QUESTION I: (26 MARKS: 47 MINUTES) IGNORE VALUE-MDDED TAX. Calvin Limited is a retailer listed on the Joharnesburg Securities Exchange's AltX Listing. The following information has been given to you: 1. The land and buildings are used for the supply of goods and for administration purposes. The buildings were revalusd on 31 May 2016 to a fair value of R11 760000 . This amounced to an increase of R280 000 over the previous earrying amount. The revaluation journal entries have already been processed. There are no deferred tax corsequences from this revaluation. 2. The authorived share capital comprises 17500000 ordinary shares of no par value. I 750000 shares were issued at R1.75 on 30 Oetober 2015. As at 31 May 2016. there are 5250000 shares in issue. 3. The income tax expense for the year ended 31 May 2016 amounts to R618 135. This expense has not yet been recordusd. 4. Postage and packaging for puposes of safe transport relate purely to the despateh area. 5. Electricity amounting to R89 250 was incured during the year. Of this, R61250 was incurred in the despatch department and R28000 was incurred in the head office. 6. The equipment consists of items used in the despatcharea and office equipment. The office equipment accounts for 67.5% of the depreciation of equigment and the balance relates oo depreciation of the equipment used in the despanch area. 7. Telepbone amounting to R47 250) was incurred during the year. Or this, R26 250 was incurred in the despatch department and R21000 was incurned in the head office, 8. R997 500 of the salaries and wages expense relates to the employees hired in the despatch area and RI 123500 relates to employees employed in the head office. 9. The building is 560 square metres in area, of which 315 square metres are used for the warehouse (used to store goods prior to despatch) and the remaining 245 square metres is used as the company head oflice. 10. The kan balance outstanding as at 31 May 2016, is repayable as follows: a. R925 000 on 31 December 2016 and b. R1 000000 on 31 December 2017 11. The managing diroctor indicated that Calvin Limiled classifies expenses according to the ir functions. The managing director categorises-lhe functions of the busisess inso administration and distribution. The trial balance of the comeany at 31 Mav 2016 is shown below: YOU ARE REQUIRED TO: IGNORE COMPARATIVES, SHOW ALL. WORKINGS CLEARLY. ROUND OFF TO THE NEAREST RAND AMOUNT. 1. Prepare the statemsent of comprehensive income of Calvin L.imited for the year ended 31 May 2016 in conformity with International Financial Reporting Standards and using the function method. (20.5 Marks) 2. Prepare the statement of changes in equity of Calvin Limited for the year ended 31 May 2016 in conformity w ith International Financial Reporting Standards. (4.5 Marks) 3. In so far as information is availabk, prepare the Profit before tax note fo the financial statements for the year ended 31 May 2016 in conformity with lnternational Financial Reporting Standards. (1 Mark) QUESTION 2: (27.5 MARKS: 50 MINUTES) IGNORE VALUE-ADDED TAX. At Your Service Limised ("A YS') creates IT solutions for the government market to cater for specific requirements. All contracts requires a 40% deposit to be paid on the signing of the contract and the balance of the amount doe at the completion of the contract. In the event that the contract is cancelled by either party, AYS will be entitled to compensation based on its costs incurred to date plus 25%, which AYS considers to be a reasonable profit margin. At Your Service Limited has one contract in progress at its fitsancial year-end 31 May 2016. This contmet entails the creation of customised call-centre software for the Eloctricity Department of Government (Whe Department'). The Department signed the contract on I Notember 2015 at a contract prike of R600 000. At Your Service Limited expects-that a discount of R40000 will be granted to The Department. The decision en whether to grant the discount will be made by At Your Service limited on completion of the contract. The customisation of the software iavolves completing the following six modules: Module 1 - Welcoming of eustonser and fact finding Module 2 - Solware trouble shooting Module 3 - User training Module 4 - Frequently asked questions Module 5-Logging of unresolved helpdesk queries Module 6 - Feedback from call centre to custonst The customer is snable to 'go live' with the software umil module 6 has been completed. At