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QUESTION 2 (30 marks) (36 minutes) The following information was extracted from the accounting records of Zadig Ltd for the financial year ended 29 February 2020: R Debit / (Credit) Total sales (refer additional information 1). (?) Cost of sales.. 8 856 632 Administrative expenses 3 840 000 Bank charges 14 000 Salaries and wages 3 500 000 Advertising costs 220 000 Auditors' remuneration Fees for audit 80 000 Fees for forensic work. 10 000 Travelling expenses 16 000 Distribution costs.. 420 000 Other operating expenses (including finance costs, depreciation and lease expense) (refer additional information 2). 550 000 Other operating income (refer additional information 4). 80 000 Proceeds on sale of motor vehicle (refer additional information 7). (190 000) Land at cost (refer additional information 6).... 1 500 000 T Motor vehicles at cost (refer additional information 7)... 650 000 Accumulated depreciation - Motor vehicles (refer additional information 7). (250 000) 620 000 Investments (refer additional information 5).. Long-term loan (refer additional information 3) (90 000) Income tax expense (assume as correctly calculated).. 560 500 Additional information 1 Zadig lid a handbag manufacturing entity. total sales for the financial year ended QUESTION 2 (continued) 3. The long-term loan was incurred on 1 January 2014 and the capital portion is repayable in five equal annual instalments starting 31 August 2016. Interest is calculated at 12% per annum and is paid at the end of each financial year. All applicable instalments have been paid to date. 4. Other operating income consists of: R Dividends received from the following companies: Straps (Pty) Ltd Tags Ltd Interest received from Straps (Pty) Ltd - 30 000 35 000 15 000 80 000 5 . Investments consist of: R 60 000 5.1 Investment in Straps (Pty) Ltd The total issued share capital of Straps (Pty) Ltd is R80 000 and consists of ordinary shares issued at R4 each. Zadig Ltd owns 15 000 shares in Straps (Pty) Ltd that were bought for R60 000. The directors are of the opinion that the fair value of the investment at the 2020 year end remained unchanged. R Investment in Tags Ltd 480 000 5.2 Zadig Ltd owns 80 000 of the 5 000 000 issued ordinary shares in Tags Ltd, purchased for R480 000. The shares of Tags Ltd are traded on the JSE Ltd and the market value on 28 February 2019 was R6,50 per share. The market value on 29 February 2020 was R4,50 per share and no adjustments for the increase in value have yet been made in the accounting records for the current financial year. These shares were purchased for speculative purposes. R Investment in Bags (Pty) Ltd 80 000 5.3 share and no adjustments for the increase in value have yet been made in the accounting records for the current financial year. These shares were purchased for speculative purposes. R Investment in Bags (Pty) Ltd 80 000 5.3 Zadig Ltd owns 8 000 of the 50 000 issued ordinary shares of Bags (Pty) Ltd, purchased on 1 May 2019 for R80 000. This investment is designated as a financial asset at fair value through other comprehensive income. According to the directors, the market value of the shares was R15 per share on 28 February 2020. This adjustment must still be recorded in the accounting records. 6. The land was purchased in the current financial year. The directors revalued the property to its fair value of R1 800 000 at year end. 7. The non-current assets are depreciated according to the following rates and methods: Motor vehicles - 20% per annum using the reducing balance method. One of the motor vehicles with a carrying amount of R180 000 on 28 February 2019, was sold on 1 November 2019. No vehicles were purchased during the year. The proceeds of the sale and the depreciation for the period is correctly recorded. Zadig Ltd have no other property, plant and equipment items except for the ones mentioned above. The entity is registered for VAT at 15%. Ignore all VAT transactions except where VAT is indicated as being included. 8. [TURN OVER] QUESTION 2 (continued) REQUIRED: Marks 24 (a) Prepare the statement of profit or loss and other comprehensive income of Zadig Ltd for the financial year ended 29 February 2020. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). (b) Show the note "profit before tax" that should accompany the statement of profit or loss and other comprehensive income of Zadig Ltd for the financial year ended 29 February 2020. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). 6 30 Please note: Ignore the note on the accounting policy. Comparative figures are not required. Show all calculations. e following information was extracted from the accounting records of Zadig Ltd for the financial year ded 29 February 2020: R Debit / (Credit) otal sales (refer additional information 1). (?) ost of sales......... 8 856 632 dministrative expenses 3 840 000 Bank charges ..... 14 000 Salaries and wages. 3 500 000 Advertising costs 220 000 Auditors' remuneration Fees for audit 80 000 - Fees for forensic work. 10 000 - Travelling expenses. . 16 000 Distribution costs. 420 000 Other operating expenses (including finance costs, depreciation and lease expense) 550 000 (refer additional information 2). 80 000 Other operating income (refer additional information 4).. (190 000) Proceeds on sale of motor vehicle (refer additional information 7). 1 500 000 Land at cost (refer additional information 6). 650 000 Motor vehicles at cost (refer additional information 7). (250 000) Accumulated depreciation - Motor vehicles (refer additional information 7). 620 000 otmonts (refer additional information 5).. (90 000) 8 856 632 3 840 000 14 000 3 500 000 220 000 80 000 10 000 16 000 420 000 f sales....... istrative expenses charges es and wages tising costs ors' remuneration es for audit..... es for forensic work. avelling expenses ibution costs. er operating expenses (including finance costs, depreciation and lease expense) er additional information 2) .... er operating income (refer additional information 4). ceeds on sale of motor vehicle (refer additional information 7). d at cost (refer additional information 6). tor vehicles at cost (refer additional information 7). cumulated depreciation Motor vehicles (refer additional information 7). estments (refer additional information 5).. ng-term loan (refer additional information 3). come tax expense (assume as correctly calculated). 550 000 80 000 (190 000) 1 500 000 650 000 (250 000) 620 000 (90 000) 560 500 Editional information Zadig Ltd, a handbag manufacturing entity, total sales for the financial year ended 29 February 2020 consists of the following: 18C Ligt QUESTION 2 (30 marks) (36 minutes) The following information was extracted from the accounting records of Zadig Ltd for the financial year ended 29 February 2020: R Debit / (Credit) Total sales (refer additional information 1). (?) Cost of sales.. 8 856 632 Administrative expenses 3 840 000 Bank charges 14 000 Salaries and wages 3 500 000 Advertising costs 220 000 Auditors' remuneration Fees for audit 80 000 Fees for forensic work. 10 000 Travelling expenses 16 000 Distribution costs.. 420 000 Other operating expenses (including finance costs, depreciation and lease expense) (refer additional information 2). 550 000 Other operating income (refer additional information 4). 80 000 Proceeds on sale of motor vehicle (refer additional information 7). (190 000) Land at cost (refer additional information 6).... 1 500 000 T Motor vehicles at cost (refer additional information 7)... 650 000 Accumulated depreciation - Motor vehicles (refer additional information 7). (250 000) 620 000 Investments (refer additional information 5).. Long-term loan (refer additional information 3) (90 000) Income tax expense (assume as correctly calculated).. 560 500 Additional information 1 Zadig lid a handbag manufacturing entity. total sales for the financial year ended QUESTION 2 (continued) 3. The long-term loan was incurred on 1 January 2014 and the capital portion is repayable in five equal annual instalments starting 31 August 2016. Interest is calculated at 12% per annum and is paid at the end of each financial year. All applicable instalments have been paid to date. 4. Other operating income consists of: R Dividends received from the following companies: Straps (Pty) Ltd Tags Ltd Interest received from Straps (Pty) Ltd - 30 000 35 000 15 000 80 000 5 . Investments consist of: R 60 000 5.1 Investment in Straps (Pty) Ltd The total issued share capital of Straps (Pty) Ltd is R80 000 and consists of ordinary shares issued at R4 each. Zadig Ltd owns 15 000 shares in Straps (Pty) Ltd that were bought for R60 000. The directors are of the opinion that the fair value of the investment at the 2020 year end remained unchanged. R Investment in Tags Ltd 480 000 5.2 Zadig Ltd owns 80 000 of the 5 000 000 issued ordinary