entity that obtains the rights to international stage Footight Produc Productions has staged a number of successful shows and is in the process of rehearsing shows and, with local actors, stages the shows for South African audiences. Footlight needed before income is earned from ticket sales. A successful show is very profitable and and building sets for a new show. The cash flow is very irregular as large cash outflows are can run for a number of years. Foodlight Productions needs to raise funds for a new show that it plans to premier during the winter holidays of 20X4. The owner, Mr Andrews, approached the bank manager and the following plan was agreed upon: Footlight Productions would borrow a total of C5 000 000 on 1 July 20X3. The facilitation fee charged by the bank would be C50 000 and the net proceeds received by Footlight Productions would amount to C4 950 000. The nominal interest rate would be 6% per annum and the loan would mature in three years. Mr Andrews approached his accountant, who prepared the following table based on an effective interest rate of 6,3767% per annum: Effective Interest Actual Interest PV Date 01/07/X3 30/06/X4 30/06/15 30/06/X6 315 648 316 645 317 707 300 000 300 000 300 000 4 950 000 4 965 648 4 982 293 5 000 000 Footlight Productions would also utilise an overdraft facility with a limit of C500 000. Footlight Productions has two current accounts with the bank - the number one account is the account that has the overdraft facility, and the only movements in this account are deposits and cheques relating to the show. All other receipts and payments, including bank charges and interest are reflected in the number two account. The interest rate charged on the overdraft is 5,5% per annum. The bank statement of the number one account for the period from 1 July 20x3 to 30 June 20X4 is as follows: Balance Date Cr Dr Balance Cheque Cheque Deposit Cheque 21 200 18 900 01/07/X3 20/08/X3 14/09/X3 10/10/X3 30/10/X3 15/12/X3 Deposit 28/02/X4 Cheque 30/03/X4 25/06/X4 Balance 35 000 145 000 123 800 104 900 139 900 (40 000) (25000) (145 000) (405 000) (405 000) 179 900 15 000 120 000 260 000 Cheque 229 An extract from the general journal of Footlight Productions for June 20X4 is shown below: Dr Cr 420 000 30/06/X4 420 000 Bank Income received in advance Advance bookings Salaries Bank Salaries for performers 20 000 20 000 There were no reconciling items on the bank reconciliation at 30 June 20x3. You are required to: a. Prepare all the journal entries to account for the long-term borrowing for the year ended 30 June 20X4. b. Show how the long-term borrowing will be presented on the statement of financial position at 30 June 20X4. Calculate the interest on the overdraft for the year ended 30 June 20X4. d. Prepare the bank reconciliation at 30 June 20x4. Explain, using the accounting framework, the rationale for the journal entry relating to the advance bookings on 30 June 20x4. f. Draft the journal entry that will be processed when the borrowing matures on 30 June 20X6. c. e. The following information is relevant for the preparation of the financial statements: 1 The land and buildings were acquired on 1 October 20X0 for an amount of C3 400 000 (C400 000 for the land and C3 000 000 for the building). The building is depreciated at 5% per year on the straight line method. 2. The plant and equipment is depreciated on the sum of units method. The total estimated output of the plant and equipment is 20 million units. During the current period, a total of 1 750 000 units were produced. All of the plant and equipment was purchased on the same date during the previous financial year. 3 The ordinary share capital at 30 September 20X2 consists of 2 000 000 shares. On incorporation, 1 000 000 shares were issued to the incorporators for C1 each. On 1 July 20x2, 1 000 000 ordinary shares were issued to the public at an issue price of C1,60 each. Share issue costs of C55 000 were incurred and paid and are included in the other operating expenses' on the trial balance. 