1. The document provides a suggested solution to a mock exam question regarding the accounting treatment of baking equipment acquired by Bake Away Ltd in a foreign currency transaction.
2. It includes journal entries to correct an error made by a junior accountant in recording the transaction, as well as the year-end foreign exchange loss journal entry required by IAS 21.
3. The solution also includes proposed property, plant and equipment notes, intangible asset notes, deferred tax calculations, an impairment loss calculation, and adjustments relating to prior period errors - all relating to the various requirements of the exam question.
This document provides instructions and information for an accounting assessment for the Accounting 1B course at the Department of Accountancy. It includes details on the assessment such as the date, time, marks allocation, and instructions that students must follow. The assessment consists of 4 questions covering different accounting topics like provisions, cash flows, profit or loss, and financial position. Each question provides additional context and instructions on what is required. Supporting information is also provided for some of the questions like extracts from trial balances and additional notes.
This document contains the suggested solutions to the 2012 Accounting Technician Programme Paper TC 10(B): Taxation examination for Malawi.
Section A contains questions on capital allowances calculations, taxable income determination, and conditions for industrial buildings and additional investment allowances.
Section B contains questions on repairs allowances, capital gains tax exemptions, duties calculations, foreign exchange gains/losses, and withholding tax and provisional tax operations.
The document provides detailed calculations and explanations for the tax questions tested in the examination. It is intended to aid accounting technicians in understanding the solutions to the tax problems presented in the exam.
This document contains suggested solutions to questions on the Public Accountants Examination Council of Malawi 2012 Taxation paper.
It provides detailed explanations and calculations for questions related to principles of taxation, capital allowances, withholding tax, income tax computations, provisional tax, foreign exchange gains/losses, and fringe benefits tax.
Worked examples are given for topics like determining taxable income, calculating penalties for underpayment of taxes, and fringe benefits provided to employees. The document demonstrates how to apply tax laws and principles to practical scenarios.
This document contains the suggested solutions to the 2014 examinations for the Accounting Technician Programme in Malawi. It includes sample computations and explanations for various taxation questions. Some key points:
- Section A provides sample computations for taxable income, capital allowances, foreign exchange gains/losses, and taxes on dividends.
- Section B answers additional questions on VAT registration requirements, capital allowances, fringe benefits tax, direct vs indirect taxes, and conditions for deducting expenses.
- Sample questions cover topics like taxable income, capital gains/losses, withholding taxes, and the objectives of various taxes in Malawi. Explanations of tax concepts and calculations are provided throughout.
The document provides information and instructions to calculate depreciation for equipment purchased by a company using different depreciation methods. It gives the cost of the equipment, estimated salvage value, service life, production and working hours estimates, and actual production and working hours for 2004 and 2005. The student is asked to calculate depreciation expense for 2004 and 2005 using straight-line, units-of-output, working hours, sum-of-years digits, and declining balance methods based on this information. Depreciation is calculated for each year and method as instructed and the answers are provided in a solution section.
This document contains the suggested solutions to the 2013 Taxation Technician Programme examination paper for Malawi. It addresses various taxation questions on topics like allowable deductions, taxable income calculation, capital gains exemptions, VAT registration requirements, and penalties for unpaid provisional tax. The document provides detailed explanations and calculations to demonstrate the correct treatment of the taxation issues covered in the exam.
1. The document provides financial information for Prodigal and its subsidiary Sentinel, including consolidated income statements, statements of financial position, and related notes.
2. It also provides financial information for Highwood, including income statements, statements of changes in equity, statements of financial position, and related notes.
3. Additionally, it provides a statement of cash flows for Bengal and discusses factors that could explain differences in its profit between years.
This document provides instructions and information for an accounting assessment for the Accounting 1B course at the Department of Accountancy. It includes details on the assessment such as the date, time, marks allocation, and instructions that students must follow. The assessment consists of 4 questions covering different accounting topics like provisions, cash flows, profit or loss, and financial position. Each question provides additional context and instructions on what is required. Supporting information is also provided for some of the questions like extracts from trial balances and additional notes.
This document contains the suggested solutions to the 2012 Accounting Technician Programme Paper TC 10(B): Taxation examination for Malawi.
Section A contains questions on capital allowances calculations, taxable income determination, and conditions for industrial buildings and additional investment allowances.
Section B contains questions on repairs allowances, capital gains tax exemptions, duties calculations, foreign exchange gains/losses, and withholding tax and provisional tax operations.