Your Service l.imited estimated that it woukd take 370 hours to customise the software and the average cost of the programmers is R6i0 per hour. At Your Servike Limited estimated that Module 4 will account for 30% of the time. The rest of the time will be spent equally across the onher modules, All other costs relating to the project are known. As at 31 May 2016, At Your Service Limited had spent 317 hours and completed Modules 1 to 5. The Department has accepted and signed off on Modules I to 4. Module 5 has not been aceepted as The Department is of the opinion that the work performed las nod been in accordance with their specification. At Your Service Liinited conceded to this and agreed to re- work Module 5 at no additional cost to The Department. YOU ARE REQUIRED TO: ROUND ALL WORKINGS OFF TO THE NEAREST RAND AMOUNT 1. Assuming that a single Performance Obligation exists, determine the transaction price and provide a detaikst explanation. (16 Marks) 2. Prepare the journals showing how the deposit and the revente from services from The Department contract should be recoggised and measuned in the financial records of At Your Service Linited for the year ended 31 May 2016. (11.5 Marks) fage 4 of 6 QUESTION 3: (29 MARKS: 50 MINUTES) Sports Limited is a company operating in the sports industry. The following information has been presented to you: FISH LIMITED EXTRACT FROM STATEMENT OE EINANCIAI. POSIIION AT MAV TAL Additional information: 1. The tax base of the property, plant and equipment balance at 31 May 2016 was R307 500 . 2. Depreciation for the year ended 31 May 2016 was R61 250 and wear and tear allowed was R43 750. There was no other moverent of property, plant and equipment for the year ended 31 May 2016. 3. Profit before tax for the year ended 31 May 2016 amounted to R525 000. 4. Dividend income amounting to R8 750 carned during the ytar ended 31 May 2016 is not taxable. 5. Fines ansouming to R15 200 incurred and paid during the year eoded 31 May 2016 is nontax deductible. 6. Donations amounting to R 15000 incurred and paid during the year ended 31 May 2016 is non-tax deductible. 7. There are no other temporary or non-temporary diflerences other than those evident from the information provided. 8. The corporate income tax rate is 28% YOU ARE REQUIRED TO: IGNORE DATES AND NARRATIONS UNLESS SPECIFICALLY REQUESTED SHOW ALL WORKINGS AND REFFRENCE CORRECTLY 1. Calculate the current inoone tax expense for the year ended 31 May 2016. (5 Marks) 2. Calculate the deferred income tax balance at 31 May 2015 and 31 May 2016 with the movement for the year ended 31 May 2016. (14 Marks) 3. Journalise the current and deferred income tax adjustments for the year ended 31 May 2016. (4 Marks) 4. Prepare the following note to the financial statements for the year ended 31 May 2016 in accordanse with International Financial Reporting Standards. 4.1 Deferred Tax note (show comparatives) (6 Marks) QUESTION 4: (17.5 MARKS: 32 MINUTES) IGNORE VAT New Venture Limited is a manuficturing company in its first year of operations. New Vemture Limited manufictures one product and bas 1250 units of finishod goods of this product on hand at year-end (there was neither raw material nor work-in-progress on hand at year-end). The bookkeeper is unsure about how to treat fixed overheads and has left the fixed overhead costs for the year in a suspense account. He has given you the following inforination: The 1250 uniss on hand at year-end were sold for an amount of R16 500 after year-end but before approval of the financtal statemerts. YOU ARE REQUIRED TO; ROUND OFF ALL. PER UNITED CALCULATIONS TO TWO DECTMAL PLACES AND ALL OTHER AMOUNTS TO THE NEAREST RAND AMOUNT 1. Calculate the amount at which finisted goods will be disclosed in the statement of financial position for the first year of operations. Show all your workings. (6.5 Marks) 2. Assuming that: - the company also had work-in-poogress on hand at year-end with a cost of R587 500 (correcly eakulated): - the work-in-progress requires abother R30 000 costs to be incurred in order to be completed; - the product made by the company is fast becoming obsolete; and - the company plans to complete the work in progress and sell it at a mark-up of 16% on cost (below the ustal mark-up) with selling costs estimated at R105 000; Calculate at what value iaventorics would be shown on the face of the statement of firancial position for the first year of operations. Stow all your workings. (6.5 Marks) QUESTION I: (26 MARKS: 47 MINUTES) IGNORE VALUE-MDDED TAX. Calvin Limited is a retailer listed on the Joharnesburg Securities Exchange's AltX Listing. The following information has been given to you: 1. The land and buildings are used for the supply of goods and for administration purposes. The buildings were revalusd on 31 May 2016 to a fair value of R11 760000 . This amounced to an increase of R280 000 over the previous earrying amount. The revaluation journal entries have already been processed. There are no deferred tax corsequences from this revaluation. 