FINANCIAL ACCOUNTING II

2023

REVISION PACK
 UMLAZI KWAZULU-NATAL
PO Box 12363 Jacobs 4026 Durban
Tel: 031 907 7111

1ST CONTROL TEST 2022

Subject and Level FINANCIAL ACCOUNTING II

Subject Code FINA 020, PFAC 020, ERFA 020, CFIN020, FICA200, FINLA200,
FINA200, LOG 200, FINC200 & FIAC200

Date 17 MAY 2022

Venue SEME HALL Number of Pages 06

(Including front page)

Time 15H00 - 17H00 Duration 2 Hours

Full Marks 70 Total Percentage Mark 100

Examiner(s) Mr. S. Dlomo and Mr. P. Luthuli

Moderator Mr. S. Osman

Faculty Management Sciences

Department Accounting and Law

Qualification Diplomas: Accounting (3 years and 4 years); Cost and Management

Accounting; Public Finances and Accounting and Local
Government

Instructions Answer all Questions

Begin each Question on the top of a new page.
Show all workings.
Round off to nearest whole number.
QUESTION 1: [06 MARKS]

1.1.Ask Ltd has been paying its rates and taxes to the municipality in arrear at the end of each
month. However, during the 2021 financial year they started to experience cash flow problems
and decided to pay the rates and taxes for three months in arrears (every quarter). During the
current financial year, Ask Ltd paid a total of R18 000 for a period of 1 January 2021 to 31
September 2021 (three quarters).
The amount of R6 000 for 1 October 2021 to 31 December 2021 has not yet been paid.

Ms Mzizi, the Accountant of Ask Ltd is of the view that since Ask Ltd has acknowledged and
agree to pay the outstanding amount of R6 000 on 31 January 2022, there is absolutely no need
to be dramatic and raise the liability for the outstanding amount as at 31 December 2021. She
told you that raising a liability of R6 000 will worsen the financial outlook of Ask Ltd, which
might chase the investors away.

Required:
1.1.Explain to Ms Mzizi by quoting the conceptual framework, definition of a liability and
recognition criteria in terms of International Accounting Standard 1 (IAS 1) whether, that
R6 000 should be recognised as a liability for the financial year ended 31 December 2021 or
not. (6)
QUESTION 2 PRESENTATION OF AFS [34 MARKS]

GATEAWAY LTD: TRIAL BALANCE FOR THE YEAR ENDED 31 OCTOBER 2021

Details R’ R’

BALANCE SHEET ACCOUNT SECTION

Ordinary share capital 1 966 850

Retained Earnings 1 300 000

Land and buildings 1 800 000

Vehicles 1 500 000

Equipment 2 300 000

Accumulated depreciation on buildings 120 000

Accumulated depreciation on Vehicles 240 000

Accumulated depreciation on Equipment 530 000

Inventory R650 000

Trade and other receivables 320 500

Bank 67 800

Loan: CapiBank 870 000

Trade and other payables 190 350

NOMINAL ACCOUNT SECTION

Sales 5 200 500

Cost of sales 1 780 000

Finance cost 60 000

Salaries R880 000

Depreciation on Vehicles R?

