FACULTY OF ACCOUNTING AND INFORMATICS
DEPARTMENT OF FINANCIAL ACCOUNTING
2023
TEST 1
INSTRUCTIONAL PROGRAMME: ADPAC1
INSTRUCTIONAL OFFERING: ADVANCED FINANCIAL ACCOUNTING FOR SMES
SUBJECT CODE: ADCS702
DATE: 29 AUGUST 2023
DURATION: 2 HOURS
TIME: 8H30-10H30
TOTAL MARKS: 50
NUMBER OF PAGES: 4 (INCLUDING COVER PAGE AND APPENDIX)
EXAMINER: MR CM CHONCO
INTERNAL MODERATOR: MR MAE KHOZA
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INSTRUCTIONS/REQUIREMENTS:-
[1] ANSWER ALL QUESTIONS.
[2] ANSWER EACH QUESTION ON A SEPARATE PAGE.
[3] PROVIDE APPROPRIATE EXAMPLES TO SUPPORT YOUR RESPONSES.
[4] APPENDIX A IS PROVIDED ON PAGE 4 (NATIONAL SMALL BUSINESS ENTERPRISE
ACT
Do not turn the page until permission is given.
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Question 1 [50 Marks]
Trock (Pty) Ltd helps businesses to build online storefronts and reach global audiences.
The company also offer sellers the ability to grow their businesses with little barrier to entry
regardless of size and geographic location. This company also offers Information
Technology related products imported from China to its customers.
This company has four shareholders and 43 employees. The memorandum of the
company's incorporation prohibits offering shares to the public and these are also not
transferable. The total revenue generated by the company during the year ended 30 June
2023 amounted to R28 956 000, and total third-party liabilities amounted to R15 890 000
as of 30 June 2023.
The company entered the following transactions during the financial year ended 30 June
2023:
• Imported 143 computers from China as the Provincial Department of Health recently
awarded the company a contract. The purchase agreement with the Chinese supplier
was as follows:
Purchase price $935 per computer
Transaction date: 02 August 2022
The purchase price was paid in full on 20 August 2023.
None of these computers was on hand at year-end. You may assume the Sales and
Cost of Sales were correctly recorded.
• The company entered a finance lease to lease specialised IT equipment from AA Ltd
under the following terms:
Lease commencement date: 01 July 2022
The initial direct cost incurred: R15 796
Lease term: 4 years
Guaranteed residual value: R20 000
Annual lease instalments payable in areas: R40 000
The company will acquire the equipment's legal title at the end of the lease term.
The useful life of the equipment is five years.
• The operating lease agreement was concluded with QQ (Pty) Ltd car rentals as
follows:
Lease term: 2 years
Lease instalments: R34 000 per year for the first year and R37 000 for the second
year, payable in areas.
Lease instalments include maintenance costs of R8 500 per annum payable in areas.
Lease inception date: 01 July 2022
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Additional information:
• The company's incremental borrowing rate is 12%.
• Tax rate 28%.
• Spot exchange rates were as follows during the year: R/1$
01 July 2022 R16,80
02 August 2022 R16,30
30 June 2023 R17,50
• The financial year ends on 30 June.
• Profit before tax is R8 900 000 and is calculated before taking the following into
account:
The effect of foreign exchange transaction (sales and cost of sales already recorded);
Finance lease; and Operating lease.
• South African ZAR is a presentation and functional currency.
• Discount factors:
Annuity discount factors Lumpsum discount factors
Rates Rates
11% 12% 13% 14% 11% 12% 13% 14%
1 0,900901 0,892857 0,884956 0,877193 1 0,900901 0,892857 0,884956 0,877193
2 1,712523 1,690051 1,668102 1,646661 2 0,811622 0,797194 0,783147 0,769468
3 2,443715 2,401831 2,361153 2,321632 3 0,731191 0,711780 0,693050 0,674972
YEARS
YEARS
4 3,102446 3,037349 2,974471 2,913712 4 0,658731 0,635518 0,613319 0,592080
5 3,695897 3,604776 3,517231 3,433081 5 0,593451 0,567427 0,542760 0,519369
6 4,230538 4,111407 3,997550 3,888668 6 0,534641 0,506631 0,480319 0,455587
7 4,712196 4,563757 4,422610 4,288305 7 0,481658 0,452349 0,425061 0,399637
Required:
a. Prepare an extract from the statement of profit/ loss and other comprehensive
income for the year ended 30 June 2023. (19 marks)
b. Calculate the current tax for the year ended 30 June 2023. (3 marks)
c. Prepare an extract from the statement of financial position as at 30 June 2023. (21
marks)
d. Indicate whether the company should have its financial statements audited or
reviewed. (3 marks)
e. Provide advice on whether this company should continue using the IFRS for SMEs or
change to the full IFRSs. (2 marks)
f. Does this company qualify as an SME in terms of the National Small Enterprise Act?
Support your answer in full. (2 marks)
Your answers must comply with the requirements of the IFRS for SMEs (a, b, & c.)
Bonus Questions:
g. How do you align yourself with the DUT ENVISION 2030? (2)
h. What are the five countries in BRICS? (2)
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APPENDIX A
pg 4
