The following balances are an extract from the trial balance of Techno Care Ltd on 28 February 2021:

QUESTION 3 (50 marks) (60 minutes)

15% Long-term loan (note 2) Investments (note 3) Sales (inclusive of sales discounts) (note 4) Administrative expenses Distribution expenses Other operating expenses Other income Retained earnings (1 March 2020) Surplus on revaluation (1 March 2020) (note 1)

Additional information: 1. Office building

Debit/(Credit) R

(2 700 000) 960 000

(10 257 000) 600 000 120 000 180 000

(300 000) (2 471 700)

(1 200 000)

Techno Care Ltd owns an office building in Sandton, which was acquired on 1 March 2015, at a cost of R2 750 000 (Land: R750 000; Building: R 2 000 000). The property was available for use, as intended by management, on acquisition date. The useful life of the building was estimated to be 20 years and a residual value of R 100 000 was allocated to the building upon initial recognition. Both the useful life and residual value of the building remained unchanged.

Techno Care Ltd adopted a policy to revalue its owner-occupied land. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value at year-end. On 1 March 2020, Mr J Bless, an independent sworn appraiser revalued the property for the first time and determined the fair value of the land to be R875 000.

The inexperienced accountant of Techno Care Ltd, Mr Heed, did not account for the revaluation for the current year. He has also not taken the residual value into account when allocating the depreciation to the buildings.

2. Long-term loan

   Techno Care Ltd entered into an unsecured long-term loan agreement on 31 August 2018. The loan is repayable in six equal annual instalments commencing on 31 August 2019. The nominal interest rate is 15% per annum. Interest for the current year must still be provided for in the accounting records of Techno Care Ltd and it is payable on 5 March 2021.

3. Investments

   Included in investments at year-end on 28 February 2021 is the following investment:

   Techno Care Ltd acquired 4 500 shares at R80 each in a listed company, Impact Ltd. The shares are not held for trading but were acquired with a long-term view. The directors of Techno Care Ltd irrevocably elected at initial recognition to classify this investment as at fair value through other comprehensive income. The market value of the shares on the JSE Ltd at year-end on 28 February 2021 amounted to R380 000. The increase in the market value of this investment has erroneously been recorded as though they were shares held for trading and has not yet been corrected.

4. Authorised and issued share capital

REQUIRED:

Techno Care Ltd was incorporated with an authorised share capital of:

6 000 000 Ordinary shares 1 500 000 10% Cumulative preference shares 900 000 12% Non-cumulative preference shares

The issued share capital of Techno Care Ltd on 1 March 2020 was as follows:

Ordinary share capital (shares issued at R2 each) 10% Cumulative preference shares

R

2 250 000 450 000

The following share transactions occurred during the current financial year and have not been accounted for yet in the accounting records of Techno Care Ltd for the current year:

• Techno Care Ltd issued 75 000 10% Cumulative preference shares at R4,00 per share on 1 September 2020.

• On 31 October 2020 Techno Care Ltd received proceeds of R1 200 000 when 600 000 ordinary shares were issued.

• On 28 February 2021 capitalisation shares were issued to all the registered ordinary shareholders at R1,50 per share at the ratio of one ordinary share for every five ordinary shares held.

5. Sales for the year includes sales discounts of 2,5% that has been accounted for. The company maintains a gross profit percentage of 35% on sales before sales discounts.

6. An ordinary dividend of 10c per share was declared to all registered ordinary shareholders on

27 February 2021. The company did not pay or declare any dividends during the previous financial year.

7. Normal company tax amounted to R731 185 after taking all the adjustments above into account.

1. (a) Calculate the profit for the year in the statement of profit or loss and other comprehensive income of Techno Care Ltd for the year ended 28 February 2021.

2. (b) Using the information calculated in (a) above, prepare the statement of changes in equity and an extract of the equity and liabilities section of the statement of financial position of Techno Care Ltd for the financial year ended 28 February 2021, according to the requirements of International Financial Reporting Standards (IFRS).

Please note:

Ignore all accounting policy notes. Show all calculations.