FAC3701 EXAM 30 MAY 2026 EXPECTED SOLUTIONS

QUESTION 1

(a) General Journal of Safewrap Ltd To record the payment of the ordinary dividend declared in the prior year.

Details Debit (R) Credit (R)
5-Jul-24
Shareholders for
dividends (SFP) 480 000
(R600 000 × 80%)
SARS (Dividends tax)
(SFP) (R600 000 × 120 000
20%)
Bank (SFP) 600 000
(b) Calculation of the Correct Profit Before Tax

, For the year ended 30 June 2025.

Item Working Total (R)
Draft profit before
1 027 000
tax
Adjustments:
Reversal of old
depreciation on 172 200
delivery vehicles

New depreciation on
(R531 600 - R45 000) / 3
delivery vehicles (162 200)
years
(Change in estimate)

Unrecorded sales
18 800
revenue (Bubble wrap)

Interest expense on
Machine Flaw R100 000 × 12.9% × 1/12 (1 075)
(Finance lease)
Correct profit before
1 054 725
tax
(c) Deferred Tax Balance Calculation Statement of Financial Position approach.

Deferred Tax
Temporary Difference
Item Carrying Amount (R) Tax Base (R) Asset / (Liability)
(R)
(R)
30 June 2024 (Tax
rate: 28%)
Delivery vehicles 531 600 438 000 93 600 (26 208)
Machines 490 000 280 000 210 000 (58 800)