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FAC3703 Assignment 1 Semester 2 2024 - DUE 7 September 2024 R50,00
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FAC3703 Assignment 1 Semester 2 2024 - DUE 7 September 2024

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QUESTIONS WITH ANSWERS FAC3703 Assignment 1 Semester 2 2024 - DUE 7 September 2024

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  • September 4, 2024
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  • 2024/2025
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FAC3703 Assignment
1 Semester 2 2024 -
DUE 7 September
2024
QUESTIONS WITH ANSWERS

, FAC3703 Assignment 1 Semester 2 2024 - DUE 7 September 2024




Ozone Ltd Ozone Ltd is neither a manufacturer nor a dealer that leases ozone friendly

machinery that reduces the emission of harmful chemicals. Ozone has a 28/29

February year-end. As part of its business strategies, Ozone Ltd entered into the

following transactions: Transaction 1 Ozone Ltd entered into an agreement with

Woodworks Ltd in which Ozone Ltd leased machinery to Woodworks Ltd. The contract

between the two companies contains a lease in terms of IFRS 16, Leases. Ozone Ltd

purchased this machine on 1 March 2023 at a cost of R420 000. FAC3703/02/2024 The

lease agreement for the machine is as follows: Fair value of the machine on 1 March

2023 R420 000 Lease commencement date 1 March 2023 Lease instalments payable

bi-annually in arrears on 31 July and 28 February R90 000 Guaranteed residual value at

the end of the lease term R15 000 Unguaranteed residual value at end of the lease term

R5 000 Lease term 3 years Initial direct costs incurred by Ozone Ltd R10 000 Initial

direct costs (Legal Fees) incurred by Woodworks Ltd R15 000 Woodworks Ltd will take

ownership of the machinery at the end of the lease term upon payment of the

guaranteed residual value. The machinery has a useful life of 5 years at the beginning

of the lease term and a Rnil residual value. The profit before tax of Woodworks Ltd for

the year ended 29 February 2024 amounted to R1 500 000 before the lease transaction

was taken into account. Assume the deferred tax balance at 1 March 2023 was Rnil.

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