101 2009 0 B

FAC4M28/101/0/2009
SCHOOL OF ACCOUNTING SCIENCES
DEPARTMENT OF FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING IV (MODULE 2)

FINANCIAL REPORTING IV (MODULE 2)
TUTORIAL LETTER 101/2009 FOR FAC4M28
Dear Student
PLEASE READ THE DEPARTMENTAL TUTORIAL LETTER ACTALL4/301/2008 IN

CONJUNCTION WITH THIS TUTORIAL LETTER. TAKE CARE THAT YOU HAVE THESE
TUTORIAL LETTERS AVAILABLE AT ALL TIMES AS FREQUENT REFERENCE WILL HAVE
TO BE MADE TO THEM.
Students registering at the Unisa Regional offices must please note that tutorial letter ACTALL-
4/301/2008, setting out all administrative arrangements for this module, will be dispatched to you from
the main campus in Pretoria on the same day that you register. It should reach you within a couple of
days after registration.
All the tutorial letters are available on the internet. Tutorial letters that include the solutions to
assignment questions will be available on the internet on the due date of the assignment. Documents
on the internet can be accessed via the UNISA website, after registering as a MyUnisa user.
Documents are in Acrobat Reader 6 format.
Access can be obtained as follows:
1. Enter your user id and password.

2. Select the relevant course code (e.g. FAC4M28).
3. Select the option “materials”.
4. Select the option “Official study material”.
5. A table with all the study material will appear.
6. Select the relevant tutorial letter and click on it to open the file.
(The tutorial letter will appear as follows: 101_2009_3_b.pdf)
Yours faithfully
LECTURER: FINANCIAL ACCOUNTING IV - FAC4M28

2
CONTENTS
PAGE
1. INTRODUCTION 2
2. TUTORIAL MATTER 2
3. SUGGESTED APPROACH TO STUDYING THIS MODULE 3
4. PLAGIARISM 4
5. PARTICULARS REGARDING ASSIGNMENTS 4
6. EXAMINATION SYSTEM 6
7. STUDY PROGRAMME 7
8. COMMUNICATION WITH THE UNIVERSITY 8
9. GENERAL 10
ANNEXURE A: ASSIGNMENT 01/2009 (COMPULSORY) 11

ANNEXURE B: ASSIGNMENT 02/2009 (COMPULSORY) 15
ANNEXURE C: ASSIGNMENT 03/2009 (OPTIONAL) 19
ANNEXURE D: MAY 2007 EXAMINATION PAPER WITH SUGGESTED SOLUTION 38
1. INTRODUCTION
Welcome to Financial Accounting and Reporting IV (Module 2) at UNISA. We trust that you will find
your studies rewarding, enriching and challenging. This tutorial letter contains very important
information. Please familiarise yourself with its contents.
Please take note of the following very important aspects:
Assignment 01 and 02 is a prerequisite for admission to the examination and counts 10% of
your final mark for this module.
Late assignments will not be accepted and will automatically be returned to you unmarked. Once
admitted to the examination, you will only have one examination opportunity to write the
examination. There is no automatic admission to a supplementary examination.
2. TUTORIAL MATTER
2.1 Supplied by Unisa
The Department of Despatch should supply you with a Study guide and a number of tutorial letters for
this module.
Note:
(1) This tutorial matter will not necessarily be available upon registration. Tutorial matter that is not
available when you register will be posted to you as soon as it is available.
(2) Upon registration, you will receive an inventory letter with information regarding your tutorial
matter. In this respect, full information can be obtained from the information brochure: Services
and Procedures which you have received together with your tutorial matter.
3 FAC4M28/101
DO NOT PHONE YOUR LECTURERS ABOUT MISSING TUTORIAL MATTER. ONLY USE THE
TELEPHONE NUMBER GIVEN IN THE INVENTORY LETTER FOR THIS PURPOSE.
Unisa Contact Centre – 0861 670 411 (RSA only) or +27 11 670 9000 (international calls).
2.2 Prescribed literature
The study guide as such is not exhaustive for purposes of tuition, and it is essential that you have at
your disposal the following prescribed books:
1. GAAP Handbook - latest edition by Von Well, R and Wingard, H.C. This book is referred to in the
Study guide as GAAP Handbook
2. Accounting Standards – latest edition by Oppermann, HRB; Booysen, SF et al. Juta: Cape Town.
This book is referred to in the study guide as Accounting Standards
3. Group Statements (Volumes 1 and 2) – latest edition by Cilliers, H.S., and Mans, K.N.
Butterworths, Durban. This work is referred to in the study guide as Group Statements
Students are required to use a non-programmable financial calculator in this module.
Please consult the list of official booksellers and their addresses at the end of this tutorial letter.
Should you have any difficulties obtaining books from the official booksellers, please contact the
Registrar (Academic) at telephone number (012) 429 4152 before the end of January (first registration)
or before the end of June (second registration). Also consult the brochure: Services and Procedures
for more information.
3. SUGGESTED APPROACH TO STUDYING THIS MODULE
Firstly work through the relevant sections of the study guide pertaining to the assignment to be
attempted.
Ensure that you understand the work and work through the examples on your own, without looking at
the answers. Compare your answer to the one in the guide and pinpoint where you made mistakes.
Restudy the relevant section and ensure that you now understand the solution to the example. If you
still do not understand, write the page reference and the problem on your “queries list” so that you can
phone the lecturer for an explanation.
Before attempting an assignment, ensure that you have studied the work as if preparing for the
examination.
Only thereafter should you attempt answering the assignment questions under examination
conditions, i.e. in the time allowed per question.
The assignment must in effect constitute your first revision of the study material which you have
studied. In other words, the assignment should not serve as a checklist of the work required to be
studied for the completion of the assignment, but should, when the assignment is attempted, serve as
a test of the knowledge that you have acquired by studying the work.
When you receive the suggested solution, compare your attempt in the time allowed to the solution
and determine the differences. In respect of every error, determine why the error was made i.e.
careless reading of the question, lack of knowledge, question not answered, carelessness in the
answering of the question, unable to complete the question due to time, calculations not shown, etc.
You have now revised the work for a second time and you have been exposed to the type of errors that
you are prone to make and can therefore work on correcting them.
4
If you persevere with this proposed approach to studying this module, you will reap the benefit of
sustained practice in answering questions and will undoubtedly enjoy success in the examination.
4. PLAGIARISM
Plagiarism is the act of taking words, ideas and thoughts of others and passing them off as your own. It
is a form of theft which involves a number of dishonest academic activities.
The Disciplinary Code for Students (2004) is given to all students at registration. Students are advised
to study the Code, especially Sections 2.1.13 and 2.1.4 (2004:3 - 4). Kindly read the University’s Policy
on Copyright Infringement and Plagiarism as well.
5. PARTICULARS REGARDING ASSIGNMENTS
Enquiries about assignments (e.g. whether or not the University has received your assignment or the
date on which an assignment was returned to you) must be addressed to:
The Unisa Contact Centre at 0861 670 411 (RSA only) or +27 11 670 9000 (international calls).
You might also find information on myUnisa.
5.1 COMPULSORY ASSIGMENTS (ASSIGNMENT 1 AND 2) AND YEAR MARK
For students to fully benefit from our formative tuition and assessment, the Management of the
University decided to make two assignments compulsory in all modules for 2009 which will count 10%
towards your final mark.
You are therefore required to submit compulsory assignments ( assignment 1 and 2) to obtain
admission to the examination.
Please ensure that this assignment reaches the University before the due date - late submission of
the assignment will result in you not being admitted to the examination.
Please take note that only assignment 1 and 2 are compulsory.
These assignments contain multiple choice questions for you to answer on a mark reading sheet. A
unique number for this assignment is provided and must be indicated on the assignment cover.
ASSIGNMENT 1 IS INCLUDED AS ANNEXURE A OF THIS TUTORIAL LETTER.

ASSIGNMENT 2 IS INCLUDED AS ANNEXURE B OF THIS TUTORIAL LETTER.
The compulsory assignments 1 and 2 will count 10% towards your final mark for this module. Your
assignment 1 and 2 mark will be used to calculate your year mark. Your performance in assignment 1
and 2 thus still plays a vital part in your final mark. The year mark will be calculated as follows:
Assignment 1 and 2 = year mark
Your year mark contributes 10% towards your final mark whilst your exam mark will contribute 90%.
You need a final mark of 50% in order to pass this module.
Assignments contribute the following weights towards your year mark:

Assignment 1 Multiple-choice assignment 5%
Assignment 2 Multiple-choice assignment 5%
Assignment 3 Long assignment 0%
5 FAC4M28/101
Example:
Year mark
Assignment 1 Mark obtained in multiple-choice assignment of 60% x 5% (weight) = 3%
Assignment 2 Mark obtained in multiple-choice assignment of 80% x 5% (weight) = 4%
Final mark
Year mark: As per above = 7%
Examination: Mark obtained in examination of 70% x 90% (weight) = 63%
= 70%
5.2 Assignments form part of the tutorial matter
Assignments and tutorial letters form an integral part of the tutorial matter and must also be studied for
examination purposes.
It is in your own interest to complete all the assignments (compulsory and optional) as:
• the assignments provide practical experience which is essential in your study of this module;
• valuable revision material is contained in the assignments;
• the type of questions in the assignments is usually representative of the type of questions which
you can expect in the examination.
Please note that it is not possible to cover every aspect of the study material in the
assignments.
The examination paper of at least one of the previous years’ is included in this tutorial letter. Some of
the questions from prior years’ examination papers are also included in your assignment questions.
5.3 Due dates
The three assignments for this module are attached as Annexure A (Assignment 1), Annexure B
(Assignment 2) and Annexure C (Assignment 3).
PLEASE NOTE THAT SUBMISSION OF ASSIGNMENT 01 AND 02 IS A PREREQUISITE FOR

ADMISSION TO THE EXAMS AND COUNTS 10% TOWARDS YOUR FINAL MARK FOR
FAC4M28.
If you decide to submit your answers to the assignment for marking by your lecturers, then your
answers to the assignments must be addressed to the Registrar (not the lecturers concerned) and
must reach the University not later that the dates specified below:
Assignment no: Due dates