Depreciation on Equipment R40 000

Advertising R60 000

Rates and taxes R80 000

Repairs and maintenance R35 000

Other expenses R680 000

10 485 500 10 485 500

Additional Information:
 ▪ Gateaway Ltd was authorised to issue 10 000 000 ordinary share capital. The ordinary share
capital consists of 1 966 850 ordinary share capital issued at R1.00 each
▪ Loan from CapiBank is classified as a long-term borrowing, however R170 000 of the
CapiBank Loan is repayable on 31 December 2021. The rest of the balance of the loan will
be repayable on 31 December 2022.
▪ Gateaway classify their expenses and income according to function method. The Financial
director categories the functions of the business into three categories which are, sales,
distribution and administration.
▪ Salaries of R400 000 relate to the administrative function, the balance is attributable to the
distribution function.
▪ Depreciation on vehicle is calculated on 20% p.a. using a straight-line method. 70% of the
depreciation is allocated to distribution while 30% is allocated to the administration
function.
▪ Depreciation on Equipment is wholly allocated to administration function.
▪ Land was revalued upwards by R140 000 (net of tax) on 31 October 2021 using the
revaluation model.
▪ Advertising expense has been paid for 10 months. Advertising is classified as an
administration function expense.
▪ The rates and taxes were paid for a period of 1 November 2020 to 28 February 2022. 80% of
rates and taxes is allocated to administrative function while 20% is allocated to distribution
function.
▪ Repairs and maintenance have been paid for 14 months. 25% of the repairs and maintenance
relates to administration function while 75% relates to distribution function.
▪ R400 000 of the other expenses relates to administrative function while R280 000 relates to
distribution function.
▪ Income tax expense has been correctly calculated to be R350 000 and has not yet been
process nor paid.
▪ The final dividend for the year ended on 31 October 2020 for R180 000 was declared on 1
December 2020 and paid on 15 January 2021. The final dividend for the year ended 31
October 2021 of R250 000 was declared on 15 December 2021 and paid on 31 December
2021.
Required:

2.1.Prepare the statement of comprehensive income of Gateaway Ltd for the year ended 31
October 2021 in accordance with IFRS (18)
 2.2.Prepare the current assets, current liabilities and non-current liabilities sections only of the
statement of financial position of Gateaway Ltd as at 31 October 2021 in accordance with
IFRS. (10)

2.3.Prepare the profit before tax note to the financial statement for the year ended 31 October
2021 in accordance with IFRS. (3)

QUESTION 3 PROPERTY, PLANT & EQUIPMENT [30 MARKS]

Section A

A company which has just been registered, has asked for your opinion on how they should carry
assets in their books. The director of a company is aware of two models, i.e. cost model and
revaluation model, but not sure of the difference between the two.

Required
3.1.Highlight the differences and similarities to the director in relation to the two models.
As part of your response, you are required to provide a detailed account of the two models
(5)
================================================================

Section B

Trapped Municipality completed the construction of machinery which they will use for water
purification in their area. The machine was constructed at a cost of R820 800 ( 14% VAT
inclusive). The municipality incurred further installation and delivery costs of R50 000 and R30 000
respectively.

All the costs were paid in cash at the beginning of the year (January 2006). The machine was
available for use in January 2006, however, because staff members had to undergo basic training, it
was only brought into use on the 31 December 2006.

The policy of the organisation in relation to machinery is to allow depreciation at 10% per annum
on the straight-line method. The residual value at the beginning was estimated to be R100 000.

The machine is carried at cost less accumulated depreciation and accumulated impairment
losses.

Details regarding this machine are as follows:

 ▪ At 31 December 2007, significant developments in technology led to the municipality
having to assess the recoverable amount of the machine:
Fair value less cost to sell R600 000.
Value in use R420 000.
▪ At the end of 2009, the asset was re-valued again, and the recoverable amount was R550
000.
Required:
3.2.Prepare the journal entries for the transactions from 31 December 2006 to 31 December 2009.
(8)

3.3.Prepare the note on Property, Plant & equipment for all transactions that took place from 31
December 2006 to 31 December 2009. (11)

3.4.Prepare the Profit before tax note for December 2006, 2007, 2008 and 2009. (6)

------------------------------------------------------END---------------------------------------------------
 UMLAZI KWAZULU-NATAL
PO Box 12363 Jacobs 4026 Durban
Tel: 031 907 7111

2nd CONTROL TEST 2022

Subject and Level FINANCIAL ACCOUNTING II

Subject Code FINA 020, PFAC 020, ERFA 020, CFIN020, FICA200, FINLA200,
FINA200, LOG 200, FINC200 & FIAC200
Date 7 JULY 2022
Venue SEME HALL Number of Pages 04
(Including front page)

Time 12H00 - 14H00 Duration 2 Hours

Full Marks 60 Total Marks 60
Examiner(s) Mr. S. Dlomo and Mr. P. Luthuli
Moderator Mr. S. Osman
Faculty Management Sciences
Department Accounting and Law
Qualification Diplomas: Accounting (3 years and 4 years); Cost and Management
Accounting; Public Finances and Accounting and Local
Government

Instructions Answer all Questions

Begin each Question on the top of a new page.
Show all workings.
Round off to nearest whole number.
QUESTION 1 40 MARKS
Woza Limited is a small company offering flight simulator experiences for corporate team building
and to members of the public.
The following is the summarised trial balance of the company at 31 March 20x4:
Woza Limited, Trial balance at 31 March 20x4

