QUESTION 2 (Green book) (30 MARKS) Sansung Limited was registered as a company in South Africa in 1998. The memorandum of incorporation indicates that the authorised capital is 2 000 000 shares in total, of which 250 000 are 10% preference shares, and 400 000 are 8% cumulative preference shares. The remainder of the authorised shares, are ordinary shares. You work for Nkonki Accountants Incorporated as a junior accountant. Your firm is assisting Sansung Ltd with the finalisation of the annual financial statements. You have been asked to assist in the process for the financial year ended 30 June 2019. Below, relevant balances as they appear in the trial balance and additional information is provided to you. 2 Extract of the trial balance of Sansung Limited at the financial year ended Note 30 June 2018 30 June 2019 R R Land and buildings 1 1 000 000 1 200 000 Investment in Appel Limited: 20 000 ordinary 20 000 21 000 shares (at fair value) Investment in Nokio (Pty) Ltd: 10 000 ordinary 50 000 48 000 shares (at fair value) Mortgage bond from BABSA Bank 1 350 000 300 000 Surplus on revaluation of land and buildings 1 320 000 7 Retained earnings 3 800 000 ? Ordinary share capital (500 000 shares at 30 2 500 000 ? June 2018) 10% Preference shares (100 000 shares at 2 400 000 ? 30 June 2018) 8% Cumulative preference shares (200 000 2 600 000 ? shares at 30 June 2018) Additional information notes as they relate to the balances above 1. Land and buildings represent the office building of Sansung Ltd in Waverley, and was purchased in 2001. At each financial year end, the fair value is determined, and revalued where appropriate. The latest revaluation was performed on 30 June 2019, where the value increased The land and buildings were purchased with the assistance of BABSA Bank, who provided a mortgage bond for its purchase. The land and buildings thus serve as security over this mortgage bond. The bond carries annual interest of 10%. It is repayable in equal instalments of R50 000 (capital + interest) per year, payable on 1 January each year. 2. In February 2019, 200 000 ordinary shares were presented for purchase to the public. All were taken up within three days, to the value of R300 000. There was no change in preference - or cumulative preference shares issued for during the period ended 30 June 2019 An ordinary dividend was declared by Sansung Ltd on 30 June 2019 of 30c per issued ordinary share at 30 June 2019. All dividend needs to be provided for Page 4 of 7 FSAO-ACCOBBI/REKOB01 - Accounting B 3. Profit before tax for Sansung Ltd has been correctly calculated as R130 000, and appears as such in the statement of comprehensive income for the period ended 30 June 2019 Income tax of R25 000 has however not been recognised yet, and should be provided for. REQUIRED (a) Prepare and present the statement of changes in equity for Sansung Ltd for the period ended 30 June 2019. (10) (b) Provide the following notes to the financial statements for Sansung Ltd for the period ended 30 June 2019: Financial Assets (6) Share capital (NB - include Reconciliation of shares issued) (10) Long term borrowings PLEASE NOTE Sansung Ltd are NOT registered for VAT purposes. Page 5 of 7 QUESTION 2 (Green book) (30 MARKS) Sansung Limited was registered as a company in South Africa in 1998. The memorandum of incorporation indicates that the authorised capital is 2 000 000 shares in total, of which 250 000 are 10% preference shares, and 400 000 are 8% cumulative preference shares. The remainder of the authorised shares, are ordinary shares. You work for Nkonki Accountants Incorporated as a junior accountant. Your firm is assisting Sansung Ltd with the finalisation of the annual financial statements. You have been asked to assist in the process for the financial year ended 30 June 2019. Below, relevant balances as they appear in the trial balance and additional information is provided to you. 2 Extract of the trial balance of Sansung Limited at the financial year ended Note 30 June 2018 30 June 2019 R R Land and buildings 1 1 000 000 1 200 000 Investment in Appel Limited: 20 000 ordinary 20 000 21 000 shares (at fair value) Investment in Nokio (Pty) Ltd: 10 000 ordinary 50 000 48 000 shares (at fair value) Mortgage bond from BABSA Bank 1 350 000 300 000 Surplus on revaluation of land and buildings 1 320 000 7 Retained earnings 3 800 000 ? Ordinary share capital (500 000 shares at 30 2 500 000 ? June 2018) 10% Preference shares (100 000 shares at 2 400 000 ? 30 June 2018) 8% Cumulative preference shares (200 000 2 600 000 ? shares at 30 June 2018) Additional information notes as they relate to the balances above 1. Land and buildings represent the office building of Sansung Ltd in Waverley, and was purchased in 2001. At each financial year end, the fair value is determined, and revalued where appropriate. The latest revaluation was performed on 30 June 2019, where the value increased The land and buildings were purchased with the assistance of BABSA Bank, who provided a mortgage bond for its purchase. The land and buildings thus serve as security over this mortgage bond. The bond carries annual interest of 10%. It is repayable in equal instalments of R50 000 (capital + interest) per year, payable on 1 January each year. 2. In February 2019, 200 000 ordinary shares were presented for purchase to the public. All were taken up within three days, to the value of R300 000. There was no change in preference - or cumulative preference shares issued for during the period ended 30 June 2019 An ordinary dividend was declared by Sansung Ltd on 30 June 2019 of 30c per issued ordinary share at 30 June 2019. All dividend needs to be provided for Page 4 of 7 FSAO-ACCOBBI/REKOB01 - Accounting B 3. Profit before tax for Sansung Ltd has been correctly calculated as R130 000, and appears as such in the statement of comprehensive income for the period ended 30 June 2019 Income tax of R25 000 has however not been recognised yet, and should be provided for. REQUIRED (a) Prepare and present the statement of changes in equity for Sansung Ltd for the period ended 30 June 2019. (10) (b) Provide the following notes to the financial statements for Sansung Ltd for the period ended 30 June 2019: Financial Assets (6) Share capital (NB - include Reconciliation of shares issued) (10) Long term borrowings PLEASE NOTE Sansung Ltd are NOT registered for VAT purposes. Page 5 of 7