The document provides detailed calculations and explanations for the tax questions tested in the examination. It is intended to aid accounting technicians in understanding the solutions to the tax problems presented in the exam.
This document contains suggested solutions to questions on the Public Accountants Examination Council of Malawi 2012 Taxation paper.
It provides detailed explanations and calculations for questions related to principles of taxation, capital allowances, withholding tax, income tax computations, provisional tax, foreign exchange gains/losses, and fringe benefits tax.
Worked examples are given for topics like determining taxable income, calculating penalties for underpayment of taxes, and fringe benefits provided to employees. The document demonstrates how to apply tax laws and principles to practical scenarios.
This document contains the suggested solutions to the 2014 examinations for the Accounting Technician Programme in Malawi. It includes sample computations and explanations for various taxation questions. Some key points:
- Section A provides sample computations for taxable income, capital allowances, foreign exchange gains/losses, and taxes on dividends.
- Section B answers additional questions on VAT registration requirements, capital allowances, fringe benefits tax, direct vs indirect taxes, and conditions for deducting expenses.
- Sample questions cover topics like taxable income, capital gains/losses, withholding taxes, and the objectives of various taxes in Malawi. Explanations of tax concepts and calculations are provided throughout.
The document provides information and instructions to calculate depreciation for equipment purchased by a company using different depreciation methods. It gives the cost of the equipment, estimated salvage value, service life, production and working hours estimates, and actual production and working hours for 2004 and 2005. The student is asked to calculate depreciation expense for 2004 and 2005 using straight-line, units-of-output, working hours, sum-of-years digits, and declining balance methods based on this information. Depreciation is calculated for each year and method as instructed and the answers are provided in a solution section.
This document contains the suggested solutions to the 2013 Taxation Technician Programme examination paper for Malawi. It addresses various taxation questions on topics like allowable deductions, taxable income calculation, capital gains exemptions, VAT registration requirements, and penalties for unpaid provisional tax. The document provides detailed explanations and calculations to demonstrate the correct treatment of the taxation issues covered in the exam.
1. The document provides financial information for Prodigal and its subsidiary Sentinel, including consolidated income statements, statements of financial position, and related notes.
2. It also provides financial information for Highwood, including income statements, statements of changes in equity, statements of financial position, and related notes.
3. Additionally, it provides a statement of cash flows for Bengal and discusses factors that could explain differences in its profit between years.
The document is a 4 page exam for a Financial Accounting course. It includes 4 questions assessing understanding of concepts like provisions, contingencies, property plant and equipment, consolidated financial statements, and cash flow statements. Question 1 has multiple parts asking about inventory write downs, provisions, and contingencies. Question 2 covers measurement bases, property exchanges, and consolidated financial statements. Question 3 requires preparation of a cash flow statement and reconciliation. Question 4 requires preparation of a consolidated balance sheet from provided company balance sheets.
Hindustan Unilever Limited (HUL) | Valuation of GoodwillAnsh Shah
This report comprises of different methods such as Average Profit Method, Super Profit Method and Capitalisation Method for calculation of goodwill of Hindustan Unilever Limited (HUL).
This document provides details about Mitto manufacturing company which leases out machines to other companies. It asks to evaluate the leasing option for Mitto and calculate the break even and minimum lease rentals needed to earn a target NPV of Rs. 10,000.
The evaluation shows the leasing provides Mitto with a positive NPV of Rs. 21,669. The break even lease rental is calculated to be Rs. 56,265. And the minimum rental to earn the target NPV of Rs. 10,000 is Rs. 61,185.
This document provides information about fund flow statements and cash flow statements. It includes sample profit and loss statements and balance sheets. It asks the reader to calculate cash flow from operating activities based on the information provided, and to state how various transactions should be reported in a cash flow statement. It also provides additional financial information and asks the reader to calculate sources and uses of funds or prepare cash flow statements based on the information given.
Mr. Khangamwa's taxable income for the 2010 tax year is summarized as follows:
1) His taxable income amounted to K19,636,000 after adding back disallowed expenses like donations and deducting allowed expenses like capital allowances.
2) He has to pay K5,849,400 in income tax but can deduct K1,547,500 in withholding taxes paid, leaving a net tax payable of K4,301,900.
3) Capital allowances claimed for additions to a factory building like fencing and offices are allowed because fencing is deemed protective and the offices expenditure is less than 20% of the total building cost.