Equipment at cost 260 000

Equipment: Accumulated depreciation (31/03/20X3) 75 000
Ordinary share capital 80 000
Long term borrowings (5% p.a.) 20 000
Retained earnings (31/03/20x3) 45 000
Profit or Loss 55 000
Trade and other receivables 50 000
Bank 25 000
Trade and other payables 60 000

The equipment was purchased on 1 April 20x0 and it was measured at 10% per annum on the
straight line basis to a residual value of R10 000.
At 31 March 20x4, the fair value of the equipment was determined by independent appraisal to be
R180 000. As part of the same process, the residual value was re-estimated to be R12 000, but the
remaining useful life remained unchanged.
The company applies revaluation model to measure it equipment, using net replacement value
method. The revaluation surplus is transferred to retained earnings on disposal of the equipment.
The balance of R55 000 on the Trial Balance for Profit or Loss, represents the Operating profit for
the year ended 31 March 20x4. This has been determined before processing any entries relating to
the equipment and the following entries:
• Trade and other receivables include a prepayment relating to insurance policy or R800
for the period from 1 January 20x4 to 31 December 20x4.
• Trade and other payables include unearned income of R2 400 relating to flight simulator
bookings for the period from 1 January 20x4 to 30 June 20x4. Income is earned evenly
over the period.
During the year ended 31 March 20x5, the company earned a profit of R 34 000.
Other relevant balances at 31 March 20x5 include:
• Trade and other receivable : R75 000
• Bank : R30 000
• Trade and other payables : R28 000
The long term borrowings represent a loan from the bank that is payable in two equal instalments
on 31 October 20x5 and 30 September 20x6.
REQUIRED:
1. Provide journal entries relating to Depreciation and Revaluation of the equipment for the
year ended 31 March 20x4. (8)

2. Prepare statement of Comprehensive income and statement of Changes in Equity for the
year ended 31 March 20x4 (Begin your statement of Comprehensive income with
Operating profit). (11)

3. Prepare statement of financial position at 31 March 20x5 (18)

4. Discus briefly whether it is necessary for an entity to process depreciation when the fair
value of an asset exceeds the carrying amount (3)
QUESTION 2 20 MARKS
Grace of God Assembly, an AFM branch began the construction of the church building on 1
January 2012. The building which is a qualifying asset in terms of IAS 23, was still under
construction at 31 December 2012.
Progress payments were made evenly during 2012 as follows:
Rands
1 January 2012 – 30 April 2012 300 000
1 May 2012 – 31 August 2012 150 000
1 September 2012 – 31 December 2012 450 000

The construction was financed by the general borrowings within the company. General loans
outstanding at any one time during 2012 average R10 000 000. The interest expense incurred on
these loans during 2012 was R1 300 000. The financier compounds interest every 4 months.

REQUIRED:
1. Calculate the amount of borrowing costs that qualify to be capitalised during the year ended
31 December 2012. (15)

2. Provide Journal entries relating to the interest expense and interest to be capitalised.
(3)

3. Calculate the depreciation and the carrying amount of the church buildings as at 31
December 2012. (2)
 UMLAZI KWAZULU-NATAL
PO Box 12363 Jacobs 4026 Durban
Tel: 031 907 7111

3rd CONTROL TEST 2022

Subject and Level FINANCIAL ACCOUNTING II

Subject Code FINA 020, PFAC 020, ERFA 020, CFIN020, FICA200, FINLA200,
FINA200, LOG 200, FINC200 & FIAC200
Date 14 September 2022
Venue SEME HALL Number of Pages 03
(Including front page)

Time 15H00 to 17H00 Duration 2 Hours

Full Marks 60 Total Marks 60

Examiner(s) Mr. S. Dlomo and Mr. P. Luthuli

Moderator Mr. S. Osman

Faculty Management Sciences

Department Accounting and Law
Qualification Diplomas: Accounting (3 years and 4 years); Cost and Management
Accounting; Public Finances and Accounting and Local
Government

Instructions Answer all Questions

Begin each Question on the top of a new page.
Show all workings.
Round off to nearest whole number.
QUESTION 1 IMPAIRMENT OF ASSETS 45 MARKS

Mphemba Ltd is a South African company specialising on manufacturing farming tractors. They
have various assets which are used in the production line of these farming tractors, of which
Mphemba Ltd consider them as a “cash generating unit”. Their cash generating unit is made of
Equipment, Factory building, goodwill and specialised patent rights. Mphemba Ltd measure their
Factory building, Goodwill, Equipment and Patent rights using cost model.

