Topic for the Assignment:

IGNORE VAT:

Assume an DIVIDEND TAX rate of $20\%$ and a company tax rate of $28\%$

Furniture Designs Ltd is a South African company that specialises in designing furniture using interesting raw materials from Brazil. The company has a year end of $30$ June. The company$$s main manufacturing plant is situated in Newcastle in Kwazulu$-$ Natal. Clients are spread across Africa and include Woolworths, Home etc. and Mr Price Home Zone. You have been provided with the following information for the financial year ended $30$ June $2018$:

Extract from the statement of financial position of Furniture Designs Ltd

as at $30$ June $2018$

Refer to additional info $2018$

R $2017$

R

ASSETS

Non current assets

Property, plant and equipment $8-12??$

Investments $52000037500$

Current assets

Inventory $15698001687590$

Trade receivables $557732527472$

Bank $0?$

SARS $-23945$

Prepaid expenses $2100014000$

EQUITY

Share capital: class A $1?16500000$

Retained earnings $?22414642$

Revaluation surplus $8+9??$

LIABILITIES

Current liabilities

Trade payables $16461341793432$

Rental income received in advance $7?3150$

Shareholders for dividends $219000075000$

SARS $57400-$

Bank $842209?$

Accrued expenses $1470010400$

Additional information:

$1.$ On $1$ July $2017,$ there were $1500000$ class A in issue. $300000$ shares were offered to the public at a price of R$22$ each on the $1$st October $2017.$ The share issue was underwritten by Investec Bank for an agreed commission of $7\%.$ Applications for the shares closed on $30$ November $2017.90\%$ of the shares were applied for by the public. The shares were allotted by the company on $1$ January $2018.$ Share issue costs, excluding the underwriter$$s commission, amounted to R$139800.$ All share issue costs $($including the underwriter$$s commission$)$ were paid in cash on the day that the shares were allotted.

$2.$ On $31$ December $2017,$ the directors declared an interim dividend of $25$ cents per share. On $20$ June $2018,$ the directors declared a final dividend of $40$ cents per share.

$3.$ Profit for the current financial year after finance costs but before taxation, amounted to R$9325200.$ This was equal to taxable income for the current financial year.

$4.$ Income from the sale of goods for the current financial year amounted to R$31250245.80\%$ of income from the sale of goods is represented by credit sales. Furniture Designs Ltd applies a $40\%$ mark$-$up on selling price.

$5.$ There was no profit or loss on the sale of investments. No investment income was earned during the year ended $30$ June $2018.$

$6.$ Included in the profit and loss section of the statement of comprehensive income of Furniture Designs Ltd for the year ended $30$ June $2018,$ were net operating costs amounting to R$2826623.$ This amount included, amongst others, the following items:

R

Rental income $?$

Profit $/$ loss on sale of plant and machinery $?$

Bad debts expense $484000$

Depreciation expense $?$

Impairment expense $?$

$7.$ Furniture Designs Ltd rents out a part of the factory to a small business enterprise that manufactures candles. Rent is paid in advance on the last day of each month. The rental agreement states that the monthly rental is increased by $8\%$ on $1$ April each year.

$8.$ The following table provides information about the different classes of property, plant and equipment that Furniture Designs Ltd owned at year ended $30$ June $2017$:

Date Purchased Cost Residual Value Useful life

Land $01$ July $2009$ R$360000$ R $0?$

Buildings $01$ July $2009$ R$200000$ R $0?$

Equipment $01$ July $2015$ R$320000$ R$40000?$

Machinery $31$ December $2015$ R$460000$ R$600005$ years

Note: Land is accounted for on the revaluation model, while all other assets $($buildings$,$ equipment and machinery$)$ are accounted for on the cost model.

$8\mathrm{.}1$ The benefits from the usage of the building are expected to be realised evenly over a $20$ year period.

$8\mathrm{.}2$ Equipment is depreciated on the reducing balance method at $12\mathrm{.}5\%$ p$.$a$.$

$8\mathrm{.}2.$ Machinery is depreciated on the straight line method.

$9.$ Land is revalued every $3$ years to fair value, as determined by an independent evaluator. No land was purchased or disposed of during the current year. The fair values on the revaluation dates were as follows:

$30$ June $201230$ June $201530$ June $2018$

Fair value of land R$450000$ R$520000$ R$630000$

$10.$ The company has decided to upgrade its equipment. All the existing equipment was sold on $30$ April $2018$ at a profit of R$3000.$ The new equipment was purchased for cash on $1$ February $2018$ at a cost of R$400000.$ The business imported the equipment from Asia. The terms of the contract indicated FOB destination. Transport costs of R$15000$ and import duties of R$8000$ were paid in cash on $1$ March $2018,$ the date the equipment arrived in South Africa. The equipment was installed and ready for use on $1$ April $2018.$ The new equipment will be depreciated oon the reducing balance method at $15\%$ p$.$a$.$ and has an estimated residual

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