QUESTION 1 (35 marks)
Fastfoods (Pty) Ltd is a producer and retailer of nutritious ready-made meals based in the Western Cape. The company produces a wide range of frozen foods, meal kits, and craft pizzas which are sold on their online store and delivered to customers across South Africa.
You are provided with the statement of profit or loss and other comprehensive income and trial balance of Fastfoods (Pty) Ltd for the June 2023 financial year-end:
Statement of profit or loss and other comprehensive income of Fastfoods (Pty) Ltd for the year ended 30 June 2023
| Rand | |
| Revenue | 1 862 588 |
| Cost of sales | (982 000) |
| Gross profit | 880 588 |
| Other income | 30 200 |
| Interest income | 11 200 |
| Dividends received | 6 700 |
| Fair value adjustment – shares held for trading | 12 300 |
| Operating expenses | (597 150) |
| Selling expense | 123 350 |
| Telephone expense | 124 000 |
| Loss on disposal of equipment | 6 800 |
| Depreciation | 343 000 |
| Profit before taxation | 313 638 |
| Income tax expense | (87 819) |
| Profit for the period | 225 819 |
Trial balance of Fastfoods (Pty) Ltd at 30 June 2023
| 2023 | 2022 | |
| Debit / (Credit) | Debit / (Credit) | |
| Rand | Rand | |
| Delivery vehicles: Cost | 1 200 000 | 870 000 |
| Delivery vehicles: Accumulated depreciation | (414 000) | (174 000) |
| Equipment: Cost | 520 000 | 500 000 |
| Equipment: Accumulated depreciation | (178 000) | (100 000) |
| Shares – held for trading | 75 000 | 40 000 |
| Inventory | 166 563 | 85 000 |
| Trade receivable | 19 000 | 31 000 |
| Prepaid selling expenses | 11 750 | 12 250 |
| Bank and Cash | 303 427 | 190 388 |
| Share capital | (125 000) | (100 000) |
| Retained earnings | (1 481 857) | (1 256 038) |
| Dividends paid | 25 000 | – |
| Loan payable | (32 000) | (45 000) |
| Trade payable | (34 550) | (16 000) |
| Accrued telephone expense | (10 333) | (9 800) |
| Current tax payable | (45 000) | (27 800) |
| – | – |
Additional information:
• A new delivery vehicle was purchased on the 1st of July 2022 and was available for use on the same date. All delivery vehicles are depreciated at 20% per annum on a straight-line basis. No disposal of vehicles occurred during the year. None of the vehicles have a residual value.
• Equipment with a cost price of R100 000 was sold on the 30th of September 2022, and replacement equipment was acquired on the same date. The newly acquired replacement equipment was available for use on the 30th of September 2022. The original purchase date of the sold equipment was the 1st of July 2021 and was available for use on the same date. All transactions relating to equipment were on a cash basis. All equipment is depreciated at 20% per annum on a straight-line basis. None of the equipment has a residual value.
• Additional shares were issued for cash.
• During the current year, Fastfoods (Pty) Ltd declared and paid dividends of R25 000 to ordinary shareholders.
REQUIRED:
Prepare the Statement of Cash Flows of Fastfoods (Pty) Ltd, using the direct method, for the year ended 30 June 2023 in accordance with International Financial Reporting Standards (IFRS).
Instructions:
• Show and reference all your calculations.
• Round to the nearest Rand.
• Ignore comparative figures.
• Notes are not required.
(35 marks)
QUESTION 2 (40 marks)
Wonderchoc (Pty) Ltd is a chocolate manufacturer offering a wide range of chocolate bars, sweets, and truffles. The company has a 30 June financial year-end.
You are the financial accountant at the company and are currently preparing the inventory accounts for June 2023, specifically for the chocolate bars.
In preparation for the inventory accounts, you have obtained the following information relating to the chocolate bars:
Balances on 1 June 2023:
| Detail | Rand | |
| Raw materials | 50 500 kilograms | 101 000 |
| Work in progress | 87 450 | |
| Finished goods | 2 890 bars (units) | 72 250 |
Raw materials:
• Wonderchoc (Pty) Ltd purchased 95 000 kilograms during the month of June 2023, amounting to R171 000.
• During the month of June 2023, 83 125 kilograms were used in production.
Wages:
• Wage expense incurred during June 2023 amounted to R220 000.
• The wage expense was incurred as follows:
Factory employees 82%
Cleaning staff in the factory 6%
Cleaning staff in the head office 4%
Administration staff in head office 8%
Other conversion costs:
• Electricity for June 2023, amounting to R15 000, was paid for in cash. Wonderchoc (Pty) Ltd classifies electricity as a variable cost.
• Depreciation, which is also classified as a variable cost, amounted to R120 000.
– 80% of the depreciation relates to machinery used in the factory. This machine was idle for 25% of the time.
– 20% of the depreciation relates to equipment used in the head office.
• The June 2023 rental of the factory building amounted to R80 000 and was paid for in cash.
Additional information:
• Budgeted normal production for June 2023 was 10 000 bars (units) of chocolate.
• Units put into production in June 2023 were 10 100 bars of chocolate.
• Cost of the completed, 9 870, chocolate bars during June 2023 amounted to R266 490.
• 80% of all finished goods were sold during June 2023.
REQUIRED:
Prepare the June 2023 general ledger accounts for:
• raw materials, (10 marks)
• working in progress, and (19 marks)
• finished goods (11 marks)
using the perpetual inventory system and assume that the first-in-first-out method is used.
Answers to Above Questions on Financial Accounting
Answer 1: The preparation of the Statement of Cash Flows of Fastfoods (Pty) Ltd, using the direct method, for the year ended 30 June 2023 in accordance with International Financial Reporting Standards (IFRS) is performed as follows:
Get completed answers on the questions above on financial accounting from the accounting assignment help experts in South Africa.
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