ANNEXURE I: FORMATIVE ASSESSMENT 2

HIGHER EDUCATION PROGRAMMES

Academic Year 2024: July - December
Formative Assessment 2: Financial Accounting Reporting
(HFAC132-1)
NQF Level, Credits: 5, 20
Weighting: 15%
Assessment Type: Open Book
Examiner: E. de Kock
Educator: E. de Kock
Due Date: 25 October 2024
Total: 100 marks

Instructions:
 This assignment consists of three (3) questions.
 It is based on units 5-8 (Chapters 12-14) of your textbook.
 Should you choose to type your assessment make use of the following format:
Font: Arial, Font size: 12, Line spacing: 1.5
 All the questions are compulsory.
 Show all calculations and reference accordingly.
 The SAICA Competency Framework Reference at the end of a question is for
recordkeeping and will inform you which SAICA Competency is covered in
the question.
 Copyleaks is not applicable for this assessment.

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ANNEXURE I: FORMATIVE ASSESSMENT 2

QUESTION 1 (30 marks)

Hills Investors (Pty) Ltd (“Hills”) is a property development company that has a 31
December financial year-end.

You are provided with an extract of the Statement of Financial Position as at 31 December
2024.
Statement of Financial Position of Hills Investors (Pty) Ltd as at 31 December
2024.
Notes R
Equity and liabilities
Equity
Ordinary share capital: Class A shares 1,2,3
(125 000 shares) 1 250 000
Retained earnings/(accumulated loss) 1,2,3
(1 January 2024) (25 450)
Total equity 1 224 550

Liabilities
Non-current liabilities
Loan 5 500 000
5 500 000
Current liabilities
Trade payables 246 500
Other payables 120 000
366 500

Total equity and liabilities 7 091 050

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During the year ending 31 December 2024, the following transactions took place and
have not yet been recorded:

Note 1: Class B share capital

On 1 January 2024, Hills invited the public to buy Class B shares. Hills offered 55 000,
5% Class B shares with a face value of R25 per share. The share issue was underwritten
by Capital Under Ltd at a commission of 2% on the selling price. The closing date for the
applications was on 31 January 2024, and on that date, 95% of the shares had been
applied for by the public. The underwriters took up the other 5% of shares on 31 January
2024. On 29 February 2024, the shares were issued. Share issue costs of R10 000,
excluding underwriters’ commission, were paid on the same day.

Note 2: Class A share capital

On 1 April 2024, Hills offered 30 000 Class A shares to the public at a price of R40 per
share. On 1 May 2024, the closing date for applications, shares have been
oversubscribed by 12%. On 15 May 2024, the 30 000 shares were issued, share issue
costs of R12 000 were paid in cash.

Note 3: Dividends
On 31 December 2024, Hills’ directors were so happy with the fact that they made a profit
of R570 890 for the year, that they declared a Class A dividend of 25 cents per share.

Additional information:

 Class A shares have voting rights but no right to a fixed dividend.

 Class B shares have no voting rights but have a right to fixed, cumulative dividend
distribution.
 During the 2024 financial year, Hills made a profit of R570 890.
 Ignore VAT and dividends tax.

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REQUIRED:

1.1 Prepare the general ledger accounts as at 31 December 2024 for Hills Investors (Pty)
Ltd for the following accounts:
1.1.1 Application for allotment - Class A and Class B (15 marks)
1.1.2 Dividends (5 marks)
 Dates are required.
 Close off of the account is required.
(20 marks)

1.2 Prepare the extract of the Statement of Financial Position of Hills Investors (Pty) Ltd
for the year ended 31 December 2024, showing only the Equity.
(10 marks)

SAICA Competency Framework Reference:

AREA B. STEWARDSHIP OF CAPITALS: BUSINESS PROCESSES AND RISK
2 MANAGEMENT
B1.1 Fundamental Reporting Concepts
a) Identify users’ needs and develop a reporting approach by selecting
suitable reporting and regulatory framework(s) which satisfies most users’
needs in general purpose reporting by:
(i) Applying the fundamental theories related to reporting,
(ii) Applying the objective, usefulness, and limitations of the available
reporting frameworks,
(iii) Applying the objective, nature, and characteristics of regulatory
frameworks and requirements
b) Apply the qualitative characteristics and principles of useful information
c) Identify, define, and evaluate appropriate reporting boundaries
d) Identify, define, and evaluate the different elements in reporting
frameworks
e) Apply the recognition and de-recognition criteria to an element

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f) Select and apply a measurement basis to an element

AREA D. PERFORMANCE MEASUREMENT FOR EXTERNAL USERS OF

2 GENERAL-PURPOSE FINANCIAL STATEMENTS
D1.1 Financial reporting: in accordance with International Financial
Reporting Standards (IFRS)
a) Prepare, analyse, and evaluate general purpose financial statements in
accordance with IFRS for an entity, which could be a for-profit entity, an
SME, a public sector entity or a not-for-profit entity

--- End of Question 1 ---

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QUESTION 2 (55 marks)

Fair Screen (Pty) Ltd (“Fair Screen”) manufactures small components used in the
manufacture of computer screens. Fair Screen has a 31 October financial year-end.

You are provided with the Statement of Financial Position as well as extracts from the
Statement of Profit or Loss and Other Comprehensive Income of Fair Screen (Pty) Ltd for
the financial year ended 31 October 2024.

Statement of Financial Position of Fair Screen (Pty) Ltd as at 31 October 2024

2024 2023
R R
ASSETS
Machinery 195 000 120 000
Land 590 000 500 000
Investments - Shares 120 000 45 000
Non-current assets 905 000 665 000

Inventory 28 500 34 500

Trade receivables 123 000 62 000
Cash and cash equivalents 281 810 74 000
Current assets 433 310 170 500
Total assets 1 338 310 835 500

EQUITY AND LIABILITIES

Equity attributable to owners 850 280 533 750
Share capital 250 000 150 000
Revaluation reserve: Land 90 000 0
Retained earnings 510 280 383 750
Total equity 850 280 533 750

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Long-term loan: 11.25 % p.a. 300 000 150 000

Non-current liabilities 300 000 150 000

Trade payables 145 250 121 500

Dividends payable 27 000 10 000
SARS (income tax payable) 15 780 20 250
Current Liabilities 188 030 151 750
Total liabilities 488 030 301 750
Total equity and liabilities 1 338 310 835 500

Extract from the Statement of Profit or Loss and Other Comprehensive

Income of Fair Screen (Pty) Ltd for the year ended 31 October 2024
R
Profit before tax 233 260
Income tax expense (62 980)
Profit for the year 170 280

All information below has already been correctly accounted for:

Note 1: Machinery
During the current financial year, the following transactions occurred which affected
Machinery:
 New machinery to the value of R155 000 was purchased in cash to replace
the old, outdated machine.
 The old machine was sold for cash. At the time of sale, the carrying value
of the old machine amounted to R50 000, and an accounting loss on sale
of R14 000 was incurred.
There were no other additions, disposals or impairments to machinery items that occurred
during the financial year.

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Note 2: Land
Land was revalued for the first time by an independent valuator.

There were no additions, disposals or impairments to Land items that occurred during the
financial year.

Note 3: Loan
On 1 July 2024, the long-term loan was increased due to the rapid growth of the company.

Note 4: Finance Cost

The following finance cost transactions occurred during the year which all were paid in
cash:
 Interest on loan.
 Interest on trade payables for the year totalled R122.

Note 5: Share Investment

During the 2024 financial year, Fair Screen purchased additional share investments at a
cost of R85 000. Certain investments were also sold during the current financial year
which resulted in a profit of R1 500 on the sale. Fair Screen received dividends from these
investments of R13 200 for the year. All transactions relating to investments including the
receipt of dividends, were done in cash.

