FAC3702 EXAM PACK EXAM REVISION

FAC3702 EXAM PACK EXAM REVISION PACK 2015 Written by Class of 2015 Together We Pass Tel: © 2015 Together We Pass. All rights reserved. Welcome If you are reading this message then you are doing(FAC3701) with UNISA. These are being compiled by our Together We Pass team for our students who are registered for FAC3701 this term, and will be built upon year on year to create the best set of questions, with suggested solutions, with the possibility of including hints and tips in the future. Please note that this is not the exam scope, but this document will work as supplementary study material which will help you prepare for the coming exams. It’s work in progress and we will make changes and amendments to the document as we progress. Good luck this term, and we look forward to working with you! Our contact details should you need help: Together We Pass PHONE EMAIL WEB FB GGLE+ Together We Pass on Google Plus TWITR @togetherwepass © 2015 Together We Pass. All rights reserved. QUESTION 1 The following financial information relates to ABC Limited for the year ended 30 April 2014: 1. Machine Cost Residual value Revalued amount on a net replacement value basis Date R 1 May 1 May 2011 50 000 30 April Depreciation rate - 20% per annum straight-line The tax base on 1 May 2013 was R200 000 which would be deductible in equal amounts on 30 April 2014 and 30 April 2015 against taxable income. On 1 May 2013 there was a deferred tax liability of R36 000 due to the temporary difference in respect of the wear and tear on the machine. The estimates of the original useful life and residual value remained unchanged after the revaluation. During 2014 the board of directors decided to disclose the machine in future at the net replacement value. The revaluation on 30 April 2014 was performed by a sworn appraiser, W Mass, on the net replacement value basis with reference to prices of similar new assets in an active market. It is company policy that the revaluation surplus will be realised on disposal of the machine. 2. Investment property On 31 August 2013 ABC Limited sold its only investment property for R1 600 000. Since ABC Limited had already decided during the financial year ended 30 April 2013 to sell the investment property, the 2004 financial statements reflected a deferred tax balance that was correctly calculated and provided based on the intention to sell. Investment property was previously accounted for according to the fair value model. No tax allowances were granted on the property. Details of the disposed investment property are as follows: Land Land Building Building Date 1 November 2011 30 April 2013 1 November 2011 30 April 2013 Fair Cost value R R 250 000 - - 350 000 750 000 - - 1 100 000 Temporar y difference R -100 000 -350 000 Deferre d tax liability R - 15 000 - 52 500 © 2015 Together We Pass. All rights reserved. Rental income from the investment property for the current period amounted to R56 000. Operating expenses incurred in 2014 in connection with the investment property while being leased out were R22 000. 3. Profit before tax The profit for the current period after taking into consideration all of the above-mentioned information is R600 000. 4. Tax rate The tax rate is 30% for all the applicable periods. REQUIRED: Disclose only the given information in the applicable notes to the annual financial statements of ABC Limited for the year ended 30 April 2014. Your answer must comply with the requirements of Generally Accepted Accounting Practice. The following are not required: - accounting policy notes - comparative figures