UNIVERSITY EXAMINATIONS

May / June 2025

FAC2601

Financial Accounting for Companies

100 marks
3 hours and 20 minutes

This paper consists of FIFTEEN (15) pages.

Instructions:

1. This paper consists of FOUR (4) questions. The QR code is as follows:

2. All questions must be answered.

3. Basic calculations, where applicable, must be shown.

4. Each question attempted must commence on a new (separate) page.

Please note that all answers should be in your own handwriting and not typed.

5. PROPOSED TIMETABLE: (Avoid deviating from this as far as possible.)

Question Time in
no Subject Marks minutes
1 Multiple-choice question 10 20
2 Statement of Financial Position and PPE note 55 110
3 Revenue 15 30
4 Provisions 20 40
TOTAL 100 200
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Download this paper as soon as it has been accessed.

Remember to complete and adhere to the Honesty Declaration.

Please upload your submission in PDF-format: a single file not larger than 20Mb, before
the expiry of the available time.
(https://cas.myexams.unisa.ac.za/mod/assign/view.php?id=71831).

Additional student instructions:

1. Students must upload their answer scripts in a single PDF file on the official myExams
platform (answer scripts must not be password protected or uploaded as "read-only"
files). Students are provided 30 minutes to submit their answer scripts after the official
examination time on myExams platform. The university only marks one submission
received from a student. Priority is granted to scripts received via the myExams platform.

2. NO e-mailed scripts will be accepted.

3. Students are advised to preview submissions (answer scripts) to ensure legibility and
also to ensure that the correct answer script file has been uploaded.

4. Students are permitted to resubmit their answer scripts, but only within the stipulated
submission duration, should they regard the initial submission to be unsatisfactory.
Resubmissions after an examination's closing time are not permitted.

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advised to refer to their module’s examination instructions to ensure they use the correct file
format. It must be in a .PDF –Format (in your own handwriting). We will not mark any
written assessment in word and or excel.

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accordance with its prioritisation rules. Unisa awards 0% to incorrect submissions made
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opportunity for resubmission will be granted.

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opportunity for resubmission will be granted.

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duration period will be marked.

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to have transgressed Unisa’s examination rules and will have their marks withheld.

13. Students who have more than one Unisa student number should ensure that the relevant
student number/s is/are registered on the Invigilator App for the module/s requiring
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invigilation through Invigilator App before their examination session.

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The QR code is available for activation 15 minutes before the start time of the
examination and 30 minutes after the official start time of the examination.
Students who fail to activate the QR code within the available 45 minutes will be
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final marks withheld.

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Invigilator App) for a total of 10 minutes during their closed-book examination
session will be considered to have violated Unisa's examination rules and their
marks will be withheld. Students writing closed-book examinations should activate
flight mode on their phones or switch off their network/Wi-Fi, after scanning the QR
code on the invigilator App, to prevent background applications overriding the
running of the Invigilator App during their examination session. The network/Wi-Fi
should be switched back on to enable uploading of the answer script on myExams after
completing the examination.

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Invigilator App enabled examinations, students have 10 minutes after their scheduled
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within the stipulated 10 minutes will result in the Invigilator App being non-responsive. In
such cases, students are advised to stop attempting to upload their answer scripts on the
Invigilator App and immediately submit their answer script via the myExams platforms.
Students must submit their answer scripts on both the Invigilator App (within the first 10
minutes) and then on the myExams platform within the remaining 30 minutes allocated
for uploading after the official examination time.

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flagged as being “Out of App” for the remaining duration of their assessment and rule 12
above will apply.

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hour of activating the QR code.

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ending their invigilation using the "finish assessment button"; doing so may result in
disciplinary proceedings, and their marks will be withheld.

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invigilator pending uploads from the Invigilator App. Failure to do so will result in students
deemed not to have used the invigilation or proctoring tools and their final marks will be
withheld.