01/2009 (COMPULSORY) – ANNEXURE A 24 April 2009
02/2009 (COMPULSORY) – ANNEXURE B 24 June 2009
03/2009 (OPTIONAL) – ANNEXURE C 22 July 2009
5.4. Finality of the due dates
The receipt of assignments after the due date disrupts our marking programme and as the uncontrolled
submission of assignments furthermore creates administrative problems no extension will be granted
for the submission of assignments.
IMPORTANT: IF THE COMPULSORY ASSIGNMENTS (ASSIGNMENT 01 AND 02) ARE RECEIVED

AFTER THE DUE DATE, YOU WILL NOT GET ADMISSION TO THE EXAMINATION.
6
5.4 Submission of assignments
(a) Full information and requirements regarding the handling of assignments appear in the brochure:
Services and Procedures which you have received together with your tutorial matter.
Assignments should be addressed to:
The Registrar
PO Box 392
UNISA
0003
(b) All the pages of your assignment must be numbered sequentially and a table of contents, set out
as follows, must be included as the first page of your assignment (not on the assignment cover):
Question number Page number

1 1
2 3
etc etc
(d) To submit an assignment via myUnisa:
• Go to myUnisa
• Log in with your student number and password
• Select the module from the orange bar
• Click on “Assignments” in the left menu
• Click on the “assignment number you want to submit”
• Follow the instructions
(e) Assignments received after the due date will not be marked.
5.6 Marking of assignments
Assignment 1 and 2
These compulsory assignments will be marked in full.
Assignment 3
Please note that it is the policy of this Department not to mark the whole assignment. Depending on
the length and degree of difficulty of an assignment only one or two questions or parts of questions
may be marked. Your mark for the whole assignment will therefore be the mark you obtain for the
specific section(s) marked. For more detail please refer to the relevant paragraph of Departmental
Tutorial Letter ACTALL43012009. Suggested solutions to all the assignment questions will be sent to
all students registered for this module in follow-up tutorial letters numbered as 201 and 202.
5.7. Enquiries
Specify the module code and assignment number in all enquires about assignments. Enquiries about
assignments (whether they were received by the University, what mark was awarded, when they were
returned to you, etc) should be addressed to:
Assignments section: Tel (012) 429-4155
6. EXAMINATION SYSTEM
For general information and requirements as far as assignments are concerned, see the brochure
Unisa: service and procedures which you received with your study material.
7 FAC4M28/101
6.1 Examination admission
THE SUBMISSION OF THE COMPULSORY ASSIGNMENTS (ASSIGNMENT 01 AND 02) ARE THE
REQUIREMENT SET FOR ADMISSION TO THE EXAMINATION. STUDENTS THAT COMPLY WITH
THE REQUIREMENTS WILL BE ADMITTED TO THE EXAMINATION OF FAC4M28.
Please note: The compulsory assignments (assignment 1 and 2) counts 10% towards your final
mark. The mark obtained by you in the examination will determine the remaining 90% of your
final mark for this module. (Refer to section 5.1 above.)
6.2 Examination period
Examinations will be held during the following period:
REGISTRATION PERIOD EXAMINATION PERIOD

January 2009 October 2009 / November 2009
During the module, the Examination Section will provide you with information regarding the
examination in general, examination venues, examination dates and examination times.
You will write a three hour, 100 mark examination for this module.
You are advised to consult the examination time-table in Calendar 1, General Information, in good time
in order to plan your final revision programme accordingly. This information is also available online on
myUnisa Please start your study programme timeously in order to avoid "cramming" at the last
moment.
The examination paper for Financial Accounting IV (Module 2) / Financial Reporting IV (Module 2) will
only be written in English.
You will have one main examination opportunity. A supplementary exam will only be granted if
your final mark is from 45% to 49%.
6.3 Previous examination papers
Previous examination papers are available to students in the form of addenda in tutorial letter 101. We
advise you, however, not to focus on old examination papers only as the content of modules and,
therefore, examination papers change from year to year. You may, however, accept that the type of
questions that will be asked in the examination will be similar to the questions asked in the activities in
your study guide and in the assignments.
6.4 Tutorial letter with information on the examination
To help you in your preparation for the examination, you will receive an examination letter (included as
an addendum in a tutorial letter) that will explain the format of the examination paper and general
advice the lecturers want to share with students.
7. STUDY PROGRAMME
Experience has shown that students often fail to plan their studies properly so as to achieve specific
study goals at predetermined dates. This leads to a haphazard approach to their studies and the use of
ineffective study techniques.
8
We assume the following:
That your studies will commence in the middle of January (first registration) and that the full module
should be completed by approximately the end of July (first registration). This will leave sufficient time
for revision.
NB: Those of you who register late should endeavour to put in extra effort in order to make up for the
lost time.
STUDY PROGRAMME: 2009
FAC4M28
Date on which
Assignment number assignment must be
Date Study unit posted* Due date
01 (Compulsory) 12/01/2009 to 1-2 14/04/2009 24/04/2009
Annexure A 14/04/2009
02 (Compulsory) 15/04/2009 to 1-4 14/06/2009 24/06/2009

Annexure B 14/06/2009
03 (Optional) 15/06/2009 to 1-8 12/07/2009 22/07/2009

Annexure C 12/07/2009
From 13/07/2009 Revision of all study units
*NB: This is only a guideline. Foreign students and students in areas with irregular postal services
must allow additional time for possible postal delays.
We feel that at this juncture a word of warning would not be amiss. Please do not allow yourself to get
behind with your study programme. Regaining of lost time is seldom achieved.
8. COMMUNICATION WITH THE UNIVERSITY
8.1 Enquiries regarding study material
The addresses for communication with the University appear in the brochure: Services and
Procedures which you have received together with your tutorial matter. The general Unisa Contact
Centre number is 086 167 4111.
Please contact the Department of Despatch in respect of study material issued by the University at
012 429-4104.
You may contact your lecturers in the following ways:
Postal Address:
Name of lecturer
University of South Africa
PO Box 392
Unisa
0003
Online address: http://my.unisa.ac.za

9 FAC4M28/101
Telephone number E-mail address Office number

Mr JAC Bosman (012) 429 4345 bosmajac@unisa.ac.za AJH 4-67
Mrs M Evans (012) 429 8606 evansm@unisa.ac.za AJH 4-64
Mr M Mokgobinyane (012) 429 6991 mokgomv@unisa.ac.za AJH 4-70
Mrs T Buonaguro (012) 429 4945 buonat@unisa.ac.za AJH 4-81
Please do not hesitate to consult the lecturer by letter, e-mail or personally (by appointment only),
should you be faced with specific problems in your studies. Please bear in mind that lecturers are
involved in research and other academic work in the afternoons and are thus normally available
between 07:45 and 09:45 and between 10:15 and 13:00 on weekdays.
In regards to administrative enquiries the following person can be contacted:

Telephone number Office number
Ms A Lawrence (012) 429 4326 AJH 4-62
The Department of Financial Accounting is situated on the main campus (Pretoria) on the fourth floor of
the AJH van der Walt Building.
Department of Financial Accounting contact numbers:

• Telephone: (012) 429-4459 (departmental secretary).
• Fax: (012) 429-3424 (marked for a specific lecturer’s attention).
Ensure that your student number, return address and telephone numbers are included with your
enquiries. Always have your student number on hand when contacting the University.
8.2 Enquiries regarding learning centres
Students who are interested in tutor assistance can obtain the telephone numbers and details from the
learning centres.
Learning Centre Telephone number

Gauteng
Benoni 011 421 6593
Florida 011 471 2658
Johannesburg (Old JSE Building) 011 630 4500
Sunnyside (Thutong) 012 484 1190
Kwazulu Natal
Durban 031 335 1749/4824
Pietermaritzburg 033 355 1728
Cape
East London 043 743 9246
Port Elizabeth 041 363 6800
Umtata 047 531 5002/6
Parow 021 936 4122/3/9
Wellington 021 936 4122/3/9
George 021 936 4122/3/9
10
Other regions
Bloemfontein 051 430 4353
Kimberley 053 832 6391
Mafikeng 018 381 6617/6588
Rustenburg 014 565 7080/2144
Kroonstad 056 213 2053/4
Polokwane 015 290 3417/9
Nelspruit 013 755 2476
9. GENERAL
It should be mentioned that you will write a three hour examination for this module in
October/November.
You are advised to consult the examination time-table in Calendar 1, General Information, in good time
in order to plan your final revision programme accordingly. Please ensure an early start in order to
avoid cramming at the last moment.
In spite of care taken to ensure that study guides, assignments and suggested solutions are compre-
hensible and free from errors, omissions and discrepancies may occur.
Should you come across such matters, or matters which are not clearly expressed, kindly let me know
to enable me to effect the necessary corrections.
I trust that you will have a pleasant year of study and wish you every success therein.
Yours faithfully
LECTURERS: FINANCIAL ACCOUNTING IV (Module 2) (FAC4M28)

11 FAC4M28/101
ANNEXURE A: ASSIGNMENT 01 FOR FAC4M28 (compulsory)
SUBMISSION OF ASSIGNMENT 01 IS COMPULSORY TO OBTAIN EXAMINATION ADMISSION
UNIQUE NUMBER:
FAC4M28: 626141
DUE DATE: 24 APRIL 2009
PLEASE NOTE:
1. This assignment consists of 10 multiple choice questions. Questions 1 - 10 of this assignment must
be answered on a mark-reading sheet. Before completing the mark-reading sheet, please see the
instructions contained in this year’s issue of “UNISA: SERVICES AND PROCEDURES”. Read these
instructions CAREFULLY and follow them exactly to avoid mistakes.
2. This assignment covers study unit 1 and 2 of the study guide. Work carefully through the relevant
tutorial matter before you tackle the assignment.
3. NO EXTENSION WILL BE GRANTED FOR THE LATE SUBMISSION OF THIS ASSIGMENT AND
NO CORRESPONDENCE OR TELEPHONE CONVERSATIONS WILL BE CONDUCTED IN THIS
REGARD.
4. THIS ASSIGNMENT MAY BE SUBMITTED VIA MYUNISA (see 5.5)
REMEMBER:
There is only on correct answer to each question.

