Nightshade Limited (hereafter Nightshade) is a listed company in the information technology sector on the JSE....

  
 
 

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Nightshade Limited (hereafter Nightshade) is a listed company in the information technology sector on the JSE. Nightshade and all its suppliers and vendors are registered for VAT purposes at a rate of 15%. Their current reporting date is 30 September. The following preliminary Statement of Profit or Loss for the year ended 30 September 2021 was prepared by an inexperienced accounting clerk in the company. NIGHTSHADE LIMITED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 2021 Sales Other income Dividends received: Snapdragon Ltd (listed on the JSE) Rent income Sundry income Operating expenses Advertising Bad debts Company tax Fees paid: To the auditors for the audit To the executive directors as remuneration Hotel expenses paid for auditors Interest on bank overdraft Proceeds on sales of computer equipment Loss with the write-down of inventories to NRV Ordinary dividends: Paid Recommended but not yet paid Salaries and wages paid: For the managing director Other salaries Water and electricity You are also provided with the following additional information: 1. SALES AND COST OF SALES 1.1 Nightshade maintains a consistent mark-up of 40% on sales. Note 1 2.2 3 4 +2 1.2 R 8 112 500 436 530 28 930 279 950 127 650 (1 765 030) 42 910 130 990 269 000 234 650 66 000 112 130 40 590 (21 000) 30 000 18 000 12 000 372 000 106 000 351 760 1.2 The cost of certain inventory items exceeds the net sales price thereof with R30 000. Although this write-down was correctly recognised with the following journal adjustment, no other entries have been made: 2.2 2021 Sept 20 Loss with the write-down of inventories to NRV (P/L) 2. INVESTMENTS IN SUBSIDIARY AND OTHER FINANCIAL ASSETS 3.1 Trade inventories (SFP) Recognise the write-down of the cost of inventories to net realisable value . 2.1 The following information pertains to investments in subsidiary and other financial assets as at 30 September 2021: Investment in Snapdragon Ltd (listed on the JSE) Investment in Sweet Pea (Pty) Ltd Dr. 30 000 Date 13/10/2020 30/04/2021 30/09/2021 Cr. Fair value per share R16.60 R15.75 R14.85 30 000 Nightshade acquired 20 000 of the 160 000 ordinary shares of Snapdragon Ltd on 13 October 2020 at an amount of R332 000. They paid it and correctly recorded the acquisition on the same date. The following JSE listed share prices of Snapdragon Ltd are provided to you: R332 000 R2 950 000 2.3 The investment in subsidiary Sweet Pea (Pty) Ltd was made during 2014 and comprises 300 000 ordinary shares at cost price and represents an equity interest of 60%. On 29 September 2021, Nightshade sent an invoice of R127 650 to Sweet Pea (Pty) Ltd for management services provided. Sweet Pea (Pty) Ltd settled the amount owed on 1 October 2021. On 30 September 2021 the recoverable amount of the investment in Sweet Pea (Pty) Ltd was determined to be R2 720 000. 3. PROVISION FOR DOUBTFUL DEBTS The accountant of Nightshade has neglected to decrease the allowance for doubtful debts from R1 950 000 to R1 910 000 at year-end. 4. VEHICLES AND COMPUTER EQUIPMENT 4.1 The accountant provided you with the following asset register regarding their delivery vehicles: Vehicle Vehicle AA Vehicle BB Computer Computer YY Computer ZZ Date acquired 1 October 2018 1 2020 November 5. LEGAL CLAIM Cost (excl. VAT) REQUIRED: price Odometer R560 000 R976 000 It is company policy to sell delivery vehicles when they have reached 300 000 kilometers. No residual values applies to vehicles. Date acquired February 2019 1 October 2020 4.2 The accountant provided you with the following asset register regarding their computer equipment: reading on 30 Sept 2021 132 456 64 532 Cost price (excl. VAT) R42 000 R63 000 Odometer reading on 30 Sept 2020 89 000 0 Useful life 5 years 5 years Residual value Computer YY was sold on 1 March 2021 for a total invoice amount of R21 000 (including VAT) The accumulated depreciation on 1 October 2020 amounted to R12 233. R5 300 R5 600 The accountant did not calculate any depreciation for the year and only recorded the proceeds received from the sale of shares. 5.1 At the end of April 2021, a claim of R900 000 was instituted against Nightshade for alleged infringement of patent rights. Nightshade's board of directors is of the opinion that the claim was instituted for malicious reasons. Their legal representatives indicated that they are of the opinion that the claim has no legal standing. 2.1 Taking the abovementioned information into consideration, present the information in the Statement of Profit or Loss of Nightshade Limited for the reporting period ended 30 September 2021. Show other expenses as one amount in the statement of profit or loss with a separate calculation to show the appropriate expense items that should be included to make up the amount. Start this calculation with the amount of operating expenses as given (R1 765 030). 