PART A Khoza Bazaar Ltd (KB) needed to acquire two new delivery vehicles for making deliveries. They decided to enter into the following 5-year contract with Lee Ltd on 1 May 2022: - KB will pay a once off fee on 1 May 2022 to the attorneys of R30 000 cash for drafting and concluding the contract; - KB will pay R200 000 per vehicle on 30 April every year as consideration for the right to use the delivery vehicles. The implicit interest rate in the contract is 17,283% compounded annually; - At the end of the 5-year period, KB is required to pay Lee Ltd an additional, final amount of R125 000 per vehicle and ownership of the delivery vehicles will not transfer to KB; - The contract provides KB with two distinct vehicles that are clearly identified in the contract (registration numbers included). The contract further specifically states the maximum quantity of the goods that can be transported in each delivery vehicle. KB can use the vehicles at their discretion and the vehicles will be kept at their warehouse. Lee Ltd can only replace the vehicles if it is deemed necessary by KB. Lee Ltd is also responsible for the maintenance of the two delivery vehicles. KB depreciates delivery vehicles using the straight-line method of depreciation, and estimates the useful life for all delivery vehicles to be 7 years. PART B During the year, Khoza Bazaar Ltd (KB) purchased Primo drink products from a Brazilian supplier for resale at its resort. However, KB was unaware that the Brazilian supplier supplied fake Primo drink products which had harmful ingredients. This resulted in some of KB's customers getting sick while others were hospitalised. The news initially broke on 8 February 2023 when Yorisha Hugo was hospitalised. Thereafter, 11 other customers came forward alleging that they became ill allegedly due to the consumption of the fake Primo drink products. Yorisha Hugo and the additional 11 customers (i.e. 12 customers) lodged a joint legal lawsuit against KB on 15 February 2023. KB engaged their lawyers immediately. The lawyers completed their investigations on 22 March 2023. The lawyers believed it is highly probable that these customers would be successful in their claim. The lawyers also envisaged additional customers who may be affected by the fake Primo drink products would lodge additional legal lawsuits. As a result, KB's lawyers suggested that the company offer an outof-court settlement to these customers to prevent any further negative publicity. On 31 March 2023, there were legal lawsuits from three additional customers which the lawyers believed were valid claims. Therefore, at the end of the financial year, the lawyers concluded that there were 15 valid legal claims against KB from the consumption of the fake Primo drink. Following a detailed calculation process, the lawyers estimated that KB offer a reasonable amount of R50 000 per customer as an out-of-court settlement which is favourable to the customers and is likely to be accepted by them. The lawyers issued an invoice of R160 000 on 15 April 2023 for the work they had performed for KB Ltd up to 31 March 2023. In the 2022 financial statements of Khoza Bazaar (KB), the following information is disclosed in the directors' report at the year end of 30 April 2022: Claim against the company A customer of the company, Eva (Pty) Ltd, claims that certain furniture items delivered to them were broken on arrival. The claim was only instituted two weeks after the delivery was made and could not be verified as true at that time and a refund was denied. Eva (Pty) Ltd instituted a claim of R600 000 for damages. At the year end, the claim was being investigated by the lawyers for legality. On 1 August 2022, the lawyers were notified of the impending court date (being 15 November 2022) and that the claim was increased to also include Eva (Pty) Ltd's attorney fees of R120 000. The court date was however postponed to 20 May 2023. The lawyers of KB are still uncertain whether the claim against the company will succeed but stated that Eva (Pty) Ltd's attorney fees might in any case have to be paid