The following information was presented to you for the period of 2020 and 2021:

During 2020, China started to produce almost similar tractors that were produced by Mphemba Ltd.
This has resulted in their customers preferring Chinese tractor over Mphemba’s tractors. Amongst
the reasons cited by customers was the affordability and advance technology fitted on the Chinese
tractors. The directors of Mphemba Ltd were of the view that their cash generating unit might be
impaired for the first time. Their determined the recoverable amount on 31 December 2020 to be
R65 000 000. The carrying amount of assets on 31 December 2020 were as follows:

Assets Carrying amount Recoverable Remaining useful

after subtracting amount life
2020 depreciation
Goodwill 2 800 000 Unknown
Equipment 40 000 000 35 000 000 10 years
Factory building 32 000 000 Unknown 10 years
Patent 1 200 000 Unknown 3 years
76 000 000 65 000 000

In 2021, tractors from China were all recalled due to faulty software, and their production was stop
indefinite. This saw Mphemba Ltd gaining more customers, from both local and international
market. As a result, directors were of the view that the cash generating unit must be tested again.
The recoverable amount of the cash generating unit on 31 December 2021 was estimated
R74 000 000.
Required:

1.1.Prepare the profit before tax note to the financial statement of Mphemba Ltd for the year
ended 31 December 2021 (comparative figures are required) (show all workings including
the working for allocation of impairment loss/reversal) (42)
1.2.Disclose the above information to the statement of financial position of Mphemba Ltd for
the year ended 31 December 2021 (comparative figures are required) (show all workings)
(3)
QUESTION 2 GOVERNMENT GRANT 15 MARKS

Njinji Ltd is in a farming business. They plant and sell fruit and vegetables to various store across
South Africa. They have requested a government assistance in order to subsidies their wage costs.
Their application for government grant was approved, and government gave them a grant on
1 January 2019 of R5 500 000. This grant was to be used to subsides 60% of future wages costs to
be incurred by Njinji Ltd.

Njinji Ltd had complied with all of the preconditions of the grant except the incurral of future
wages cost. The following costs represent wages costs incurred by Njinji Ltd during their respective
financial year

Financial year Wages cost

31 December 2019 R3 000 000
31 December 2020 R5 600 000
31 December 2021 R6 000 000

Required:

2.1.Show the journals entries in the company’s general journal, for the years ended 31
December 2019 to 31 December 2021, assuming the company policy is to present such a
grant directly as grant income. (8)
2.2.Prepare the statement of comprehensive income for Njinji Ltd, for the year ended 31
December 2019 to 31 December 2021. (7)
 PO Box 12363 Jacobs 4026 Durban
Tel: 031 907 7111

November 2022 Main Examination

Subject and Level Financial Accounting II

Subject Code FINA 020, PFAC 020, ERFA 020, CFIN020, FICA200, FINLA200,
FINA200, LOG 200, FINC200 & FIAC200
Date 15 November 2022

Venue Dr. Seme Hall Number of Pages 06

(Including front page)
Time Duration 3 HRS
13:00

Full Marks 100 Total Marks 100

Examiner Mr. S Dlomo and Mr. P Luthuli

Moderator Mr. S Osman CA (SA)

Faculty Management Sciences

Department Accounting and Law

Qualification DIPLOMAS: Accounting; Cost and management accounting; Local

government and Public finances and accounting

Instructions Begin each Question on the top of a new page.

Show all workings.
Round off to nearest whole number.
Requirements Answer all Questions

DO NOT TURN OVER UNTIL PERMISSION IS GIVEN BY THE MAIN INVIGILATOR

QUESTION 1 GOVERNMENT GRANT [20 MARKS]

Jack Ltd is in a business of manufacturing the scientific calculators that are widely used in both
private and public schools. During the current financial year, they approached government for
government grant funding. Upon presenting their proposal, government agreed to release grant of
R10 million to Sipho Ltd on 1 January 2019. The condition of the government grant was that Jack
Ltd must purchase and service the specialised machine from the local supply.

