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CPUT FIA213S Financial Statement Handout
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This is a comprehensive and detailed handout on presentation of financial statements for CPUT FIA213S. Essential!!
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FINANCIAL ACCOUNTING 2 – 2020FAC260S
HANDOUT: PRESENTATION OF
FINANCIAL STATEMENTS
QUESTION 1 (49 MARKS)
Big Bay Limited has an authorised share capital of 2 500 000 ordinary shares of no par value,
of which 600 000 had already been issued by the time the trial balance was prepared.
The financial director requests your assistance in preparing the financial statements for the
year ended 31 December 2011, and provides you with the following information:
Trial balance at 31 December 2011
Debit Credit
R R
Property 1 300 000
Furniture and Equipment (carrying value) 925 000
, 2
Additional information:
1 On 31 December 2011 it was estimated that the inventory has a net realisable
value of R180 000. No entries have yet been made for this.
2 The loan from ABBA Bank was acquired on 1 January 2010 and is repayable in
full on 1 January 2012. The Interest is payable annually in arrears on 1 January.
Provide for the interest outstanding on the loan for the current financial period.
3 On 31 December 2011 the property was re-valued upwards by R300 000 using
the replacement value method. This revaluation still has to be recorded.
4 On 1 December 2011, Big Bay Ltd received cash for 125 000 shares issued at
R2 each, and all the shares were allotted on this day. This issue has not yet
been recorded.
5 On 31 December 2011 the directors declared a dividend of 20 cents per share
on all the issued shares, including those issued on 1 December 2011. No
entries have yet been made for this.
6 In drafting the trial balance, all the expenses of Big Bay Ltd had been allocated
to the following four functions:
Cost of sales,
Distribution costs,
Operating costs, and
Administration costs.
7 The above costs reflected on the trial balance include the following:
Depreciation on the sales department equipment, R55 000
Depreciation on the office furniture and equipment, R65 000
Salaries of the sales staff, R220 000
Salaries of the office staff, R200 000
REQUIRED:
1.1 Prepare general journal entries on 31 December 2011 for additional information
numbers 1, 2, 3, 4 and 5. You are not required to prepare the closing transfers
for the write down of inventory and ordinary dividends accounts.
(Dates and narrations may be omitted.) (11)
1.2 Prepare the statement of comprehensive income of Big Bay Limited for the year
ended 31 December 2011 in conformity with International Financial Reporting
Standards. (Show your calculations in brackets.) (11)
1.3 Prepare the statement of changes in equity of Big Bay Limited for the year
ended 31 December 2011 in conformity with International Financial Reporting
Standards. (6)
, 3
1.4 Prepare the statement of financial position of Big Bay Limited at 31 December
2011 in conformity with International Financial Reporting Standards.
(Show your calculations in brackets.) (10)
1.5 Prepare the following notes to the financial statements of Big Bay Limited for the
year ended 31 December 2011 in conformity with International Financial
Reporting Standards:
Accounting policy
- Statement of compliance
Revenue
Profit before tax (8)
1.6 Assume that the directors of Big Bay Ltd made a capitalisation issue to its
existing shareholders on 31 January 2012 of 1 ordinary share for every 5 shares
already held, at R2 each.
Prepare the general journal entry for the above issue on 31 January 2012. (3)
ANSWERS
QUESTION 1 (49 MARKS)
1.1 Big Bay Ltd
General Journal for December 2011
DEBIT CREDIT
Write down of inventory
1 21 000 ü
(201 000 – 180 000)
Inventory 21 000 ü
Interest expense
2 14 000 ü
(100 000 x 14% x 12/12)
Accrued expenses 14 000 ü
3 Property 300 000 ü
Surplus on revaluation of Property 300 000 ü
4 Bank (125 000 x R2) 250 000 ü
Ordinary stated capital 250 000 ü
5 Ordinary dividends (725 000 x R0,20) ü 145 000 ü
Ordinary shareholders for dividends 145 000 ü
(11)
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