Part A

Khoza Bazaar Ltd has the following capital structure 31 December 20x16:

Description	Number
Authorised ordinary share	500 000
Issued ordinary shares	225 000
Share capital	R8 000 000

1. On 2 January 20x17 the directors of Khoza Bazaar Ltd invited the general public to apply and subscribe for 100 000 shares at R30 per share in the company.

1. Applications for 135 000 shares were received on 31 January 20x17, the closing date for application and subscription.

1. CAT (Pty) Ltd is a large investment company and applied for some of the shares in Khoza Bazaar Ltd. They applied and paid for 18 000 shares in Khoza Bazaar Limited on 20 January 20x17, these shares are included in 2 above.

1. On 15 February the board of directors decide to allot only the number they had invited the public to subscribe for, as there was no need for the excess capital. The allotment of shares was made in proportion to the number of shares applied for.

Part B

Khoza Bazaar Ltd, as well as all of Khoza Bazaars suppliers, is registered as VAT vendors (VAT is calculated at 15%). Khoza Bazaars current reporting period ends on 31 December 20x17.

On 31 December 20x17, the detail of Khoza Bazaars plant, machinery and computer equipment was as follows according to the trial balance:

Plant	Note	Dr	Cr
- Cost price		5 400 000
- Accumulated depreciation 31 Dec 20x16	2		1 875 000
Machinery
- Cost price	3	6 850 000
- Accumulated depreciation 31 Dec 20x16	3		3 342 800
Computer equipment
- Cost price	4	3 367 500
- Accumulated depreciation 31 Dec 20x16	4		960 000

ADDITIONAL INFORMATION:

1. No plant, machinery or computer equipment was purchased, sold or disposed of during 20x17 other than those mentioned in the paragraphs below.

1. Plant

2.1 At the initial recognition on 1 January 20x14, the plants useful life was estimated at 10 years with a residual value of R400 000 (excluding VAT).

2.2 On 1 January 20x17, management reconsidered the remaining useful life of the plant. The

remaining useful life was estimated at six years with a residual value of R96 000 (excluding VAT).

2.3 The depreciation expense in respect of plant for 20x17 still has to be recognised in accordance with the straight line method.

1. Machinery

3.1 The depreciation expense on machinery is calculated in accordance with the diminishing balance method at a rate of 20% per year. The depreciation expense in respect of machinery for 20x17 still has to be recognised.

3.2 According to the asset register, the detail of machinery on 31 December 2016 is as follows:

	Machine	Machine	Machine	Total
	OO	PP	QQ
	R	R	R	R
Cost price	2 850 000	800 000	3 200 000	6 850 000
Accumulated depreciation
31 Dec 20x16	(1 390 800)	(390 400)	(1 561 600)	(3 342 800)
	1 459 200	409 600	1 638 400	3 507 200

4 Computer equipment

4.1 The depreciation expense on computer equipment is calculated in accordance with the straight line method at a rate of 20% per year. The depreciation expense in respect of computer equipment for 20x17 still has to be recognised.

4.2 On 1 April 20x17, Khoza Bazaar purchased new computers for use within their administrative offices from Incredible Connection. Khoza purchased 6 new desktops at R9 775 each (incl. VAT) and paid Dial-a Nerd R22 770 (incl. VAT) to have all the computers delivered and installed. The computers were ready to be used on 30 April 20x17.

Required

1. Khoza Bazaar Ltd as identified in this assignment is a private company. True or False?

2. On 1 January 20x17 (before the share issue), how many ordinary shares can Khoza Bazaar Ltd still issue?

	a.	As many as they like
	b.	225 000
	c.	500 000
	d.	275 000

3. If the depreciation rate on computer equipment is changed to number of years, what will the total useful life amount to?

3 years

5 years

4 years

6 years

4. The total cost of the new computers amounted to:

R32 545

R51 000

R70 800

R81 420

5. The carrying amount of machinery (in total) at 31 December 20x17 amounted to:

R2 895 760

R2 523 528

R2 805 760

R2 137 200

6. The journal entry to account for the application of shares on 31 January 20x17 in the accounting records of Khoza Bazaar Ltd is:

Dr: Bank (SFP) 3 000 000

Cr: Application & allotment (SFP) 3 000 000

Dr: Bank (SFP 4 050 000

Cr: Ordinary Share Capital (SFP) 4 050 000

Dr: Bank (SFP) 4 050 000

Cr: Application & allotment (SFP) 4 050 000

No journal entry.

7. The depreciation expense on computer equipment (in total) for 20x17 amounted to:

R682 940

R673 500

R689 784

R781 417

8. The carrying amount of Machine PP at 31 December 20x17 amounted to:

R58 061

R341 939

R327 680

R249 600

9. The depreciation expense on the plant for 20x17 amounted to:

R675 000

R587 500

R571 500

R625 000

10. How many shares were allotted to CAT (Pty) Ltd?

4000

13 333

20 000

9 000