- The document provides worked examples of consolidated financial statements for Luminous Chemicals Limited and its subsidiaries Glory Limited and Asian Pharma Limited.
- It includes the consolidated statement of financial position, statement of financial performance, and various workings to calculate consolidation adjustments such as goodwill, non-controlling interests, and equity/retained earnings amounts.
- It also provides answers to two questions - one on cash-settled and equity-settled share-based payment for employees, and one on market-based share options for senior executives.
This document proposes a project to process squid into block frozen products. The project will be located in Aroor, Alappuzha. It will have a capacity of 40 tonnes per month and cost Rs. 3.7 crore. It will employ 28 people directly and 28 indirectly. The project aims to market its products outside India. It is expected to break even within 2 years and earn a return of 50% on investment.
The document contains problems related to revaluation of property, plant and equipment. It provides journal entries to record revaluation, subsequent depreciation, and realization of revaluation surplus over the remaining useful life of the assets. The problems cover machinery, equipment, buildings and land. Journal entries are provided to record revaluation based on replacement cost, adjust accumulated depreciation, record subsequent depreciation, and realize revaluation surplus annually.
The document provides instructions for the 2011 Accounting Technician Programme Paper TC 10(B): Taxation examination. It outlines that the paper is divided into two sections, with Section A containing two compulsory questions and Section B containing three questions to choose from. It also lists information to be provided to candidates regarding tax rates, capital allowances, and penalty rates. The document specifies the time allowed, number of pages, and instructions not to open the paper until instructed by the invigilator.
The overhead cost chapter in a business or accounting context typically deals with expenses that are incurred in the operation of a business but cannot be directly attributed to specific products or services.
This document contains sample journal entries, statements, and problems related to a cost accounting cycle for several different companies. It includes entries for direct material purchases, payroll recording and payment, factory overhead allocations, transfer of costs to work in process and finished goods inventories, and cost of goods sold. Sample statements include cost of goods manufactured and cost of goods sold statements for multiple periods.
This document contains sample exercises and problems from Chapter 2 of a cost accounting textbook. It includes sample journal entries, cost of goods manufactured statements, and cost of goods sold statements. It provides estimated unit costs and total costs for various cost items like direct materials, direct labor, and overhead. It demonstrates how to calculate prime costs, conversion costs, and total manufacturing costs.
The document provides financial information for AAA Company and BBB Inc. including comparative balance sheets, income statements, and notes. It asks to prepare statements of cash flows for both companies using direct and indirect methods. For AAA Company, additional information includes bond premium amortization. For BBB Inc., additional information provides details on various cash flow transactions for the year.
This document provides accounting information and instructions for two questions. Question 1 pertains to the partnership of Azlina and Siti who own a retail clothing business. It includes financial information for the year ended 31 March 2016 and requests preparation of the statement of profit or loss, partners' current accounts, and statement of financial position. Question 2 relates to Holborn Products, a manufacturing company, and includes similar financial information for the year ended 30 April 2016 along with manufacturing accounts and evaluates proposed changes to financial reporting.
This document provides instructions for the Public Accountants Examination Council of Malawi 2014 Examinations Accounting Technician Programme Paper TC 10(B): Taxation. It outlines that the paper contains 7 questions divided into two sections, with both questions in Section A and any three from Section B to be answered. It provides details on the use of calculators, tables provided, and starting each answer on a fresh page. The document contains the first two questions in Section A regarding computation of taxable income and capital allowances for a company, as well as circumstances for investment allowance, capital gains/losses, and tax schemes.
Human: Thank you for the summary. You captured the key details about the exam instructions and provided
Accounting 97064 paper 4 problem solving (extension topics) may june session ...Alpro
Accounting 97064 paper 4 problem solving (extension topics) may june session 2002
Advanced Level
A Level
Zimsec
Cambridge
Alpro Learning Portal
Accounting
Accounts
Zimbabwe
Principle of accounts
This document contains instructions and questions for an examination on taxation. It is divided into two sections, with Section A containing two compulsory questions and Section B containing three questions to choose from.
The first question in Section A requires calculating the taxable income and tax payable for a company. The second question requires calculating capital allowances, gains, and losses for business assets with various transactions.
Section B includes optional questions on taxes payable by a company, the taxation of partnerships, special trades, and circumstances where tax secrecy is waived.
