Viggy Ltd is a small business with August year end. During the interim board meeting directors announced that they want to diversify the company to ensure sustainability and growth and require additional funding to sponsor the diversification project. It was then agreed that the company will issue 600 000 10% preference at the issue price of R15 compulsorily redeemable for 100 engaged in the ordinary shares for every 100 000 preference shares held. The preference shares were issued on 31 August 2020 and are redeemable on 31 December 2025. The market interest rate for similar shares is 12% per annum. Viggy Ltd holds preference shares within the business model whose objective is to collect contractual cashflows of principal and payment. Assume 18.92% as effective interest rate. 

Required Prepare the journal entries all the necessary journal entries for the year ended 31 August 2021 and 2022.

 

QUESTION:

Takeout Limited is a diversified company involved in a wide range of activities in the food take aways.

Take out following activities during the year

The company purchased a brand on 1 January 2020 for R3 000 000. At acquisition, the estimated useful life of the brand was 15 years. At acquisition it was determined that that there is no active market for the brand. At 31 December 2020, the directors of Takeout believed that the brand is now worth R4 000 000.

Required

Explain, giving reasons, how each of the above transaction should be dealt with in the financial statements of Eat Limited for the year ended 31 December 2022, in accordance with IAS 38 Intangible assets.