2. The authorived share capital comprises 17500000 ordinary shares of no par value. I 750000 shares were issued at R1.75 on 30 Oetober 2015. As at 31 May 2016. there are 5250000 shares in issue. 3. The income tax expense for the year ended 31 May 2016 amounts to R618 135. This expense has not yet been recordusd. 4. Postage and packaging for puposes of safe transport relate purely to the despateh area. 5. Electricity amounting to R89 250 was incured during the year. Of this, R61250 was incurred in the despatch department and R28000 was incurred in the head office. 6. The equipment consists of items used in the despatcharea and office equipment. The office equipment accounts for 67.5% of the depreciation of equigment and the balance relates oo depreciation of the equipment used in the despanch area. 7. Telepbone amounting to R47 250) was incurred during the year. Or this, R26 250 was incurred in the despatch department and R21000 was incurned in the head office, 8. R997 500 of the salaries and wages expense relates to the employees hired in the despatch area and RI 123500 relates to employees employed in the head office. 9. The building is 560 square metres in area, of which 315 square metres are used for the warehouse (used to store goods prior to despatch) and the remaining 245 square metres is used as the company head oflice. 10. The kan balance outstanding as at 31 May 2016, is repayable as follows: a. R925 000 on 31 December 2016 and b. R1 000000 on 31 December 2017 11. The managing diroctor indicated that Calvin Limiled classifies expenses according to the ir functions. The managing director categorises-lhe functions of the busisess inso administration and distribution. The trial balance of the comeany at 31 Mav 2016 is shown below: YOU ARE REQUIRED TO: IGNORE COMPARATIVES, SHOW ALL. WORKINGS CLEARLY. ROUND OFF TO THE NEAREST RAND AMOUNT. 1. Prepare the statemsent of comprehensive income of Calvin L.imited for the year ended 31 May 2016 in conformity with International Financial Reporting Standards and using the function method. (20.5 Marks) 2. Prepare the statement of changes in equity of Calvin Limited for the year ended 31 May 2016 in conformity w ith International Financial Reporting Standards. (4.5 Marks) 3. In so far as information is availabk, prepare the Profit before tax note fo the financial statements for the year ended 31 May 2016 in conformity with lnternational Financial Reporting Standards. (1 Mark) QUESTION 2: (27.5 MARKS: 50 MINUTES) IGNORE VALUE-ADDED TAX. At Your Service Limised ("A YS') creates IT solutions for the government market to cater for specific requirements. All contracts requires a 40% deposit to be paid on the signing of the contract and the balance of the amount doe at the completion of the contract. In the event that the contract is cancelled by either party, AYS will be entitled to compensation based on its costs incurred to date plus 25%, which AYS considers to be a reasonable profit margin. At Your Service Limited has one contract in progress at its fitsancial year-end 31 May 2016. This contmet entails the creation of customised call-centre software for the Eloctricity Department of Government (Whe Department'). The Department signed the contract on I Notember 2015 at a contract prike of R600 000. At Your Service Limited expects-that a discount of R40000 will be granted to The Department. The decision en whether to grant the discount will be made by At Your Service limited on completion of the contract. The customisation of the software iavolves completing the following six modules: Module 1 - Welcoming of eustonser and fact finding Module 2 - Solware trouble shooting Module 3 - User training Module 4 - Frequently asked questions Module 5-Logging of unresolved helpdesk queries Module 6 - Feedback from call centre to custonst The customer is snable to 'go live' with the software umil module 6 has been completed. At