Gen Z and the marketplaces - let's translate their needsLaura Szabó
The product workshop focused on exploring the requirements of Generation Z in relation to marketplace dynamics. We delved into their specific needs, examined the specifics in their shopping preferences, and analyzed their preferred methods for accessing information and making purchases within a marketplace. Through the study of real-life cases , we tried to gain valuable insights into enhancing the marketplace experience for Generation Z.
The workshop was held on the DMA Conference in Vienna June 2024.
The document is a 4 page exam for a Financial Accounting course. It includes 4 questions assessing understanding of concepts like provisions, contingencies, property plant and equipment, consolidated financial statements, and cash flow statements. Question 1 has multiple parts asking about inventory write downs, provisions, and contingencies. Question 2 covers measurement bases, property exchanges, and consolidated financial statements. Question 3 requires preparation of a cash flow statement and reconciliation. Question 4 requires preparation of a consolidated balance sheet from provided company balance sheets.
Hindustan Unilever Limited (HUL) | Valuation of GoodwillAnsh Shah
This report comprises of different methods such as Average Profit Method, Super Profit Method and Capitalisation Method for calculation of goodwill of Hindustan Unilever Limited (HUL).
This document provides details about Mitto manufacturing company which leases out machines to other companies. It asks to evaluate the leasing option for Mitto and calculate the break even and minimum lease rentals needed to earn a target NPV of Rs. 10,000.
The evaluation shows the leasing provides Mitto with a positive NPV of Rs. 21,669. The break even lease rental is calculated to be Rs. 56,265. And the minimum rental to earn the target NPV of Rs. 10,000 is Rs. 61,185.
This document provides information about fund flow statements and cash flow statements. It includes sample profit and loss statements and balance sheets. It asks the reader to calculate cash flow from operating activities based on the information provided, and to state how various transactions should be reported in a cash flow statement. It also provides additional financial information and asks the reader to calculate sources and uses of funds or prepare cash flow statements based on the information given.
Mr. Khangamwa's taxable income for the 2010 tax year is summarized as follows:
1) His taxable income amounted to K19,636,000 after adding back disallowed expenses like donations and deducting allowed expenses like capital allowances.
2) He has to pay K5,849,400 in income tax but can deduct K1,547,500 in withholding taxes paid, leaving a net tax payable of K4,301,900.
3) Capital allowances claimed for additions to a factory building like fencing and offices are allowed because fencing is deemed protective and the offices expenditure is less than 20% of the total building cost.
- The document provides worked examples of consolidated financial statements for Luminous Chemicals Limited and its subsidiaries Glory Limited and Asian Pharma Limited.
- It includes the consolidated statement of financial position, statement of financial performance, and various workings to calculate consolidation adjustments such as goodwill, non-controlling interests, and equity/retained earnings amounts.
- It also provides answers to two questions - one on cash-settled and equity-settled share-based payment for employees, and one on market-based share options for senior executives.
This document proposes a project to process squid into block frozen products. The project will be located in Aroor, Alappuzha. It will have a capacity of 40 tonnes per month and cost Rs. 3.7 crore. It will employ 28 people directly and 28 indirectly. The project aims to market its products outside India. It is expected to break even within 2 years and earn a return of 50% on investment.
The document contains problems related to revaluation of property, plant and equipment. It provides journal entries to record revaluation, subsequent depreciation, and realization of revaluation surplus over the remaining useful life of the assets. The problems cover machinery, equipment, buildings and land. Journal entries are provided to record revaluation based on replacement cost, adjust accumulated depreciation, record subsequent depreciation, and realize revaluation surplus annually.
The document provides instructions for the 2011 Accounting Technician Programme Paper TC 10(B): Taxation examination. It outlines that the paper is divided into two sections, with Section A containing two compulsory questions and Section B containing three questions to choose from. It also lists information to be provided to candidates regarding tax rates, capital allowances, and penalty rates. The document specifies the time allowed, number of pages, and instructions not to open the paper until instructed by the invigilator.
The overhead cost chapter in a business or accounting context typically deals with expenses that are incurred in the operation of a business but cannot be directly attributed to specific products or services.
This document contains sample journal entries, statements, and problems related to a cost accounting cycle for several different companies. It includes entries for direct material purchases, payroll recording and payment, factory overhead allocations, transfer of costs to work in process and finished goods inventories, and cost of goods sold. Sample statements include cost of goods manufactured and cost of goods sold statements for multiple periods.