All questions are equal in value.
Only mark-reading sheets provided may be used.
Colour in the correct block with a HB pencil.
Fill in your student number correctly.
Fill in the assignment number correctly.
Fill in the unique number of the assignment for the specific module correctly. Every assignment
which is marked by the computer is given a unique number. The number contains information on the
module code and assignment number. When the computer reads the mark-reading sheet with, say,
the unique number 103039, it knows that it is Assignment 01 for that specific module.
Send only your mark-reading sheet to the Assignment Section in the appropriate envelope.
Make sure that you have enough mark-reading sheets.
DO NOT:
Make more than one mark per question;

tear or fold the mark-reading sheet;
staple the mark reading sheet to another piece of paper;
colour outside the block;
colour in the block with a pen;
make corrections with Tippex;
submit answers on written sheet of paper, or
try to repair a torn mark-reading sheet with sticky tape – use another one.
12
ASSIGNMENT 1 (10 marks)
Help-u-Sell (Pty) Ltd is a Property Management company situated in Cape Town. The company
invests in property which it lease out. The company has a 30 September 2008 year-end.
The following information relates to the activities of the company:
Land & Buildings:
On 1 February 2008, the company purchased erf 90210, Camps Bay. The value of the land, on that
date, was R1 197 000 (incl VAT). The land was purchased from PropDev who is a registered VAT
vendor.
On 1 March 2008, the company decided to commence construction of a building on the land. They
anticipate that construction of the building will be complete on 31 May 2009. At 30 September 2008,
the costs incurred on the building amount to R1 320 050.
On 1 October 2008, the company entered into a lease agreement with V&A Holdings. The lease is for
a period of 6 years. The monthly lease payment amounts to R 94 000. The fair value of the building in
the area is R6 000 000. The useful life of the building is estimated at 30 years.
Machinery:
The company bought a machine on 1 January 2006 at a cost of R650 000. The machine has no
residual value at this date. The machine is used by the company to print banners for the properties in
order to advertise them. The machine has an estimated useful life of 4 years.
Due to technical advancement, a new machine has been released to the market at a cost of R907 600.
The new machine will be delivered on 1 July 2008, and will be ready for use from that date. Payment of
the machine is to be made on 31 December 2008. This machine has an expected useful life of 5 years.
The company has an option to trade-in the machine for a new one.
Should they opt for the trade-in; details are as follows:

Trade-in value: R250 000
Trade-in date: 30 June 2008
Additional information:
1. The company is a registered VAT vendor.

2. Depreciation is provided for using the straight-line method, over the asset’s expected useful life.
3. Ignore taxation.
4. Market interest rate on similar lease agreements is 16% per annum.
5. The company discloses Investment Properties using the Fair Value model.
6. Normal payment terms are considered 30 days from date of delivery. Interest is levied at 12% per
annum.
13 FAC4M28/101
ASSIGNMENT 01/2009(continued)
MULTIPLE CHOICE QUESTIONS
Please ensure that you fill in the correct unique number for the specific module and year
module on the mark reading sheet. Each question has only one correct answer.
The questions all relate to the notes for the year ended 30 September 2008 as disclosed on that date
in the annual financial statements of Help-u-Sell (Pty) Ltd, which comply with the requirements of
Generally Accepted Accounting Practice and the Companies Act, 1973.
Round off all calculations to the nearest Rand.
1. What is the correct treatment relating to the VAT on the land?
1. Claim an amount of R147 000 as VAT

2. Claim an amount of R119 700 as Transfer Duty
3. There is no claim as the seller is not a registered VAT vendor
4. None of the above
2. Calculate the depreciation on the land for year 1.
1. Depreciation of R10 606 per annum

2. Land has an unlimited useful life, and therefore is not depreciated
3. Depreciation period not provided
3. If the company had decided not to commence with the construction of the building on
1 March 2008, what would be disclosed in the statement of financial position at
30 September 2008?
1. An amount of R1 050 000 as Investment Property

2. An amount of R1 050 000 as Property, Plant and Equipment
3. An amount of R1 088 182 as Investment Property
4. How will the amount of R1 320 050 relating to the construction of the building be disclosed in the
statement of financial position at 30 September 2008?
1. As a balance under the line item, Construction Contracts

2. As a balance under the line item, Investment Property
3. As a balance under the line item, Property, Plant and Equipment
5. From the information provided in the question, classify the building which is leased out:
1. As an item of PPE, classified as owner-occupied property, which will be depreciated over

the useful life of 30 years, according to the statement of Property, Plant and Equipment
(IAS16)
2. As an investment property, as it is held to earn rentals or for capital appreciation
3. The building is leased out in terms of a Finance lease, and thus does not appear in the
accounting records of Help-u-Sell (Pty) Ltd
14
ASSIGNMENT 01/2009 (continued)
6. Calculate the carrying value of the existing machine at 30 June 2008.
1. The carrying value of the machine is R243 750.

2. The carrying value of the machine is R406 250
3. The carrying value of the machine is R250 000
7. If the machine is traded in, in exchange for the new one. What is the correct accounting treatment?
1. Recognise the new machine at the fair market value of R907 600, and continue
depreciating the existing machine for the remainder of its useful life.
2. Derecognise the carrying value of the current machine, record the value of the new machine
in the accounting records. Recognise the profit or loss on disposal of the machine when the
machine is derecognised.
3. I don’t know
8. The amount to be recognised in the Statement of Financial position as the cost of the new
machine, is:
1. R840 000
2. R855 000
3. R736 845
9. The interest portion to be recognised at year end amounts to:
1. R15 000
2. R52 600
3. R26 300
10. Calculate the depreciation of the new machine at 30 September 2008.
1. R42 000
2. R171 000
3. R42 750
15 FAC4M28/101
ANNEXURE B: ASSIGNMENT 02 FOR FAC4M28 (compulsory)
SUBMISSION OF ASSIGNMENT 02 IS COMPULSORY TO OBTAIN EXAMINATION ADMISSION
UNIQUE NUMBER:
FAC4M28: 567818
DUE DATE: 24 JUNE 2009
PLEASE NOTE:
1. This assignment consists of 10 multiple choice questions. Questions 1 - 10 of this assignment must
be answered on a mark-reading sheet. Before completing the mark-reading sheet, please see the
instructions contained in this year’s issue of “UNISA: SERVICES AND PROCEDURES”. Read these
instructions CAREFULLY and follow them exactly to avoid mistakes.
2. This assignment covers study unit 1 to 4 of the study guide. Work carefully through the relevant
tutorial matter before you tackle the assignment.
3. NO EXTENSION WILL BE GRANTED FOR THE LATE SUBMISSION OF THIS ASSIGMENT AND
NO CORRESPONDENCE OR TELEPHONE CONVERSATIONS WILL BE CONDUCTED IN THIS
REGARD.
4. THIS ASSIGNMENT MAY BE SUBMITTED VIA MYUNISA (see 5.5)
REMEMBER:
There is only on correct answer to each question.

All questions are equal in value.
Only mark-reading sheets provided may be used.
Colour in the correct block with a HB pencil.
Fill in your student number correctly.
Fill in the assignment number correctly.
Fill in the unique number of the assignment for the specific module correctly. Every assignment
which is marked by the computer is given a unique number. The number contains information on the
module code and assignment number. When the computer reads the mark-reading sheet with, say,
the unique number 103039, it knows that it is Assignment 01 for that specific module.
Send only your mark-reading sheet to the Assignment Section in the appropriate envelope.
Make sure that you have enough mark-reading sheets.
DO NOT:
Make more than one mark per question;

tear or fold the mark-reading sheet;
staple the mark reading sheet to another piece of paper;
colour outside the block;
colour in the block with a pen;
make corrections with Tippex;
submit answers on written sheet of paper, or
try to repair a torn mark-reading sheet with sticky tape – use another one.
16
ASSIGNMENT 2 (10 marks)
Toys for all (Pty) Ltd is a toy manufacturing company with a 31 December 2008 year-end. The
company is situated in Port-Elizabeth.
The following information is available regarding the assets of the company:
Machine:
The company acquired the machine on 1 April 2007 for R500 000. The company had to pay R20 000
for delivery of the machine and R30 000 to mount the machine. The company is of the opinion that the
machine will have a useful life of 5 years. No residual value was allocated to this machine.
Delivery vehicle:
The company acquired a delivery vehicle on 31 May 2008 for R200 000. A residual value of R40 000
was allocated to this vehicle. The vehicle has an estimated useful life of 4 years.
Computer software package:
The company developed a new computer software package for internal use. The following expenditure
was incurred relating to this package:
1 Jan 2007 – 31 Oct 2007 R90 000

1 Nov 2007 – 31 Dec 2007 R20 000
1 Jan 2008 – 31 Dec 2008 R100 000
The company is of the opinion that the software package has an estimated useful life of 10 years. No
residual value was allocated to this intangible asset.
Additional information:
1. The company applies the cost model to its assets.
2. Depreciation is provided on the number of units’ method.
3. Amortisation is provided on the straight-line method.
4. The following information is available to calculate depreciation:

Number of units Number of km’s
produced by machine travelled by vehicle
Year ending 31 December 2007 60 000 40 000
Year ending 31 December 2011 90 000 -
5. Proof was provided on 1 Nov 2007 that the software package met the criteria for recognition as an
intangible asset.
6. Due to a pipe leakage in the factory, there is an indication that the machine is subject to an
impairment loss. On 31 December 2008 the fair value of the machine amounts to R380 000. Value
in use on this date was calculated to be R350 000. Cost to sell was indicated to be R20 000.
17 FAC4M28/101
MULTIPLE CHOICE QUESTIONS
Please ensure that you fill in the correct unique number for the specific module and year
module on the mark reading sheet. Each question has only one correct answer.
The questions all relate to the notes for the year ended 31 December 2008 as disclosed on that date in
the annual financial statements of Toys for all (Pty) Ltd, which comply with the requirements of
Generally Accepted Accounting Practice and the Companies Act, 1973
1. What is the total cost price of the machine? (At what amount will this machine be recognized in the
accounting records?)
1. R520 000
2. R550 000
3. R500 000
2. Calculate the amount that will be included in the note profit before tax, for the year ending
31 December 2008, in regards to depreciation on the machine.
1. R114 583
2. R104 167
3. R108 333
3. Calculate the impairment loss on the machine as at 31 December 2008.
1. R16 667
2. R17 083
3. R6 667
4. The depreciation policy that the company applies is disclosed in the following note:
1. Profit before tax

