QUESTION 1 [40 MARKS 60 MINUTES] Buffalo Foods Limited ("Buffalo Foods") is a JSE-listed company headquartered in Pietermaritzburg (South Africa), where it owns and operates maize mills, wheat mills, animal feed factories, snacking and bread production facilities, and soya crushing and extraction plants. Buffalo Foods also runs a poultry business in Botswana with a nationwide footprint, from where it exports poultry products (live chicken, various chicken packs and eggs) to neighboring countries with South Africa representing the largest export market. PART A-Items of property, plant, and equipment: Fieldwork motor vehicles Buffalo Foods owns 6 Ford Ranger 2.0D XLT 4X4 bakkies used as part of the greater fleet of transportation within the entity, two of which were purchased on 30 September 2021 at a cost of R899 999. The fixed asset register reflected a total historical cost of R2 239 667 and accumulated depreciation of R891 333 in respect of the other four bakkies on 01/04/2021. On 30/09/2021, the company decided to modify the bakkies to suit the off-road terrains of Pietermaritzburg and operationes tegisirements, as follows: Product category BANK Cost per unit Total cost 6 x bonnet guards 4728 6x trail lamp covers ? Snorkel facelifts for Ford Ranger x 6 3179 Vi electric 4D side steps 6 16 798 ? Labour invoice 14200 788 745 7 The bakkies are accounted for using the cost model. The old four and the two new bakkies have remaining useful lives of 4 years and 6,5 years respectively at year-end (31/03/2022). with no residual values. On 24/02/2022, war erupted between Russia and Ukraine, resulting in increased transportation costs in Africa due to high fuel costs. As a result Buffalo Foods could only use 75% of the existing bakkie capacity in its operations. The finance manager determined that the bakkies need to be impaired and provided you with the following figures as at 31/03/2022 ZAR Total fair value of bakkies 1 650 000 Estimated costs of disposing of the bakkies 75 000 Value in use determined in terms of IAS 36 1 650 000 Gaborone poultry buildings Buffalo Foods owns buildings in Gaborone used for poultry breeding and production of chicken-based products (mainly eggs and meat packages). During March 2022, a well-known meat producer established operations in Gaborone, offering slightly lower prices for the chicken-based products compared to Buffalo Foods. The finance manager indicated that there is not yet a need to process any impairment in respect of the Gaborone assets, but prepared preliminary figures for briefing the head office executive management. The figures revealed that the poultry buildings had a value in use of R1 840 667 and a fair value less costs of disposal of R1 804 776. On 1 April 2021, the buildings had a carrying amount of R2 440 400 and a remaining useful life of 13 years. On 31 March 2022, Buffalo Foods performed plastering work on the buildings to ensure durability of the building walls, at a cost of R30 150. PART B - Note to the financial statements: A junior accountant at Buffalo Foods assisted you with the preparation of some of the notes to the financial statements for the year ended 31 March 2022. She sent you the following note: Buffalo Foods Limited Extract from the) Notes to the financial statements for the year 31 March 2022 4. Intangible assets Trading licenses Website costs Historical purchase costs-beginning of year 702658 851 370 Accumulated depreciation 370 136 419 415 Carrying amount at beginning of year TOT2794 1 270788 Movements during the year Depreciation for the year 88 148 138 938 Salanes.website mai 230 007 4. Intangible assets Trading licenses Website costs 702 658 851 370 Historical purchase costs beginning of year 370 136 419 418 1 072 754 1 270 788 Accumulated depreciation Carrying amount at beginning of year Movements during the year Depreciation for the year Salaries - website maintenance team 58 148 138 938 330 007 Historical purchase costs - end of year 702 658 1 181377 Accumulated depreciation 281 988 749 425 431 952 Carrying amount at end of year 420 670 PART C-Statement of financial position: The finance manager has sent you the following e-mail for your attention: From: FinanceManager1@buffalo.co.za To Senior Accountant.buttale.co.za Date: 29 March 2022 Subject: Current and non-current distinction Good day-hope you are well I need your assistance with the classification of the following terms in the financial statements: Interest-bearing loan Buffalo Foods borrowed an amount of R120 000 (bearing interest from Times Bank at 11,5% per annum) from Times Bank to support operating liquidity requirements, to be repaid in 3 equal annual instalments in arrears starting 1 January 2023 The loan agreement was signed by both parties on 31 December 2021 Trade receivables Buffalo Foods has 30 days credit terms for customers buying food products on credit. Historical data shows that 2% of credit customers take up to 2 years to make payment while 0.05% of debtors never pay. Overdraft facility Buffalo Foods holds an overdrat facility with Times Bank from which it can withdraw cash for use in the normal business operations. The overdraft has a facility limit of R10 000 at year end Should we classify these items as current or non-current in the statement of financial position? You are a life saver! Regards Finance Manager I need your assistance with the classification of be following terms in the financial statement Interest-bearing loan Buffalo Foods borrowed an amount of R120 000 (bearing interest from Times Bank at 11.5% per annum from Times Bank to support operating liquidity requirements to be repaid in 3 equal annual instaliments in areas starting a 2023. The ban agreement was signed by both parties on 31 December 2021 Trade receivables Buffalo Foods has 30 days credit forms for customers buying food products on credit. Historical data shows that 2% of credit customers take up to 2 years to make pigment, while 0.05% of debtors never pay Overdraft facility Buffalo Foods holds an overal facility with Times Bark from which can withdraw cash for use in the normal business operations. The overdraft has a facility limit of R60 000 at year end Should we classify these toma e current or non curent in te statement of financial position? You are a fe saver Regards, Finance Manager REQUIRED MARKS (241 Considering information in PART A only prepare the journal entry or entries necessary to account for the supplied information in the Financial statements of Bulele Foods Limited for the year ended 31 March 2022 PARTA Note: Date(s) and jumal narrations are ruired 111 Communication skills-structuradayout Considering information in PART only critically evaluate the Intangible assets note prepared by the finance manager in terms of PART B AS 38 - Intangible Assets communication skits -ingit layout daily 111 Respond to the finance managers email addressing her motion PART CI communication skite-cort byour scary TOTAL MARKS: 40 QUESTION 1 [40 MARKS 60 MINUTES] Buffalo Foods Limited ("Buffalo Foods") is a JSE-listed company headquartered in Pietermaritzburg (South Africa), where it owns and operates maize mills, wheat mills, animal feed factories, snacking and bread production facilities, and soya crushing and extraction plants. Buffalo Foods also runs a poultry business in Botswana with a nationwide footprint, from where it exports poultry products (live chicken, various chicken packs and eggs) to neighboring countries with South Africa representing the largest export market. PART A-Items of property, plant, and equipment: Fieldwork motor vehicles Buffalo Foods owns 6 Ford Ranger 2.0D XLT 4X4 bakkies used as part of the greater fleet of transportation within the entity, two of which were purchased on 30 September 2021 at a cost of R899 999. The fixed asset register reflected a total historical cost of R2 239 667 and accumulated depreciation of R891 333 in respect of the other four bakkies on 01/04/2021. On 30/09/2021, the company decided to modify the bakkies to suit the off-road terrains of Pietermaritzburg and operationes tegisirements, as follows: Product category BANK Cost per unit Total cost 6 x bonnet guards 4728 6x trail lamp covers ? Snorkel facelifts for Ford Ranger x 6 3179 Vi electric 4D side steps 6 16 798 ? Labour invoice 14200 788 745 7 The bakkies are accounted for using the cost model. The old four and the two new bakkies have remaining useful lives of 4 years and 6,5 years respectively at year-end (31/03/2022). with no residual values. On 24/02/2022, war erupted between Russia and Ukraine, resulting in increased transportation costs in Africa due to high fuel costs. As a result Buffalo Foods could only use 75% of the existing bakkie capacity in its operations. The finance manager determined that the bakkies need to be impaired and provided you with the following figures as at 31/03/2022 ZAR Total fair value of bakkies 1 650 000 Estimated costs of disposing of the bakkies 75 000 Value in use determined in terms of IAS 36 1 650 000 Gaborone poultry buildings Buffalo Foods owns buildings in Gaborone used for poultry breeding and production of chicken-based products (mainly eggs and meat packages). During March 2022, a well-known meat producer established operations in Gaborone, offering slightly