21. Students must acknowledge compliance with the Unisa examination rules and affirm that
the work they are submitting is their own, by ticking the honesty declaration box when
submitting their answer scripts. Students suspected of dishonest conduct during the
examinations will be subjected to disciplinary processes. Students may not communicate
with any other person or request assistance from any other person during their
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examinations. The use of Telegram, WhatsApp, or any other instant messaging services
with any other person (except when asking for technical assistance via official channels of
the SCSC or the Invigilator WhatsApp line) are strictly prohibited. Plagiarism is a violation
of academic integrity and students who plagiarise, copy from published work, or use
Artificial Intelligence Software (e.g. ChatGPT) or online sources (e.g. course material),
unless explicitly permitted, will be in violation of the Policy on Academic Integrity and the
Student Disciplinary Code and may be referred to a disciplinary hearing. Unisa has a zero
tolerance for plagiarism and/or any other forms of academic dishonesty.

22. Selected assessments requiring the usage of Turnitin software will require students to
submit typed responses (digital documents with selectable text) only. Scanned
handwritten scripts or scanned typed scripts will not be accepted for marking. Any student
whose module has indicated, before the examination sitting, that the use of Turnitin
software is a requirement and fails to provide a typed response, will have their submission
disregarded and not marked. In such cases, students will be awarded a non-compliance
with proctoring tools outcome on their academic records.

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to activate the Turnitin software. Students who have not accepted the EULA will be
considered to have violated Unisa's examination rules and their answer scripts will not be
marked. The time allocated for uploading scripts for Turnitin-enabled assessments is
included in the overall examination duration, and no additional 30 minutes will be provided
for uploading.

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during your examination session unless such usage of the software is related to a
student’s assistive device which has been so declared. Failure to do so will be a
transgression of Unisa’s examination rules and the student's marks will be withheld.

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such as Google Glass or similar smart eyewear, during examinations.

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complete their examinations, or who are incarcerated, are exempted from using
proctoring tools. Only students who have declared their disability with supporting
documentation (doctor's note indicating the disability and the additional time that will be
required for the completion of the examination) during registration will be exempted.
Students who have not so declared may provide the declaration (doctor's note indicating
the disability and the additional time that will be required for the completion of the
examination) to [email protected] at least 7 days prior to their examination
sitting for processing of their exemption. Any irregularities that lead to an unfair advantage
and improved performance for students exempted from using proctoring tools will be
reviewed and appropriate disciplinary or corrective steps will be taken in accordance with
the academic integrity policy.

27. Incarcerated students are advised to submit their proof of incarceration to

[email protected] at least 7 days prior to their examination sitting for
processing of their exemption. Any irregularities that lead to an unfair advantage and
improved performance for students exempted from using proctoring tools will be reviewed
and appropriate disciplinary or corrective steps will be taken in accordance with the
academic integrity policy.

28. Students who are negatively affected by their examination scheduling on religious/holy
days are requested to apply for alternative examination arrangements. A student's
religious organisation must communicate directly with Unisa on a letterhead informing
Unisa of (1) Name, surname, and student number of the enrolled member of the religious
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organisation; (2) Module code affected by the examination scheduling (dates of religious
days) on the holy day; (3) Nature of objection. The letter should be sent to
[email protected] at least 7 days prior to the examination sitting for
processing. Letters received directly from students will not be processed.

29. Students who experience technical challenges should report the challenges immediately
to the SCSC telephonically on 080 000 1870 and choose option 4 for exams, or their
College exam support centers (refer to the Get help during the examinations by
contacting the Student Communication Service Centre [unisa.ac.za]) within 30 minutes.
Queries received after 30 minutes of the official examination duration time will not be
responded to. Submissions made after the official examination time will be rejected
according to the examination regulations and will not be marked. Only communication
received from your myLife account will be considered.

30. Non-adherence to the processes for uploading examination responses will not qualify the
student for any special concessions or future assessments.

31. Queries that are beyond Unisa’s control include the following:
a. Personal network or service provider issues.
b. Load shedding/limited space on personal computer.
c. Crashed computer.
d. Non-functioning cameras or web cameras.
e. Using work computers that block access to the myExams site (employer
firewall challenges).
f. Unlicensed software (e.g. license expires during exams).

