UNIVERSITY EXAMINATIONS

18 August 2025 (FI Concession) (2025)

FAC2601

Financial Accounting for Companies

100 marks (200 minutes)

This paper consists of FIFTEEN (15) pages.

Instructions:

1. This paper consists of FOUR (4) questions.

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. Please SCAN QR Code:

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

Question Time in
no Subject Marks minutes
1 Conceptual Framework for Financial Reporting 20 40
2 Statement of profit or loss and other comprehensive
income including the note on remuneration of 40 80
directors
3 Statement of changes in equity & Only the Equity
and Liabilities section of the statement of financial 30 60
position
4 Events after the reporting period (IAS 10) 10 20
TOTAL 100 200

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Download this paper as soon as it has been accessed.

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to do so will be a transgression of Unisa’s examination rules and the student's

marks will be withheld.
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supporting documentation (doctor's note indicating the disability and the
additional time that will be required for the completion of the examination)
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provide the declaration (doctor's note indicating the disability and the additional
time that will be required for the completion of the examination) to
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advantage and improved performance for students exempted from using
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steps will be taken in accordance with the academic integrity policy.

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[email protected] at least 7 days prior to their examination
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advantage and improved performance for students exempted from using
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qualify the student for any special concessions or future assessments.

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32. Queries that are beyond Unisa’s control include the following:
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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).

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QUESTION 1 (20 marks) (40 minutes)

Bayfront Investments Ltd is a property investment company that specializes in acquiring and
managing income-generating properties. On 1 March 2024, the company acquired a
portfolio of three fully furnished holiday homes in a popular tourist destination.
The purpose of the acquisition is to generate rental income through short-term leases to
holidaymakers and to benefit from long-term capital appreciation.
The following costs were incurred in acquiring and preparing the properties for rental during
the current financial year ending 28 February 2025.

Cost Description Amount (R)

Purchase price of the three properties (land & buildings) 9,000,000

Legal fees related to the purchase 150,000

Transfer duties (non-refundable taxes on property) 300,000

Initial refurbishment to make homes rentable (not structural) 500,000

Marketing expenses for initial tenant attraction 120,000

Prepaid insurance (12 months from acquisition date) 60,000

Monthly property management fees (March 2024 – February 2025) 300,000

The company prepares its financial statements according to IFRS and uses the Conceptual
Framework for Financial Reporting when applying accounting judgements. Management
is unsure how to account for the holiday homes and associated costs?

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REQUIRED:

(a) Using the Conceptual Framework, assess whether the holiday homes meet the
definition and recognition criteria of an asset in the financial statement of Bayfront
Investments Ltd, for the financial year end 28 February 2025? 5

(b) Explain the appropriate classification of the holiday homes in terms of IFRS
standards and justify your classification with reference to the necessary IFRS
standard. 2

(c) Calculate the initial cost at which the holiday homes should be recognized at
acquisition, identifying which of the above costs should be capitalized as part of the
cost of the investment property and which should be expensed. Provide brief
reasons for your treatment of each cost? 7

(d) Briefly explain the subsequent measurement options available under IAS 40 for
investment property. Discuss the implications of selecting either the fair value
model or the cost model, and outline how future changes in fair value or
depreciation would be treated under each?
5
Communication skill (logical argument) 1
(20)

Please note:

Your answer must comply with the requirements of International Financial Reporting
Standards (IFRS)

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QUESTION 2 (40 marks) (80 minutes)