Jack Ltd bought the specialised machine from local supplier on 1 March 2019 for R16 800 000. The
machine was transported on the same day to their warehouse at a cost of R100 000. Jack Ltd further
paid R100 000 for installation and fitting of the machine on their production line on 1 March 2019.
The useful life of the machine was estimated at 10 years, with a nil residual value. It is Jack Ltd’s
policy to measure its machines using cost method.

On 1 January 2021, Jack Ltd decided to use suppliers from Ghana to service the machine. This
information was communicated to government, of which government decided to rule that R5
million of the government grant received on 1 January 2019 is repayable immediately since Jack
failed to comply with all the conditions.

Required:

1.1.Provide the general journals for the year ended 31 December 2019 to 31 December 2021
assuming that Jack Ltd recognises the government grant using the direct method (reduction
towards related asset cost). (09)
1.2.Provide the general journals for the year ended 31 December 2019 to 31 December 2021
assuming that Jack Ltd recognises the government grant using the indirect method (reduction
towards related expenditure). (11)
QUESTION 2 BORROWING COSTS [25 MARKS]

Mthutlong Ltd is in a business of manufacturing specialised chemical for plant fertiliser. During the
current year, they embarked on a mission expanding their business through building new facilities.
In order to achieve this, they borrowed R4 000 000 from Stand Bank on 1 January 2021. They
further borrowed R6 000 000 on 1 January 2021 from Capi Bank. These loans were generally
borrowed for various purposes including the construction of a building which is a qualifying asset
in terms of IAS 23. There were no capital repayments of the loan. The terms of the loan agreement
stipulate that interest is compounding on quarterly basis. You may assume that interest incurred for
the period was R1 200 000 during the current year of assessment. The construction began in
January 2021 and the following payment were made at the beginning of each quarter over the stated
period:

1 January 2021 to 31 March 2021 R1 400 000

1 April 2021 to 30 June 2021 R1 350 000
1 July 2021 to 30 September 2021 R4 120 000
1 October 2021 to 31 December 2021 R1 800 000

Required:

2.1.Prepare the general journals to be recorded in the books of Mthutlong Ltd for the year ended 31
December 2021 (Show all the workings). (18)
2.2.Calculate the carrying amount of the building on 31 December 2021. (3)
2.3.Prepare the statement of financial position of Mthutlong Ltd as at 31 December 2021. (4)
QUESTION 3 SHARE CAPITAL [25 MARKS]
The following information relates to Beta Ltd for the year ended 31 December 2013:
R
Ordinary share capital- R1 per share 200 000
50 000 12% cumulative, redeemable preference shares ?
Bank 150 000
Retained earning 300 000

Additional information:
1. On 1 January 2014, Beta Ltd issued 100 000 ordinary shares at R1.50 each. The share issue
costs for this issue amounted to R15 000.

2. The preference shares were issued on 1 January 2013 at R2 and are compulsory redeemable
on 31 December 2016 at a premium of R0.75. The effective interest rate of interest paid is
calculated to be 19, 0791%.

3. On 30 June 2014, there was a capitalisation issue of 2 ordinary shares for every 3 ordinary
shares in issue at R0.50 per share.

4. On 30 September 2014, Beta Ltd undertook a share buy-back of 75 000 ordinary shares at a
market price of R1, 20 per share. The average price per share is R0, 90.

5. The directors are satisfied that the company’s assets, fairly valued exceed its liabilities and
that the company will be able to pay its debts as they become due.