2. Accounting policy
3. Property, plant and equipment
5. Calculate the carrying value of the delivery vehicle as on 31 December 2008.
1. R163 636
2. R160 000
3. R170 909
6. The company received an offer on 31 December 2008 to buy the delivery vehicle for R180 000.
Calculate the profit on disposal if the company decides to sell the vehicle.
1. R9 091
2. R16 364
3. R20 000
18
7. The information regarding the discount rate used in the calculation of value in use (if the recoverable
amount of an asset is the value in use thereof) should be disclosed in terms of:
1. Presentation and disclosure (IAS 1)

2. Impairment of assets (IAS 36)
3. Companies Act
8. The date on which the internal generated computer software will be capitalized as an asset is as
follows:
1. The date when development begins

2. The date when the development is finished
3. The date at which the criteria for recognition is met
9. The total cost price of the software amounts to:
1. R20 000
2. R120 000
3. R210 000
10. Calculate the accumulated amortisation as on 1 January 2008 on the software package.
1. R2 000
2. R333
3. R1 833
19 FAC4M28/101
ANNEXURE C: ASSIGNMENT 03 FOR FAC4M28 (OPTIONAL)
DUE DATE: 22 JULY 2009
QUESTION TOPIC MARKS TIME

(minutes)
1 Property, plant and equipment with revaluation 22 40
2 Investment properties 34 61
3 Impairment of assets 26 47
4 Investment properties and impairment of assets 26 47
5 Intangible assets 32 58
6 Intangible assets 15 27
7 Group statements – Vertical group 45 81
8 Group statements – Horizontal group 33 59
9 Associates 30 54
10 Joint ventures 25 45
11 Consolidated statement of cash flows 30 54
12 Consolidated statement of cash flows 25 45
343 618
20
QUESTION 1 (22 marks)(40 minutes)
YRU Limited has always accounted for its property, plant and equipment using the cost model. During
the year the board of directors decided they wanted to revalue the plant on an annual basis to net
replacement value. This would ensure that the carrying amount of the plant is reflected at their
approximate market values.
The following information is relevant to the plant for the year ended 30 June 20.6.
Historical cost R1 200 000

Purchase date 1 July 1999
Useful life 8 years
Depreciation method Straight-line
Gross replacement value on 1 July 20.5 R1 300 000
Wear and tear allowance 15% pa
Profit before tax and depreciation – 20.6 R580 000
– 20.5 R490 000
The revaluation on 1 July 20.5 was performed by a sworn appraiser, Mr A Bloom, 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 plant.
REQUIRED:
1. Prepare the following notes to the annual financial statements of YRU Limited for the year ended
30 June 20.6 in order to comply with the requirements of the Statements of Generally Accepted
Accounting Practice.
a) Accounting policy - Property, plant and equipment (4)

b) Property, plant and equipment (7)
c) Revaluation reserve (3)
2. Prepare the statement of comprehensive income (previously the income statement) of YRU
Limited for the year ended 30 June 20.6 in accordance with the requirements of the Statements of
Generally Accepted Accounting Practice. (8)
21 FAC4M28/101
You are the financial accountant of Bodmin Limited, a manufacturing company situated in Industria
Park. Bodmin Limited specialises in the manufacturing of cables. The company’s year end is
31 December. The following information is relevant to their assets:
Land and buildings (Situated at Stand 66, Industria Park)
Land and buildings were bought on 1 January 20.3 at a cost of R1 250 000 (Land: R500 000; Office
building: R750 000). The building has a useful life of 25 years. At that stage 5% of the building was
used by Bodmin Limited for its head office. The portion of the building of 5% is regarded as
insignificant.
The remaining space was rented out to various tenants. The lessees occupied the office building in
terms of 5 year operating lease agreements. The total rental income is R22 000 per month.
Bodmin Limited incurred the following monthly expenses on the office building during the 20.4 financial
year:
• short-term insurance of R2 500
• property rates of R1 200, and
• security services of R1 000.
The following were the fair values (net replacement values) on the different dates indicated:
Land Building
R R
31/12/20.3 Fair value 510 000 753 000
31/12/20.4 Fair value 520 000 770 000
Land and buildings (Situated at Stand 67, Industria Park)
Due to the demand for cables, Bodmin Limited expanded their production facilities and as a result
purchased the stand next door on 1 January 20.4 for R2 800 000 (Land: R750 000; Manufacturing
building: R2 050 000). The building has a useful life of 25 years. Bodmin Limited did not renew a rental
agreement that expired on 1 January 20.4 for the premises that they had previously used for their
manufacturing activities.
Machine
On 30 June 20.3 Bodmin Limited bought a new machine with a useful life of 10 years and no residual
value. The machine must undergo a major inspection every 2 000 working hours, therefore
approximately once a year. The estimated cost of a major inspection is R15 000. Due to the increase in
production of cables, the inspection was done on 1 January 20.4 at a cost of R20 000. The machine
was idle for a period of 1 month during the servicing of the machine.
R
30/06/20.3 Original cost of machine (includes the inspection cost component) 150 000
Additional information
1. The following are the accounting policies of Bodmin Limited concerning its assets:
• Owner-occupied land and buildings are carried at cost less accumulated depreciation.
Depreciation is provided for on the straight-line basis over the useful life of the building.
• Machinery is carried at cost less accumulated depreciation. Depreciation is provided for on the
straight-line basis over the useful life of the machinery.
• Investment property is carried at fair value.
22
QUESTION 2 (continued)
2. The valuations were done by Mr. Mills of Manpro, a firm of independent sworn appraisers.
Mr. Mills holds a recognised and relevant professional qualification and has recent experience in
the location and category of the property being valued. The fair values were determined by
reference to current market evidence and the latest valuation took place on 31 December 20.4.
REQUIRED:
Disclose the above information in the following notes to the annual financial statements of Bodmin
Limited for the year ended 31 December 20.4. Your answer must comply with the requirements of
Statements of Generally Accepted Accounting Practice and the Companies Act, 1973:
• Accounting policy
• Property, plant and equipment
• Investment property
• Profit before tax
Comparative figures are not required.

Round off all calculations to the nearest rand.
23 FAC4M28/101
Treeline Limited has a machine in operation that has been damaged by lightning. The machine is still
in a working condition but its capacity has been diminished. The carrying amount of the machine at
31 August 20.2, before taking into account any possible impairment, is as follows:
Other
Machine A machinery
R R
Cost 2 800 000 5 000 000
Accumulated depreciation to 31 August 20.1 (420 000) (3 200 000)
Carrying amount 2 380 000 1 800 000
Depreciation for current year (280 000) (800 000)
Carrying amount 2 100 000 1 000 000
The machine is being depreciated at 10% per year on the straight-line method. The machine is
2,5 years old.
If the machine is sold, as is, in an arm’s length transaction it can be sold for R1 400 000. Treeline
Limited will have to incur costs of R50 000 to dispose of the machine. The value in use of the machine
was calculated to be R1 361 000 using a before tax discount rate of 15%.
The other machinery of Treeline Limited is not impaired at 31 August 20.1 and nor was there any
impairment of machinery at 31 August 20.0.
REQUIRED:
PART A
Discuss the following:
• What is an impairment loss?

• How is it treated in the financial statements of a company?
• What is the implication of an impairment loss on the carrying amount of an asset that is impaired?
PART B
Disclose the abovementioned information in the notes to the annual financial statements of Treeline
Limited for the year ended 31 August 20.2. Your answer must comply with the requirements of the
Companies Act, 1973 and Statements of Generally Accepted Accounting Practice.
Ignore all tax implications.

24
PART A
1. On 1 March 20.5 Butters Limited acquired land and office buildings for R400 000 and R1 450 000
respectively for cash. The property is situated on stand 704 in Midrand. Butters Limited has leased
out the building to Abee Limited, under a five year operating lease, since the date of acquisition.
The rental income per month is R32 000.
2. On 31 May 20.6 repairs of R33 000 were done to the office building.
3. Butters Limited is an investment company and applies the fair value model to its investment
properties.
The property was valued by Mr Value, an independent sworn appraiser with a recognised and
applicable professional qualification who has recent experience in the location and category of the
investment property being valued. The fair value of the property is determined with reference to
current market evidence. The fair values are as follows:
30 June 20.6 30 June 20.5

R R
Land and buildings 2 610 000 1 975 000
REQUIRED:
Prepare all the journal entries in respect of the above-mentioned property in the accounting records of
Butters Limited for the years ended 30 June 20.5 and 30 June 20.6.
Journal narrations are not required and all calculations must be shown.
Your answer must comply with the requirements of the Companies Act, 1973 and Statements of
Generally Accepted Accounting Practice. [11]
PART B
Naboom Limited is a company in the publishing industry. The company acquired all its machines to be
used in the production process on 1 May 20.3.
On 30 April 20.6 it was found that due to the introduction of new technology affecting the printing
machines, Machine S could no longer be used to its full capacity and thus the machine was impaired.
The cost of Machine S was R116 000 and it is depreciated over 5 years using the straight-line method.
The calculated value in use for Machine S amounted to R44 000. The appropriate discount rate used
for this machine is 8,5% per annum.
The machine can be disposed of in an arms’ length transaction in an active market for R46 000 and the
costs to be incurred in the disposing of the machine will be R5 000.
Any impairment loss is considered to be material.

25 FAC4M28/101
REQUIRED:
Prepare the following notes to the annual financial statements of Naboom Limited for the year ended
30 April 20.6:

2. Property, plant and equipment (including the information relating to the impairment loss).
The accounting policy notes are not required.

Comparative amounts are not required
Generally Accepted Accounting Practice. Show all your calculations.
[15]
26
Aldo Limited developed a process which will be patented during the current financial year and it will be
available for use in its manufacturing plant from 1 August 20.2. The development costs met the criteria
for recognition as an internally generated intangible asset on 30 April 20.2.
1 September 20.1 1 May 20.2

- 30 April 20.2 - 31 July 20.2
R R
Work outsourced to subcontractors 105 000 90 000
Personnel costs 175 000 300 000
Consumables 15 000 50 000
Water and electricity 50 000 40 000
A specialised machine with a cost price of R220 000 was acquired by Aldo Limited on 30 April 20.2 to
assist with the development of the patent. The machine was used in the development process from
1 May 20.2 until 31 July 20.2. Thereafter it was used in the manufacturing department.
1. Development costs will be amortised on a systematic basis over their expected useful life of
5 years.
2. All machinery is depreciated at 20% per annum on a straight-line basis.
REQUIRED:
PART A
Discuss the following:
• What is an intangible asset?

