Description
Alphabet Ltd is a large stationery retailer listed on the JSE Securities Exchange. The company
has a 30 June reporting period and it and all of its suppliers and/or customers are registered
VAT vendors at a rate of 15%.
The following extract from the trial balance for the year ended 30 June 2023 is presented to
you:
ALPHABET LTD
TRIAL BALANCE FOR THE YEAR ENDING 30 JUNE 2023
Note Debit Credit
R R
Other financial investments 6 1 275 625
Mortgage bond: Finrite Financers (7,5%) 3 1 500 000
Accumulated impairment loss – Investment in EF (Pty) Ltd 6 17 255
Gross profit 1 3 502 012
Dividends received 7 50 000
Interest paid 2 57 500
Insurance compensation – vehicle destroyed in fire 5 120 500
Impairment loss – Investment in EF (Pty) Ltd 6 17 255
Doubtful debts 566 350
General expenses 122 500
Salaries and wages 560 000
Other expenses 183 500
ADDITIONAL INFORMATION:
Unless stated otherwise, the following information has not yet been accounted for in the
accounting records of Alphabet Ltd:
1. Gross profit percentage on turnover amounts to 50%.
2. The following interest was paid during the year and correctly accounted for:
Supplier loan R36 500
Bank overdraft 21 000
57 500
3. On 1 July 2019, a vacant stand adjacent to the existing property was purchased, which
was financed through the acquisition of a further mortgage bond of R1 500 000 from
Finrite Financers at an annual interest rate of 7,5%. The loan is repayable in 5 equal
annual instalments, which includes capital and interest. The accountant has correctly
entered the acquisition of the property and the loan in the accounting records. The
following repayment schedule is applicable:
ACCOUNTING 12
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Page 6 of 7
Payment
R
Capital
R
Interest
R
Capital
outstanding
R
01 July 2019 Loan 1 500 000
30 June 2020 Instalment 1 370 747 258 247 112 500 1 241 753
30 June 2021 Instalment 2 370 747 277 616 93 131 964 137
30 June 2022 Instalment 3 370 747 298 437 72 310 665 701
30 June 2023 Instalment 4 370 747 320 820 49 928 344 881
30 June 2024 Instalment 5 370 747 344 881 25 866 –
4. On 30 June 2022, it was determined that the recoverable amount of a machinery item
was lower than its carrying amount and the machinery item was thus impaired. The
impairment was correctly accounted for in the accounting records for the previous year.
The recoverable amount of the machinery item was R472 075. The machinery item was
originally purchased on 1 March 2020 and it is the policy of Alphabet Ltd to depreciate
machinery over its useful life of 8 years. The current year’s depreciation has not yet been
accounted for.
5. On 31 January 2023, one of the company’s vehicles was destroyed in a fire on the
premises. This vehicle’s original cost price was R265 000 and its carrying value on 1
July 2022 was R208 356. As the vehicle was destroyed by the fire, the insurance
company paid out an amount of R138 575 (including VAT), in full and final settlement.
The accountant only recorded the following in the accounting records:
2023
Dr.
R
Cr.
R
31 Jan Vehicles (SFP) 120 500
Insurance compensation – vehicles
destroyed in fire (P/L) 120 500
Recognise the insurance pay-out of claim
Vehicles are depreciated at 15% p.a. on the diminishing balance method.
6. Other financial investments are made up as follows:
80 000 ordinary shares of R12,50 each in CD Ltd, listed on R1 000 000
the JSE Ltd
31 500 ordinary shares of R8,75 each at cost in EF (Pty) Ltd 275 625
1 275 625
ACCOUNTING 12
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Page 7 of 7
The following JSE listed share prices of CD Ltd are provided to you:
Date Fair value per
share
01/07/2022 R12.50
31/01/2023 R11.75
30/06/2023 R11.25
7. Dividends received are made up of:
Dividends received from CD Ltd R45 000
Dividends from EF (Pty) Ltd 5 000
50 000
8. Company tax, correctly calculated, amounted to R442 960.
REQUIRED:
3.1 Present the abovementioned information in the Statement of Profit and Loss of
Alphabet Ltd for the year ended 30 June 2023. (17)
3.2 Disclose the following notes to the financial statements of Alphabet Ltd as at 30 June
2023. (8)
• Other Financial Investments
• Long-Term Borrowings
Please note:
• Show all calculations as marks are awarded for these;
• Round off all amounts to the nearest Rand
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