in terms of rental
payments.
- Both (½) It is not held for both as discussed above i.e only for (½)
earning rentals.
The assumption of the financial manager is incorrect (1) as the building should thus be
classified as Investment Property. (1)

b)

2022 Dr Cr
R R
28 Mar  Dr Receivable: Arsenal Ltd (SFP) 17 000 000 
Cr Bank (SFP) 17 000 000 
Recognition of purchase price paid to Arsenal Ltd for
a building

2022 Dr Cr
R R
30 Apr  Dr Investment Property (SFP) 17 000 000 
Cr Receivable: Arsenal Ltd (SFP) 17 000 000 
Recognition of investment property as well as fair
value adjustment on the measurement date.

2022 Dr Cr
R R
31 May  Dr Investment Property (SFP) 1 000 000 
Cr Profit with fair-value adjustment (P/L) 1 000 000 
Recognition of fair value adjustment on the
measurement date.

For having Journal Narrations (All Journals)

QUESTION 2 (SUGGESTED SOLUTION)

2021 Dr Cr
R R
1 Mar  Bank (SFP) 2 800 000 
Long-term borrowings - Specific Loan (SFP) 2 800 000 
Long-term loan (specific borrowing) obtained for office
construction

2021 Dr Cr
R R
30 Nov  Current (call) account (SFP) 24 000 
Interest income – temporary investment (P/L) 24 000 
Recognise interest income earned on unutilised funds

2021 Dr Cr
R R
30 Nov  Interest income – temporary investment (P/L) 24 000 
Interest expense – specific loan (P/L) 24 000 
Recognise closing-off of interest income on
temporary investment of unutilised specific loan funds
against the interest expense on the specific loan

2021 Dr Cr
R R
30 Nov  Interest expense – specific loan (P/L) 210 000 P
Long-term borrowings - Specific Loan (SFP) 210 000 P
Recognise interest incurred on specific loan
(2 800 000 x 10% x 9/12)

2021 Dr Cr
R R
30 Nov  Buildings under construction (SFP)  186 000
Interest expense – specific loan (P/L)  186 000
Recognise capitalisation of net borrowing costs
(2 800 000 x 10% x 9/12 ) – 24 000 

2021 Dr Cr
R R
30 Nov  Buildings (SFP)  2 986 000
Buildings under construction (SFP)  2 986 000
Recognise transfer of completed buildings under
construction to buildings
 (2 800 000  + 186 000 P)

2021 Dr Cr
R R
31 Dec  Depreciation (P/L) 12 442 
Accumulated depreciation (SFP) 12 442 
Recognise depreciation expense on buildings
(2 986 000 P x 5% x 1/12 )

2021 Dr Cr
R R
31 Dec  Interest expense – specific loan (P/L) 23 333 
Long-term borrowings - Specific Loan (SFP) 23 333 
Recognise interest incurred on specific loan – not
capitalised (2 800 000 x 10% x 1/12 )
(32)
[MAX 30]
---o0o---

QUESTION 3 SUGGESTED SOLUTION

REQUIRED:

a) Disclose the following notes to the financial statements of Aladdin Limited for the
reporting period ended 31 December 2022:

INVESTMENT PROPERTY
R
At fair value (1)
Balance at beginning of the year 10 800 000 (1)
Loss on fair value adjustment (900 000) (1)
Balance at end of the year 9 900 000 (1)

Investment property, with office buildings on it, was acquired on 2 January 2021 for
R10 800 000. (1) The property is rented out, in accordance with an operating lease
agreement. (1)
A bond is registered over the property, with a carrying amount of R9 900 000 (1),
which serves as security for the mortgage bond of R6 000 000. (1)
The fair value of investment property is determined by an independent expert, who
possesses the appropriate qualification and experience. (1) The fair value reflects the
actual market conditions and circumstances as at the reporting date. (1)

(10)
 INTANGIBLE ASSETS
Students are only required to show the
TOTAL for all trademarks. Individual
columns supplied for marking and learning
purposes
Trademark Trademark
Trademarks
A B
R R R
Carrying amt. beginning of year 1 485 000 (1) 2 700 000 (1) 4 185 000 (2)
Gross carrying amount 2 400 000 3 600 000 6 000 000
Accumulated amortization (600 000) (900 000) (1 500 000)
Accumulated impairment (315 000) - (315 000)

Additions - - -

Disposals at carrying amount (1 333 750) (1p) - (1 333 750) (1p)

Gross carrying amount (2 400 000) - (2 400 000)
wk2
Accumulated amortization 751 250 (1p) - 751 250 (1p)
Accumulated impairment 315 000 - 315 000

wk1 wk3
Amortisation (151 250) (4) (300 000) (3) (451 250) (7)

wk4
Impairment (250 000) (4) (250 000) (4)

Gross carrying amount - 3 600 000 3 600 000

Accumulated amortization - (1 200 000) (1p) (1 200 000) (1p)
Accumulated impairment - (250 000) (1p) (250 000) (1p)
Carrying amount end of year - 2 150 000 (1) 2 150 000 (1)

(18)

WORKINGS:

wk1
(R2 400 000 (1) – R600 000 (1) – R315 000 (1) = R1 485 000) ÷ 9 x 11/12 (1) = R151 250
wk2
R600 000 + R151 250 = R751 250
wk3
(R3 600 000 (1) – R900 000 (1)) = R2 700 000) ÷ 9 (1) = R300 000
wk4
(R3 600 000 (1) – R900 000 (1) – R300 000 (1p)) = R2 400 000 – R2 150 000 (1) =
R250 000
LEASE LIABILITIES
Secured (1) R
Lease liability (1) 2 866 617 (1)
A right-of-use asset (equipment) (1) with a carrying amount of
R2 873 750 is pledged as security for the lease liability. (1)
The interest rate is a fixed rate of 8.75% per year (1) and the lease
liability is repayable in equal semi-annual instalments of R264 633 (1)
each over the remaining term (7.5 years on 31 December 2022) of the
lease. (1)
Ownership of the right-of-use asset (equipment) transfers to the entity
after payment of the last instalment. (1)
Less: portion payable within 12 months transferred to current liabilities (284 527) (1)
2 582 090

(10)

SHORT-TERM PROVISIONS
R
Balance at the beginning of the year -
Additional provision 1 000 000 (2)
Amounts used during the year -
Amounts reversed during the year -
Balance at the end of the year 1 000 000
The provision was created in respect of a claim by a client as a result of damages
caused by a defective product that was purchased from Aladdin Limited. (1) All
indications are that the case will be adjudicated by the court during the second half of
2023. (1)

(4)
(42)
MAX [40]

---o0o---