• What is research?
• What is development?
• An intangible asset arising from development (or from the developmental phase of an internal
project) shall be recognised if, and only if, an entity can demonstrate certain criteria. What are
these criteria?
PART B
Prepare all the relevant notes to the financial statements of Aldo Limited for the year ended
31 August 20.2. Your answer must comply with the requirements of the Companies Act, 1973 and
Statements of Generally Accepted Accounting Practice.
Comparative figures are required.

27 FAC4M28/101
Bale Limited developed a new electronic component for use in motor engines during the current
financial year.
The following costs relating to the development of the electronic component were incurred during the
year ended 31 August 20.6:
R
Work outsourced to subcontractors 100 000
Personnel costs 300 000
Consumables 50 000
Water and electricity 60 000
510 000
On 31 May 20.6 the development costs met the criteria for recognition as an intangible asset.
It is the policy of the company to amortise development costs on the basis of units of the electrical
component sold to saleable units.
The following are the projected sales of units of the electrical component:
For the year ended Units

31 August 20.6 (actual) 3 000
31 August 20.7 27 000
31 August 20.8 30 000
With the preparation of the financial statements on 31 August 20.6 there were indications that the
recoverable amount of the development costs was materially impaired. Based on forecasts of future
sales the value in use at year end amounted to R450 000. The technology could be sold on
31 August 20.6 for R430 000.
REQUIRED:
Prepare the following notes to the financial statements of Bale Limited for the year ended
31 August 20.6:
3. Intangible assets
Generally Accepted Accounting Practice.
28
QUESTION 7 (45 marks)(81minutes)
The following trial balances of City Limited, Fruit Limited and Veggie Limited are provided for the year
ended 31 March 20.6:
City Fruit Veggie
Limited Limited Limited
R R R
Credits
Share capital - R1 ordinary shares 70 000 50 000 19 700
Retained earnings - 1 April 20.5 193 000 74 000 40 800
Trade and other payables 23 000 27 000 17 500
Revenue 180 000 90 000 149 000
Other income 24 000 6 300 -
Long-term borrowings 57 750 40 600 17 300
547 750 287 900 244 300
Debits
Property, plant and equipment 241 500 84 000 60 000
Investments:
- Fruit Limited 65 000 - -
- Veggie Limited - 35 000 -
Loan to City Limited - - 15 000
Cost of sales 75 000 54 000 70 000
Finance costs 5 000 2 000 4 000
Other expenses 15 000 26 000 23 000
Dividends paid - ordinary 6 000 5 000 9 000
Income tax expense 24 000 2 400 15 300
Cash and cash equivalents 46 250 28 500 24 000
Trade receivables 39 000 14 000 8 000
Inventories 31 000 37 000 16 000
547 750 287 900 244 300
1. City Limited acquired 80% of the ordinary shares in Fruit Limited on 1 October 20.4 and paid
R65 000 for the investment. At that date the equity of Fruit Limited was as follows:
R
Share capital - R1 ordinary shares 50 000
Retained earnings 11 000
2. Fruit Limited acquired 13 790 ordinary shares in Veggie Limited on 1 April 20.5 and paid R35 000
for the investment.
3. City Limited sold machinery to Fruit Limited on 1 October 20.5 for R37 500. The sale was made at
carrying amount plus 25%. Fruit Limited depreciates machinery at 20% per annum on the straight-
line method. This is the same policy as used by the SA Revenue Service. The land is not
depreciated.
4. Assume that the SA Normal tax rate is 28%.
REQUIRED:
Prepare the consolidated annual financial statements of City Limited and its subsidiaries for the year
ended 31 March 20.6. Your answer must comply with the requirements of the Companies Act, 1973
and Statements of Generally Accepted Accounting Practice.
Notes to the consolidated annual financial statements and comparative figures are not required.
All calculations are to be done to the nearest R1.
29 FAC4M28/101
The following are the trial balances of Vaal Limited, Orange Limited and Dam Limited for the year
ended 30 April 20.6:
Vaal Orange Dam
Credits R R R
R2 ordinary shares 200 000 - 80 000
R1 ordinary shares - 75 000 -
Retained earnings: 1 May 20.5 675 250 225 000 207 500
Profit for the year before depreciation charge 154 000 83 000 121 000
Accumulated depreciation: machinery 36 800 - 33 000
1 066 050 383 000 441 500
Debits
Land and buildings: at cost 536 275 331 250 259 150
Machinery: at cost 92 000 - 60 000
Depreciation 18 400 - 12 000
Income tax expense 49 175 29 050 42 350
Dividends paid: 30 April 20.6 25 000 - 15 000
Investment in Orange Limited:
52 500 R1 ordinary shares at fair value 120 000 - -
Investment in Dam Limited:
36 000 R2 ordinary shares at fair value 165 000 - -
Inventory 45 000 17 700 29 000
Bank 15 200 5 000 24 000
1 066 050 383 000 441 500
1. Vaal Limited obtained its investment in Orange Limited on 1 September 20.3, when the retained
earnings of Orange Limited amounted to R110 000. On the date off acquisition the fair value of the
assets and liabilities of Orange Limited were equal to the carrying amounts thereof. There were no
contingent liabilities not provided for.
2. Vaal Limited obtained its investment in Dam Limited on 1 January 20.4, when the retained earnings
of Dam Limited were R100 000. On the date off acquisition the fair value of the assets and liabilities
of Dam Limited were equal to the carrying amounts thereof. There were no contingent liabilities not
provided for.
3. Included in the inventory of Vaal Limited is inventory which was bought from Dam Limited. Dam
Limited invoices Vaal Limited at cost plus 25%. The amount of inventory included in Vaal Limited's
inventory at year end was as follows:
30 April 20.6: R20 000

30 April 20.5: R31 000.
4. Assume a SA Normal tax rate of 28%.
5. The fair value of the available-for-sale financial assets is equal to the cost price thereof.
6. No impairment of goodwill is considered to have taken place till 30 April 20.6.
7. Each share carries one vote.

30
REQUIRED:
Prepare the consolidated statement of financial position, statement of comprehensive income and
statement of changes in equity of Vaal Limited and its subsidiaries for the year ended 30 April 20.6.
No notes are required.
Calculations are to be done to the nearest R1.

31 FAC4M28/101
The following represents the trial balances of Wood Limited and its subsidiaries, and Bell Limited for
the year ended 30 June 20.6:
Wood
Limited and
its
subsidiaries Bell Limited
Dr/(Cr) Dr/(Cr)
R R
Share capital - R1 ordinary shares (130 000) -
Share capital - R2 ordinary shares - (36 000)
Share premium (32 500) -
Retained earnings - 30 June 20.5 (129 100) (49 500)
Revenue (222 200) (72 000)
Cost of sales (150 000) 40 000
Minority interest (statement of comprehensive income) 21 000 -
Dividends received (11 500) -
Minority interest (65 000) -
Trade payables (25 300) (12 700)
Property, plant and equipment at carrying amount 361 600 68 000
Inventory 21 900 18 100
Trade receivables 6 000 24 000
Income tax expense 20 600 8 100
Dividends paid 12 500 12 000
Investment in Bell Limited at cost 22 000 -
1. Wood Limited acquired 8 100 ordinary shares for R22 000 in Bell Limited, an unlisted company in
the motor industry, on 1 July 20.0 when the retained earnings of Bell Limited amounted to R8 000.
Wood Limited exercises significant influence over the operating policies of Bell Limited. The assets
and liabilities were fairly stated at date of acquisition of the shares in Bell Limited and there were no
contingent liabilities.
2. Wood Limited accounts for investments in associates in its own (separate) financial statements at
cost.
3. During the current financial year Wood Limited bought inventory from Bell Limited at cost plus 20%.
At year end on 30 June 20.6, Wood Limited had inventory amounting to R5 700 on hand that was
bought from Bell Limited during the year.
4. The tax rate has been 28% since 20.0.
5. The directors’ valuation of the investment in Bell Limited is R48 000 and the carrying amount of the
investment in the associate is not considered to be impaired.
REQUIRED:
Prepare the consolidated financial statements of Wood Limited and its subsidiaries on 30 June 20.6.
All calculations are to be done to the nearest Rand.

32
Basil Limited and Sage Limited have joined forces to develop and sell a computer programme for
short-term insurers. They entered into a contractual agreement whereby joint control over the
development and selling of this computer package is established.
The agreement determines that the profit sharing ratio in the joint venture is 50%. All the income
received and expenses incurred relating to the development and selling of the computer package will
be shared according to the profit sharing ratio.
Basil Limited has the expertise and personnel for the development of the computer package. Basil
Limited will incur all the costs relating to the development and will then recover 50% of the costs from
Sage Limited.
Sage Limited will be responsible for the marketing and selling of the product. All related costs will be
incurred by Sage Limited and 50% will then be recovered from Basil Limited. Sage Limited will also
receive all the income from the selling of the product which must then be shared in the ratio of 50%
with Basil Limited.
The following are the trial balances of Basil Limited and Sage Limited for the year ended
30 September 20.6:
Basil Sage
Limited Limited
R R
Credits
Share capital - R1 ordinary shares 100 000 80 000
Retained earnings - 1 October 20.5 446 000 367 000
Profit before tax (excluding profit from joint venture) 112 000 84 000
Total income received from selling of computer package - 193 000
Bank overdraft 40 000 53 000
698 000 777 000
Debits
Property, plant and equipment at carrying amount 550 000 440 000
Trade and other debtors 69 000 248 000
Total expenses incurred relating to the development and selling of the
computer package 79 000 89 000
698 000 777 000
1. The tax rate is 28% and there are no temporary or exempt differences.
2. The issued share capital of both companies has remained unchanged since incorporation.
3. The fair value of available-for-sale financial assets is equal to the original cost price thereof.
4. All income and expenses relating to the joint venture are recorded separately and must still be
shared between the two companies in the profit sharing ratio of 50%. After the financial statements
for the year have been drawn up and finalised, the companies will settle the intercompany debt.
REQUIRED:
Prepare the financial statements of Basil Limited for the year ended 30 September 20.6. Your answer
must comply with the requirements of the Companies Act, 1973 and Statements of Generally Accepted
Accounting policy notes and notes to the financial statements are not required.
33 FAC4M28/101
The following represents the consolidated financial statements of Kaygee Limited and its subsidiaries:
KAYGEE LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.6