2.2 Disclose the following notes in the financial statements of Nightshade Limited forthe reporting period ended 30 September 2021: PLEASE NOTE: . . Note 4: Investment in subsidiary Note 5: Contingent liability . No comparative figures are required. Notes in respect accounting policy, compliance with IFRS and measurement bases arenot required. Inventories are valued at the lower of cost, according to the first-in-first-out method andnet realisable value and the company uses the perpetual inventory system. Round off all amounts to the nearest Rand. Show all the necessary calculations as marks are awarded for these. Nightshade Limited (hereafter Nightshade) is a listed company in the information technology sector on the JSE. Nightshade and all its suppliers and vendors are registered for VAT purposes at a rate of 15%. Their current reporting date is 30 September. The following preliminary Statement of Profit or Loss for the year ended 30 September 2021 was prepared by an inexperienced accounting clerk in the company. NIGHTSHADE LIMITED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 2021 Sales Other income Dividends received: Snapdragon Ltd (listed on the JSE) Rent income Sundry income Operating expenses Advertising Bad debts Company tax Fees paid: To the auditors for the audit To the executive directors as remuneration Hotel expenses paid for auditors Interest on bank overdraft Proceeds on sales of computer equipment Loss with the write-down of inventories to NRV Ordinary dividends: Paid Recommended but not yet paid Salaries and wages paid: For the managing director Other salaries Water and electricity You are also provided with the following additional information: 1. SALES AND COST OF SALES 1.1 Nightshade maintains a consistent mark-up of 40% on sales. Note 1 2.2 3 4 +2 1.2 R 8 112 500 436 530 28 930 279 950 127 650 (1 765 030) 42 910 130 990 269 000 234 650 66 000 112 130 40 590 (21 000) 30 000 18 000 12 000 372 000 106 000 351 760 1.2 The cost of certain inventory items exceeds the net sales price thereof with R30 000. Although this write-down was correctly recognised with the following journal adjustment, no other entries have been made: 2.2 2021 Sept 20 Loss with the write-down of inventories to NRV (P/L) 2. INVESTMENTS IN SUBSIDIARY AND OTHER FINANCIAL ASSETS 3.1 Trade inventories (SFP) Recognise the write-down of the cost of inventories to net realisable value . 2.1 The following information pertains to investments in subsidiary and other financial assets as at 30 September 2021: Investment in Snapdragon Ltd (listed on the JSE) Investment in Sweet Pea (Pty) Ltd Dr. 30 000 Date 13/10/2020 30/04/2021 30/09/2021 Cr. Fair value per share R16.60 R15.75 R14.85 30 000 Nightshade acquired 20 000 of the 160 000 ordinary shares of Snapdragon Ltd on 13 October 2020 at an amount of R332 000. They paid it and correctly recorded the acquisition on the same date. The following JSE listed share prices of Snapdragon Ltd are provided to you: R332 000 R2 950 000 2.3 The investment in subsidiary Sweet Pea (Pty) Ltd was made during 2014 and comprises 300 000 ordinary shares at cost price and represents an equity interest of 60%. On 29 September 2021, Nightshade sent an invoice of R127 650 to Sweet Pea (Pty) Ltd for management services provided. Sweet Pea (Pty) Ltd settled the amount owed on 1 October 2021. On 30 September 2021 the recoverable amount of the investment in Sweet Pea (Pty) Ltd was determined to be R2 720 000. 3. PROVISION FOR DOUBTFUL DEBTS The accountant of Nightshade has neglected to decrease the allowance for doubtful debts from R1 950 000 to R1 910 000 at year-end. 4. VEHICLES AND COMPUTER EQUIPMENT 4.1 The accountant provided you with the following asset register regarding their delivery vehicles: Vehicle Vehicle AA Vehicle BB Computer Computer YY Computer ZZ Date acquired 1 October 2018 1 2020 November 5. LEGAL CLAIM Cost (excl. VAT) REQUIRED: price Odometer R560 000 R976 000 It is company policy to sell delivery vehicles when they have reached 300 000 kilometers. No residual values applies to vehicles. Date acquired February 2019 1 October 2020 4.2 The accountant provided you with the following asset register regarding their computer equipment: reading on 30 Sept 2021 132 456 64 532 Cost price (excl. VAT) R42 000 R63 000 Odometer reading on 30 Sept 2020 89 000 0 Useful life 5 years 5 years Residual value Computer YY was sold on 1 March 2021 for a total invoice amount of R21 000 (including VAT) The accumulated depreciation on 1 October 2020 amounted to R12 233. R5 300 R5 600 The accountant did not calculate any depreciation for the year and only recorded the proceeds received from the sale of shares. 5.1 At the end of April 2021, a claim of R900 000 was instituted against Nightshade for alleged infringement of patent rights. Nightshade's board of directors is of the opinion that the claim was instituted for malicious reasons. Their legal representatives indicated that they are of the opinion that the claim has no legal standing. 2.1 Taking the abovementioned information into consideration, present the information in the Statement of Profit or Loss of Nightshade Limited for the reporting period ended 30 September 2021. Show other expenses as one amount in the statement of profit or loss with a separate calculation to show the appropriate expense items that should be included to make up the amount. Start this calculation with the amount of operating expenses as given (R1 765 030). 2.2 Disclose the following notes in the financial statements of Nightshade Limited forthe reporting period ended 30 September 2021: PLEASE NOTE: . . Note 4: Investment in subsidiary Note 5: Contingent liability . No comparative figures are required. Notes in respect accounting policy, compliance with IFRS and measurement bases arenot required. Inventories are valued at the lower of cost, according to the first-in-first-out method andnet realisable value and the company uses the perpetual inventory system. Round off all amounts to the nearest Rand. Show all the necessary calculations as marks are awarded for these.

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