Altemative: Bazinga Ltd (60,5 marks; 91 minutes) (Source: Test 5 - 2023 On 1 March 20.

On 1 March 20.20, Bazinga obtained a long-term loan of R6 500 000 at an interest

Alternative Required) rate of 12% per annum and, on this date, settled the purchase price of the buildings.
The capital amount of the loan is settled annually in 10 equal instalments of R650 000
Bazinga Ltd ('Bazinga') is a manufacturer of high-quality plastic products for outdoor each, with the first instalment on 28 February 20.21. Interest on the loan is settled
use, including plastic sheds and other plastic accessories for outdoor areas. The annually in arrears with the first payment on 28 February 20.21. Assume that 12%
company is listed on the Johannesburg Stock Exchange (JSE) Ltd and has a interest is a fair rate for all of Bazinga's financing and credit risk.
28 February reporting date.
The amount of interest on the long-term loan allowed as a tax deduction, is the same
Accounting policies amount calculated for accounting purposes.
Property, plant and equipment are accounted for in accordance with the cost model of
IAS 16, Property, Plant and Equipment. Machine
Bazinga ordered a new machine from a supplier in the USA on 1 October 20.22. The
Factory plant machine was shipped free on board (FOB) from the USA to Durban on
The factory plant was acquired on 1 March 20.16 for R6 120 000 and was available 1 November 20.22. The invoice for $100 000 was also received on
for use as intended by management immediately. The factory plant is depreciated on 1 November 20.22 and was paid on 31 March 20.23. Transportation and installation
the straight-line method over the estimated useful life thereof. On 1 March 20.16, the costs amounted to R30 000 in total and was paid in cash to the relevant parties on
factory plant had an estimated useful life of eight years with an insignificant residual 30 November 20.22. The machine was ready for use, as intended by management,
value. on 30 November 20.22. Staff had to be trained in December 20.22 and January 20.23
to use the new machine. Staff training costs amounted to R150 000. The machine
The estimated useful life and residual value of the factory plant were reviewed started producing packaging material from 1 January 20.23.
annually, and management determined that the factory plant's estimated remaining
useful life and the residual value remained unchanged during the current and following Bazinga's premises were destroyed during riots in Durban in October 20.23. The
financial years. machine was also destroyed and on 30 October 20.23 management established that
no future economic benefits were expected from its use or disposal. The insurance
During the 20.20 financial year, the local economy resulted in Bazinga earning lower company did not pay out the full insured amount due to the nature of the loss of the
returns than expected. An impairment loss of R75 800 was recognised for the year machinery. Bazinga received during November 20.23 an amount of RBOO 000 from
ended 28 February 20.20. The carrying amount of the factory plant was R2 984 200 HelpUinsurance.
after the recognition of the impairment loss.
The machine is depreciated on the diminishing balance method over its useful life of
During 20.23, business returns improved. A reversal of the impairment loss of R18 950 eight years and has no residual value.
was recognised for the year ended 28 February 20.23.
The machine was not yet replaced with a new machine.
The South African Revenue Services (SARS) grants a tax allowance on the cost of
the factory plant at 20% per annum, without any adjustments for impairment losses or Applicabl�exchange rates were as follows·
reversal of impairment losses and not apportioned for any part of a year. Date 1$ = R?
1 October 20.22 17.50
Buildings 1 November 20.22 16.45
The land, on which the buildings are situated, is regarded as insignificant. 28 February 20.23 14.60
31 March 20.23 14.55
Bazinga acquired on 1 March 20.20 buildings at a total cost of R6 500 000 Averaae rate vear ended 20.24 14.45
(R4 500 000 for the factory building and R2 000 000 for the administration building).
The tax allowance on the machinery granted by the SARS is 20% per annum on the
Assume that the residual values of the buildings are not material. Depreciation and tax cost and not apportioned for any part of a year. Additional costs incurred with the
allowance�_Q_ll_ building_s are as follows: acquisition of the machinery are allowed by the SARS as a deduction for the
Deoreciation Tax allowances calculation of taxable income in the year in which the cost is actually paid.
Factory building 25 years straight-line 5% per annum (not pro-rated if
used for part of the vear) The SARS will recognise a recoupment or scrapping loss between the amount
Administration buildina 40 vears straiaht-line Nil received from the insurance claim less the tax base of the machinery. Assume that
the accounting and tax treatment of foreign exchange differences and finance cost
are the same.