20.6 20.5
R R
ASSETS
Non-current assets 393 300 223 800
Land 193 000 86 000
Buildings 110 000 50 000
Plant and equipment - Cost 83 200 96 000
- Accumulated depreciation (25 400) (28 200)
Investments 32 500 20 000
Current assets 218 785 33 900
Inventory 60 480 17 700
Cash and cash equivalents 144 005 7 200
Total assets 612 085 257 700

EQUITY AND LIABILITIES
Total equity 389 445 193 400
Equity attributable to equity holders of the parent 340 195 179 000
Ordinary share capital 75 000 50 000
Preference share capital 55 000 -
Retained earnings 175 195 129 000
Non-distributable reserve 35 000 -
Minority interest 49 250 14 400
Total liabilities 222 640 64 300
Non-current liabilities 159 240 40 800
Deferred tax 5 200 3 800
Long-term borrowings 154 040 37 000
Current liabilities 63 400 23 500
Trade and other payables 36 100 10 300
Taxation payable - SA Revenue Service 21 200 9 700
Shareholders for dividends 6 100 3 500
Total equity and liabilities 612 085 257 700

34
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20.6
R
Revenue 181 000
Cost of sales (57 300)
Gross profit 123 700
Other income (interest received) 5 900
Other expenses (26 000)
Profit before tax 103 600
Income tax expense (28 080)
Profit for the period 75 520
Attributable to:
Equity holders of the parent 52 670
Minority interest 22 850
75 520
EXTRACT FROM THE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR
ENDED 31 DECEMBER 20.6
Attributable to equity holders of the parent
Share Revaluation Retained
capital reserve earnings Total
R R R R
Balance at 31 December 20.5 50 000 - 129 000 179 000
Profit for the period 52 670 52 670
Revaluation of land 35 000 35 000
Shares issued 25 000 25 000
Dividends paid (6 475) (6 475)
Balance at 31 December 20.6 75 000 35 000 175 195 285 195
1. The following items were included in the calculation of profit before tax:
R
Depreciation on plant and equipment 2 240
Profit on sale of plant and equipment 15 400
2. Details of subsidiary purchased was as follows:
On 1 January 20.6 Kaygee Limited obtained 75% of the issued share capital of Lenny Limited for
R36 000.
Particulars of the net assets of Lenny Limited on 1 January 20.6 were as follows:
R
Land 45 000
Inventories 27 000
Cash and cash equivalents 15 000
Trade and other payables (9 000)
Long-term borrowings (30 000)
48 000
35 FAC4M28/101
3. Land was revalued during the year by Mr. Right. The surplus on revaluation of R35 000 was
transferred to a non-distributable reserve. The purchase of land was to expand operations.
4. Interest paid of R3 200 is included with the other expenses.
REQUIRED:
a) Prepare the consolidated statement of cash flows of Kaygee Limited and its subsidiaries for the
year ended 31 December 20.6 using the DIRECT METHOD. (25)
b) Prepare the following notes to the consolidated statement of cash flows of Kaygee Limited and its
subsidiaries for the year ended 31 December 20.6:
- Purchase of a subsidiary. (5)
Your answer must comply with the requirements of the Companies Act, 1973 and Generally Accepted
Ignore comparative amounts.

Do all calculations to the nearest Rand.
36
You have been asked by the directors of Casey Limited, a listed company to prepare a statement of
cash flows using the direct method for presentation in the company’s financial statements. The
following information is made available to you:
CASEY LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2005

2005 2004
ASSETS R R
Non-current assets
Property, plant and equipment 556 100 339 300
Current assets 230 000 164 000
Inventory 198 000 135 000
Total assets 786 100 503 300

Total equity 555 700 336 000
Share capital 10 000 10 000
Revaluation reserve - Plant and equipment 44 700 -
Non-current liabilities
Long-term borrowings 150 000 120 000
Current liabilities 80 400 47 300
SA Revenue Service 12 000 9 000
Bank overdraft 68 400 38 300
Total equity and liabilities 786 100 503 300
CASEY LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2005

R R
Revenue 680 000 475 000
Cost of sales (253 700) (261 250)
Gross profit 426 300 213 750
Other costs (171 400) (120 000)
Profit before interest 254 900 93 750
Interest paid (5 400) -
Profit before tax 249 500 93 750
Income tax expense (74 500) (28 750)
37 FAC4M28/101
CASEY LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005

Share Revaluation Retained
capital reserve earnings Total
R R R R
Balance at 31 December 2003 10 000 - 261 000 271 000

Profit for the period - - 65 000 65 000
Balance at 31 December 2004 10 000 - 326 000 336 000
Revaluation during the year - 44 700 - 44 700
Profit for the period - - 175 000 175 000
Balance at 31 December 2005 10 000 44 700 501 000 555 700
1. It is estimated that R90 000 of the plant and equipment acquisitions are for investments in future
operations. The remaining balance of acquisitions relates to the replacement of plant and
equipment. No property, plant and equipment was sold during the year.
2. Trade receivables are stated after taking the following provision for doubtful debts into account:
2005 2004
R R
Provision for doubtful debts 3 000 8 000
3. Depreciation of R120 000 is included in other costs.
REQUIRED:
Prepare the statement of cash flows of Casey Limited for the year ended 31 December 2005 using the
direct method.
Your answer must comply with Statements of Generally Accepted Accounting Practice.

38
ANNEXURE D: MAY 2007 EXAMINATION PAPER AND SOLUTION
Attached please find the examination paper for May 2007 with the suggested solution. We suggest
that you do this examination paper under exam conditions. Once you have completed the
examination paper, you should then compare your answer to the suggested solution. Your answers
to this examination paper must not be submitted to Unisa. This examination paper will indicate
to you the standard required of you and will help you to identify areas of weaknesses that you must
pay attention to.
PLEASE NOTE:
1. The paper consists of FOUR (4) questions.
2. All questions must be answered.
3. All calculations must be shown.
4. Ensure that you are handed the correct examination answer book (blue for accounting) by the
invigilator.
5. Each question attempted, must commence on a new (separate) page.
6. The required pass mark for this paper is 50%.
7. PROPOSED TIME-TABLE: (Avoid deviating from this as far as possible.)
Question Time
Subject Marks
number (minutes)
1 Property, plant and equipment with revaluation (IAS 16 (AC 123))
and Income taxes (IAS 12 (AC 102)) 39 70
2 Intangible assets (IAS 38 (AC 129)) 21 38
3 Consolidations 32 58
4 Investment properties (IAS 40 (AC 135)) and Impairment of assets
(IAS 36 (AC 128)) 8 14
TOTAL 100 180
39 FAC4M28/101
Almac Limited has historically accounted for its property, plant and equipment using the cost model.
During the year the board of directors decided to revalue the plant on an annual basis to net
replacement value. This would ensure that the carrying amount of the plant is reflected at their
approximate market values.
The following information is relevant to the plant for the year ended 31 December 2006:
Historical cost R780 000

Cost of bringing the plant to the location for its intended use R20 000
Purchase date and the date that the plant was ready for use and put into use 1 January 2003
Expected useful life 7 years
Residual value (Unchanged since date of purchase) R65 000
Depreciation method Straight-line
Net replacement value on 31 December 2006 R395 000
The remaining useful life and residual value has remained the same after the valuation
Wear and tear allowance 15% p.a.
Profit before tax and depreciation - 2006 R530 000
- 2005 R470 000
Tax rate 29%
The revaluation on 31 December 2006 was performed by a sworn appraiser, Mr B Vermaak, with
reference to prices of similar new assets in an active market. It is company policy that the revaluation
surplus will be realised during the use of the plant.
Almac Limited provides for deferred tax on all temporary differences on the comprehensive basis using
the statement of financial position approach (previously the balance sheet approach). It is probable that
the company will have sufficient taxable profits in future against which any unused tax losses can be
utilised. There are no other items causing temporary or exempt differences except those identified in
the question. There was a deferred tax liability of R8 700 at 31 December 2004.
REQUIRED:
1. Prepare the following notes to the annual financial statements of Almac Limited for the year ended
31 December 2006 in order to comply with the requirements of Statements of Generally Accepted
Accounting Practice and the Companies Act, 1973.
a) Accounting policy - Property, plant and equipment (5)

b) Property, plant and equipment (Plant only) (15½)
c) Deferred tax (7)
d) Revaluation reserve (3½)
2. Prepare the statement of comprehensive income of Almac Limited for the year ended
31 December 2006 in accordance with the requirements of Statements of Generally Accepted
Accounting Practice and the Companies Act, 1973. (10)
Ignore all aspects of Capital Gains Tax.

40
Gadget Limited developed a new process which will be patented during the current financial year and it
will be available for use in its manufacturing plant from 30 November 2006. The development costs
met the criteria for recognition as an internally generated intangible asset on 31 May 2006. The
following costs were incurred during the process:
1 January 2006 1 June 2006

to to
31 May 2006 30 November 2006
R R
Work outsourced to subcontractors 50 000 85 000
Personnel costs 75 000 70 000
Administrative costs 45 000 30 000
(directly attributable to the preparation of the asset for use)
Rent paid 20 000 25 000
Water and electricity 35 000 60 000
A specialised machine with a cost price of R216 000 was acquired by Gadget Limited on 31 May 2006
to assist with the development of the patent. The machine was used in the development process from
1 June 2006 until 30 November 2006. Thereafter it was used in the manufacturing department.
1. Development costs will be amortised on a systematic basis over their expected useful life of
6 years.
2. All machinery is depreciated at 20% per annum on a straight-line basis.
3. Development costs are material to the financial statements.
REQUIRED:
Prepare the following notes to the annual financial statements of Gadget Limited for the year ended
31 December 2006:
1. Basis of preparation and the introductory paragraph to the accounting policy note.
2. Accounting policy for intangible assets
Your answer must comply with the requirements of Statements of Generally Accepted Accounting
Practice and the Companies Act, 1973.
Calculations are to be done to the nearest Rand.

