IGNORE VAT:

Assume an DIVIDEND TAX rate of $20\%$ and a company tax rate of $28\%$

Furniture Designs Ltd is a South African company that specialises in designing

furniture using interesting raw materials from Brazil. The company has a year end of

$30$ June. The company$$s main manufacturing plant is situated in Newcastle in

Kwazulu$-$ Natal. Clients are spread across Africa and include Woolworths, Home etc.

and Mr Price Home Zone. You have been provided with the following information for

the financial year ended $30$ June $2018$:

Extract from the statement of financial position of Furniture Designs Ltd

as at $30$ June $2018$

Refer to

additional

info

$2018$

R

$2017$

R

ASSETS

Non current assets

Property, plant and equipment $8-12??$

Investments $52000037500$

Current assets

Inventory $15698001687590$

Trade receivables $557732527472$

Bank $0?$

SARS $-23945$

Prepaid expenses $2100014000$

EQUITY

Share capital: class A $1?16500000$

Retained earnings $?22414642$

Revaluation surplus $8+9??$

LIABILITIES

Current liabilities

Trade payables $16461341793432$

Rental income received in

advance

$7?3150$

Shareholders for dividends $219000075000$

SARS $57400-$

Bank $842209?$

Accrued expenses $1470010400$

Page$3$

Additional information:

$1.$ On $1$ July $2017,$ there were $1500000$ class A in issue. $300000$ shares were offered

to the public at a price of R$22$ each on the $1$st October $2017.$ The share issue was

underwritten by Investec Bank for an agreed commission of $7\%.$ Applications for

the shares closed on $30$ November $2017.90\%$ of the shares were applied for by

the public. The shares were allotted by the company on $1$ January $2018.$ Share

issue costs, excluding the underwriter$$s commission, amounted to R$139800.$ All

share issue costs $($including the underwriter$$s commission$)$ were paid in cash on

the day that the shares were allotted.

$2.$ On $31$ December $2017,$ the directors declared an interim dividend of $25$ cents per

share. On $20$ June $2018,$ the directors declared a final dividend of $40$ cents per

share.

$3.$ Profit for the current financial year after finance costs but before taxation,

amounted to R$9325200.$ This was equal to taxable income for the current

financial year.

$4.$ Income from the sale of goods for the current financial year amounted to R$31250$

$245.80\%$ of income from the sale of goods is represented by credit sales.

Furniture Designs Ltd applies a $40\%$ mark$-$up on selling price.

$5.$ There was no profit or loss on the sale of investments. No investment income was

earned during the year ended $30$ June $2018.$

$6.$ Included in the profit and loss section of the statement of comprehensive income

of Furniture Designs Ltd for the year ended $30$ June $2018,$ were net operating costs

amounting to R$2826623.$ This amount included, amongst others, the following

items:

R

Rental income $?$

Profit $/$ loss on sale of plant and machinery $?$

Bad debts expense $484000$

Depreciation expense $?$

Impairment expense $?$

$7.$ Furniture Designs Ltd rents out a part of the factory to a small business enterprise

that manufactures candles. Rent is paid in advance on the last day of each month.

Page$4$

The rental agreement states that the monthly rental is increased by $8\%$ on $1$ April

each year.

$8.$ The following table provides information about the different classes of property,

plant and equipment that Furniture Designs Ltd owned at year ended $30$ June

$2017$:

Date Purchased Cost

Residual

Value Useful life

Land $01$ July $2009$ R$360000$ R $0?$

Buildings $01$ July $2009$ R$200000$ R $0?$

Equipment $01$ July $2015$ R$320000$ R$40000?$

Machinery $31$ December $2015$ R$460000$ R$600005$ years

Note: Land is accounted for on the revaluation model, while all other assets $($buildings$,$

equipment and machinery$)$ are accounted for on the cost model.

$8\mathrm{.}1$ The benefits from the usage of the building are expected to be realised

evenly over a $20$ year period.

$8\mathrm{.}2$ Equipment is depreciated on the reducing balance method at $12\mathrm{.}5\%$ p$.$a$.$

$8\mathrm{.}2.$ Machinery is depreciated on the straight line method.

$9.$ Land is revalued every $3$ years to fair value, as determined by an independent

evaluator. No land was purchased or disposed of during the current year. The

fair values on the revaluation dates were as follows:

$30$ June $201230$ June $201530$ June $2018$

Fair value of land R$450000$ R$520000$ R$630000$

$10.$ The company has decided to upgrade its equipment. All the existing equipment

was sold on $30$ April $2018$ at a profit of R$3000.$ The new equipment was

purchased for cash on $1$ February $2018$ at a cost of R$400000.$ The business

imported the equipment from Asia. The terms of the contract indicated FOB

destination. Transport costs of R$15000$ and import duties of R$8000$ were paid

in cash on $1$ March $2018,$ the date the equipment arrived in South Africa. The

equipment was installed and ready for use on $1$ April $2018.$ The new equipment

will be depreciated on the reducing balance method at $15\%$ p$.$a$.$ and has an

estimated residual value of R$30000.$

$11.$ The company decided to manufacture clothing in addition to the furniture they

currently produce. In order to accom