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Fac2601 October/Nov 2017

QUESTION 1

(a) 1
(b) 2 1 960 000/100 000 x (100 000 – 80 000) = 392 000 under recovery
(c) 2 Based on actual production
(d) 4 (12 x 1 500 + 24 x 3 000)/36 = 2 500/month
2 500 x 6 = 15 000

(e ) 3 2 500 x 6 – 1 500 x 6 = 6 000 (provision for lease payments)(payment less than

equalized)
QUESTION 2
(a)
PRO-WORKS LTD

NOTES FOR THE YEAR ENDED 28 FEBRUARY 2017

1. Property, plant and equipment

Plant and Delivery

Land Buildings machinery vehicles
Carrying amount at 1 March 2016 400 000 5 438 640 936 000 960 000
1 320 000
Cost 400 000 6 398 400 ④ 1 600 000⑦
Accumulated depreciation - (959 760)① (384 000) 640 000 ⑧

Revaluation 200 000 961 360 ②

Additions 600 000 360 000 ⑨

Asset realisation (120 000)⑩

(243 500)
Depreciation (376 471)③ ⑤ (296 000)⑪

Carrying amount at end of year 600 000 6 023 529 1 292 500 904 000
Cost/Valuation 600 000 6 400 000 1 920 000 1 720 000 ⑫
(627 500)
Accumulated depreciation - (376 471) ⑥ (816 000)⑬

The land and buildings were revalued by an independent sworn appraiser

2. Investment Property
Land and Buildings
Carrying amount at beginning of year -
Additions 3 200 000
Additions from improvements (400 000 - 50 000) 350 000
Fair value adjustment (1 100 000 + 3 000 000 - 3 200 000 - 350 000) 550 000
Carrying amount at end of year 4 100 000

The fair value of the investment property were determined by an independent sworn appraiser

Calculations

① Accumulated depreciation at beginning of year - Buildings

6 398 400/20 x 3 = 959 760

② Revaluation on buildings
Net replacement value 6 400 000
less carrying amount (5 438 640)
961 360

③ depreciation - Buildings
6 400 000/17 = 376 471

④ Cost of plant and machinery at the beginning of year

(1 920 000 - 600 000) 1 320 000

⑤ Depreciation on plant and machinery

On old plant and machinery (1 320 000 - 384 000) x 20% 187 200

On new machinery [(600 000 - 40 000)x 20% x 6/12] 56 000

243 500
⑥ Accumulated depreciation at end of year - Plant and
machinery (384 000 + 243 500) 627 500

⑦ Cost of motor Vehicles at beginning of year

Carrying amount (given) 960 000

Period held (2014 - 2016) 2 years

Therefore remaining (100% - 20% x 2) 60%

Cost is therefore (960 000/60%) 1 600 000

⑧ Accumulated depreciation at beginning of year

1 600 000 - 960 000 640 000

⑨Cost of new vehicle (410 400 x 100/114) 360 000

⑩ Carrying amount at beginning of year (240 000 - 96 000) 144 000

Depreciation (240 000 x 20% x 6/12) (24 000)
120 000

⑪ Depreciation on motor vehicles

Old (1 600 000 - 240 000) x 20% 272 000

Sold (240 000 x 20% x 6/12) 24 000

296 000
** New on purchased on last day of year therefore no depreciation yet

⑫ Cost of motor vehicles at end of year (1 600 000 - 240 000 +

360 000) 1 720 000

⑬ Accumulated depreciation on motor vehciles at end of year

(640 000 + 296 000 - 96 000 - 24 000) 816 000
(b)
PRO-WORKS LTD
STATEMENT OF FINANCIAL POSITION AS AT 28 FEB 2017
ASSETS Notes
Non-current assets 12 941 029
Property, plant and equipment (600 000 + 6 023 529 + 1 292
500 + 904 000) 1 8 820 029
Investment property 2 4 100 000
Financial Assets (7 000 x 3) 21 000

Current assets 791 000

Inventories (280 000 x 95% + 400 000 + 100 000) 766 000
Financial assets 25 000

TOTAL ASSETS 13 732 029

QUESTION 3

WILD THINGS LTD

Statement of profit or loss and other comprehensive income for the year ended 28 Feb 2017
Revenue 20 000 000
Cost of sales (8 000 000)
Gross profit 12 000 000

Other income 300 000

Administrative expenses (2 400 000)

Distribution expenses (240 000)
Other operating expenses (160 000 + 352 941②) (512 941)

Profit before tax 9 147 059

Income tax expense (2 471 700)

Profit for the year 6 675 359

Other comprehensive income 2 867 500

Revaluation of land and buildings ① 2 800 000
Fair value adjustment on investment - not held for trading (4
500 x 95 - 360 000) 67 500

Total comprehensive income for the year 9 542 859

Calculations

① Revaluations

Land (1 700 000 - 1 500 000) 200 000

Building
Net replacement value 6 000 000
Carrying amount (4 000 000 - 4 000 000 x 3/20) (3 400 000)
Revaluation on buildings 2 600 000
Total revaluation (200 000 + 2 600 000) 2 800 000

② Depreciation on buildings

6 000 000/17 352 941

(b) WILD THINGS LTD
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY
2017
Non- Mark-
Ordinary Cumulative cumulative to-
share preference preference Retained Revaluation market
capital shares shares earnings surplus reserve
Balance at the beginning of year 4 500 000 900 000 1 350 000 2 400 000 - 120 000

Ordinary shares issue 1 200 000

Issue of cumulative preference

shares (75 000 x 4) 300 000

Capitalisation issue (4 500 000/2 +

600 000) x 1/5 x 1,50 855 000

Comprehensive income for the year 6 675 359 2 800 000 67 500

Dividends paid :
Preference dividend ① (345 750)
Ordinary dividend ② (342 000)

Carrying amount at end of year 6 555 000 1200 000 1 350 000 8 387 609 2 800 000 187 500
① Preference dividends

Cumulative preference shares

2016 (900 000 x 10%) 90 000
2017 (900 000 x 10% + 75 000 x 4 x 10% x 6/12) 93 750
183 750

Non-cumulative preference shares

2017 (1 350 000 000 x 12%) 162 000

Total preference dividends 345 750

② Ordinary dividend

Shares in issue at beginning of year (4 500 000/2) 2 250 000

Shares issued : 31 Oct 2016 600 000
Capitalisation issue (2 250 000 + 600 000)/5 570 000
Total shares 3 420 000

Ordinary dividend (3 420 000 x 0,10) 342 000

Ordinary dividend (3 420 000 x 0,10) 342 000