QUESTION $3(55$ marks$)(99$ minutes$)$

The following balances were extracted from the accounting records of Laduma Ltd for the financial year ended $28$ February $2023$:

R Debit$($Credit$)$

Revenue $.................................................................................................................$ Cost of sales $..........................................................................................................$ Administrative expenses: Bank charges $.........................................................................................................$ Salaries and wages including directors remuneration $..........................................$ Advertising $.............................................................................................................$ Auditors remuneration: $-$ Fees for audit $......................................................................................................-$ Expenses $............................................................................................................$ Other operating expenses $($including finance costs, depreciation and lease payments$)..............................................................................................................$ Other operating income $.........................................................................................$ Proceeds on sale of motor vehicle $.........................................................................$ Machinery and equipment at carrying amount....................................................... $($Additional information $3$ and $4)$

Motor vehicles at cost $($Additional information $3$ and $4).........................................$ Land and buildings at cost $(28$ February $2018)($Additional information $2$ and $3)..$ Inventory $($Additional information $1).......................................................................$ Long$-$term loan from On The Ball Bank $($Cr$)($Additional information $6)................($Additional information $3$ and $4)$

Income tax expense $($after all adjustments have been taken into account$)..........$ Additional information:

$(9550000)46332753710$

$142500012781$

$75001250$

$2435000(210000)(45000)290000$

$235000$

$1400000475000$

$(450000)275000$

$1.$ At year$-$end the closing inventory had a cost price of R$475000.$ The net realisable value was $90\%$ of the cost price. The adjustment was not recorded in the balances above.

$2.$ The factory buildings are situated on Erf $44,$ Pretoria Soweto, consisting of a factory and office buildings. The land was acquired on $31$ July $2018$ at a cost of R$500000$ and buildings were acquired at the same date at a cost of R$900000.$ During the current year additions were made to the building at a cost of R$250000$ and were completed on $30$ November $2022.$ The buildings are occupied by the owners. The land was revalued on $1$ March $2021$ at a net replacement value of R$700000$ by Mr D Cooper, an independent sworn appraiser.

$3.$ Non$-$current assets are depreciated as follows:

Machinery and equipment at $20\%$ according to the diminishing balance method. Buildings at $2\%$ according to the straight$-$line method. Motor vehicles at $20\%$ according to the straight$-$line method.

QUESTION $3($continued$)$

$4.$ A motor vehicle with a cost price of R$75000$ and on which R$15000$ depreciation was already written off at the beginning of the current financial year was sold on $1$ August $2022.$ The proceeds of R$45000$ on the sale of the motor vehicle has been incorrectly recorded as the profit on the motor vehicle in other income. On the same date of the sale a new vehicle was purchased at a cost of R$100000.$ No transactions occurred involving machinery and equipment during the current year.

$5.$ Laduma Ltd entered into a non$-$cancellable lease on $1$ July $2022$ to lease $3$ photocopying and printing machines for the use of the company. The contract is a lease in terms of IFRS $16.$

The following information is applicable to the lease contract:

The initial lease term is $3$ years. An initial payment of R$3000$ was made. The lease payments are R$1250$ per month for the first $6$ months. The lease payments thereafter are R$750$ per month until the end of the three years. All actual lease payments made by Laduma Ltd are included in the operating expenses above.

Laduma Ltd has the option to extend the lease term by a further two years at R$500.$ At the commencement of the lease term Laduma Ltd is reasonably certain that it will exercise the option to extend the lease term by a further two years.

$5\%$ of every lease payment goes towards covering the maintenance costs incurred by and is to be paid for by the lessor. These values are similar to those with costs for similar maintenance services rendered by third parties.

Laduma Ltd elected to apply the recognition exemption in respect of low value assets to this lease agreement. Laduma Ltd accounts for the lease and non$-$lease components separately.

$6.$ The long$-$term loan from On The Ball Bank was entered into on $1$ March $2020.$ The capital portion of the loan is repayable in $8$ equal instalments starting on $31$ August $2021.$ Interest, calculated at $15\%$ per annum is payable bi$-$annually on $31$ August and $28$ February of each year.

$7.$ Included under salaries and wages are the following payments to directors and prescribed officers:

Salaries R

Financial director $($Mr Buccaneer