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QUESTION 2 (36 marks) FreeLine Limited is a transport business with a 30 June year-end. They are in the process of finalising their 30 June
QUESTION 2 (36 marks) FreeLine Limited is a transport business with a 30 June year-end. They are in the process of finalising their 30 June 2021 financial statements. The financial statements were presented to the board of directors for authorisation for issue on 5 August 2021. The following events that took place: 1. After the finalisation of the 2021 figures, on 31 July 2021, the directors approved and declared an additional ordinary dividend of R0,50 per share. The dividend is payable on 31 August 2021. FreeLine Limited has 1 500 000 shares in issue. 2. On 5 July 2021, FreeLine Limited instituted a claim of R500 000 against one of their competitors. The claim is based on the grounds of infringement of the FreeLine-trademark. FreeLine Limited's legal advisors believe that the claim will most probably succeed, but they were not virtually certain of this when finalising the financial statements. 3. On 15 July 2021, a fire broke out at one of FreeLine Limited's depots. A truck to the value of R1 500 000 was destroyed, and damages to the depot amounted to R300 000. 4. On 15 August 2021, FreeLine Limited signed a contract with Construction Limited to repair the damages to the depot at the cost of R300 000. 5. On 1 August 2021, one of the company's customers sent an e-mail to inform them that they are terminating their business due to financial difficulty. A statement of assets and liabilities supported by an auditor's certificate was included in his com- munication. They offered to pay FreeLine Limited RO,45 in the Rand to cover their outstanding debt. This customer owed FreeLine Limited R250 000 on 30 June 2021. You can assume that all amounts are material. 5 HFAC232-1-Jul-Dec2021-SA1-CP-V2-02072021 REQUIRED: 2.1) Identify, per event, whether these events will classify as adjusting or non- adjusting events, in terms of the requirements of IAS 10, in the 30 June 2021 financial statements of FreeLine Limited. (6 marks) 2.2) Briefly discuss the effect of each event, if any, on the financial statements of FreeLine Limited as at 30 June 2021. Clearly label your discussion for each event, for example: Event 1 This event has the following effects.... (20 marks) 2.3) Provide an extract from the financial statements of FreeLine Limited for 30 June 2021, disclosing the details, if necessary, of events 1, 2, 3, and 4. (10 marks) Competency Framework Reference: III-2.1 Develops or evaluates accounting policies in accordance with IFRS Identifies the economic substance of financial transactions in order to correctly identify the appropriate IFRS and accounting treatment III-2.2 Accounts for the entity's routine transactions Analyses and calculates, or evaluates, the accounting for routine trans- actions (e.g. sales, cost of sales, operating expenses) III-2.5 Prepares or evaluates financial statement note disclosure Prepares information to be included in the notes to the financial state
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