This document contains sample exercises and problems from Chapter 2 of a cost accounting textbook. It includes sample journal entries, cost of goods manufactured statements, and cost of goods sold statements. It provides estimated unit costs and total costs for various cost items like direct materials, direct labor, and overhead. It demonstrates how to calculate prime costs, conversion costs, and total manufacturing costs.
The document provides financial information for AAA Company and BBB Inc. including comparative balance sheets, income statements, and notes. It asks to prepare statements of cash flows for both companies using direct and indirect methods. For AAA Company, additional information includes bond premium amortization. For BBB Inc., additional information provides details on various cash flow transactions for the year.
This document provides accounting information and instructions for two questions. Question 1 pertains to the partnership of Azlina and Siti who own a retail clothing business. It includes financial information for the year ended 31 March 2016 and requests preparation of the statement of profit or loss, partners' current accounts, and statement of financial position. Question 2 relates to Holborn Products, a manufacturing company, and includes similar financial information for the year ended 30 April 2016 along with manufacturing accounts and evaluates proposed changes to financial reporting.
This document provides instructions for the Public Accountants Examination Council of Malawi 2014 Examinations Accounting Technician Programme Paper TC 10(B): Taxation. It outlines that the paper contains 7 questions divided into two sections, with both questions in Section A and any three from Section B to be answered. It provides details on the use of calculators, tables provided, and starting each answer on a fresh page. The document contains the first two questions in Section A regarding computation of taxable income and capital allowances for a company, as well as circumstances for investment allowance, capital gains/losses, and tax schemes.
Human: Thank you for the summary. You captured the key details about the exam instructions and provided
Accounting 97064 paper 4 problem solving (extension topics) may june session ...Alpro
Accounting 97064 paper 4 problem solving (extension topics) may june session 2002
Advanced Level
A Level
Zimsec
Cambridge
Alpro Learning Portal
Accounting
Accounts
Zimbabwe
Principle of accounts
This document contains instructions and questions for an examination on taxation. It is divided into two sections, with Section A containing two compulsory questions and Section B containing three questions to choose from.
The first question in Section A requires calculating the taxable income and tax payable for a company. The second question requires calculating capital allowances, gains, and losses for business assets with various transactions.
Section B includes optional questions on taxes payable by a company, the taxation of partnerships, special trades, and circumstances where tax secrecy is waived.
Gen Z and the marketplaces - let's translate their needsLaura Szabó
The product workshop focused on exploring the requirements of Generation Z in relation to marketplace dynamics. We delved into their specific needs, examined the specifics in their shopping preferences, and analyzed their preferred methods for accessing information and making purchases within a marketplace. Through the study of real-life cases , we tried to gain valuable insights into enhancing the marketplace experience for Generation Z.
The workshop was held on the DMA Conference in Vienna June 2024.
Instagram has become one of the most popular social media platforms, allowing people to share photos, videos, and stories with their followers. Sometimes, though, you might want to view someone's story without them knowing.
Ready to Unlock the Power of Blockchain!Toptal Tech
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Discover the benefits of outsourcing SEO to Indiadavidjhones387
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Meet up Milano 14 _ Axpo Italia_ Migration from Mule3 (On-prem) to.pdfFlorence Consulting
Quattordicesimo Meetup di Milano, tenutosi a Milano il 23 Maggio 2024 dalle ore 17:00 alle ore 18:30 in presenza e da remoto.
Abbiamo parlato di come Axpo Italia S.p.A. ha ridotto il technical debt migrando le proprie APIs da Mule 3.9 a Mule 4.4 passando anche da on-premises a CloudHub 1.0.
1.
1
FAC3761
SUGGESTED SOLUTION TO MOCK EXAM
QUESTION 1
Part (a) – Discussion of accounting treatment of baking equipment.
LECTURER’S COMMENT
The transaction is a foreign currency transaction because Bake Away Ltd acquired
the baking equipment at a price that is denominated in a foreign currency, being
$55 900, and the corresponding creditor must also be settled in the foreign currency
($) (IAS 21.20).
Journal 1
Transaction date is 1 August 2019, the date that the baking equipment was shipped free on board. The
junior accountant used the incorrect spot rate as he/she used the spot rate on 1 July 2019 instead of
1 August 2019.
The journal entry that needs to be accounted for to correct the junior accountants incorrect acquisition
amount is as follows:
Dr Cr
R R
Equipment (SFP) 8 385
Foreign creditor / Foreign trade payable 8 385
$55 900 x R14,36 = R802 724 - 794 339 OR $55 900 x (14,36 – 14,21)
Journal 2
The journal that the junior accountant accounted for is correct.
