QUESTIONS 1 - 10 USE THE BELOW INFORMATION:

The following balances were extracted from the accounting records of Stimela Ltd as at 31 December 2022:

Debit/

(Credit)

R

Land at cost..............................................................................................

5 000 000

Buildings at cost.......................................................................................

?

Plant and machinery at cost (1 Jan 2022)...................................................

4 750 000

Furniture and equipment at cost (1 Jan 2022).............................................

485 000

Accumulated Depreciation

- Plant and machinery (1 Jan 2022)..........................................................

?

- Furniture and equipment (1 Jan 2022)....................................................

(285 000)

10% Long-term loan..................................................................................

(1 085 000)

Trade and other receivables......................................................................

833 500

Inventories...............................................................................................

?

Additional information:

1. Inventories

Stimela Ltd had an opening balance of inventory worth R930 000. During the current financial year, purchases worth R850 000 of inventory were made. The cost of sales of Lion Ltd relating to sold inventory amounted to R970 000.

2. The following information regarding property, plant and equipment is available: 2.1 Stimela Ltd purchased land on 1 January 2020 for R5 000 000. Construction of a building on the land commenced on 1 March 2022 and was completed on 31 July 2022. The following direct costs relating to the erection of the building were incurred:

- Labour R985 000

- Material R2 500 000

The land and buildings were situated in Johannesburg, plot 100.

2.2 All the machinery of Stimela Ltd was purchased on 31 March 2020 for R4 500 000. The machine was installed for a further R250 000. During the current financial year, machinery was withdrawn from the production process to be used for the construction of the building for a period of 4 months. No sale or additional purchases of machinery took place during the current financial year.

2.3 Proceeds of R75 000 was received for furniture and equipment sold on 30 April 2022. The sold furniture and equipment had a cost of R120 000 and accumulated depreciation of R60 000 up to the beginning of the financial year. On the same date of the sale, replacement furniture and equipment was purchased for R90 000.

3. The companys policy is to depreciate non-current assets as follows:

- Buildings at 2% per annum on the straight-line method

- Machinery at 20% per annum on the reducing balance method

- Furniture and equipment at 10% per annum on the straight-line method

REQUIRED:

Answer the following multiple-choice questions. Indicate your choice by only selecting only one option from the four options given below.

Question 1:

Land will be disclosed in the PPE note as?

1. As part of buildings.

2. As a separate class asset with an opening balance of R5 000 000.

3. As a separate class asset, shown as an addition of R5 000 000 in the current year.

4. Will first have to acquire the services of an independent sworn appraiser to determine the value.

Question 2 Not yet answered Marked out of 2.00 Flag question Question text Part A (20 marks)

QUESTION 2 is based on the information in Part A

Question 2:

Inventory will be disclosed at the following amount in the Statement of Financial Position as at 31 December 2022?

1. R930 000

2. R850 000

3. R1 780 000

4. R810 000

Question 3 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 3 is based on the information in Part A

Question 3:

The opening balance on 1 January 2022 to be disclosed for accumulated depreciation on plant and machinery in the PPE note will be?

1. R1 520 000

2. R1 440 000

3. R1 710 000

4. R1 900 000

Question 4 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 4 is based on the information in Part A

Question 4:

Buildings will be recorded in the PPE note as in addition during the current year at a cost price of?

1. R985 000

2. R2 500 000

3. R3 485 000

4. R3 700 000

Question 5 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 5 is based on the information in Part A

Question 5:

The depreciation expense on land in the current year, will be calculated as?

1. No depreciation provided

2. R5 000 000 x 2%

3. R5 000 000 x 2% x4/12

4. R5 000 000 x 2% x 8/12

Question 6 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 6 is based on the information in Part A

Question 6:

The depreciation expense on land in the current year, will be calculated as?

1. Cost price x 2%

2. Cost price x 2% x 5/12

3. Cost price x 2% x 7/12

4. Cost price x 2% x 9/12

Question 7 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 7 is based on the information in Part A

Question 7:

The depreciation expense on furniture and equipment in the current year will amount to?

1. R48 500

2. R45 500

3. R46 500

4. R51 500

Question 8 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 8 is based on the information in Part A

Question 8:

The profit/ loss to be recognized on selling of furniture and equipment item is?

1. A profit of R15 000

2. A loss of R45 000

3. A profit of R19 000

4. A loss of R19 000

Question 9 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 9 is based on the information in Part A

Question 9:

The cost price amount recorded for furniture and equipment in the PPE note at the end the current year will be?

1. R485 000

2. R455 000

3. R515 000

4. R575 000

Question 10 Not yet answered Marked out of 2.00 Flag question Question text Part A - (20 Marks)

Question 10 is based on the information in Part A

Question 10:

Stimela Ltd plans to rent out a portion of its buildings to generate additional income, which is considered to be insignificant in relation to the total buildings and it wont be possible to sell these two portions separately. The portion to be rented out will be recognised as?

1. A lease

2. Investment property

3. Property, plant and equipment

4. A low value asset