Financial Accounting 2A

Please assist with solutions

[30 MARKS] SECTION A Answer ALL the questions in this section. In order to assist Ingiphile in the preparation of the 2021 financial statements, you are required to read the case study provided and answer the questions. Tsangoni CC is a company which manufactures, sells and services mountain bikes in Cape Town, South Africa. The financial director of the company, Ingiphile, is struggling with the preparation of the financial statements for the year ended 31 August 2021 and has asked for your assistance. Bicycle frames: Tsangoni CC imports the majority of its bicycles and the parts required for maintenance from Europe. On 1 February 2021, an order for the shipment of bicycle frames was placed by Ingiphile. The terms of the order were as follows: Date of order 1/2/2021 X Financial Accounting 2A PDF - 358 KB Sensa Bicycles Ltd (Netherlands) Supplier Customer Tsangoni CC Product 10 "Sensa Romagna" frames Shipping date 1/3/2021 Price R5 000 per frame Payment terms Full payment to be made on 1/3/2022 9 Shipping terms FOB shipping point The shipment was made on 1 March 2021, and the inventory was received on 27 May 2021. A fair interest rate of 12% applies. Property. Plant and Equipment (PPE): PPE is comprised of two assets: a servicing machine and a delivery vehicle. Tsangoni CC purchased the servicing machine for the servicing of bicycles for R110 000 on 1 September 2019. Ingiphile felt that the consumption of future economic benefits would be best represented by the number of bicycles it serviced, which was estimated to be 750 bicycles. The servicing machine serviced 34 bicycles from 1 September 2019 to 31 August 2020 (the previous financial year) and 43 bicycles from 1 September 2020 to 31 August 2021 (the current financial year). The machine could be sold at the end of its useful life for R4 000. Tsangon CC purchased the delivery vehicle for R120 000 on 1 October 2020. Ingiphile estimated the useful life to be 5 years. The vehicle can be sold at the end of its useful life for R12 000 if costs of R2 000 are incurred to have it serviced. 1.1 Discuss when and at what amount the bicycle frames should be initially recorded in the financial (10 marks) statements of Tsangoni CC. You should apply the relevant definition and recognition criteria as per the Conceptual Framework in your discussion Prepare all the general journal entries relating to the purchase of bicycle frames for the year ended (10 marks) 31 August 2021 1.2 1.3 (8 marks) 1.4 Calculate the opening balance of the accumulated depreciation: PPE: servicing machine account (balance at 1 September 2020) and the total depreciation expense. Assume that at the end of the year, Ingiphile found that the delivery vehicle had a value in use of R84 000 and could be sold for R87 000 if R8 000 was incurred to prepare it for sale. At what amount would PPE: delivery vehicle be shown on the statement of financial position as at 31 August 2021? (2 marks)