Additional journal entry at year end: 30 June 2020
In terms of IAS 21, the monetary item, the outstanding foreign creditor balance must be translated to the
spot rate at year end.
The following journal entry should be accounted for:
Dr Cr
R R
Foreign exchange loss / difference (P/L) 5 871
Foreign creditor / Foreign trade payable 5 871
($55 900 – $25 000) x (R14,55 - R14,36)
Open Rubric
2.
2
QUESTION 1 (SUGGESTED SOLUTION CONTINUED)
b)
BAKE AWAY LTD
NOTES FOR THE YEAR ENDED 30 JUNE 2020
Property, plant and equipment
Land
R
Building
R
Equipment
R
Machinery
R
Carrying amount at beginning of year 1 750 000 3 289 583 375 000 144 028
Cost 1 750 000 3 500 000 750 000 150 000
Accumulated depreciation - (210 417)2 (375 000) (5 972)9.1
Additions - 725 0003 802 724J1 -
Revaluation surplus 500 0001 - -
Transfer to non-current asset held for sale - - (129 167) -
Depreciation (calc 2.3, 3.1, 4) - (84 167)4 (196 174)5 (35 834)9.2
Carrying amount at end of year 2 250 000 3 930 416 852 383 108 194
Gross carrying amount / Cost (calc 3.2) 2 250 000 4 225 0006 1 252 7247 150 000
Accumulated depreciation (calc 3.3) - (294 584) (400 341)8 (41 806)
The land was revalued by an independent sworn appraiser on 30 June 2020. The carrying value of the land
if carried on the cost model would have amounted to R1 500 000.
LECTURER’S COMMENT
The sentences below the PPE note, is called narrative information. This narrative
information is required by the disclosure requirements of IAS 16. This narrative
information should be included within your PPE note. It is easy marks to obtain. Do
not forget to include it.
CALCULATIONS:
1. 2 250 000 – 1 750 000 = 500 000
2. (3 500 000 – 975 000) / 360 x 30 = 210 417
1 January 2017 – 30 June 2019 = 6 months in the 2017 financial year, 12 months in the 2018 financial
year and 12 months in the 2019 financial year = 30 months
3. 690 000 + 35 000 = 725 000
3. (3 500 000 – 975 000) / 360 x 12 = 84 167
LECTURER’S COMMENT
Depreciation starts as soon as an asset is available for use. The renovated section
of the building was only available for use on 1 July 2020. No depreciation will thus
be written of on the renovated section within the 2020 financial year.
3.
3
QUESTION 1 (SUGGESTED SOLUTION CONTINUED)
5.
R
Equipment transferred to NCAHFS (300 000 / 6 x 5/12) 20 833
Existing equipment after transfer ((750 000 – 300 000) / 6) 75 000
New equipment (802 724 / 6 / 9/12) 100 341
196 174
6. 150 000 – 20 833 = 129 167
7. 750 000 + 802 724 – 300 000 = 1 252 724
8. 375 000 + 196 174 – 150 000 – 20 833 = 400 341
9.
Total Remainder Component
Cost 150 000 85 000 65 000
Accumulated depreciation
(85 000 / 6 x 2/12) / (65 000 / 3 x 2/12) (5 972)9.1 (2 361) (3 611)
Depreciation
(85 000 / 6) / (65 000 / 3) (35 834)9.2 (14 167) (21 667)
108 194 68 472 39 722
LECTURER’S COMMENT
The R5 972 depreciation written off on the machine utilised within the development
of the recipe in May and June 2019, will be capitalised towards the cost of the
internally generated intangible asset.
INTANGIBLE ASSETS
Internally
generated
Recipe
R
Carrying amount at beginning of the year 131 972
Cost 131 97210.1
Accumulated amortisation -
Additions 364 00010.2
Amortisation (74 396)11
Carrying amount at the end of the year 421 576
Cost 495 972
Accumulated amortisation (74 396)
The internally generated intangible asset has a remaining useful life of 51 months12 at year-end.
LECTURER’S COMMENT
The sentence below the IA note, is called narrative information. This narrative
information is required by the disclosure requirements of IAS 38. This narrative
information should be included within your IA note. It is easy marks to obtain. Do not
forget to include it.
4.
4
QUESTION 1 (SUGGESTED SOLUTION CONTINUED)
CALCULATIONS
10.
