Cloudy Cliffs Limited (hereafter Cloudy Cliffs) is a South African company involved in various business activities and has a financial year end of 30 June. The entity entered into various contracts with customers and made investments in financial instruments during the 2021 financial year. The following information is available with regards to transactions that occurred during the 2021 financial year: Contract A Cloudy Cliffs offer their customers early settlement discounts. One customer, who generally makes prompt payments (within 10 days of the transaction), purchased merchandise to the value of R 120 000 on 1 June 2021. The goods were delivered to the premises of the customer on the day of purchase. Cloudy Cliffs offered them a 4% trade discount, and a further 5% settlement discount if the outstanding balance is settled within 30 days. On 8 July 2021 the accountant of Cloudy Cliffs received the payment confirmation (dated 7 July 2021) from the customer. They apologized for their late payment, but explained that their payments clerk had tested positive for Covid-19, causing a delay in all payments. Contract B Cloudy Cliffs entered into Contract B on 1 January 2021. Contract B requires Cloudy Cliffs to bill the customer for each hour of service performed, at a rate of R 75 per hour. By the end of the financial year, Cloudy Cliffs had performed 360 hours and R 7 500 had been received from the customer. Contract C Cloudy Cliffs entered into Contract C on 1 January 2021. The contract is for a period of two years and is non-cancellable. Contract C requires the customer to pay a fixed amount of R 1 200 per month. Cloudy Cliffs is required to provide consulting services as and when the customer requires, up to a maximum of four consultations a month. Cloudy Cliffs recognises the progress towards satisfaction of this performance obligation based on months passed as a percentage of total months per contract. The monthly fee for January, February, March and April 2021 have been received from the customer on 30 June 2021 with the monthly fee for May and June 2021 still outstanding

Investment in unlisted shares On 15 June 2021 Cloudy Cliffs acquired a 100% investment in an unlisted company at a cost of R 1 380 000 and incurred transaction costs of R 20 000. The investment in the unlisted company is held as a long-term investment and Cloudy Cliffs has no plans to sell the investment. The fair value of the unlisted company (as per a valuation performed by the companys directors) on 30 June 2021 is R 1 428 000. Additional information: Each of the contracts as detailed above is with a different customer. On 1 July 2020 the balance of Cloudy Cliffs bank account was R 1 500 000. On 1 July 2020 the balance of retained earnings was R 30 000. Cost of sales and other expenses incurred by Cloudy Cliffs amounted to R 85 000 and R 3 200 for the financial year respectively. The accountant correctly calculated the income tax payable for the year as R 25 000. The implications of VAT may be ignored. The question must be answered in compliance with International Financial Reporting Standards (IFRS)

a. Prepare the journal entries required to record Contract A in the records of Cloudy Cliffs for the financial years ended 30 June 2021 and 30 June 2022 in terms of IFRS 15: Revenue from Contracts with Customers

b)Discuss the accounting treatment of the investment in unlisted shares in terms of IFRS 9: Financial Instruments. [5] c) Prepare the journal entries required to record the investment in unlisted shares in terms of IFRS 9: Financial Instruments. Communication skills: Dates and narrations [6] [1] d) Prepare an extract of the Statement of Profit or Loss and Other Comprehensive Income for Cloudy Cliffs for the financial year ended 30 June 2021. The extract should reflect only the line items affected by the transactions as detailed above. Comparative figures ARE NOT required. [5] e) Prepare an extract of the Statement of Financial Position for Cloudy Cliffs as at 30 June 2021. The extract should reflect only line items affected by the transactions as detailed above. Comparative figures ARE NOT required.