FAC1601 - Financial Accounting And Reporting Semesters 1 and 2.

FAC1601 - Financial Accounting And Reporting Semesters 1 and 2. SOLUTION 7.6 a) (i) NJABULO LIMITED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 20.8 Notes R Revenue R(975 000 – 3 000 – 5 000) 7 967 000 Cost of sales (697 000) Inventory (1 March 20.7) 90 000 Purchases R(700 000 – 4 000) 696 000 Freight on purchases 6 000 792 000 Inventory (28 February 20.8) (95 000) Gross profit 270 000 Other income 17 500 Dividend income: listed share investment 2 000 Unlisted share investment 3 000 Fair value adjustment: listed investment [R(1,50 – 1,00) x 25 000] 12 500 287 500 Distribution, administrative and other expenses (175 450) Freight on sales 4 000 Commission expense 9 000 Salaries and wages 95 450 Stationery 3 000 Credit losses R(7 500 – 5 000) 2 500 Insurance expense 6 000 Sundry expenses R(18 000 – 2 000) 16 000 Auditor's remuneration R(6 000 + 500) 6 500 Directors' remuneration 15 000 Loss on sale of equipment 2 000 Depreciation 2, 3 16 000 Finance costs (14 800) Interest on bank overdraft 2 000 Interest on mortgage 6 12 800 Profit before tax 97 250 Income tax expense (40 000) Profit for the year 57 250 Other comprehensive income for the year - Total comprehensive income for the year 57 250 FAC1601/TL102/3/2022/B 6 SOLUTION 7.6 (continued) (ii) NJABULO LIMITED STATEMENT OF CHANGES IN NET INVESTMENT OF MEMBERS FOR THE YEAR ENDED 28 FEBRUARY 20.8 Share capital Revaluation surplus Retained earnings Total R R R R Balances at 1 March 20. Total comprehensive income for the year Dividends: (32 000) (32 000) Ordinary shares Preference shares Balances at 28 February 20. (iii) NJABULO LIMITED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.8 Notes R ASSETS Non-current assets 252 000 Property, plant and equipment 2, 3 232 000 Unlisted share investment 20 000 Current assets 275 000 Inventories 2 95 000 Trade and other receivables 4 142 500 Listed share investment 2, 4 37 500 Total assets 527 000 EQUITY AND LIABILITIES Total equity 300 250 Share capital R(160 000 + 100 000) 5 260 000 Retained earnings 30 250 Other components of equity 10 000 Total liabilities 226 750 Non-current liabilities 75 000 Long-term borrowings R(80 000 – 5 000) 6 75 000 Current liabilities 151 750 Trade and other payables R(70 000 + 500 + 4 250) 6 74 750 Bank overdraft 6 15 000 Current portion of long-term borrowings 6 5 000 Dividends payable R(20 000 + 12 000) 32 000 Current tax payable R(40 000 – 15 000) 25 000 Total equity and liabilities 527 000 FAC1601/TL102/3/2022/B 7 SOLUTION 7.6 (continued) b) NJABULO LIMITED NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.8 1. Basis of presentation The annual financial statements have been prepared according to the requirements of the IFRS appropriate to the business of the entity. The annual financial statements have been prepared on the historical cost basis, modified by the fair value of certain financial instruments, and incorporate the principal accounting policies set out below. 2. Summary of significant accounting policies The financial statements incorporate the following significant accounting policies that are consistent with those applied in previous years, except where otherwise stated. 2.1 Property, plant and equipment Property, plant and equipment are initially recognised at cost price. No depreciation is written off on land and buildings that are revalued at regular intervals by an independent appraiser. Equipment and vehicles are subsequently measured at historical cost less accumulated depreciation and accumulated impairment losses. Depreciation on equipment and vehicles is recorded at a rate deemed to be sufficient to reduce the carrying amount of the assets over their estimated useful life to their estimated residual value. The depreciation rates are as follows: • Vehicles: 20% per annum according to the straight method • Furniture and equipment: 10% per annum according to the diminishing balance method Depreciation is charged to profit or loss for the year. Profit or losses on disposal are determined by comparing the proceeds with the carrying amount of the asset. The net amount is included in profit or loss for the year.