32. Non-adherence to the processes for uploading examination responses will not qualify the
student for any special concessions or future assessments.

33. Students must ensure that they have adequate time to submit their assessment in the
allowed time, as there is no alternative to submit on any other day. You must make
sure that you submit within the allowed time from 07:45 – 12:15. No e-mail scripts will be
allowed and we will not engage in any e-mail queries in this regard.

34. Students experiencing technical challenges, contact the SCSC 080 000 1870 or email
[email protected] or refer to Get-Help for the list of additional contact numbers.
Communication received from your myLife account will be considered.
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QUESTION 1 (10 Marks) (20 minutes)

Answer the following multiple-choice questions. Indicate your choice by selecting only ONE
option from the four options given for each question answered.

1. The following list of balances appears, amongst others, in the accounting records of
Shimmo Ltd on 31 December 2024:
R
Ordinary share capital (shares issued at R0,50 each) 5 000 000
Proceeds of 1 500 000 ordinary shares issued on 31 October 2024 1 125 000

The following decision that must still be recorded was ratified by the directors on
31 December 2024:

Capitalisation shares must be issued to the ordinary shareholders that are registered in the
share register on 31 December 2024, in the ratio of one ordinary share for every five ordinary
shares held at R0,65 per share.

Which one of the following options represents the Rand-value of the shares that must
be capitalised?

1. R796 250
2. R1 495 000
3. R845 000
4. R7 475 000 (2)

2. Both the managing director and the chief executive officer of Bossa Ltd have the benefit of the
use of company cars, which may also be used for private purposes. The total benefit for each
director, for the use of the cars, is estimated at R400 000 per year, of which 30% is for private
use and 70% for business purposes.

The total amount that should be disclosed in remuneration, as other benefits, should
be:

1. R120 000
2. R400 000
3. R240 000
4. R560 000 (2)

3. The normal production capacity of an entity is 350 000 units per annum. The raw material cost
is R220 per unit, and direct labour is R250 per unit.

Variable production overheads are R60 per unit and fixed production overheads incurred
amounts to R5 250 000. The closing balance of finished goods is 9 500 units (assume there is
no opening balance).

Which amount is the correct cost of sales figure if the actual production was 280 000
units for the year?

1. R148 400 000

2. R147 422 500
3. R148 472 500
4. R152 600 000 (2)
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QUESTION 1 (continued)

4. USW Ltd, a manufacturing entity, manufactures specialized, robust cellphone cases for resale.
The manufacturing cost per ton is R900. Finished products are sold for R935 per ton. Sales
expenses amount to R45 per ton, delivery costs amount to R35 per ton, and other directly
associated costs to inventory to make a sale are R25 per ton. Closing inventories on hand at
31 December 2024 amount to 3,500 tons.

The amount that must be used to write down inventories to its net realisable value is:

1. R0
2. R35 000
3. R157 500
4. R245 000 (2)

5. Preference shares, which retain the right to a dividend from year to year, irrespective of
whether a dividend was declared or not during the year, are known as:

1. Ordinary preference shares;

2. Participating preference shares;
3. Non-cumulative preference shares;
4. Cumulative preference shares. (2)
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QUESTION 2 (55 marks) (110 minutes)

The following information was taken from the financial records of DDP Ltd, who manufacturer unique
off-road caravans for the year ended 31 December 2024:
R
Land at valuation (note 1) ........................................................................................... 3 000 000
Office buildings at cost (31/12/2023 (note 1 and 2) .................................................... -
Motor vehicles at carrying amount (31/12/2023) (note 2 and 3).................................. 1 575 000
Machinery at cost (31/12/2023) (note 1, 2 and 3) ...................................................... 1 800 000
Furniture and fittings at carrying amount (note 2 and 3) ............................................. 720 000
Accumulated depreciation:
- Motor vehicles (31/12/2023) ................................................................................... 1 050 000
- Machinery (31/12/2023) .......................................................................................... 990 000
Investments at cost (note 5) ........................................................................................ 130 000
Loan (note 6) ............................................................................................................... 93 750
Inventories (note 4) ..................................................................................................... 1 502 500
Trade and other receivables ....................................................................................... 2 352 000
Bank overdraft ............................................................................................................. 630 000
Trade and other payables ........................................................................................... 731 250

