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Question 1 35 marks Go Green Ltd is a company situated in East London. The company produces and sells dual energy (electricity and solar energy)

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Question 1 35 marks Go Green Ltd is a company situated in East London. The company produces and sells dual energy (electricity and solar energy) products and appliances. The company was incorporated a number of years ago and has 31 October year-end. Provided below is an extract of the Statement of Financial Position for the 2020 and 2019 financial years. Statement of Financial Position of Go Green Ltd as at 31 October 2020 2019 17 324 000 Share capital: Ordinary Share capital: Preference 14 972 000 3 024 000 ? 9782 800 Retained earings Revaluation surplus 8 372 150 400 000 Liabilities Loan Accrued expenses (including interest) ? 3 000 000 91 400 97 500 Additional Information a) Ordinary shares have voting rights but no right to a fixed dividend. Preference shares have no voting rights but have a right to a foed dividend distribution b) Go Green Ltd issued a prospectus invite to the public to buy shares) to the public on 1 March 2020. The company offered 250 000, R20 15% Preference shares at face value. The share issue was underwritten by Franc bank at a commission of 5%. By 15 April 2020, the closing date for the applications, only 80% of the shares had been applied for by the public. The shares were issued on 30 April 2020. Share issue costs of R45 000 excluding the underwriters commission were paid on the same date. c) The only loan owed by Go Green Lid on 1 November 2019 had been granted by Franc Bank on 1 February 2018. The loan is repayable in five equal annual instalments commencing on 01 February 2019. Interest is charged at 16% per annum and is payable half yearly in arrears commencing on 1 August 2018. All payments were made on their respective dates Question 1 continued d) The following is an extract of Property Plant and Equipment reconciliation appeared in the Notes to the financial statements of Go Green Lid A delivery truck was purchased at a total cost of R2 000 000 on 31 January 2018 and was ready for use on the same day. The vehicle started to give problems in 2019. Management is considering replacing it in 2021. At 31 October 2020, the vehicle had a value in use of R900 000 and the fair value of R915 000 before selling costs of R12 000. Depreciation on motor vehicles is written off @20% per annum using the diminishing balance method. Land is accounted for on the revaluation model. Land was revalued for the first time during the current year. No land was sold during the current year. Vehicles 2 000 000 Go Green Ltd Extract: Notes to the financial statements for the year ended 31/10/2020: Land Gross Carrying Amount 3 200 000 Accumulated depreciation Carrying amount (31 October 2019) 3 200 000 Movements Revaluations Additions Disposal Depreciation Impairment Carrying amount (31 October 2020) 3 950 000 Accumulated depreciation and impairment Gross Carrying Amount ? ? ? Question 1 continued Marks QUESTION 1 REQUIRED Sub-total Total (1) a) Prepare the journal entry that would have been processed in the books of Go Green Lid on 15 April 2020. b) What type of account have you credited in question (a) above? Use any relevant definition and recognition criteria as per the IFRS Framework to support your answer. c) Prepare the closing entries required to close off the share Issue cost incurred as a result of the share issue. 10 3 17 12) a) Prepare the loan account as it would appear in the books of Go Green Lod for the year ended 31 October 2020. b) Calculate and show where interest expense will be disclosed in the Statement of Comprehensive Income of Go Green Ltd for the year ended 31 October 2020. a) Show how the movement of Land would appear in the Statement of Cash Flow as at 31 October 2020. b) Prepare the journal entry that would have been processed in the books of Go Green Lid on 31 October 2020 to record depreciation and impairment of vehicles. Refer to additional information (d). Narrations are not required. 10 Total 35 Question 2 50 marks You are the accountant of Forte (Pty) Ltd and you are busy finalizing the statement of cash flows for the year ended 31 December 2013. Below is the sun'marized Statement of comprehensive income and statement of financial position at 31 December 2013 Forte (Pty) Ltd Statement of Financial Position as at December 2019 2019 2018 R R ASSETS Non-current assets Land at cost 3 000 000 1 900 000 Plant net carrying value 675 000 1 200 000 Machinery net carrying value 442 86B 590 490 Investment in WSU Ltd (2018: 80 000 shares) 527 500 320 000 Current assets Inventories 155 000 320 000 Accounts receivable 405 850 285 780 Bank 233 556 223 981 Dividend income receivable 45 000 15 000 5 484 774 4 855 251 EQUITY AND LIABILITIES Equity and reserves Ordinary shares (2018: 200 000 shares) 1 300 000 900 000 2 045 024 1 821 251 12% Preference shares (issued at R2 each) 5 000 105 000 Revaluation reserve (Land) 500 000 200 000 Non-current liabilities Long term liabilities - debentures 1 000 000 1 000 000 12% Long term loan 176 000 Current liabilities Accounts payable 278 750 554 000 Shareholders