Q: If a branch manager is entitled to a commission of 5% of net profit after charging such commission, which formula should be used to calculate the commission?

$$ Commission = \frac{Net\text{ profit} \times 5\%}{1 + 5\%} $$

Q: If Ndlovu Holdings Ltd sells goods to Khula Ltd at a 25% mark-up on cost and 40% of these goods remain in Khula Ltd's inventory at year-end, what is the unrealised profit to be eliminated in consolidation?

$$ Unrealised\ profit = E500,000 \times 25\% \times 40\% $$

Question 1

Which of the following best describes the treatment of depreciation under IAS 16 for Property, Plant and Equipment?

Accepted Answer

Depreciation is charged systematically over the asset's useful life, with a full year's depreciation in the year of acquisition and none in the year of disposal unless otherwise stated.

Question 2

Ndlangamandla Distributors purchased a delivery truck for E420,000, paid a deposit of E60,000, and will pay four annual instalments of E95,000 each. If the implicit interest rate is 12.5% per annum, which formula should be used to calculate the present value of the instalments?

Accepted Answer

$$ PV = \sum_{t=1}^{n} \frac{Instalment}{(1 + r)^t} $$

Question 3

In the context of branch accounting, goods are sent to the branch at invoice price, which is cost plus 25%. If goods costing E16,000 are lost in transit, what is the value of the loss to be recorded in the Branch Stock Account?

Accepted Answer

E20,000

Question 4

Akhona Manufacturing (Pty) Ltd scrapped computer equipment with an original cost of E90,000 and accumulated depreciation of E90,000. What is the journal entry for this transaction?

Accepted Answer

Debit Accumulated Depreciation E90,000; Credit Computers E90,000

Question 5

When calculating goodwill on acquisition under IFRS, which formula is correct?

Accepted Answer

$$ Goodwill = Cost	ext{ of acquisition} + Fair	ext{ value of NCI} - Net	ext{ assets at acquisition} $$

Question 6

If a branch manager is entitled to a commission of 5% of net profit after charging such commission, which formula should be used to calculate the commission?

Accepted Answer

$$ Commission = \frac{Net	ext{ profit} 	imes 5\%}{1 + 5\%} $$

Question 7

In the consolidation process, how is unrealised profit in inventory from intra-group sales eliminated?

Accepted Answer

By reducing the value of inventory and retained earnings by the unrealised profit amount.

Question 8

Akhona Manufacturing (Pty) Ltd revalued its land from E900,000 to E1,050,000 at year-end. What is the correct journal entry for the revaluation surplus?

Accepted Answer

Debit Land E150,000; Credit Revaluation Surplus E150,000

Question 9

Which of the following is NOT a requirement under IAS 16 for Property, Plant and Equipment?

Accepted Answer

Depreciation must be charged on all assets, including land.

Question 10

If Ndlovu Holdings Ltd sells goods to Khula Ltd at a 25% mark-up on cost and 40% of these goods remain in Khula Ltd's inventory at year-end, what is the unrealised profit to be eliminated in consolidation?

Accepted Answer

$$ Unrealised\ profit = E500,000 	imes 25\% 	imes 40\% $$

Question 11

Which of the following statements about impairment under IAS 16 is correct?

Accepted Answer

Impairment is recognised when the carrying amount exceeds the recoverable amount.

Question 12

A motor vehicle originally purchased for E400,000 with accumulated depreciation of E320,000 is sold for E150,000. What is the gain or loss on disposal?

Accepted Answer

$$ Gain/Loss = E150,000 - (E400,000 - E320,000) $$

Question 13

In branch accounting, if goods are invoiced to the branch at cost plus 25%, what is the formula to convert invoice price back to cost?

Accepted Answer

$$ Cost = Invoice\ price 	imes \frac{100}{125} $$

Question 14

Which of the following is a correct journal entry for the impairment of goodwill in consolidation?

Accepted Answer

Debit Goodwill Impairment Expense; Credit Goodwill

Question 15

When calculating consolidated retained earnings, which of the following must be eliminated?

Accepted Answer

Intra-group dividends received by the parent from subsidiaries.

Question 16

Which formula is used to calculate the carrying amount of an asset under the straight-line depreciation method?

Accepted Answer

$$ Carrying\ amount = Cost - (Annual\ depreciation 	imes Years\ used) $$

Question 17

In the context of intra-group loans, what adjustment is required in the consolidated statement of financial position?

Accepted Answer

Eliminate the loan receivable and loan payable between group entities.

Question 18

Which of the following is TRUE regarding the revaluation model under IAS 16?

Accepted Answer

Assets are carried at fair value less subsequent depreciation and impairment.

Question 19

If Khula Ltd sold goods to Sibusiso Ltd for E400,000 at a 20% gross profit margin on selling price, and 30% of these goods remain unsold at year-end, what is the unrealised profit to be eliminated?

Accepted Answer

$$ Unrealised\ profit = E400,000 	imes 20\% 	imes 30\% $$

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