4. On 1 October 20X1 the company issued 10 000 debentures of C150 par value at a discount of 5%. The debentures are to be redeemed on 30 September 20X6 at par The interest rate is 12% per annum and is payable annually in arrears on 1 October The debenture discount is to be amortised over the life of the debentures using the effective interest rate method. The effective interest rate is 13,43675% and the accountant has correctly prepared the following amortisation schedule: each year cumpanies Effective interest Actual interest Debenture discount PV 01/10/X1 30/09/X2 30/09/X3 30/09/X4 30/09/X5 30/09/X6 191 474 193 015 194 764 196 748 198 999 180 000 180 000 180 000 180 000 180 000 75 000 (11 474) (13 015) (14 764) (16 748) (18 999) 1 425 000 1 436 474 1 449 489 1 464 253 1 481 001 1 500 000 5 C118 200. 8 redeemable preference shares issued at C2,50 each. The shares were placed The preference share capital at 30 September 20X2 consists of 100 000 15% privately at a large financial institution on 1 April 20X2 for an amount of C250 000 and are subject to compulsory redemption by the company after a period of three years. 6 Company tax must still be accounted for at the correctly calculated amount of 7. The company's accounting policy is to set off share transaction costs against share An extract from the minutes of a directors' meeting on 30 September 20X2 appears as Declared the preference dividend to all shareholders registered on 30 September 20X2, to be paid on 15 October 20X2. The preference shareholders are subject to 20% dividends tax. b Declaration of ordinary dividend: 8 cents per share cash dividend to all shareholders registered on 30 September 20X2, to be paid on 15 October 20X2. .4 cents per share capitalisation issue to all shareholders registered on 30 September 20X2 The ordinary shareholders are subject to 20% dividends tax on the cash dividend but are not liable for dividends tax on the capitalisation issue. follows: a . You are required to: a Prepare the statement of profit or loss of Safeseat Limited for the year ended 30 September 20X2 Prepare the statement of changes in equity of Safeseat Limited for th 1 30 September 20X2 C Prepare the statement of financial position of Safeseat Limited at 30 Der 20X2 b Safeseat Limited is a listed company and makes seats for motor car manufacturers. The trial balance of the company at 30 September 20X2 appears as follows: SAFESEAT LIMITED TRIAL BALANCE AT 30 SEPTEMBER 20X2 Dr 3 400 000 Cr 150 000 1 100 000 120 000 810 000 536 000 662 724 425 000 90 000 Land and buildings Buildings: accumulated depreciation Plant and equipment: cost Plant and equipment: accumulated depreciation Inventory Trade accounts receivable Bank Trade accounts payable Current tax payable: income tax Ordinary share capital Retained earnings Ordinary dividend 12% debentures 15% redeemable preference shares Gross profit Administrative expenses Distribution expenses Other operating expenses 2 600 000 942 000 90 000 1 425 000 250 000 1 801 724 400 000 385 000 240 000 7 788 724 7 788 724 The following information is relevant for the preparation of the financial statements: 1. The land and buildings were acquired on 1 October 20X0 for an amount of C3 400 000 (C400 000 for the land and C3 000 000 for the building). The building is depreciated at 5% per year on the straight line method. 2. The plant and equipment is depreciated on the sum of units method. The total estimated output of the plant and equipment is 20 million units. During the current period, a total of 1 750 000 units were produced. All of the plant and equipment was purchased on the same date during the previous financial year. 3. The ordinary share capital at 30 September 20X2 consists of 2 000 000 shares. On incorporation, 1 000 000 shares were issued to the incorporators for C1 each. On 1 July 20X2, 1 000 000 ordinary shares were issued to the public at an issue price of C1,60 each. Share issue costs of C55 000 were incurred and paid and are included in the 'other operating expenses' on the trial balance. 