for dividends 150 000 250 000 Accrued interest 30 000 25 000 5 484 774 4 855 251 Forte (Pty) Ltd Statement of comprehensive income for the year ended 31 December 2019 2019 Sales 15 380 000 Cost of sales (11 OBO 000) Gross profit 4 300 000 Other income 90 000 Operating expenses (2 900 000) Finance costs (113 320) Profit before tax 1 376 680 Income tax expense (405 000) Profit for the year 971 680 ADDITIONAL INFORMATION: 1. The following items are included in Other income for the year. Profit on disposal of asset R30 000 Dividend income R60 000 2. The following items are included in operating expenses for the year: Depreciation: Plant R250 000 Depreciation: Machinery R53 308 Impairment: Plant R375 000 Credit losses recovered R35 000 Credit losses R10 000 3. Machinery was sold for cash on 31 May 2019, at a profit of R30 000. Depreciation on the machinery sold amounted to R4 101 for the current year, included in the above machinery depreciation. The Machinery was bought on 1 January 2015. Depreciation is calculated using the diminishing balance method at a rate of 10% per annum. The residual value is zero. No other machinery was bought or sold during the year. Any plant that was purchased if any was purchased on 31 December 2019. 4. On 1 June 2019 WSU Ltd announces a rights-issue in terms of which the shareholders get the right to apply for 2 shares at R3.75 each for every 5 shares held. The value of the right was R$ each All rights were converted into shares on 30 September 2019. 5. On 1 January 2019, Forte (Ply) Ltd redeemed 50 000 Preference shares at R2 per share. These were funded by a fresh issue of 20 000 ordinary shares at the market value of R2.70 per share. The remaining balance was funded out of a long term loan which will be paid back in 31 December 2024. Another long term loan was received on 1 July 2019 and will be paid back in 31 December 2024. 6. On 31 May 2019 there was a capitalisation issue of 1 share for every 2 shares held at the current market price of R2.90 per share. 7. A further share issue was done on 30 September 2019. 8. The final ordinary dividends were declared at the end of the year. No other ordinary dividends were declared during the year. Preference share dividends were also declared and paid during the year. 9. The R1 000 000 debentures were issued on 1 April 2016 at par. These 10% debentures are redeemable at par on 31 December 2020. Interest is payable semi-annually on 30 September and 31 March Question 2 continued Marks QUESTION 2 REQUIRED Sub-total Total a) Prepare the statement of cash flows of Forte (Pty) Ltd for the year ended 31 December 2019, in accordance with International Financial Reporting Standards, using the indirect method. 50 50 Question 1 35 marks Go Green Ltd is a company situated in East London. The company produces and sells dual energy (electricity and solar energy) products and appliances. The company was incorporated a number of years ago and has 31 October year-end. Provided below is an extract of the Statement of Financial Position for the 2020 and 2019 financial years. Statement of Financial Position of Go Green Ltd as at 31 October 2020 2019 17 324 000 Share capital: Ordinary Share capital: Preference 14 972 000 3 024 000 ? 9782 800 Retained earings Revaluation surplus 8 372 150 400 000 Liabilities Loan Accrued expenses (including interest) ? 3 000 000 91 400 97 500 Additional Information a) Ordinary shares have voting rights but no right to a fixed dividend. Preference shares have no voting rights but have a right to a foed dividend distribution b) Go Green Ltd issued a prospectus invite to the public to buy shares) to the public on 1 March 2020. The company offered 250 000, R20 15% Preference shares at face value. The share issue was underwritten by Franc bank at a commission of 5%. By 15 April 2020, the closing date for the applications, only 80% of the shares had been applied for by the public. The shares were issued on 30 April 2020. Share issue costs of R45 000 excluding the underwriters commission were paid on the same date. c) The only loan owed by Go Green Lid on 1 November 2019 had been granted by Franc Bank on 1 February 2018. The loan is repayable in five equal annual instalments commencing on 01 February 2019. Interest is charged at 16% per annum and is payable half yearly in arrears commencing on 1 August 2018. All payments were made on their respective dates Question 1 continued d) The following is an extract of Property Plant and Equipment reconciliation appeared in the Notes to the financial statements of Go Green Lid A delivery truck was purchased at a total cost of R2 000 000 on 31 January 2018 and was ready for use on the same day. The vehicle started to give problems in 2019. Management is considering replacing it in 2021. At 31 October 2020, the vehicle had a value in use of R900 000 and the fair value of R915 000 before selling costs of R12 000. Depreciation on motor vehicles is written off @20% per annum using the diminishing balance method. Land is accounted for on the revaluation model. Land was revalued for the first time during the current year. No land was sold during the current year. Vehicles 2 000 000 Go Green Ltd Extract: Notes to the financial statements for the year ended 31/10/2020: Land Gross Carrying Amount 3 200 000 Accumulated depreciation Carrying amount (31 October 2019) 3 200 000 Movements Revaluations Additions Disposal Depreciation Impairment Carrying amount (31 October 2020) 3 950 000 Accumulated depreciation and impairment Gross Carrying Amount ? ? ? Question 1 continued Marks QUESTION 1 REQUIRED Sub-total Total (1) a) Prepare the journal entry that would have been processed in the books of Go Green Lid on 15 April 2020. b) What type of account have you credited in question (a) above? Use any relevant definition and recognition criteria as per the IFRS Framework to support your answer. c) Prepare the closing entries required to close off the share Issue cost incurred as a result of the share issue. 