Note 6: Trade receivables

During the year, R8 900 worth of trade receivables were written off as irrecoverable.

Note 7: Dividends
At year-end, Fair Screen decided to declare dividends of R1.75 per share. At the time of
the divided declaration, there were 25 000 issued shares.

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REQUIRED:
Prepare the Statement of Cash Flows of Fair Screen (Pty) Ltd for the financial year ended
31 October 2024, using the indirect method.

 Ignore VAT and dividends tax.

 Show all workings, and reference accordingly.
 Always round up to the nearest rand where applicable.

(55 marks)

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SAICA Competency Framework Reference:

AREA B. STEWARDSHIP OF CAPITALS: BUSINESS PROCESSES AND RISK
2 MANAGEMENT
B1.1 Fundamental Reporting Concepts
a) Identify users’ needs and develop a reporting approach by selecting
suitable reporting and regulatory framework(s) which satisfies most users’
needs in general purpose reporting by:
(i) Applying the fundamental theories related to reporting,
(ii) Applying the objective, usefulness, and limitations of the available
reporting frameworks,
(iii) Applying the objective, nature, and characteristics of regulatory
frameworks and requirements
b) Apply the qualitative characteristics and principles of useful information
c) Identify, define, and evaluate appropriate reporting boundaries
d) Identify, define, and evaluate the different elements in reporting
frameworks
e) Apply the recognition and de-recognition criteria to an element
f) Select and apply a measurement basis to an element
AREA D. PERFORMANCE MEASUREMENT FOR EXTERNAL USERS OF
2 GENERAL-PURPOSE FINANCIAL STATEMENTS
D1.1 Financial reporting: in accordance with International Financial
Reporting Standards (IFRS)
a) Prepare, analyse, and evaluate general purpose financial statements in
accordance with IFRS for an entity, which could be a for-profit entity, an
SME, a public sector entity or a not-for-profit entity

--- End of Question 2 ---

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QUESTION 3 (15 marks)

Elsie Wines (Pty) Ltd (Elsie Wines) is a wine farm in South Africa. Elsie Wines has a 30
November financial year-end.

You are provided with the following information about Elsie Wines for the year ended 30
November 2024:
 At the beginning of the year, the company had a share capital of R100 000 Class
A shares and a retained earnings balance of R55 000.
 During the year, the company issued additional Class A shares for R20 000 and
new Class B shares for R60 000.
 The company had a net profit of R45 780 for the year.
 The directors declared a dividend of R15 250 during the year.
 The owner of the company took wines for personal use at a cost price of R5 950
from the company.
 Elsie Wines had an opening balance of revaluation surplus of R65 000 on 1
December 2023. During the year, the company revalued its land resulting in a
revaluation loss of R15 000. The company did not dispose of any of its assets
during the year. This was the only revaluation that took place during the year.

REQUIRED:
Prepare the Statement of Change in Equity of Elsie Wines (Pty) Ltd for the year ended
30 November 2024.
 Include all necessary headings and sub-headings in your statement.
 Provide workings where necessary.
 Total columns are not necessary.
 Ignore taxation.
(15 marks)

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Competency Framework Reference:

B1 REPORTING FUNDAMENTALS
B1.1 Fundamental reporting concepts
Identify users’ needs and develop a reporting approach by selecting suitable
reporting and regulatory framework(s) which satisfies most users’ needs in
general purpose reporting by: (i) Applying the fundamental theories related to
a)
reporting, (ii) Applying the objective, usefulness and limitations of the available
reporting frameworks, (iii) Applying the objective, nature and characteristics of
regulatory frameworks and requirements
b) Apply the qualitative characteristics and principles of useful information
d) Identify, define and evaluate the different elements in reporting frameworks
e) Apply the recognition and de-recognition criteria to an element
f) Select and apply a measurement basis to an element

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