Additional information:

The following information in respect of transactions that occurred during the financial year was given:

1. Land and buildings are owner-occupied and consist of erf 14, Sunnyside, with an office building
thereon. The land was acquired on 1 March 2023 for R1 425 000. The office buildings were
erected during the current financial year and have no residual value.

Total costs incurred on the building were as follows:

- Material ....................................................................................................... R1 950 000

- Professional fees ......................................................................................... R525 000
- Labour cost .................................................................................................. R1 125 000

The company withdrew the machinery, listed in the balances above, from production for a
period of 7 months during the year. It was used in the process of erecting the office building.
This machinery was acquired on 1 July 2022 and had no residual value. The building was
completed on 31 October 2024 and was available for use, as intended by management, on the
same date. The land was revalued for the first time on 1 January 2024 at net replacement
value by Mrs. Msiza, an independent sworn appraiser.

2. Other transactions in respect of non-current assets that took place during the current year:

- On 30 June 2024, one of the vehicles was involved in an accident and as a result, it was
written off to zero. This vehicle was purchased on 1 July 2021 and had a cost price of
R225 000. An amount of R187 500 was paid by the insurance company on 25 August
2024 as a reimbursement. On 1 October 2024, a new vehicle costing R337 500 was
purchased, to replace the vehicle that was written off.

- The company bought an additional machine for business on 1 July 2024 at a cost of
R562 500. The machine has an estimated residual value of R37 500 at the end of its useful
life. The machine was ready and available for use, as intended by management, on the
purchase date. This machine requires a major inspection every two years, estimated to
cost R50 000 per inspection. No inspection was done on acquisition, but the separate
component was identified. This machine was not used in the construction of the new office
building.
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QUESTION 2 (continued)

All the machinery produce 100 000 units over its useful life, with the number of units per
year, being estimated at: 40 000 (year 1), 30 000 (year 2), 20 000 (year 3), 10 000 (year 4).

- All furniture and fittings were purchased on 1 January 2023. No furniture and equipment
were purchased during the current financial year.

3. Non-current assets are depreciated as follows:

- Buildings: 2% per annum on the straight-line method.

- Motor vehicles: On the straight-line method over the asset’s useful life of 5 years.
- Machinery is depreciated in accordance with the units of production method.
- Furniture and fittings: 20% per annum on the reducing balance method.

4. Inventories consist of the following at cost price:

- Raw materials ............................................................................................... R565 000

- Work in progress ........................................................................................... R750 000
- Finished goods.............................................................................................. R187 500

The net realisable value of the inventories was reviewed by the directors at year end, and they
arrived at the estimates below:

Inventory type : Net realisable value:

- Raw material : 10% above cost

- Work in progress : 8% below cost
- Finished goods : 5% above cost

5. Investments consist of the following:

- 20 000 Ordinary shares in MMA Ltd purchased for R80 000. These shares were classified
as a financial asset through profit or loss, purchased for speculation purposes. The issued
share capital of MMA Ltd consists of 200 000 ordinary shares. These shares were trading
on the JSE at R4,50 each on 31 December 2024.

- 10 000 Preference shares in UFC Ltd purchased for R50 000. The issued preference
share capital of UFC Ltd consists of 40 000 shares. These shares were trading on the JSE
at R6,00 each on 31 December 2024. These shares are classified as a financial asset at
fair value through other comprehensive income.