The following balances were extracted from the records of Zodwa Toys (Pty) Ltd for the
financial year ended 30 June 2024:
R
Dr/(Cr)
Revenue (note 1) ............................................................................................ (32 599 600)
Administrative expenses: ................................................................................ 4 650 200
Bank charges .................................................................................................. 15 412
Salaries and wages (note 7) ........................................................................... 2 624 000
Marketing ......................................................................................................... 583 011
Subscriptions ................................................................................................... 983 710
Auditors’ remuneration:
Fees for audit .................................................................................................. 375 827
Travelling expenses ........................................................................................ 68 240
Distribution costs ............................................................................................. 487 100
Operating expenses (including finance cost) .................................................. 953 400
Other operating income (note 6)..................................................................... (600 050)
Proceeds on sale of motor vehicles (note 3)………………… (250 000)
Land at cost (note 2 and 4) ............................................................................ 890 000
Motor vehicles at cost (note 3 and 4) ............................................................. 650 000
Accumulated depreciation – Motor vehicles (note 3 and 4) (485 000)
Provisional tax paid………………………………………………………………… 35 500
Investments (note 9) ....................................................................................... 4 050 000
Long-term loan (note 8) .................................................................................. (680 000)
Income tax expenses (note 5) ........................................................................ ?

Additional information:

1. The revenue amount includes VAT at 15%. Zodwa Toys (Pty) Ltd maintained a gross
profit of 35% on sales during the year. Included in the revenue amount, is the advance
payment of R400 000 (vat exclusive) for a bulk sale of toys which will be delivered on
the 2nd of July 2025.

2. Land which was purchased on 1 July 2023 was revalued on 30 June 2024 to its fair value
of R940 000 by Mr Reece, as sworn appraiser. The revaluation amount was included in
revenue.

3. Zodwa Toys (Pty) Ltd sold two of its motor vehicles for an amount of R250 000 on
31 May 2024. The proceeds from the sale of the motor vehicles is included in other
operating income. The carrying amount of the vehicles sold was R285 000 on 1 July
2023. The original cost of the two vehicles sold on 31 May 2024 was R400 000.

On 1 June 2024, Zodwa Toys (Pty) Ltd purchased a new fleet of vehicles to replace
the ones sold, for R900 000, of which was yet to be recorded. Depreciation on both the
new and sold vehicles were not yet recorded at year end.

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Question 2 (continue)

4. The following is an extract from the accounting policies of Zodwa Toys (Pty) Ltd:

 Owner-occupied land is accounted for using the revaluation model. It is the company
policy that revaluations will be made with sufficient regularity to ensure that the
carrying amounts do not differ materially from that which would be determined using
the fair values at the end of the reporting period.
 The policy on depreciation is as follows:
o Motor vehicles – written of in accordance with the straight-line method at 20%.

5. Normal company taxation of R402 450 must still be provided for.

6. Included in other operating income are dividends received from Thabo Ltd of R40 800
and R59 000 received from Osama Ltd.

7. Included under salaries and wages are the following salary payments to top
management:
Capacity Name R
Chairperson Mr R Tira Nil
Managing Director Mrs B Moshion 352 000
Financial Director Mr Z Bantini 245 200
Human Resources Director Mr R Madlisa 534 800
General Secretary Mr M Phori (Prescribed Officer) 264 000
Regional Manager Mrs S Smaal (Prescribed Officer) 200 000

Zodwa Toys (Pty) Ltd identified all of their prescribed officers and ensured that they
meet the statutory requirements for appointment. The prescribed officers were
informed that their remuneration will be disclosed in terms of the requirements of the
Companies Act, 2008.

The following information is applicable to the remuneration of directors and

prescribed officers for the financial year-end 30 June 2024:

7.1 Four directors’ meetings were held during the financial year of which all of top
management personnel received R2 050 per meeting for attending, except for the
Chairperson who received R3 000 per meeting.

7.2 Mr Madlisa is also a managing director of Osama Ltd. He received R244 800 for
the year as remuneration.

Mr Z Bantini was relieved from her duties as Financial Director on the 30 June 2024
and received a pay-out in remuneration for an amount of R80 000 as compensation
for loss of office.

7.3 The total annual pension contributions amounted to R120 000 per year per director
and R60 000 per prescribed officer per year. The companies are paying 60% of
these contributions on behalf of their directors and prescribed officers.