41 FAC4M28/101
The following are the audited statements of financial position of Summer Limited, Sun Limited and Fun
limited as at 28 February 2007:
Summer Sun Fun
R R R
ASSETS
Non-current assets 255 000 142 400 35 405
Property, plant and equipment 132 000 122 400 35 405
Investment in Sun Limited at fair value 105 000 - -
Investment in Fun Limited at fair value - 20 000 -
Investment in Beach Limited at fair value 18 000 - -
Current assets 23 000 20 800 -
Cash and cash equivalents 23 000 20 800 -
Total assets 278 000 163 200 35 405

256 000 163 200 35 405
Total equity
Share capital - R1 ordinary shares 60 000 100 000 30 000
Retained earnings 196 000 63 200 5 405
Total liabilities 22 000 - -
Current liabilities 22 000 - -
Short-term loan 22 000 - -
Total equity and liabilities 278 000 163 200 35 405
1. Summer Limited acquired 90 000 ordinary shares in Sun Limited on 1 March 2004 when the
retained earnings of Sun Limited were R10 500.
2. Sun Limited acquired 24 000 ordinary shares in Fun Limited on 1 March 2006.
3. At both the acquisition dates there were no unidentified assets, liabilities or contingent liabilities
and the fair values of all assets, liabilities and contingent liabilities were considered to be equal to
the carrying amounts thereof.
4. The profit for the current period per the audited income statements of the entities was as follows:
R
Summer Limited 33 400
Sun Limited 10 508
Fun Limited 22 305
5. On 1 March 2006, Sun Limited sold machinery with a carrying amount of R22 000 to Summer
Limited for R31 000. On this date the estimated remaining useful life of the machine was 3 years.
The entities’ policy is to provide for depreciation over the estimated useful life of the machinery
using the straight-line method which is consistent with the wear and tear allowances granted by
the SA Revenue Service.
42
6. On 1 March 2006 Summer Limited invested in a joint venture, Beach Limited, and acquired a 25%
interest in the joint venture.
The following is the trial balance of Beach Limited as at 28 February 2007:

R
Property, plant and equipment 70 000
Short-term loan 22 000
Cash and cash equivalents 6 600
Share capital – R1 ordinary shares (50 000)
Retained earnings – 1 March 2006 (32 900)
Profit for the period (15 700)
-
The short-term loan was made to Summer Limited on 1 May 2006 and is interest free. The loan is
repayable in full on 30 April 2007.
The fair values of all assets, liabilities and contingent liabilities of Beach Limited were considered
to be equal to the carrying amounts thereof on 1 March 2006.
7. The fair value of the available-for-sale financial assets is equal to the cost price thereof unless
otherwise stated.
8. At the end of the current financial year, it was assessed that the goodwill in Sun Limited was
impaired by R510. Goodwill in all the other entities was not considered to be impaired at year end.
9. The SA Normal tax rate is 29% and in all the entities each share carries one vote.
REQUIRED:
Prepare the consolidated statement of financial position of Summer Limited and its subsidiaries as at
28 February 2007.
Your answer must comply with the requirements the Companies Act, 1973 and Statements of
Notes to the consolidated annual financial statements and comparative figures are not required.

43 FAC4M28/101
This question consists of two separate parts.
PART A
Explain the difference between investment property and owner-occupied property. (3)
PART B
Faber Limited has a machine on hand at 28 February 2007 and its details are as follows:
Cost of machine on 1 March 2005 – R550 000

Depreciation method – Straight-line basis over the estimated useful life of the asset
Useful life of the asset – 10 years
The company has an offer of R380 000 for the purchase of the machine.
Fair value of the machine at 28 February 2007 – R450 000
Value in use of the machine at 28 February 2007 – R400 000
Costs to sell the machine at 28 February 2007 – R40 000
REQUIRED:
Determine if the machine is impaired at 28 February 2007 and if so, what the amount of the impairment
loss is. (5)
44
QUESTION 1 (Suggested solution)
PART 1
ALMAC LIMITED
NOTES FOR THE YEAR ENDED 31 DECEMBER 2006
1.1 Property, plant and equipment
Property, plant and equipment are stated at net (depreciated) replacement values less accumulated
depreciation since the date of the revaluation. A sworn appraiser revalues the plant annually. The
revaluation surplus is credited to a revaluation surplus. Plant and equipment is written off on the
straight-line basis at rates which will reduce the carrying amounts to the estimated residual values over
the expected useful life of the asset. The expected useful life is as follows:
Plant and equipment – 7 years (5)

2006 2005
R R
Carrying amount at beginning of the year 485 000 590 000
Cost 800 000 800 000
Accumulated depreciation (1) (2) (315 000) (210 000)
Revaluation (3) 20 000 (105 000)
Depreciation (4) (1) (110 000) 485 000
Carrying amount at end of the year 395 000
Revalued amount 505 000 800 000
Accumulated depreciation (5) (2) (110 000) (315 000)
(1) (780 000 + 20 000 - 65 000) / 7 = 105 000 x 2 = 210 000

(2) 105 000 x 3 = 315 000
(3) (395 000 – 65 000)/3 = 110 000
Net replacement value at 1 January 20.6: 395 000 + 110 000 = 505 000
Surplus = 505 000 – 485 000 = 20 000
(4) (505 000 – 65 000)/4 = 110 000 (10)
3. Deferred tax
2006 2005
R R
Accelerated wear and tear (10 800 – 4 725) 6 300 4 725
Revaluation surplus (1) 4 500 -
10 800 4 725
(1) 20 000 x 3/4 x 30% = 4 500 (9)

45 FAC4M28/101
QUESTION 1 (Suggested solution)(continued)
4. Revaluation reserve
R
Balance at beginning of the period -
Revaluation 20 000
Deferred tax on revaluation (1) (6 000)
Realisation during period (2) (3 500)
Balance at end of period 10 500
(1) 20 000 x 30% = 6 000

(2) 20 000/4 x 70% = 3 500 (3)
Calculations
Carrying Temporary Deferred

amount Tax base difference tax @ 30%
R R R R
2004 590 000 579 500 (3) 10 500 3150
2005 485 000 469 250 (1) 15 750 4 725
2006 395 000 359 000 (2) 36 000 10 800
1) 800 000 – [(800 000 – 65 000) x 15% x 3) = 469 250 [(800 000 – 65 000) x 15% = 110 250]
2) 469 250 – 110 250 = 359 000
3) 800 000 – [(800 000 – 65 000) x 15% x 2] = 579 500
PART 2
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2006
2006 2005
R R
Profit before tax (1) (2) 423 500 365 000
Income tax expense (3) (4) (129 000) (102 000)
(1) 20.6: 530 000 – 110 000 + 3 500 = 423 500

(2) 20.5: 470 000 – 105 000 = 365 000
(3) 530 000 – [(800 000 – 65 000) x 15%] = 419 750 x 30%
= 125 925 + (10 800 – 4 725 – 4 500) = 127 500
(4) 470 000 – [(800 000 – 65 000) x 15%] = 359 750 x 30%
= 107 925 + (4 725 – 3 150) = 109 500 (10)
Mark plan Marks

Notes to the financial statements
Accounting policy 5
Property, plant and equipment 10
Deferred tax 9
Revaluation surplus 3
Statement of comprehensive income 10
Total 37
46
QUESTION 2 (Suggested solution)
GADGET LIMITED
NOTES FOR THE YEAR ENDED 31 DECEMBER 2006
The financial statements are prepared in accordance with Statements of Generally Accepted
Accounting Practice. They incorporate the following principal accounting policies which are consistent
in all material aspects with those applied in previous years. (2)
Basis of preparation
The financial statements have been prepared on the historical cost basis.
Intangible assets
Intangible assets are disclosed at cost less accumulated amortisation. Amortisation on development
costs is provided for over the expected useful life of the asset. Development costs are written off over
6 years. (3½)
Profit before tax includes the following items:

R
Development costs amortised (Calc 1) 4 050
Research costs (50 000+ 75 000+ 45 000+ 20 000+ 35 000) 225 000
Depreciation (216 000 x 20% x 1/12) 3 600
(4½)
R
Carrying amount at beginning of year -
Additions to machinery 216 000
Depreciation (216 000 x 20% x 7/12 (6 months + 1 month)) (25 200)
Carrying amount at end of year 190 800
Cost 216 000
Accumulated depreciation (25 200)
(3½)
Internally generated intangible asset – patent

R
Carrying amount at beginning of year -
Development cost capitalised (Calc 1) 291 600
Amortisation (Calc 1) (4 050)
Carrying amount at end of year 287 550
Cost 291 600
Accumulated amortisation (4 050)
The remaining useful life of the patent (carrying amount – R287 550) is 5 years and 11 months.
(3½)
47 FAC4M28/101
QUESTION 2 (Suggested solution)(continued)
Calculations
1. Amortisation
R
Costs (85 000+ 70 000+ 30 000+ 25 000+ 60 000) 270 000
Depreciation on machinery (240 000 x 20% x 3/12) 21 600
Development costs capitalised 291 600
Amortisation (291 600/6 x 1/12) (4 050)
287 550
(6)
Mark plan Marks

Notes to the financial statements
Introductory description 2
Accounting policy 3½
Profit before tax 4½
Property, plant and equipment 3½
Intangible assets 3½
Amortisation - calculation 6
Total 23
48
QUESTION 3 (SUGGESTED SOLUTION)
SUMMER LIMITED AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2007
R
ASSETS
Non-current assets 316 653
Property, plant and equipment 301 305
(132 000 + 122 400 + 35 405 + (70 000 x 25%) – 9 000(1) + 3 000(1)))
Goodwill (5 550h + 8 568i – 510) 13 608
Deferred tax (2 610(1) - 870(1)) 1 740
Current assets 45 450
Cash and cash equivalents (23 000 + 20 800 + (6 600 x 25%)) 45 450
Total assets 362 103
(13½)
Total equity 345 603
Equity attributable to equity holders of the parent 321 796
Share capital 60 000
Non-distributable reserve (13 520 x 90%) 12 168
Retained earnings (2) 249 628
Minority interest (7 081 + 16 726) 23 807j
Total liabilities 16 500
Short-term loan (22 000 – (22 000 x 25%)) 16 500
Total equity and liabilities 362 103
(26½)
Calculations
1. Intercompany transaction – machinery sold