6. The profit before finance charges and tax for 2014 financial year amounts to R250 000.

7. The tax expense for 2014 financial year was correctly calculated as R90 000.

8. There are no items of other comprehensive income.

Required:
1. Disclose the above information in the statement of changes in equity of Beta Ltd for the year
ended 31 December 2014, in accordance with IFRSs (Show all your workings). (18)
2. Prepare an effective interest rate table (7)
QUESTION 4 EARNINGS PER SHARE [20 MARKS]
The issued share capital of Rooibok Ltd for the years ended 31 December 2011 and 2012 was as
follows:
2012 2011
Rand Rand
200 000 ordinary shares 200 000 200 000
50 000 10% participating preference shares 50 000 50 000
250 000 250 000

The statement of comprehensive income has shown, inter alia, the following:
2012 2011
Rand Rand
Profit before tax 277 778 250 000
Income tax expense (77 778) (70 000)
Profit for the year 200 000 180 000

The following dividends were declared by Rooibok Ltd for years ended 31 December 2011 and 31
December 2012.
2012 2011
Rand Rand
Ordinary dividends 80 000 50 000
Preference dividends 25 000 17 500
105 000 67 500

Participative preference shareholders are entitled to share in the dividends on the basis of 1:4 cents
for each cent earned by ordinary shareholders, in addition to the fixed preference dividend. This
right to participate also applies in the event of liquidation.

Required:
Calculate the basic earnings per share and dividend per share and disclose it in financial statements
of Rooibok Ltd in accordance with International Financial Reporting Standards (Show all your
workings). (20)
QUESTION 5 THEORY [10 MARKS]

PART A
“Intangible assets must meet the definition and recognition criteria if they are to be recognised and
must be initially measured at cost. However, the recognition of the intangible asset and initial
measurement of its cost may be affected by the manner in which the intangible asset was acquired
or created.”

Required:
List 5 different ways in which an intangible asset could be acquired, and briefly explain how this
would affect the recognition and measurement thereof. (5)

PART B
Briefly discuss five recognition criteria that must be met before capitalisation of development costs.
(5)
 UMLAZI KWAZULU-NATAL
PO Box 12363 Jacobs 4026 Durban
Tel: 031 907 7111

2022 Supplementary Examinations

Subject and Level FINANCIAL ACCOUNTING 11

10 December 2022
Date

Venue Seme Hall Number of Pages 6

(including front page)
Time Duration 3 hrs

Full Marks 100 Total Marks 100

Examiner(s) Mr S Dlomo and Mr P Luthuli

Moderator(s) Mr Osman

Faculty MANAGEMENT SCIENCES

Department ACCOUNTING AND LAW

Qualification DIPLOMAS: Accounting; Cost and management accounting; Local

government, Public finances and accounting

Instructions Answer all Questions

Requirements Own calculator

DO NOT TURN OVER THE PAGE UNTILL THE PERMISSION IS GIVEN

QUESTION 1 BORROWING COSTS [23 MARKS]

Kinder Ltd is in a business of manufacturing specialised chemical used in paint. During the current
year, they embarked on a mission expanding their business through building new facilities. Kinder
Ltd borrowed R14 500 000 from Netbank at an interest rate of 10% on 1 January 2021. The loan
was specifically borrowed to fund the construction of a building which is a qualifying asset in terms
of IAS 23. The surplus funds were invested in an account that yields 6% interest per annum. On 31
July 2021 Kinder Ltd made a payment of R3 200 000 as a capital repayment of the loan. The
construction began on 1 January 2021, and it was not complete as at the year end. The following
payment were made:

1 January 2021 R4 850 000

1 April 2021 R3 150 000
1 August 2021 R2 400 000
1 December 2021 R650 000

Required:

1.1.Prepare the general journals to be recorded in the books of Kinder Ltd for the year ended 31
December 2021 (Show all the workings). (18)
1.2.Calculate the carrying amount of the building on 31 December 2021 (3)
1.3.Calculate the total amount to be shown as “finance cost” on statement of comprehensive income
for the year ended 31 December 2021 (2)

QUESTION 2 GOVERNMENT GRANT [20 MARKS]

Can Ltd is a South African company specialising in can production. They manufacture cans for
different purposes including beverage and food storing purposes. At the beginning of the current
year, directors were of the view that, robotic technology could cut their costs by 50%, which will
result in increase in the productivity and increase in profits.

On 1 January 2021, Directors started with the retrenchment process. They consulted all employees
about their retrenchment intentions. On 2 January 2021, media houses reported about the Can Ltd’s
intention to retrench 1 600 employees. After seeing the news, government approach the company on
4 January 2021, and proposed a government funding of R30 000 000 over 4-year period, provided
that Can Ltd does not retrench employees during that period.

