FINANCIAL ACCOUNTING THE VALUES ON THESE TABLES ARE IN (R 1000s), FOR EXAMPLE R 260 is R 260 000 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- THIS IS WHAT I DID

FINANCIAL ACCOUNTING

THE VALUES ON THESE TABLES ARE IN (R 1000s), FOR EXAMPLE R 260 is R 260 000

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THIS IS WHAT I DID BUT I AM NOT SO SURE

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HERE AS MENTIONED MOETI TRANSFERRED 20% WHICH MEANS THAT 260 000 x 20% = R 52 000 (nominal value) will be transferred to B. Faith.

EXPLANATIONS BASED ON NET INVESTMENT:

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Question two Fresh Meats CC was registered on 1 August 2015. The founding statement of the CC sets out the following: i. Names of members, their interests and contributions: Amounts in R1000 Name % interest Contribution N. Moeti 50% R260 B. Faith 50% R240 ii. The accounting date: 30 June. The following abbreviated trial balance of the close corporation was available on 30 June 2017: (Amounts in R1000) Debit Credit Members' 500 Retained earnings 200 00 Mortgage bond 2 000 00 Loan to B. Faith 60 00 Land and buildings 2 500 Bank 140 00 R2 700 00 R2 700 00) 00 00 With regard to the 2017/2018 financial year the following was available: N. Moeti transferred 20.00 % (nominal value R 52 000) of her contribution on 30 June 2018 to B. Faith. N. Moeti lent the CC R 40 000, repayable on 30 June 2019. On 31 March 2018, the land and buildings were re-valued at R3 000 000. All interest was paid and received promptly on 30 June. Retained earnings for the year ended 30 June 2018 amounted to R 300 000. The distribution of income is equal to 50.00 % of retained earnings at the end of the financial year. Required 1. Calculate the change in members % interest and members' funds at 30 June 2018. 2. Calculate the values of the members' net investment at 30 June 2018. (15 marks) (5 marks) 50% 50% Total R500 Beginning Capital Transfer Revaluation of Land Income distribution Loan Ending capital N. MOETI R260 (R52) R250 R60 B. FAITH R240 R52 R250 R90 (R60) R602 *R500 **R150 (R60) R518 *The revaluation of Land from increases from 2500 to 3000. Thus the increase difference of 500 is allocated according to the original interest of 50/50 since the revaluation was earlier before the change in interest of the partners. **The income is distributed according to the new ratio, 40/60. Since it is made at year-end. 1. The transfer of 20% interest of N. Moeti to BFaith is a personal transaction between the two partners. It is computed as follows: 50% x 20% = 10%, thus 40% for NMoeti and 60% to BFaith. Likewise, the change in members fund would be computed as: End capital less beginning capital. 5.2.6. Special statements peculiar to a CC There are two statements in particular that are often used when preparing the financial statements of a CC. These are: A Statement of changes in Members' Net Investment Transactions with Members In the event that these statements are not present, the information must be disclosed in the notes to the financial statements. Figure 5.2.1 Statement of changes in members' net investment Members contribution Revaluation surplus Retained earning Total members interest Loans from Total Net change in members investment Members D E B Xxx Xxx XXX Xxx XXX Xxx Opening balance XXX XXX Xxx Members loans' raised Xxx XXX Xxx Xxx Members contributio n Xxx Xxx Xxx Revaluatio n reserve Profit for xxx Xxx Xxx the year Xxx Xxxx XXXX Xxxx XXXX Closing balance Source: Flynn and Koornhof (2016) As shown in the figure 2.1 (Statement of changes in the members net investment) we notice that any movement that took place during the financial period affects the member's interest/fund that was already there, as shown by row A row Dimovements during the year), with their effects shown on column A to E. Therefore, the closing balance as per each column, added together, they must aggregate to the closing balance as per total net change in members investments. Question two Fresh Meats CC was registered on 1 August 2015. The founding statement of the CC sets out the following: i. Names of members, their interests and contributions: Amounts in R1000 Name % interest Contribution N. Moeti 50% R260 B. Faith 50% R240 ii. The accounting date: 30 June. The following abbreviated trial balance of the close corporation was available on 30 June 2017: (Amounts in R1000) Debit Credit Members' 500 Retained earnings 200 00 Mortgage bond 2 000 00 Loan to B. Faith 60 00 Land and buildings 2 500 Bank 140 00 R2 700 00 R2 700 00) 00 00 With regard to the 2017/2018 financial year the following was available: N. Moeti transferred 20.00 % (nominal value R 52 000) of her contribution on 30 June 2018 to B. Faith. N. Moeti lent the CC R 40 000, repayable on 30 June 2019. On 31 March 2018, the land and buildings were re-valued at R3 000 000. All interest was paid and received promptly on 30 June. Retained earnings for the year ended 30 June 2018 amounted to R 300 000. The distribution of income is equal to 50.00 % of retained earnings at the end of the financial year. Required 1. Calculate the change in members % interest and members' funds at 30 June 2018. 2. Calculate the values of the members' net investment at 30 June 2018. (15 marks) (5 marks) 50% 50% Total R500 Beginning Capital Transfer Revaluation of Land Income distribution Loan Ending capital N. MOETI R260 (R52) R250 R60 B. FAITH R240 R52 R250 R90 (R60) R602 *R500 **R150 (R60) R518 *The revaluation of Land from increases from 2500 to 3000. Thus the increase difference of 500 is allocated according to the original interest of 50/50 since the revaluation was earlier before the change in interest of the partners. **The income is distributed according to the new ratio, 40/60. Since it is made at year-end. 1. The transfer of 20% interest of N. Moeti to BFaith is a personal transaction between the two partners. It is computed as follows: 50% x 20% = 10%, thus 40% for NMoeti and 60% to BFaith. Likewise, the change in members fund would be computed as: End capital less beginning capital. 5.2.6. Special statements peculiar to a CC There are two statements in particular that are often used when preparing the financial statements of a CC. These are: A Statement of changes in Members' Net Investment Transactions with Members In the event that these statements are not present, the information must be disclosed in the notes to the financial statements. Figure 5.2.1 Statement of changes in members' net investment Members contribution Revaluation surplus Retained earning Total members interest Loans from Total Net change in members investment Members D E B Xxx Xxx XXX Xxx XXX Xxx Opening balance XXX XXX Xxx Members loans' raised Xxx XXX Xxx Xxx Members contributio n Xxx Xxx Xxx Revaluatio n reserve Profit for xxx Xxx Xxx the year Xxx Xxxx XXXX Xxxx XXXX Closing balance Source: Flynn and Koornhof (2016) As shown in the figure 2.1 (Statement of changes in the members net investment) we notice that any movement that took place during the financial period affects the member's interest/fund that was already there, as shown by row A row Dimovements during the year), with their effects shown on column A to E. Therefore, the closing balance as per each column, added together, they must aggregate to the closing balance as per total net change in members investments