Your Service l.imited estimated that it woukd take 370 hours to customise the software and the average cost of the programmers is R6i0 per hour. At Your Servike Limited estimated that Module 4 will account for 30% of the time. The rest of the time will be spent equally across the onher modules, All other costs relating to the project are known. As at 31 May 2016, At Your Service Limited had spent 317 hours and completed Modules 1 to 5. The Department has accepted and signed off on Modules I to 4. Module 5 has not been aceepted as The Department is of the opinion that the work performed las nod been in accordance with their specification. At Your Service Liinited conceded to this and agreed to re- work Module 5 at no additional cost to The Department. YOU ARE REQUIRED TO: ROUND ALL WORKINGS OFF TO THE NEAREST RAND AMOUNT 1. Assuming that a single Performance Obligation exists, determine the transaction price and provide a detaikst explanation. (16 Marks) 2. Prepare the journals showing how the deposit and the revente from services from The Department contract should be recoggised and measuned in the financial records of At Your Service Linited for the year ended 31 May 2016. (11.5 Marks) fage 4 of 6 QUESTION 3: (29 MARKS: 50 MINUTES) Sports Limited is a company operating in the sports industry. The following information has been presented to you: FISH LIMITED EXTRACT FROM STATEMENT OE EINANCIAI. POSIIION AT MAV TAL Additional information: 1. The tax base of the property, plant and equipment balance at 31 May 2016 was R307 500 . 2. Depreciation for the year ended 31 May 2016 was R61 250 and wear and tear allowed was R43 750. There was no other moverent of property, plant and equipment for the year ended 31 May 2016. 3. Profit before tax for the year ended 31 May 2016 amounted to R525 000. 4. Dividend income amounting to R8 750 carned during the ytar ended 31 May 2016 is not taxable. 5. Fines ansouming to R15 200 incurred and paid during the year eoded 31 May 2016 is nontax deductible. 6. Donations amounting to R 15000 incurred and paid during the year ended 31 May 2016 is non-tax deductible. 7. There are no other temporary or non-temporary diflerences other than those evident from the information provided. 8. The corporate income tax rate is 28% YOU ARE REQUIRED TO: IGNORE DATES AND NARRATIONS UNLESS SPECIFICALLY REQUESTED SHOW ALL WORKINGS AND REFFRENCE CORRECTLY 1. Calculate the current inoone tax expense for the year ended 31 May 2016. (5 Marks) 2. Calculate the deferred income tax balance at 31 May 2015 and 31 May 2016 with the movement for the year ended 31 May 2016. (14 Marks) 3. Journalise the current and deferred income tax adjustments for the year ended 31 May 2016. (4 Marks) 4. Prepare the following note to the financial statements for the year ended 31 May 2016 in accordanse with International Financial Reporting Standards. 4.1 Deferred Tax note (show comparatives) (6 Marks) QUESTION 4: (17.5 MARKS: 32 MINUTES) IGNORE VAT New Venture Limited is a manuficturing company in its first year of operations. New Vemture Limited manufictures one product and bas 1250 units of finishod goods of this product on hand at year-end (there was neither raw material nor work-in-progress on hand at year-end). The bookkeeper is unsure about how to treat fixed overheads and has left the fixed overhead costs for the year in a suspense account. He has given you the following inforination: The 1250 uniss on hand at year-end were sold for an amount of R16 500 after year-end but before approval of the financtal statemerts. YOU ARE REQUIRED TO; ROUND OFF ALL. PER UNITED CALCULATIONS TO TWO DECTMAL PLACES AND ALL OTHER AMOUNTS TO THE NEAREST RAND AMOUNT 1. Calculate the amount at which finisted goods will be disclosed in the statement of financial position for the first year of operations. Show all your workings. (6.5 Marks) 2. Assuming that: - the company also had work-in-poogress on hand at year-end with a cost of R587 500 (correcly eakulated): - the work-in-progress requires abother R30 000 costs to be incurred in order to be completed; - the product made by the company is fast becoming obsolete; and - the company plans to complete the work in progress and sell it at a mark-up of 16% on cost (below the ustal mark-up) with selling costs estimated at R105 000; Calculate at what value iaventorics would be shown on the face of the statement of firancial position for the first year of operations. Stow all your workings. (6.5 Marks)