4. On 1 October 20X1 the company issued 10 000 debentures of C150 par value at a discount of 5%. The debentures are be redeemed on 30 September 20X6 at par- The interest rate is 12% per annum and is payable annually in arrears on 1 October The debenture discount is to be amortised over the life of the debentures using the effective interest rate method. The effective interest rate is 13,43675% and the accountant has correctly prepared the following amortisation schedule: each year. entity that obtains the rights to international stage Footight Produc Productions has staged a number of successful shows and is in the process of rehearsing shows and, with local actors, stages the shows for South African audiences. Footlight needed before income is earned from ticket sales. A successful show is very profitable and and building sets for a new show. The cash flow is very irregular as large cash outflows are can run for a number of years. Foodlight Productions needs to raise funds for a new show that it plans to premier during the winter holidays of 20X4. The owner, Mr Andrews, approached the bank manager and the following plan was agreed upon: Footlight Productions would borrow a total of C5 000 000 on 1 July 20X3. The facilitation fee charged by the bank would be C50 000 and the net proceeds received by Footlight Productions would amount to C4 950 000. The nominal interest rate would be 6% per annum and the loan would mature in three years. Mr Andrews approached his accountant, who prepared the following table based on an effective interest rate of 6,3767% per annum: Effective Interest Actual Interest PV Date 01/07/X3 30/06/X4 30/06/15 30/06/X6 315 648 316 645 317 707 300 000 300 000 300 000 4 950 000 4 965 648 4 982 293 5 000 000 Footlight Productions would also utilise an overdraft facility with a limit of C500 000. Footlight Productions has two current accounts with the bank - the number one account is the account that has the overdraft facility, and the only movements in this account are deposits and cheques relating to the show. All other receipts and payments, including bank charges and interest are reflected in the number two account. The interest rate charged on the overdraft is 5,5% per annum. The bank statement of the number one account for the period from 1 July 20x3 to 30 June 20X4 is as follows: Balance Date Cr Dr Balance Cheque Cheque Deposit Cheque 21 200 18 900 01/07/X3 20/08/X3 14/09/X3 10/10/X3 30/10/X3 15/12/X3 Deposit 28/02/X4 Cheque 30/03/X4 25/06/X4 Balance 35 000 145 000 123 800 104 900 139 900 (40 000) (25000) (145 000) (405 000) (405 000) 179 900 15 000 120 000 260 000 Cheque 229 An extract from the general journal of Footlight Productions for June 20X4 is shown below: Dr Cr 420 000 30/06/X4 420 000 Bank Income received in advance Advance bookings Salaries Bank Salaries for performers 20 000 20 000 There were no reconciling items on the bank reconciliation at 30 June 20x3. You are required to: a. Prepare all the journal entries to account for the long-term borrowing for the year ended 30 June 20X4. b. Show how the long-term borrowing will be presented on the statement of financial position at 30 June 20X4. Calculate the interest on the overdraft for the year ended 30 June 20X4. d. Prepare the bank reconciliation at 30 June 20x4. Explain, using the accounting framework, the rationale for the journal entry relating to the advance bookings on 30 June 20x4. f. Draft the journal entry that will be processed when the borrowing matures on 30 June 20X6. c. e. The following information is relevant for the preparation of the financial statements: 1 The land and buildings were acquired on 1 October 20X0 for an amount of C3 400 000 (C400 000 for the land and C3 000 000 for the building). The building is depreciated at 5% per year on the straight line method. 2. The plant and equipment is depreciated on the sum of units method. The total estimated output of the plant and equipment is 20 million units. During the current period, a total of 1 750 000 units were produced. All of the plant and equipment was purchased on the same date during the previous financial year. 3 The ordinary share capital at 30 September 20X2 consists of 2 000 000 shares. On incorporation, 1 000 000 shares were issued to the incorporators for C1 each. On 1 July 20x2, 1 000 000 ordinary shares were issued to the public at an issue price of C1,60 each. Share issue costs of C55 000 were incurred and paid and are included in the other operating expenses' on the trial balance. 