R
Machinery:
Selling price 31 000
Carrying amount (22 000)
Intercompany profit 9 000
Tax effect (9 000 x 29%) (2 610)
6 390
Depreciation (9 000/ 3 years) 3 000
Tax effect (3 000 x 29%) (870)
2 130
49 FAC4M28/101
QUESTION 3 (SUGGESTED SOLUTION) (continued)
2. Retained earnings
R
Summer Limited (196 000 – 33 400) 162 600
Sun Limited (3) 37 973a
Profit for period: 68 093
Summer Limited 33 400
Sun Limited 10 508
Fun Limited 22 305
Beach Limited (15 700 x 25%) 3 925b
Intercompany profit: Profit on sale of machinery (1) (6 390)
Depreciation (1) 2 130
Impairment of goodwill (510)
Excess of fair value above cost – Beach Limited (5) 2 725c
Transfer to non-distributable reserve (3) (12 168)d
Minority interest per income statement (2 409e + 4 461f) (6 870)
249 628
3. Analysis of shareholders equity of Sun Limited
100% 90% 10%

Total At Since MI
R R R R
At acquisition
Share capital 100 000 90 000 10 000
Retained earnings 10 500 9 450 1 050
110 500 99 450 11 050
Investment in Sun Limited (105 000)
Goodwill (5 550)h
Since acquisition
Retained earnings 42 192 37 973a 4 219
(63 200 – 10 508 – 10 500)
152 692 37 973 15 269
Current year
Profit for the period 24 092 21 683 2 409e
Profit for the period 10 508
Adjustments:
Unrealised profit – sale of machinery (1) (6 390)
Depreciation (1) 2 130
Fun Limited: Profit for the period (4) 17 844
Transfer to non-distributable reserve (4) (13 520) (12 168) RE (1 352)
Non-distributable reserve (4) 13 520 12 168d NDR 1 352
Goodwill (4) (9 520) (8 568)i (952)
g
167 264 47 488 RE 16 726j
12 168 NDR
Impairment of goodwill
Current year (given) 510
Carrying amount at 28 February 2007 (13 608)
50
4. Analysis of shareholders’ equity of Fun Limited
100% 80% 20%

Total At Since MI
R R R R
At acquisition
Share capital 30 000 24 000 6 000
Accumulated loss (22 305 – 5 405) (16 900) (13 520) (3 380)
13 100 10 480 2 620
Investment in Fun Limited (20 000)
Goodwill (9 520)
Current year
Profit for the period 22 305 17 844 RE 4 461f
Transfer to non-distributable reserve (13 520) RE
Non-distributable reserve 13 520 NDR
35 405 4 324 RE 7 081j
13 520 NDR
5. Analysis of shareholders’ equity of Beach Limited
100% 25%
Total At Since
R R R
At acquisition
Share capital 50 000 12 500
82 900 20 725
Investment in Beach Limited (18 000)
Excess of fair value above cost 2 725c
Current year
Profit for the period 15 700 3 925 b
98 600 3 925
Comment:
Students can elect to perform their calculations by means of the analysis of shareholders’ equity or by
preparing the pro form consolidation journals.
51 FAC4M28/101
6. Journals
Dr Cr MI
R R R
Intercompany journals:
J1 Retained earnings 9 000
Machinery (1) 9 000
Elimination of unrealised profit on intercompany sale of
machinery
J2 Deferred tax (1) 2 610
Tax effect on unrealised profit on intercompany sale of
machinery
J3 Accumulated depreciation (1) 3 000
Depreciation 3 000
Write back of excess depreciation on unrealised profit
J4 Retained earnings (1) 870
Deferred tax (SFP) 870
Tax effect on excess depreciation on intercompany sale of
machinery
Pro forma journals
J5 Mark-to-market reserve 25 650
Deferred tax 4 350
Investment in Sun Limited 30 000
Write-back of mark-to-market reserve
J6 Share capital 100 000
Goodwill 5 550h
Investment in Sun Limited 105 000
Minority interest (SFP) 11 050 11 050
Elimination of shareholders’ equity at acquisition of Sun
Limited
J7 Retained earnings 4 219
Recording of minority interest in retained earnings since
acquisition of Sun Limited (63 200 – 10 508 – 10 500) x 10%)
J8 Minority interest (SCI) 2 409
Minority interest (SFP) 2 409 2 409e
Recording of minority interest in profit for the period of Sun
Limited
((10 508 – 6 390 + 2 130 + 17 844 – 13 520 + 13 520) x 10%)
J9 Minority interest (SFP) 952 (952)
Goodwill 952
Recording of minority shareholder’s interest of Sun Limited in
goodwill of Fun Limited (9 520(J10) x 10%)
52
J10 Share capital 30 000

Goodwill 9 520
Accumulated loss (22 305 – 5 405) 16 900
Investment in Fun Limited 20 000
Elimination of shareholders’ equity at acquisition of Fun
Limited
Dr Cr MI
R R R
J11 Minority interest (SCI) 4 461
Minority interest (SFP) 4 461 4 461f
Recording of minority interest in profit for the period of Fun
Limited (22 305 x 20%)
J12 Property, plant and equipment (70 000 x 25%) 17 500
Short term loan to Summer Limited (22 000 x 25%) 5 500
Cash and cash equivalents (6 600 x 25%) 1 650
Excess of fair value above cost 2 725c
Retained earnings (15 700 x 25%) 3 925b
Investment in Beach Limited 18 000
Recording of 25% interest in Beach Limited
J13 Short term loan 5 500
Short term loan to Summer Limited 5 500
Elimination on intercompany loan
J14 Other expenses 510
Goodwill 510
Recording of impairment of goodwill of Sun Limited at year
end
J15 Retained earnings (13 520 x 90%) 12 168
Non-distributable reserve 12 168d
Transfer to non-distributable reserve
23 807j
Mark plan Marks

Consolidated statement of financial position 40
As part of consolidated statement of financial position
Property, plant and equipment 3½
Goodwill 6½
Deferred tax 1½
Current assets - Cash and cash equivalents 2
Share capital and non-distributable reserve 3
Retained earnings 15
Minority interest 7
Current liabilities – Short-term loan 1½
Total 40
53 FAC4M28/101
QUESTION 4 (SUGGESTD SOLUTION)
PART A
Investment property is property held to earn rentals or for capital appreciation or both. Investment
property generates cash flows largely independently of the other assets held by and entity. This
distinguishes investment property form owner-occupied property. The production or supply of goods or
services (or the use of property for administrative purposes) generates cash flows that are attributable
not only to property, but also to other assets used in the production or supply process.
(3)
PART B
Calculations
1. Calculation of the recoverable amount

R
Expected selling price 450 000
Costs of disposal (40 000)
Fair value less costs to sell 410 000
Value in use (given) 400 000
Recoverable amount is the greater of fair value less costs to sell and value in use.
R
Therefore the recoverable amount is (Fair value less costs to sell) 410 000
Therefore the asset is impaired.
Calculation of the impairment loss

R
Carrying amount (550 000 – (550 000/ 10 x 2) 440 000
Recoverable amount (calc 1) (410 000)
Impairment loss 30 000
(5)
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FAC4M28/101/0/2009

SCHOOL OF ACCOUNTING SCIENCES

DEPARTMENT OF FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING IV (MODULE 2)

TUTORIAL LETTER 101/2009 FOR FAC4M28

PLEASE READ THE DEPARTMENTAL TUTORIAL LETTER ACTALL4/301/2008 IN

Access can be obtained as follows:

1. Enter your user id and password.

LECTURER: FINANCIAL ACCOUNTING IV - FAC4M28

ANNEXURE A: ASSIGNMENT 01/2009 (COMPULSORY) 11

Please take note of the following very important aspects:

2.1 Supplied by Unisa

2.2 Prescribed literature

Students are required to use a non-programmable financial calculator in this module.

3. SUGGESTED APPROACH TO STUDYING THIS MODULE

5. PARTICULARS REGARDING ASSIGNMENTS

You might also find information on myUnisa.

5.1 COMPULSORY ASSIGMENTS (ASSIGNMENT 1 AND 2) AND YEAR MARK

Please take note that only assignment 1 and 2 are compulsory.

ASSIGNMENT 1 IS INCLUDED AS ANNEXURE A OF THIS TUTORIAL LETTER.

Assignment 1 and 2 = year mark

Assignments contribute the following weights towards your year mark:

5.2 Assignments form part of the tutorial matter

5.3 Due dates

PLEASE NOTE THAT SUBMISSION OF ASSIGNMENT 01 AND 02 IS A PREREQUISITE FOR

Assignment no: Due dates

5.4. Finality of the due dates

IMPORTANT: IF THE COMPULSORY ASSIGNMENTS (ASSIGNMENT 01 AND 02) ARE RECEIVED

Assignments should be addressed to:

Question number Page number

(d) To submit an assignment via myUnisa:

5.6 Marking of assignments

Assignments section: Tel (012) 429-4155

6.1 Examination admission

6.2 Examination period

Examinations will be held during the following period:

REGISTRATION PERIOD EXAMINATION PERIOD

6.3 Previous examination papers

6.4 Tutorial letter with information on the examination

STUDY PROGRAMME: 2009

02 (Compulsory) 15/04/2009 to 1-4 14/06/2009 24/06/2009

03 (Optional) 15/06/2009 to 1-8 12/07/2009 22/07/2009

From 13/07/2009 Revision of all study units

8. COMMUNICATION WITH THE UNIVERSITY

8.1 Enquiries regarding study material

You may contact your lecturers in the following ways:

Online address: http://my.unisa.ac.za

Telephone number E-mail address Office number

In regards to administrative enquiries the following person can be contacted:

Department of Financial Accounting contact numbers:

8.2 Enquiries regarding learning centres

Learning Centre Telephone number

LECTURERS: FINANCIAL ACCOUNTING IV (Module 2) (FAC4M28)

ANNEXURE A: ASSIGNMENT 01 FOR FAC4M28 (compulsory)

SUBMISSION OF ASSIGNMENT 01 IS COMPULSORY TO OBTAIN EXAMINATION ADMISSION

DUE DATE: 24 APRIL 2009

4. THIS ASSIGNMENT MAY BE SUBMITTED VIA MYUNISA (see 5.5)

There is only on correct answer to each question.

Make more than one mark per question;

ASSIGNMENT 1 (10 marks)

The following information relates to the activities of the company:

Land & Buildings:

Should they opt for the trade-in; details are as follows: