QUESTION 1 (28 Marks) You have been given the following pre-adjusted trial balance of Waxy Ltd for the year ended 30 June 2020 before taking into account the additional information. Dr (R) Cr (R) Ordinary share capital 270 000 15% Long term loan 48 000 Retained earnings (01/07/2019) 145 800 General reserves (01/07/2019) 183 600 Land and buildings at cost 258 000 Plant and equipment at cost 498 000 Accumulated depreciation building 12 000 Accumulated depreciation: Plant & equipment 133 200 Inventory (01/07/2019) 114 000 Trade payables 117 000 Accounts receivables 188 000 Bank 75 600 Sales 1 608 000 Purchases 1 219 000 Interest (Long term loan) 7 200 Salaries and wages 152 400 Electricity 18 600 Sundry expenses 67 800 Suspense account 81 000 2 598 600 2 598 600 Additional information 1. Electricity bill for two months to 30 June 2020, for R1 500 was received and paid on 15 July 2020. This bill has yet to be accrued for. 2. The suspense account comprise the following: R Long term loan taken on 30 June 2020 72 000 Proceeds on sale of plant (153 000) Closing balance 81 000 ANNEXURE E: FORMATIVE ASSESSMENT 1 (FA1) Plant sold had a carrying value of R165 000 on the date of disposal. This plant's initial cost was R210 000. 3. Total depreciation on plant and equipment of R20 000 is to be recorded for 2020. 4. The balance of land and buildings at 1 July 2019 comprises: R Land 75 000 Buildings 140 000 The estimated useful life of the building was 50 years. 5. Land and buildings were valued at R400 000 on 30 June 2020. 6. The year-end inventory count indicated that inventory to the value of R132 000 was on hand at 30 June 2020. Required: 1.1) Prepare the adjusting journal entries for points 1 to 6. (23 marks) 1.2) Prepare only the gross profit section of the statement of profit or loss and other comprehensive income of Waxy Ltd for the year ended 30 June 2020. (5 marks) QUESTION 2 (52 Marks) Sovax Proprietary Limited had the following items of property, plant and equipment on 1 January 2020 Plant A Office Building Cost 400 000 900 000 Accumulated depreciation (40 000) (18 000) Carrying value 360 000 882 000 Estimated useful life 10 50 The following revaluations were performed on the plant and the building: Date revalued R Plant A 30 June 2020 391 000 Office Building 30 June 2020 1 000 000 To try and ease the pressure on its cash flows caused by Covid-19, the directors decided to lease part of the office building to a third party to earn rental income. Sovax (Pty) Ltd signed a lease with a third party for 90% of the office building, which commenced on 1 July 2020. The 10% of the building occupied by Sovax (Pty) Ltd, as its office building cannot be sold separately from the remaining building. Sovax (Pty) adopted the fair value model for its investment property. REQUIRED: Prepare the disclosures (with comparatives) in the statement of financial position, in accordance with IAS 16 and IAS 40 for the year ended 31 December 2020. QUESTION 3 (20 Marks) Jacko Limited is a manufacturing company with a 31 December financial year end. The following information is an extract from its asset register: Machine at cost Accumulated depreciation Carrying amount on 1 January 2020 1 700 000 (637 500) 1 062 500 The machine was acquired on 1 January 2017 and is depreciated on a straight basis over its useful life of 8 years. On 1 June 2020, the machine was damaged by flooding in the manufacturing building due to heavy rains. The machine could not be repaired due to lack of an expert to fix the machine. The management of Jacko Limited has estimated the remaining useful life of the machine to be three years. The machine is still being used but at a reduced capacity. The following values have been calculated for the plant at 1 September 2020. R Present value of future cash flows from the plant's use 560 000 Fair value of the machine 735 000 Estimated cost to sell the machine in its current condition 45 000 Jacko Limited does not wish to replace the machine owing to concerns about the future demand of the machine's output. REQUIRED: 3.1) List three examples of internal indicators that might cause an asset to be impaired. (3 marks) 3.2) Calculate and prepare the journal entries that would have been prepared by Jacko Limited at 31 August 2020, to record the following: - Impairment loss on the plant (if applicable) - Depreciation (17 marks) Round all amounts to the nearest rand