shares in Tags Ltd, purchased for R480 000. The shares of Tags Ltd are traded on the JSE Ltd and the market value on 28 February 2019 was R6,50 per share. The market value on 29 February 2020 was R4,50 per share and no adjustments for the increase in value have yet been made in the accounting records for the current financial year. These shares were purchased for speculative purposes. R Investment in Bags (Pty) Ltd 80 000 5.3 share and no adjustments for the increase in value have yet been made in the accounting records for the current financial year. These shares were purchased for speculative purposes. R Investment in Bags (Pty) Ltd 80 000 5.3 Zadig Ltd owns 8 000 of the 50 000 issued ordinary shares of Bags (Pty) Ltd, purchased on 1 May 2019 for R80 000. This investment is designated as a financial asset at fair value through other comprehensive income. According to the directors, the market value of the shares was R15 per share on 28 February 2020. This adjustment must still be recorded in the accounting records. 6. The land was purchased in the current financial year. The directors revalued the property to its fair value of R1 800 000 at year end. 7. The non-current assets are depreciated according to the following rates and methods: Motor vehicles - 20% per annum using the reducing balance method. One of the motor vehicles with a carrying amount of R180 000 on 28 February 2019, was sold on 1 November 2019. No vehicles were purchased during the year. The proceeds of the sale and the depreciation for the period is correctly recorded. Zadig Ltd have no other property, plant and equipment items except for the ones mentioned above. The entity is registered for VAT at 15%. Ignore all VAT transactions except where VAT is indicated as being included. 8. [TURN OVER] QUESTION 2 (continued) REQUIRED: Marks 24 (a) Prepare the statement of profit or loss and other comprehensive income of Zadig Ltd for the financial year ended 29 February 2020. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). (b) Show the note "profit before tax" that should accompany the statement of profit or loss and other comprehensive income of Zadig Ltd for the financial year ended 29 February 2020. Your answer must comply with the requirements of International Financial Reporting Standards (IFRS). 6 30 Please note: Ignore the note on the accounting policy. Comparative figures are not required. Show all calculations. e following information was extracted from the accounting records of Zadig Ltd for the financial year ded 29 February 2020: R Debit / (Credit) otal sales (refer additional information 1). (?) ost of sales......... 8 856 632 dministrative expenses 3 840 000 Bank charges ..... 14 000 Salaries and wages. 3 500 000 Advertising costs 220 000 Auditors' remuneration Fees for audit 80 000 - Fees for forensic work. 10 000 - Travelling expenses. . 16 000 Distribution costs. 420 000 Other operating expenses (including finance costs, depreciation and lease expense) 550 000 (refer additional information 2). 80 000 Other operating income (refer additional information 4).. (190 000) Proceeds on sale of motor vehicle (refer additional information 7). 1 500 000 Land at cost (refer additional information 6). 650 000 Motor vehicles at cost (refer additional information 7). (250 000) Accumulated depreciation - Motor vehicles (refer additional information 7). 620 000 otmonts (refer additional information 5).. (90 000) 8 856 632 3 840 000 14 000 3 500 000 220 000 80 000 10 000 16 000 420 000 f sales....... istrative expenses charges es and wages tising costs ors' remuneration es for audit..... es for forensic work. avelling expenses ibution costs. er operating expenses (including finance costs, depreciation and lease expense) er additional information 2) .... er operating income (refer additional information 4). ceeds on sale of motor vehicle (refer additional information 7). d at cost (refer additional information 6). tor vehicles at cost (refer additional information 7). cumulated depreciation Motor vehicles (refer additional information 7). estments (refer additional information 5).. ng-term loan (refer additional information 3). come tax expense (assume as correctly calculated). 550 000 80 000 (190 000) 1 500 000 650 000 (250 000) 620 000 (90 000) 560 500 Editional information Zadig Ltd, a handbag manufacturing entity, total sales for the financial year ended 29 February 2020 consists of the following: 18C Ligt