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QUESTION 2 (continued)

7.4 The managing director received a travelling allowance of which R46 000 per annum
was for private use.

7.5 Entertainment allowances are as follows:

Managing director R35 000

Financial director R30 000
Human resource director R180 000

7.6 Salaries and wages (staff costs) excluding remuneration of directors and
prescribed officers, amounts to R505 200

8. The long-term loan from Ulazi Capital Ltd was incurred on 1 August 2023 and bears
interest at 11.5% per annum. The interest is payable monthly in arrears. The capital
portion of the loan is repayable on 30 June 2027.

9. Investments consist of:

R
9.1 Investment in Bold Ltd .....................................................................................3 600 000

- 9 000 Ordinary shares in Bold Ltd purchased at a cost of R3 600 000 for speculative
purposes. The issued share capital of Bold Ltd consists of 200 000 ordinary shares.
These shares are traded on the JSE and the fair value of the shares was R450 each
on 30 June 2023. Bold Ltd shares were trading at R460 each on 30 June 2024. No
adjustment has been accounted for in the current financial year.

9.2 Investment in Thabo Ltd 300 000

- 3 000 Ordinary shares in Thabo Ltd purchased at a cost of R300 000 for speculative
purposes. The issued share capital of Thabo Ltd consists of 500 000 ordinary shares.
These shares are traded on the JSE and the fair value of the shares was R100 each
on 30 June 2023. There were no changes to the fair value of the shares held in Thabo
Ltd on 30 June 2024.

9.3 Investment in Osama Ltd 150 000

- 2 500 Ordinary shares in Osama Ltd purchased at a cost of R150 000 for speculative
purposes. The issued share capital of Osama Ltd consists of 200 000 ordinary shares.
These shares are traded on the JSE and the fair value of the shares was R60 each on
30 June 2023. There were no changes to the fair value of the shares held in Osama
Ltd on 30 June 2024.

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REQUIRED:
Marks
a. Prepare the statement of profit or loss and other comprehensive income
of Zodwa Toys (Pty) Ltd for the year ended 30 June 2024. 17

b. Prepare the note “profit before tax” that should accompany the statement 5
of profit or loss and other comprehensive income of Zodwa Toys (Pty)
Ltd for the financial year ended 30 June 2024. Your answer must comply
with the requirements of International Financial Reporting Standards
(IFRS).

c. Disclose the remuneration of directors and prescribed officers in the notes 18

to the financial statements of Zodwa Toys (Pty) Ltd for the year ended
30 June 2024.
40
Please note:

Comparative figures and accounting policies are not required.

All calculations must be shown.

Your answer must comply with the requirements of International Financial

Reporting Standards (IFRS).

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QUESTION 3 (30 marks) (60 minutes)

The following is an extract from the trial balance of Time Wise Ltd on 28 February 2025.

R
Dr/(Cr)
Land and Buildings at cost (note 1) .................................................................. 6 000 000
Investment at cost (note 2) ............................................................................... 325 000
Sales ................................................................................................................. (10 000 000)
Cost of sales ..................................................................................................... 4 000 000
Administrative expenses ................................................................................... 800 000
Distribution expenses ........................................................................................ 240 000
Other operating expenses ................................................................................. 80 000
Other income ..................................................................................................... (80 000)
Income tax expense (final amount after all adjustments) ................................. 1 304 107
Retained earnings (1 March 2024) ................................................................... (2 200 000)
Mark-to-market reserve ( note 2)...................................................................... ?

Additional information:

1. Office building

Time Wise Ltd owns an office building in Alberton, which was acquired on
1 March 2020, at a cost of R6 000 000 (Land: R1 000 000; Building: R5 000 000). The
property was available for use, as intended by management, on acquisition date. The
useful life of the building was estimated to be 20 years and a residual value of R nil
was allocated to the building upon initial recognition. Both the useful life and residual
value of the building remained unchanged.

