Exam (elaborations)
FAC3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 - DUE 23 August 2024
- Course
- General Financial Reporting
- Institution
- University Of South Africa
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FAC3701 Assignment 1(COMPLETE ANSWERS)
Semester 2 2024 - DUE 23 August
2024
100% GUARANTEED
,FAC3701 Assignment 1 (COMPLETE ANSWERS)
Semester 2 2024 - DUE 23 August 2024
TopStyle Ltd is a manufacturer and retailer of smartphone
accessories. TopStyle Ltd was incorporated on 1 July
2021. The profit before tax for the year ended 30 June
2023 amounted to R2 800 000, after taking into account
the information below: 1. Administration building The
administration building was acquired on 1 October 2021
at a cost of R1 500 000 and on this date, it was available
for use, as intended by management. Depreciation on the
administration building is written off over its estimated
useful life of 15 years according to the straight-line
method. A residual value of Rnil was allocated to the
administration building. The SA Revenue Service does not
allow a tax allowance on the administration building. No
other administration buildings were acquired or sold
during the year. On 20 December 2021 TopStyle Ltd made
a payment of R80 000 to an independent security
company, for security services to be rendered at the
administration building for the period from 1 January
2022 to 31 December 2022. The directors of TopStyle Ltd
decided to employ their own full time security staff from 1
January 2023. TopStyle Ltd paid security fees of R30 000
to their own security staff for the period 1 January 2023
to 30 June 2023.
To assist you with the financial analysis for TopStyle Ltd., let's break down the information
provided:
1. Administration Building Depreciation
Cost of the Administration Building: R1,500,000
Acquisition Date: 1 October 2021
Estimated Useful Life: 15 years
Depreciation Method: Straight-line
Residual Value: Rnil
, Calculation of Annual Depreciation:
Annual Depreciation=Cost of Asset−Residual ValueUseful Life\text{Annual Depreciation} = \
frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful
Life}}Annual Depreciation=Useful LifeCost of Asset−Residual Value
Annual Depreciation=R1,500,000−R015 years=R100,000 per year\text{Annual Depreciation}
= \frac{R1,500,000 - R0}{15 \text{ years}} = R100,000 \text{ per
year}Annual Depreciation=15 yearsR1,500,000−R0=R100,000 per year
Depreciation for the Period:
From 1 October 2021 to 30 June 2023:
o 2021/2022 (1 October 2021 - 30 June 2022): 9 months out of 12 months in a
year. Depreciation for 9 months=912×R100,000=R75,000\text{Depreciation for 9
months} = \frac{9}{12} \times R100,000 =
R75,000Depreciation for 9 months=129×R100,000=R75,000
o 2022/2023: Full year of depreciation. Depreciation for 12 months=R100,000\
text{Depreciation for 12 months} =
R100,000Depreciation for 12 months=R100,000
Total Depreciation from 1 October 2021 to 30 June 2023:
Total Depreciation=R75,000+R100,000=R175,000\text{Total Depreciation} = R75,000
+ R100,000 = R175,000Total Depreciation=R75,000+R100,000=R175,000
2. Security Services Expenses
Payment to Independent Security Company: R80,000 for the period 1 January 2022 to
31 December 2022.
Payment to Own Security Staff: R30,000 for the period 1 January 2023 to 30 June
2023.
Allocation of Expenses:
2021/2022 (for 6 months of security services):
Security Expense=612×R80,000=R40,000\text{Security Expense} = \frac{6}{12} \times
R80,000 = R40,000Security Expense=126×R80,000=R40,000
2022/2023:
o First 6 months (Independent Security Company):
Security Expense=612×R80,000=R40,000\text{Security Expense} = \frac{6}
{12} \times R80,000 = R40,000Security Expense=126×R80,000=R40,000
o Next 6 months (Own Security Staff): Security Expense=R30,000\text{Security
Expense} = R30,000Security Expense=R30,000
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