FAC2601/QUESTION BANK QUESTIONS 5.2 - (45 marks) (54 minutes) The following information was taken from the accounting records of Jackel Ltd, on 31 December 2014: Additional information The information in respect of transactions that occurred during the 2014 financial year is as follows: 1. On 1 March 2013, Jackel Ltd acquired land, erf 308 Midstream, at a cost of R600 000 with the intention to build an office block thereon. The building will be owner occupied. Jackel Ltd commenced erecting the building during the current financial year. Total cost incurred on the building up to 31 December 2014 , was as follows: The company withdrew one of its machines from production for a period of 4 months during which it was used in the process of erecting the office building. The office building was completed and ready for use on 30 November 2014 . The land was revalued on 31 December 2014 at net replacement value by Mrs C Collins, an independent sworn appraiser. It is company policy to revalue and account for land and buildings according to its net replacement values at the end of every second year. 2. Jackel Ltd acquired the following property for investment purposes on 30 June 2014 : Land: Erf 448, Parkview Buildings thereon R100000025000003500000 The property is let to Hide Ltd in terms of an operating lease agreement. FAC1601/QUESTION BANK QUESTION 5.2 (continued) During the current financial year the following costs were incurred on the property: R - Improvements to the building to extend rentable floor capacity (completed 1 December 2014) - Repairs and maintenance. These transactions have not yet been recorded in the accounting records of Jackel Ltd. The company accounts for the property using the fair value model. On 31 December 2014, MrZ Mathews, a sworn appraiser, valued the property based on market evidence at the follnwinc valu ec 3. Other transactions in respect of property, plant and equipment that took place during the year are as follows: - On 30 September 2014, a motor vehicle was sold for R170 000. The cost price and accumulated depreciation on this vehicle at the beginning of the current financial year was R250 000 and R62 500 respectively. A new vehicle costing R315000 was purchased on the same date to replace the old vehicle. - The company purchased an additional machine for the business on 1 October 2014. It was calculated that the machine would have a residual value of R8000 at the end of its useful life. The cost price of the machine is R448 000. This machine was not used in the construction of the new office building. This transaction has not yet been recorded in the accounting records of Jackel Ltd. - All furniture and fittings were purchased on 1 January 2013. No furniture or fittings were purchased during the current financial year. 4. Property, plant and equipment are depreciated as follows: - Machinery: According to the straight-line method over a period of 60 months. - Furniture and fittings: 20% per annum according to the reducing balance method. - Motor vehicles: According to the straight-line method over the asset's useful life of 5 years. - Buildings: 2% per annum according to the straight-line method. 5. Investments consist of the following: - 22000 Ordinary shares in Hamper Ltd purchased for R39 000. These shares were classified as a financial asset through profit or loss, purchased for speculation purposes. The issued share capital of Hamper Ltd consists of 800000 ordinary shares. Each share carries one vote. These shares are traded on the JSE at R3,50 per share on 31 December 2014. FAC2601/QUESTION BANK QUESTION 5.2 (continued) REQUIRED: Prepare the "Asset" section of the Statement of Financial Position as well as the Property, Plant and Equipment and Investment Property notes of Jackel Ltd at 31 December 2014. Your answer should comply with the requirements of International Financial Reporting Standards (IFRS). Comparative figures are not required. The accounting policy note is not required. All amounts exclude VAT (where appropriate), except where otherwise noted. Ignore the total column in the Property, Plant and Equipment note. [45] FAC2601/QUESTION BANK QUESTIONS 5.2 - (45 marks) (54 minutes) The following information was taken from the accounting records of Jackel Ltd, on 31 December 2014: Additional information The information in respect of transactions that occurred during the 2014 financial year is as follows: 1. On 1 March 2013, Jackel Ltd acquired land, erf 308 Midstream, at a cost of R600 000 with the intention to build an office block thereon. The building will be owner occupied. Jackel Ltd commenced erecting the building during the current financial year. Total cost incurred on the building up to 31 December 2014 , was as follows: The company withdrew one of its machines from production for a period of 4 months during which it was used in the process of erecting the office building. The office building was completed and ready for use on 30 November 2014 . The land was revalued on 31 December 2014 at net replacement value by Mrs C Collins, an independent sworn appraiser. It is company policy to revalue and account for land and buildings according to its net replacement values at the end of every second year. 2. Jackel Ltd acquired the following property for investment purposes on 30 June 2014 : Land: Erf 448, Parkview Buildings thereon R100000025000003500000 The property is let to Hide Ltd in terms of an operating lease agreement. FAC1601/QUESTION BANK QUESTION 5.2 (continued) During the current financial year the following costs were incurred on the property: R - Improvements to the building to extend rentable floor capacity (completed 1 December 2014) - Repairs and maintenance. These transactions have not yet been recorded in the accounting records of Jackel Ltd. The company accounts for the property using the fair value model. On 31 December 2014, MrZ Mathews, a sworn appraiser, valued the property based on market evidence at the follnwinc valu ec 3. Other transactions in respect of property, plant and equipment that took place during the year are as follows: - On 30 September 2014, a motor vehicle was sold for R170 000. The cost price and accumulated depreciation on this vehicle at the beginning of the current financial year was R250 000 and R62 500 respectively. A new vehicle costing R315000 was purchased on the same date to replace the old vehicle. - The company purchased an additional machine for the business on 1 October 2014. It was calculated that the machine would have a residual value of R8000 at the end of its useful life. The cost price of the machine is R448 000. This machine was not used in the construction of the new office building. This transaction has not yet been recorded in the accounting records of Jackel Ltd. - All furniture and fittings were purchased on 1 January 2013. No furniture or fittings were purchased during the current financial year. 4. Property, plant and equipment are depreciated as follows: - Machinery: According to the straight-line method over a period of 60 months. - Furniture and fittings: 20% per annum according to the reducing balance method. - Motor vehicles: According to the straight-line method over the asset's useful life of 5 years. - Buildings: 2% per annum according to the straight-line method. 5. Investments consist of the following: - 22000 Ordinary shares in Hamper Ltd purchased for R39 000. These shares were classified as a financial asset through profit or loss, purchased for speculation purposes. The issued share capital of Hamper Ltd consists of 800000 ordinary shares. Each share carries one vote. These shares are traded on the JSE at R3,50 per share on 31 December 2014. FAC2601/QUESTION BANK QUESTION 5.2 (continued) REQUIRED: Prepare the "Asset" section of the Statement of Financial Position as well as the Property, Plant and Equipment and Investment Property notes of Jackel Ltd at 31 December 2014. Your answer should comply with the requirements of International Financial Reporting Standards (IFRS). Comparative figures are not required. The accounting policy note is not required. All amounts exclude VAT (where appropriate), except where otherwise noted. Ignore the total column in the Property, Plant and Equipment note. [45]