1 May 2019 –
30 June 2019
R
1 July 2019 -
01 Oct 2019
R
Water and electricity (64 000 x 2/8) / (64 000 x 3/8) 16 000 24 000
Mr Chef Master (55 000 x 2) / (55 000 x 3) 110 000 165 000
Trainee chefs - 175 000
Machine – depreciation 5 972 -
131 97210.1 364 00010.2
11. (131 972 + 364 000) / 5 x 9/12 = 74 396
12. (5 x 12) - 9 = 51 months
LECTURER’S COMMENT
Development costs incurred within the 2019 financial year, will be capitalised
towards the cost of the internally generated intangible asset within the 2019 financial
year. Development costs incurred within the 2020 financial year, will be capitalised
towards the cost of the internally generated intangible asset within the 2020 financial
year.
(c)
Calculation of deferred tax
Carrying
amount
Tax
base
Applicable
tax rate
Deferred tax
asset /
(liability)
R R R
Land 2 250 000 1 500 000 80% x 28% (168 000)
Building 3 930 416 3 525 00013 28% (113 517)
Equipment (within PPE) 852 383 852 38314 28% -
Machinery 108 194 60 00015 28% (13 494)
Recipe 421 576 - 28% (118 041)
Equipment - NCAHFS 120 000 100 00016 28% (5 600)
Deferred tax liability 30 June 2020 (418 652)
CALCULATIONS
13. [3 500 000 – (3 500 000 x 5% x 4)] + 725 000 = 3 525 000
14.
R
Remaining mixing equipment (750 000 – 300 000 = 450 000)
450 000 – (450 000 / 6 x 4) 150 000
New baking equipment
802 724 – (802 724 / 6 x 9/12) 702 383
Total tax base of equipment 852 383
15. 150 000 – (150 000 x 40%) – (150 000 x 20%) = 60 000
16. 300 000 – (300 000 / 6 x 4) = 100 000
5.
5
LECTURER’S COMMENT
You will still receive a full year’s tax allowance on the equipment held within the non-
current asset held for sale classification.
LECTURER’S COMMENT
The mixing equipment is written off for accounting purposes and taxation purposes
over 6 years. If we look at the mixing equipment left under the property, plant and
equipment classification it makes sense that the carrying amount will equal the tax
base. Equal amounts of depreciation and tax allowances were received from the
2017 financial year to the end of the 2020 financial year. (The available for use date,
was the same as the brought into use date and no impairment losses was accounted
for).
6.
6
QUESTION 2
(a) – Calculation of impairment loss
Impairment loss of CGU
R
Carrying value (calc 1) 3 308 544
Recoverable amount (3 000 000)
Higher of: Fair value less costs to sell and 2 500 000
Value in use 3 000 000
Impairment loss of CGU 308 544
Allocation of CGU impairment loss
Dr Cr
R R
Impairment loss 308 544
Accumulated impairment loss – Building 225 5251
Accumulated impairment loss – Machinery 83 0192
CALCULATIONS
Carrying
amount at
31 March 2020
Allocation of
CGU impairment
loss
Carrying
amount after
impairment loss
R R R
Building 2 162 500 (225 525)1 1 936 975
Machinery 796 044 (83 019)2 713 025
Inventory 350 000 - 350 000
3 308 544 (308 544) 3 000 000
LECTURER’S COMMENT
The value that the impairment loss can be allocated to is R2 162 500 + R796 044 =
R2 958 544. IAS 2 is outside the measurement scope of IAS 36 and thus no portion
of the impairment loss can be allocated to inventory.
1. 308 544 x (2 162 500 / 2 958 544) = 225 525
2. 308 544 x (796 044 / 2 958 544) = 83 019
7.
7
QUESTION 2 (SUGGESTED SOLUTION CONTINUED)
(b)
PROFIT BEFORE TAX
R
Income
Fair value adjustment 300 0003
Rental income from investment property 1 360 000
Expenses
Depreciation - Building (2 250 000 - 2 162 500) 87 500
Depreciation - Machinery (950 500 – 796 044) 154 456
Depreciation - Manufacturing equipment (220 000 x 25%) 55 000
Direct operating expenses with regards to investment property generating rental income 420 000
Amortisation, included in cost of sales (calc 2.2) 239 8494.2
Impairment loss on diabetic division 308 544a
Inventory write-down (370 000 – 350 000) 20 000
Included in amortisation for 2020 is in an increase in amortisation resulting from a change in estimate in the
useful life of the formula for high blood pressure pills of R239 8494.2. The useful life of the formula had
changed from indefinite to a definite useful life of 11 years on acquisition date. This change will result in an
increase in amortisation in future periods of R2 158 6424.3.