4. On 1 October 20X1 the company issued 10 000 debentures of C150 par value at a discount of 5%. The debentures are to be redeemed on 30 September 20X6 at par The interest rate is 12% per annum and is payable annually in arrears on 1 October The debenture discount is to be amortised over the life of the debentures using the effective interest rate method. The effective interest rate is 13,43675% and the accountant has correctly prepared the following amortisation schedule: each year cumpanies Effective interest Actual interest Debenture discount PV 01/10/X1 30/09/X2 30/09/X3 30/09/X4 30/09/X5 30/09/X6 191 474 193 015 194 764 196 748 198 999 180 000 180 000 180 000 180 000 180 000 75 000 (11 474) (13 015) (14 764) (16 748) (18 999) 1 425 000 1 436 474 1 449 489 1 464 253 1 481 001 1 500 000 5 C118 200. 8 redeemable preference shares issued at C2,50 each. The shares were placed The preference share capital at 30 September 20X2 consists of 100 000 15% privately at a large financial institution on 1 April 20X2 for an amount of C250 000 and are subject to compulsory redemption by the company after a period of three years. 6 Company tax must still be accounted for at the correctly calculated amount of 7. The company's accounting policy is to set off share transaction costs against share An extract from the minutes of a directors' meeting on 30 September 20X2 appears as Declared the preference dividend to all shareholders registered on 30 September 20X2, to be paid on 15 October 20X2. The preference shareholders are subject to 20% dividends tax. b Declaration of ordinary dividend: 8 cents per share cash dividend to all shareholders registered on 30 September 20X2, to be paid on 15 October 20X2. .4 cents per share capitalisation issue to all shareholders registered on 30 September 20X2 The ordinary shareholders are subject to 20% dividends tax on the cash dividend but are not liable for dividends tax on the capitalisation issue. follows: a . You are required to: a Prepare the statement of profit or loss of Safeseat Limited for the year ended 30 September 20X2 Prepare the statement of changes in equity of Safeseat Limited for th 1 30 September 20X2 C Prepare the statement of financial position of Safeseat Limited at 30 Der 20X2 b Safeseat Limited is a listed company and makes seats for motor car manufacturers. The trial balance of the company at 30 September 20X2 appears as follows: SAFESEAT LIMITED TRIAL BALANCE AT 30 SEPTEMBER 20X2 Dr 3 400 000 Cr 150 000 1 100 000 120 000 810 000 536 000 662 724 425 000 90 000 Land and buildings Buildings: accumulated depreciation Plant and equipment: cost Plant and equipment: accumulated depreciation Inventory Trade accounts receivable Bank Trade accounts payable Current tax payable: income tax Ordinary share capital Retained earnings Ordinary dividend 12% debentures 15% redeemable preference shares Gross profit Administrative expenses Distribution expenses Other operating expenses 2 600 000 942 000 90 000 1 425 000 250 000 1 801 724 400 000 385 000 240 000 7 788 724 7 788 724 The following information is relevant for the preparation of the financial statements: 1. The land and buildings were acquired on 1 October 20X0 for an amount of C3 400 000 (C400 000 for the land and C3 000 000 for the building). The building is depreciated at 5% per year on the straight line method. 2. The plant and equipment is depreciated on the sum of units method. The total estimated output of the plant and equipment is 20 million units. During the current period, a total of 1 750 000 units were produced. All of the plant and equipment was purchased on the same date during the previous financial year. 3. The ordinary share capital at 30 September 20X2 consists of 2 000 000 shares. On incorporation, 1 000 000 shares were issued to the incorporators for C1 each. On 1 July 20X2, 1 000 000 ordinary shares were issued to the public at an issue price of C1,60 each. Share issue costs of C55 000 were incurred and paid and are included in the 'other operating expenses' on the trial balance. 4. On 1 October 20X1 the company issued 10 000 debentures of C150 par value at a discount of 5%. The debentures are be redeemed on 30 September 20X6 at par- The interest rate is 12% per annum and is payable annually in arrears on 1 October The debenture discount is to be amortised over the life of the debentures using the effective interest rate method. The effective interest rate is 13,43675% and the accountant has correctly prepared the following amortisation schedule: each year