YT 3 2016 (33,5 marks; 50 minutes) TILE MANIA manufactures and sells ceramic tiles. Customers purchase the manufactured tiles according to the number of tiles needed and not in pre-packed amounts. The entity has a 28 February reporting date. The entity uses the perpetual inventories system and the First-in, First-out valuation method. The tiles are made from a wet talc mixture (500 grams per tile), which is poured into moulds and then put into a kiln (oven) to dry and harden. The tiles are then painted with a glaze (100 ml per tile) and left to dry. The following extract from the trial balance as at 28 February 2005 is provided to you: Wet talc mixture - raw materials (4 500 kg) Glaze - raw materials (800 litres) Work-in-progress (2 000 tiles) Finished goods (5 000 tiles) Cleaning materials R 60 750 2 880 33 360 88 550 2 500 Additional information: 1) The manufacturing of 252 000 tiles were started in the financial year ended 28 February 2006. The costs of manufacture per tile are not consistent with the previous financial year. 2) The following purchases occurred during the year ended 28 February 2006: Quantity R Wet talc mixture 130 000 kg 1 950 000 Glaze 28 000 litres 112 000 Cleaning materials 30 000 28 February 2006. The costs of manufacture per tile are not consistent with the previous financial year. 2) The following purchases occurred during the year ended 28 February 2006: Quantity R Wet talc mixture 130 000 kg 1 950 000 Glaze 28 000 litres 112 000 Cleaning materials 30 000 Kiln 1 20 000 000 Moulds 100 5 000 000 3) The stage of completion of the work-in-progress was as follows: 28 February 2005 28 February 2006 WIP units 2 000 tiles 3 000 tiles Wet talc mixture 100% 100% Glaze 0% 0% Direct labour 85% 25% Overheads I 95% 12% 4) The entity employs 3 employees to manufacture the tiles and 1 cleaner to clean the factory and equipment. The marketing department consists of 2 employees. All employees were appointed during the whole of the 2005 and 2006 financial years. The cost to company for these employees are as follows: 28 February 2005 3 factory workers R1,40 per tile 1 cleaner R1 000 per month 2 marketing personnel 5% of sales 28 February 2006 R1,50 per tile R1 500 per month 6% of sales When a salary or wage increase occurs (namely 1 March of each year), any incomplete tiles completed by the employees at that stage, are charged at the new cost to company rate. 5) The estimated overheads incurred for the financial year ended 28 February 2005 amounted to R1 840 000, and 200 000 tiles were estimated to be worked on during that financial year. The overheads incurred for the financial year ended 28 February 2006 were estimated to increase significantly after the purchase of the new kiln and moulds (which both have an estimated useful life of 10 years), and it was also estimated that the production would increase significantly due to the use of the new assets. The increase in overheads incurred was estimated at 25% and the increase in production was estimated at 15%. 6) On 28 February 2006, it was calculated that R31 700 cleaning materials were used during the past 12 months. 7) The entity sold 254 500 tiles during the financial year ended 28 February 2006. The cost price of these tiles amounted to R4 918 590 and the sales price amounted IDA1492219 7) The entity sold 254 500 tiles during the financial year ended 28 February 2006. The cost price of these tiles amounted to R4 918 590 and the sales price amounted to R6 148 238. All closing inventories have a net selling price that is higher than cost. REQUIRED: 1. Prepare the general journal entries that will affect ONLY the Work-in-progress account of Tile Mania for the year ended 28 February 2006. (26,0) NOTE: Journal narrations ARE required. Round off calculations to two decimals. Round off final amounts to the nearest Rand. - Unnecessary journal entries will be negatively marked. 2. Prepare the inventories note to accompany the statement of financial position of Tile Mania for the year ended 28 February 2006, in accordance with International Financial Reporting Standards (IFRS). (7,5) NOTE: Comparative amounts are not required. YT 3 2016 (33,5 marks; 50 minutes) TILE MANIA manufactures and sells ceramic tiles. Customers purchase the manufactured tiles according to the number of tiles needed and not in pre-packed amounts. The entity has a 28 February reporting date. The entity uses the perpetual inventories system and the First-in, First-out valuation method. The tiles are made from a wet talc mixture (500 grams per tile), which is poured into moulds and then put into a kiln (oven) to dry and harden. The tiles are then painted with a glaze (100 ml per tile) and left to dry. The following extract from the trial balance as at 28 February 2005 is provided to you: Wet talc mixture - raw materials (4 500 kg) Glaze - raw materials (800 litres) Work-in-progress (2 000 tiles) Finished goods (5 000 tiles) Cleaning materials R 60 750 2 880 33 360 88 550 2 500 Additional information: 1) The manufacturing of 252 000 tiles were started in the financial year ended 28 February 2006. The costs of manufacture per tile are not consistent with the previous financial year. 2) The following purchases occurred during the year ended 28 February 2006: Quantity R Wet talc mixture 130 000 kg 1 950 000 Glaze 28 000 litres 112 000 Cleaning materials 30 000 28 February 2006. The costs of manufacture per tile are not consistent with the previous financial year. 2) The following purchases occurred during the year ended 28 February 2006: Quantity R Wet talc mixture 130 000 kg 1 950 000 Glaze 28 000 litres 112 000 Cleaning materials 30 000 Kiln 1 20 000 000 Moulds 100 5 000 000 3) The stage of completion of the work-in-progress was as follows: 28 February 2005 28 February 2006 WIP units 2 000 tiles 3 000 tiles Wet talc mixture 100% 100% Glaze 0% 0% Direct labour 85% 25% Overheads I 95% 12% 4) The entity employs 3 employees to manufacture the tiles and 1 cleaner to clean the factory and equipment. The marketing department consists of 2 employees. All employees were appointed during the whole of the 2005 and 2006 financial years. The cost to company for these employees are as follows: 28 February 2005 3 factory workers R1,40 per tile 1 cleaner R1 000 per month 2 marketing personnel 5% of sales 28 February 2006 R1,50 per tile R1 500 per month 6% of sales When a salary or wage increase occurs (namely 1 March of each year), any incomplete tiles completed by the employees at that stage, are charged at the new cost to company rate. 5) The estimated overheads incurred for the financial year ended 28 February 2005 amounted to R1 840 000, and 200 000 tiles were estimated to be worked on during that financial year. The overheads incurred for the financial year ended 28 February 2006 were estimated to increase significantly after the purchase of the new kiln and moulds (which both have an estimated useful life of 10 years), and it was also estimated that the production would increase significantly due to the use of the new assets. The increase in overheads incurred was estimated at 25% and the increase in production was estimated at 15%. 6) On 28 February 2006, it was calculated that R31 700 cleaning materials were used during the past 12 months. 7) The entity sold 254 500 tiles during the financial year ended 28 February 2006. The cost price of these tiles amounted to R4 918 590 and the sales price amounted IDA1492219 7) The entity sold 254 500 tiles during the financial year ended 28 February 2006. The cost price of these tiles amounted to R4 918 590 and the sales price amounted to R6 148 238. All closing inventories have a net selling price that is higher than cost. REQUIRED: 1. Prepare the general journal entries that will affect ONLY the Work-in-progress account of Tile Mania for the year ended 28 February 2006. (26,0) NOTE: Journal narrations ARE required. Round off calculations to two decimals. Round off final amounts to the nearest Rand. - Unnecessary journal entries will be negatively marked. 2. Prepare the inventories note to accompany the statement of financial position of Tile Mania for the year ended 28 February 2006, in accordance with International Financial Reporting Standards (IFRS). (7,5) NOTE: Comparative amounts are not required