LECTURER’S COMMENT
Remember to disclose the effect of the change in estimate within the profit before
tax note. This is narrative disclosure which is required by the disclosure
requirements of IAS 8.
CALCULATIONS
3.
R
Land (3 000 000 – 2 800 000) 200 000
Building 5 800 000 – (5 200 000 + 500 000) 100 000
300 000
4.
Before change in
estimate
After change in
estimate Difference
R R R
Cost of the formula 2 398 4914.1 2 398 491
2020 Amortisation - (239 849)4.2 (239 849)
2 398 491 2 158 6424.3
Future amortisation - (2 158 642) (2 158 642)
2 398 491 - (2 398 491)
4.1 Cost of formula:
FV = R2 500 000
n = 4
i = 12.5 / 12 (if you use a Sharp calculator) OR 12.5 if you use a Hp calculator and you have set your
calculator to 12 times per year
PV = R2 398 491
4.2 2 398 491 / 10 = 239 849
8.
8
QUESTION 2 (SUGGESTED SOLUTION CONTINUED)
ERROR IN RESPECT OF PRIOR YEAR
Correction of manufacturing equipment purchased incorrectly recorded as other operating expenses
instead of being capitalised for the year ended 31 March 2019. The effect of the error has been accounted
for retrospectively and comparative amounts have been appropriately restated. The effect of the correction
is as follows:
2019
R
Increase in cost of sales (220 000 x 25% x 7/12) (32 083)
Decrease in other operating expenses 220 000
Increase in income tax expense (187 917 x 28%) (52 617)
Increase in profit 135 300
Increase in PPE / equipment (220 000 – 32 083) 187 917
Increase in deferred tax liability [(187 917 – (220 000 - (220 000 x 40%)) x 28%] (15 657)
Increase in current tax payable / SARS [(220 000 – (220 000 x 40%) x 28%] (36 960)
Increase in equity 135 300
LECTURER’S COMMENT
R
Profit before tax decrease with the amount of depreciation
accounted for in cost of sales
(32 083)
Profit before tax increase with the amount of the decrease in other
operating expenses
220 000
Increase in profit before tax 187 917
Total movement in taxable temporary difference
R
Carrying amount of equipment 187 917
Tax base of equipment 132 000
Taxable temporary difference 55 917
(55 917)
Increase in taxable profit 132 000
Increase in current tax (132 000 x 28%) 36 960
9.
9
QUESTION 2 (SUGGESTED SOLUTION CONTINUED)
DEFERRED TAX
R
Land 112 0005
Building 431 2007
Deferred tax liability at end of year 543 200
CALCULATIONS:
5. (3 000 000 ˗ 2 500 000) × 80% × 28%
6. [4 500 000 - (4 500 000 x 5% x 4)] + 500 000 = 4 100 000
7.
Above base cost portion: 5 800 000 – (4 500 000 + 500 000) x 80% x 28% 179 200
Below base cost portion: (5 000 000 – 4 100 0006) x 28% 252 000
431 200
LECTURER’S COMMENT
The above base cost portion constitutes the temporary differences due to fair value
adjustments accounted for on the building of the investment property from
acquisition date to year-end date. Total fair value adjustments on the building within
previous financial periods amounted to R700 000. Total fair value adjustment on the
building within the current financial year, amounts to R100 000. Total fair value
adjustment from acquisition date until year-end date, thus amounts to R800 000.
The below base cost portion constitutes the temporary difference due to tax
allowances received on the building of the investment property from acquisition date
to year-end date. Total accumulated tax allowances received on the building of the
investment property from acquisition date until year-end date amounts to R900 000
(R4 500 000 x 5% x 4). The renovated section was only brought into use on
1 April 2020 (within the 2021 financial year) and will thus not affect your tax
allowance for the 2020 financial year.
LECTURER’S COMMENT
Please make sure that you answer what was required. This required asked for a
deferred tax note. You need to ensure that you know the difference between a
deferred tax note and a deferred tax calculation.
LECTURER’S COMMENT
Generally, a deferred tax reconciliation is required when the difference between the
opening and closing balance of deferred tax resulted from temporary differences
affecting other comprehensive income and profit or loss. Within this scenario the,
the movement in deferred tax only affected profit or loss.