On 5 January 2021, government and Can Ltd agreed that this grant was to be used to subsidise 60%
of future wages cost to be incurred by Can Ltd. Should Can Ltd fail to comply with this condition,
80% of the government grant received on 5 January 2021 becomes payable immediately.

Can Ltd had complied with all of the preconditions of the grant except the incurral of future wages
cost. The following costs represent wages costs incurred by Can Ltd during their respective
financial year

Financial year Wages cost

31 December 2021 R14 000 000
31 December 2022 R16 000 000
31 December 2023 R17 000 000
31 December 2024 R8 000 000

Note:

Can Ltd decided to resume with the retrenchment process on 1 January 2024 and on that day,
retrenched 1 800 employees. They cited the escalating wages costs, and instability caused by labour
strikes as the reasons to migrates into robotic production. Upon that date, 80% of the government
grant received on 05 January 2021 was immediately payable.

Required:

2.3.Provide the general journal for the years ended 31 December 2021 to 31 December 2024,
assuming the Can Ltd recognises the government grant using the direct method (grant
income). (10)
2.4.Provide the general journals for the year ended 31 December 2021 to 31 December 2024
assuming the Can Ltd recognises the government grant using the indirect method (reduction
towards related expenditure) (10)
QUESTION 3 SHARE CAPITAL [27 MARKS]
The following information relates to Supp Ltd for the year ended 31 December 2013:
R
Ordinary share capital – R1 per share 200 000
50 000 12% cumulative, redeemable preference shares ?
Bank 150 000
Retained earnings 300 000

Additional information:
9. On 1 January 2014, Supp Ltd issued 100 000 ordinary shares at R1.50 each. The share issue
costs for this issue amounted to R15 000.

10. The preference shares were issued on 1 January 2013 at R2, and are compulsory redeemable
on 31 December 2016 at a premium of R0.75. The effective interest rate of interest paid is
calculated to be 19, 0791%.

11. On 30 June 2014, there was a capitalisation issue of 2 ordinary shares for every 3 ordinary
shares in issue at R0.50 per share.

12. On 30 September 2014, Supp Ltd undertook a share buy-back of 75 000 ordinary shares at a
market price of R1, 20 per share. The average price per share is R0, 90.

13. The directors are satisfied that the company’s assets, fairly valued exceed its liabilities and
that the company will be able to pay its debts as they become due.

14. The profit before finance charges and tax for 2014 financial year amounts to R250 000.

15. The tax expense for 2014 financial year was correctly calculated as R90 000.

16. There are no items of other comprehensive income.

Required:
3.1.Disclose the above information in the statement of changes in equity of Supp Ltd for the year
ended 31 December 2014, in accordance with IFRSs. Show all your workings.
(19)

3.2.Prepare an effective interest rate table (8)

QUESTION 4 EARNINGS PER SHARE [30 MARKS]
As at 1 January 2014, Mangethe Ltd had the following shares in issue:
• 300 000 ordinary shares at 80 cents each
• 120 000 15% non-cumulative participating preference shares at R1.5 each, with an additional
right to one-tenth of total dividend declared on ordinary shares.

During the year, 1 April 2014, the company issued 75 000 new ordinary shares at 75 cents per
share.
The statement of comprehensive income of Mangethe Ltd reflected a profit after tax of R650 000
for the financial year ending 31 December 2014 and R450 000 for 2013
The company re-valued their assets during the year and had an impairment loss of R90 000, (2013:
loss of R30 000) which is included in profit for the year.
On the 1 July 2014, Mangethe Ltd had rights issue in terms of which existing shareholders were
entitled to two ordinary shares for every five already held. Ordinary shares were issued at that date
at a price of R12 per share at a time when the market price of Mangethe Ltd was R16 per share.
On 31 December 2014, Mangethe Ltd had a share split in terms of which each ordinary share was
split in three.
An ordinary dividend of R100 000 was declared on 31 December 2014. No dividend was declared
last year for all classes of shares.

Required:

4.1.Disclose earnings per share in the statement of comprehensive income and notes to the
financial statements of Mangethe Ltd for the year ended 31 December 2014.
(22)

4.2.Disclose the dividend per share in the statement of changes in equity of Mangethe Ltd for the
year ended 2014. (08)
NB: Show all your workings