- On 1 April 2024, a property was acquired at a cost of R700 000 to serve as an investment
property in the future. This property is located at stand 22 in Mamelodi, and on 1 July
2024, construction of an office block commenced on the property. On 1 December 2024
a tenant for the office block was secured, and a capital expenditure of R25 000 was
incurred to secure this tenant. At the end of the financial year, construction costs incurred,
amounts to R2 500 000. The fair value of the land and buildings at the end of the current
financial year, as valued by Mr. Nkosi a sworn appraiser, is R3 500 000. The accountant
was not sure as how to record this in the financial records, so it has not yet been included
in the investment amount. The company applies the fair value model for investment
property.
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QUESTION 2 (continued)

6. The loan was granted to Nkosi Ltd on 30 June 2024. Interest is calculated on the loan at 12%
per annum. The loan is secured by a first mortgage bond over the company’s fixed property.
The capital portion of the loan is repayable on 31 December 2027. Interest is paid annually on
31 December each year.

7. The company applies the revaluation model for non-depreciable assets, the cost model for
remaining property plant and equipment.

8. On 1 July 2024, DDP Ltd signed a long-term agreement with Camp Ltd to supply them with
the kitchen unit for these unique caravans on a daily basis, for a period of five years. To ensure
that Camp Ltd fulfils its obligations in terms of the agreement, the management of both
companies agreed that Camp Ltd constructs a manufacturing plant on its own premises. The
plant will also then be used by DDP Ltd to manufacture and assemble the caravans. The close
proximity of the plant will ensure that these kitchen units can be supplied as and when needed
by DDP Ltd.

The following information is relevant to the long-term agreement:

 To ensure the continuous availability of the kitchen units, the agreement stipulates that
DDP Ltd has to pay an annual fixed charge of R600 000 (at the end of each financial year) to
Camp Ltd;
 A deposit of R50 000 was paid on 1 June 2024, to secure the lease;
 DDP Ltd incurred legal fees of R30 000 relating to this lease contract and was partially
reimbursed by Camp Ltd, who paid over R10 000 on 1 July 2024;

 Since these products are unique, the plant has no other purpose and will be demolished at the
end of the agreement at the expense of Camp Ltd;

 The incremental borrowing rate of DDP Ltd is 12% per annum.

The arrangement conveys the right to DDP Ltd to control the use of the plant and the plant will
be depreciated over its useful live.
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REQUIRED:
Marks
For DDP Ltd as at 31 December 2024, you are required to:

(a) Prepare the “Asset” section of the Statement of Financial Position; 4½

(b) Property, Plant and Equipment note; 33

(c) Investment Property note; 3

(d) Draft Prepare the necessary journal entries in the accounting records of DDP 14 ½
Ltd to account for the lease (assuming the agreement meets the requirements
to be recognised as a lease in terms of IFRS16, for the financial year-end
31 December 2024.Ignore closing entries.

Please note:

Comparative figures are NOT required.

The accounting policy note is NOT required.

All amounts exclude VAT (where appropriate), except where otherwise noted.

Ignore the total column in the Property, Plant and Equipment note.

Show all calculations, no marks for amounts without calculations.

Your answers must comply with the requirements of International Financial

Reporting Standards (IFRS).

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QUESTION 3 (15 marks) (30 minutes)

Mr Sharp has recently been appointed as the new financial manager of Wizard Ltd. Even though he
held a financial position long ago, he has been working in the entertainment industry for the past 5
years. His knowledge of financial accounting is thus somewhat outdated, and he approached you
for advice on the correct accounting treatment for the products and services offered by Wizard Ltd.
The company's year-end is 31 December 2024.
Technology support services
Wizard Ltd provides online technology support services to customers remotely via the internet.
Wizard Ltd will scan a customer’s personal computer for viruses and optimise their computer’s
performance for a fixed fee of R500. When a customer calls to obtain the support services the
following process is followed:
- Wizard Ltd describes to the customer the services it can provide and the price for those services.
All telephonic conversations with customers are recorded.
- When the customer agrees to the terms stated by the Wizard Ltd representative, a payment is
made over the telephone via the customer’s credit card.
- After a successful payment has been made by the customer, Wizard Ltd gives the customer an
access code for Wizrd Ltd’s website in order to obtain and use the scan services.
Software licenses and software customisation
Wizard Ltd licenses accounting software to its customers. In addition, Wizard Ltd also provides a
service to significantly customise the accounting software to the customer’s business environment
and information technology platform. The license, including the customisation of the software, is sold
to customers at R20 000.
Laptops
Wizard Ltd also sells laptops to the public via its website. Wizard Ltd only sells the Delux and Pro
model laptops. The Delux and Pro are sold for R10 000 and R15 000 respectively.
Once the customer has paid for the laptop on Wizard Ltd’s online shop using his/her credit card, the
laptop is dispatched to the customer. Wizard Ltd uses a third-party carrier to deliver the laptops to
its customers. Wizard Ltd’s delivery terms on its website stipulate that legal title of the product passes
to the customer when the laptop is handed over to the carrier.
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REQUIRED:
Marks
Provide a response to Mr Sharp on the following:

(a) If the technology support services provided by Wizard Ltd is a contract with a 5
customer.

(b) If the software licenses and software customisation are separate performance 6
obligations in a single contract.

(c) When should revenue from the laptops sold through the online shop be 4
recognised by Wizard Ltd.

Please note:

Your answers must comply with the requirements of International Financial

Reporting Standards (IFRS).

[15]
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QUESTION 4 (20 marks) (40 minutes)

Power Ltd is a manufacturer and distributor of energy bars. During the current financial year ending
30 June 2024, the company’s main competitor introduced a new energy bar to the market, which
has lower calories and offers more daily fiber intake. In an attempt to retain its market share, Power
Ltd decided to also improve and change the content of its energy bars, resulting in a major
restructuring of the company’s operations.

1. Restructuring
The company’s business operations had to be relocated to Durban, and the different distribution
outlets were all closed in other locations within South Africa to centralise the distribution of the
product. This proposed restructuring plan was announced in the media during the current financial
year, and the plan will be implemented . At year-end on 30 June 2024, the directors of Power Ltd
estimated that the future operating losses to be incurred during the relocation of the business
operations will amount to R500 000. The dismantling costs of the equipment at the different
distribution outlets are estimated to be R200 000 and this will take place during July 2024. The
financial director of Power Ltd estimated that an amount of R100 000 will be spent in the following
year for the continuous repair and maintenance of the manufacturing machines due to the fact that
the machines are currently operating at their full capacity.

2. Legal claim
On 28 June 2024, Strength Ltd, a competitor, instituted a claim of R800,000 against Power Ltd for a
possible infringement of patent rights on their new formula for energy bars. The legal advisors of
Power Ltd are of the opinion that the claim will probably be unsuccessful and there is a remote
chance that the claim against Power Ltd will be successful. The directors of Power Ltd estimated
that the legal costs to defend the claim will amount to R75 000.

3. Provisions for refunds Power Ltd has a policy to refund purchases to dissatisfied customers
within two months from the date of the sale, even though it is under no legal obligation to do so. Its
refund policy is generally known and advertised on the packaging of the energy bars. Based on past
experience a provision for refunds amounting to R15 000 was made in the annual financial
statements of Power Ltd for the year ended 30 June 2023. During the current financial year R20 000
was refunded to dissatisfied customers of which R3 000 related to sales until 30 June 2023. The
financial director estimated, based on the sales figures and past experience, that R2 500 will most
probably be refunded to customers in the first two months of the next financial year relating to sales
for the year ended 30 June 2024.

Service contract termination

On 1 June 2024 the shareholders of Power Ltd decided to terminate the service contract of the
managing director due to a conflict of interest. The severance package of the managing director,
according to his service contract, amounted to R1 000 000. The managing director disputes this
amount and considers taking legal action to claim an amount of R1 500 000. On 30 June 2024, no
cash payment has been made to the managing director yet.
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REQUIRED:
Marks
(a) Prepare the journal entries, including narrations, for all provisions to be made
for the financial year ending on 30 June 2024, 10

(b) Provide explanations for all amounts not recognised as a provision. 10

Please note:

Your answers must comply with the requirements of International Financial

Reporting Standards (IFRS).

[20]