10 3 17 12) a) Prepare the loan account as it would appear in the books of Go Green Lod for the year ended 31 October 2020. b) Calculate and show where interest expense will be disclosed in the Statement of Comprehensive Income of Go Green Ltd for the year ended 31 October 2020. a) Show how the movement of Land would appear in the Statement of Cash Flow as at 31 October 2020. b) Prepare the journal entry that would have been processed in the books of Go Green Lid on 31 October 2020 to record depreciation and impairment of vehicles. Refer to additional information (d). Narrations are not required. 10 Total 35 Question 2 50 marks You are the accountant of Forte (Pty) Ltd and you are busy finalizing the statement of cash flows for the year ended 31 December 2013. Below is the sun'marized Statement of comprehensive income and statement of financial position at 31 December 2013 Forte (Pty) Ltd Statement of Financial Position as at December 2019 2019 2018 R R ASSETS Non-current assets Land at cost 3 000 000 1 900 000 Plant net carrying value 675 000 1 200 000 Machinery net carrying value 442 86B 590 490 Investment in WSU Ltd (2018: 80 000 shares) 527 500 320 000 Current assets Inventories 155 000 320 000 Accounts receivable 405 850 285 780 Bank 233 556 223 981 Dividend income receivable 45 000 15 000 5 484 774 4 855 251 EQUITY AND LIABILITIES Equity and reserves Ordinary shares (2018: 200 000 shares) 1 300 000 900 000 2 045 024 1 821 251 12% Preference shares (issued at R2 each) 5 000 105 000 Revaluation reserve (Land) 500 000 200 000 Non-current liabilities Long term liabilities - debentures 1 000 000 1 000 000 12% Long term loan 176 000 Current liabilities Accounts payable 278 750 554 000 Shareholders for dividends 150 000 250 000 Accrued interest 30 000 25 000 5 484 774 4 855 251 Forte (Pty) Ltd Statement of comprehensive income for the year ended 31 December 2019 2019 Sales 15 380 000 Cost of sales (11 OBO 000) Gross profit 4 300 000 Other income 90 000 Operating expenses (2 900 000) Finance costs (113 320) Profit before tax 1 376 680 Income tax expense (405 000) Profit for the year 971 680 ADDITIONAL INFORMATION: 1. The following items are included in Other income for the year. Profit on disposal of asset R30 000 Dividend income R60 000 2. The following items are included in operating expenses for the year: Depreciation: Plant R250 000 Depreciation: Machinery R53 308 Impairment: Plant R375 000 Credit losses recovered R35 000 Credit losses R10 000 3. Machinery was sold for cash on 31 May 2019, at a profit of R30 000. Depreciation on the machinery sold amounted to R4 101 for the current year, included in the above machinery depreciation. The Machinery was bought on 1 January 2015. Depreciation is calculated using the diminishing balance method at a rate of 10% per annum. The residual value is zero. No other machinery was bought or sold during the year. Any plant that was purchased if any was purchased on 31 December 2019. 4. On 1 June 2019 WSU Ltd announces a rights-issue in terms of which the shareholders get the right to apply for 2 shares at R3.75 each for every 5 shares held. The value of the right was R$ each All rights were converted into shares on 30 September 2019. 5. On 1 January 2019, Forte (Ply) Ltd redeemed 50 000 Preference shares at R2 per share. These were funded by a fresh issue of 20 000 ordinary shares at the market value of R2.70 per share. The remaining balance was funded out of a long term loan which will be paid back in 31 December 2024. Another long term loan was received on 1 July 2019 and will be paid back in 31 December 2024. 6. On 31 May 2019 there was a capitalisation issue of 1 share for every 2 shares held at the current market price of R2.90 per share. 7. A further share issue was done on 30 September 2019. 8. The final ordinary dividends were declared at the end of the year. No other ordinary dividends were declared during the year. Preference share dividends were also declared and paid during the year. 9. The R1 000 000 debentures were issued on 1 April 2016 at par. These 10% debentures are redeemable at par on 31 December 2020. Interest is payable semi-annually on 30 September and 31 March Question 2 continued Marks QUESTION 2 REQUIRED Sub-total Total a) Prepare the statement of cash flows of Forte (Pty) Ltd for the year ended 31 December 2019, in accordance with International Financial Reporting Standards, using the indirect method. 50 50

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