lower prices for the chicken-based products compared to Buffalo Foods. The finance manager indicated that there is not yet a need to process any impairment in respect of the Gaborone assets, but prepared preliminary figures for briefing the head office executive management. The figures revealed that the poultry buildings had a value in use of R1 840 667 and a fair value less costs of disposal of R1 804 776. On 1 April 2021, the buildings had a carrying amount of R2 440 400 and a remaining useful life of 13 years. On 31 March 2022, Buffalo Foods performed plastering work on the buildings to ensure durability of the building walls, at a cost of R30 150. PART B - Note to the financial statements: A junior accountant at Buffalo Foods assisted you with the preparation of some of the notes to the financial statements for the year ended 31 March 2022. She sent you the following note: Buffalo Foods Limited Extract from the) Notes to the financial statements for the year 31 March 2022 4. Intangible assets Trading licenses Website costs Historical purchase costs-beginning of year 702658 851 370 Accumulated depreciation 370 136 419 415 Carrying amount at beginning of year TOT2794 1 270788 Movements during the year Depreciation for the year 88 148 138 938 Salanes.website mai 230 007 4. Intangible assets Trading licenses Website costs 702 658 851 370 Historical purchase costs beginning of year 370 136 419 418 1 072 754 1 270 788 Accumulated depreciation Carrying amount at beginning of year Movements during the year Depreciation for the year Salaries - website maintenance team 58 148 138 938 330 007 Historical purchase costs - end of year 702 658 1 181377 Accumulated depreciation 281 988 749 425 431 952 Carrying amount at end of year 420 670 PART C-Statement of financial position: The finance manager has sent you the following e-mail for your attention: From: FinanceManager1@buffalo.co.za To Senior Accountant.buttale.co.za Date: 29 March 2022 Subject: Current and non-current distinction Good day-hope you are well I need your assistance with the classification of the following terms in the financial statements: Interest-bearing loan Buffalo Foods borrowed an amount of R120 000 (bearing interest from Times Bank at 11,5% per annum) from Times Bank to support operating liquidity requirements, to be repaid in 3 equal annual instalments in arrears starting 1 January 2023 The loan agreement was signed by both parties on 31 December 2021 Trade receivables Buffalo Foods has 30 days credit terms for customers buying food products on credit. Historical data shows that 2% of credit customers take up to 2 years to make payment while 0.05% of debtors never pay. Overdraft facility Buffalo Foods holds an overdrat facility with Times Bank from which it can withdraw cash for use in the normal business operations. The overdraft has a facility limit of R10 000 at year end Should we classify these items as current or non-current in the statement of financial position? You are a life saver! Regards Finance Manager I need your assistance with the classification of be following terms in the financial statement Interest-bearing loan Buffalo Foods borrowed an amount of R120 000 (bearing interest from Times Bank at 11.5% per annum from Times Bank to support operating liquidity requirements to be repaid in 3 equal annual instaliments in areas starting a 2023. The ban agreement was signed by both parties on 31 December 2021 Trade receivables Buffalo Foods has 30 days credit forms for customers buying food products on credit. Historical data shows that 2% of credit customers take up to 2 years to make pigment, while 0.05% of debtors never pay Overdraft facility Buffalo Foods holds an overal facility with Times Bark from which can withdraw cash for use in the normal business operations. The overdraft has a facility limit of R60 000 at year end Should we classify these toma e current or non curent in te statement of financial position? You are a fe saver Regards, Finance Manager REQUIRED MARKS (241 Considering information in PART A only prepare the journal entry or entries necessary to account for the supplied information in the Financial statements of Bulele Foods Limited for the year ended 31 March 2022 PARTA Note: Date(s) and jumal narrations are ruired 111 Communication skills-structuradayout Considering information in PART only critically evaluate the Intangible assets note prepared by the finance manager in terms of PART B AS 38 - Intangible Assets communication skits -ingit layout daily 111 Respond to the finance managers email addressing her motion PART CI communication skite-cort byour scary TOTAL MARKS: 40