QUESTION $4(25$ marks$)$

Walker $($Pty$)$ Ltd $($Walker$)$ is a company that manufactures kitchen cupboards. Walker

has a $30$ June financial year$-$end.

Account Note Debit

$($R$)$

Credit

$($R$)$

Share capital $2000000$

Land $(1$ July $2023)1$

$8500000$

Retained income $(1$ July $2023)1350700$

Machinery $$ cost $(1$ July $2023)2$

$1800000$

Machinery $-$ accumulated depreciation

$(1$ July $2023)$

$2$

$337500$

Equipment $-$ cost $(1$ July $2023)3950000$

Equipment $-$ accumulated depreciation

$(1$ July $2023)$

$3$

$285000$

Bank $125000$

The following transactions took place during the current financial year and have

not yet been recorded:

Note $1$: Land:

On $1$ January $2024,$ Walker received the valuation report from the bank, stating that the

land is worth R$9250000.$ The land was purchased on $1$ January $2022.$

Note $2$: Machinery:

Machinery consists of $1$ machine that is used to cut the material in the shape that is

required. This machine consists of $2$ components, namely mechanical and control. The

mechanical component contributes to $75\%$ of the total cost of the machinery and the

balance of $25\%$ of the total cost is attributable to the control component. The mechanical

component has a useful life of $10$ years, and the control component only has a useful

life of $5$ years and are depreciated on the straight$-$line method. The machine was

purchased and ready for use on the $1$st of January $2022.$

ANNEXURE F: FORMATIVE ASSESSMENT $1$

$67$ HFAC$132-1-$Jul$-$Dec$2024-$FA$1-$EDK$-$V$4-20240829$

Components: Mechanical Control

Component contribution: $75\%25\%$

Useful life: $10$ years $5$ years

Purchase date: $1$ January $20221$ January $2022$

On the $1$st of May $2024$ the control component of the machine broke and needed to be

replaced. The component was relaced immediately at a cost of R$550000.$ The

component was ready for use on the $1$st of May $2024.$ Walker paid the supplier at the

end of the month as agreed. The new control component has a useful life of $6$ years and

is depreciated on the straight$-$line method.

Note $3$: Equipment:

Equipment consists of $20$ drills. All the drills have been purchased on the $1$st of January

$2022.$ All drills were available for use on the $1$st of January $2022.$ These drills have a

useful life of $5$ years and are depreciated on the straight$-$line method. On the $31$st of

November $2023,$ Walker had to service all the drills at a cost of R$32000.$ They paid the

service provider immediately in cash.

Additional information:

$$ Walker is not a registered VAT vendor.

$$ Land is accounted for on the revaluation model.

$$ Exclude all income and deferred taxation implications.

REQUIRED:

$4\mathrm{.}1$ By referring to notes $1$ and $3,$ prepare the general journal entries to account for

transactions related to land and equipment in the accounting records of

Walker $($Pty$)$ Ltd for the year ended $30$ June $2024.$

$$ Journal dates and narrations are not required.

$(7$ marks$)$

ANNEXURE F: FORMATIVE ASSESSMENT $1$

$68$ HFAC$132-1-$Jul$-$Dec$2024-$FA$1-$EDK$-$V$4-20240829$

$4\mathrm{.}2$ By referring to note $2,$ calculate the depreciation expense for the machinery for

the year ended $30$ June $2024.$

$(8$ marks$)$

$4\mathrm{.}3$ Prepare an extract of the Statement of Financial Position of Walker $($Pty$)$ Ltd

showing only the Non$-$current Assets of Walker Ltd for the year ended $30$ June

$2024.$

$$ Totals are not required.

$$ Round off to the nearest Rand where applicable.

$$ Reference all workings $($including those from $4\mathrm{.}1/4\mathrm{.}2)$

$(10$ marks