Time Wise Ltd adopted a policy to revalue its owner-occupied land. Revaluations are
made with sufficient regularity to ensure that the carrying amount does not differ
materially from the fair value at year-end. On 28 February 2025, Mr E Botes, an
independent sworn appraiser revalued the property for the first time and determined
the fair value of the land to be R1 350 000.

2. Investment

Details of the only investment of Time Wise Ltd is as follows:

Time Wise Ltd acquired 3 250 ordinary shares at a cost of R100 per share in a listed
company, Clock Works Ltd. The ordinary shares are not held for trading but were
acquired with a long-term view. The directors of Time Wise Ltd irrevocably elected at
initial recognition to classify this investment as at fair value through other
comprehensive income. The market value of the shares on 1 March 2024, amounted
to R357 000. The shares traded at R105 per share on the JSE as at 28 February 2025.
The changes in the market value of this investment have not yet been recorded in the
accounting records of Time Wise Ltd for the current year.

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QUESTION 3 (continued)

3. Authorised and issued share capital

Time Wise Ltd was incorporated with an authorised share capital of:

6 000 000 Ordinary shares (Equity shares)

The issued share capital of Time Wise Ltd on 1 March 2024 is as follows:
R
Ordinary share capital (R2 per share) ............................................ 3 000 000

4. Dividends

An ordinary dividend of 10c per share was declared to all registered ordinary shareholders
on 28 February 2025.

5. Time Wise Ltd entered into a contract with Hour Ltd on 1 March 2024, whereby Hour
Ltd will lease specialised machinery to Time Wise Ltd. The interest rate implicit in the
lease is 11,95% per annum, compounded annually. Time Wise Ltd incurred R3 500
legal fees for negotiating the lease. There is no reasonable certainty that ownership
will be transferred to Time Wise Ltd at the end of the lease term. The contract meets
the requirement of a lease in terms of IFRS 16, Leases.

The terms of the lease are as follows:

Lease term 4 years

Initial payment R20 000
Instalment payable yearly R264 000
Useful life of the machinery 5 years

The above lease transaction has not yet been recorded in the accounting records of
Time Wise Ltd.

REQUIRED:
Marks

a. Prepare the statement of changes in equity for Time Wise Ltd for the
financial year ended 28 February 2025, according to the requirements of
International Financial Reporting Standards (IFRS). 14

b. Prepare the equity and liabilities section only of the statement of financial
position for Time Wise Ltd as at 28 February 2025, according to the 16
requirements of International Financial Reporting Standards (IFRS).
30
Please note:

Ignore all notes to the financial statements.

Show all calculations.

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QUESTION 4 (10 marks) (20 minutes)

The financial statements of Sterling Ltd for the year ended 31 December 2024 were
presented to the board of directors for approval on 31 March 2025.

The following events have taken place since the reporting period date. You must consider
each event as independent form each other.

Event 1:
During the investigation of the debtor’s ledger in January 2025 by the external auditors it
was discovered that an error was made on one of the invoices sent to a customer. The
transaction was recorded as R670 000 instead of R640 000. The correct taxation amounted
to R9 000 on the transaction.

Event 2:
During November 2024, a customer sued Sterling Ltd for breach of contract to an amount
of R300 000. The case is still to be heard in May 2025. The lawyers of Sterling Ltd cannot
at this point give any indication of success or failure to defend the lawsuit.

Additional information:

 Assume that all amounts are material and that Sterling Ltd is a going concern
notwithstanding the effects of the above events on the financial statements.
 There is no other comprehensive income.

REQUIRED:
Marks

a. Identify each of the above events in terms of IAS 10 as either adjusting or 2

non-adjusting event after the reporting date;
Note: (Provide a discussion for any non-adjusting-event, if any)

b. Provide an extract of the annual financial statements of Sterling Ltd on 31 7

December 2024 disclosing the effect of each event to comply with the
International Financial Reporting Standards (IFRS) and Companies Act 71 of
2008.

Communication skill (presentation) 1

10

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UNISA 2025
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