 Ngcobo Ltd elected to apply the recognition exemption in respect of low value assets to this
lease agreement (IFRS 16.5). Ngcobo Ltd accounts for the lease and non-lease components
separately (IFRS 16.12).
4. The long-term loan was obtained on 1 January 2019 from HL Bank and the capital portion is
repayable in seven equal annual instalments starting 31 August 2019. Interest on the loan is
calculated at 10% per annum and is payable at the end of each financial year.
5. Other operating income consists of:
Dividends received from the following companies:
- Eysele Ltd ..........................................................................................
- Maraisane Ltd ....................................................................................
Interest received from Maraisane Ltd..........................................................
R
10 000
6 000
3 000
19 000
6. Investments:
6.1 The issued ordinary share capital of Maraisane Ltd is R40 000 (shares issued at R1 each).
Ngcobo Ltd owns 21 000 shares in Maraisane Ltd.
6.2 Ngcobo Ltd owns 50 000 of the 1 200 000 issued shares in Eysele Ltd purchased for R100 000.
The shares of Eysele Ltd are traded on the JSE Limited and the market value per share was
R3,00 each on 29 February 2020. The market value on 28 February 2021 was R4,00 per share
and no adjustments have yet been made during this year regarding the increased market value.
These shares are obtained for speculative purposes.
7. The non-current assets are depreciated at the following rates and methods:
Motor vehicles - 20% per annum using the reducing balance method
Equipment - 20% per annum using the straight-line method
One of the motor vehicles with a carrying amount of R40 000 on 29 February 2020 was sold on
31 August 2020. Only the proceeds have been recorded so far.
All the equipment was purchased on 1 March 2018 and no sales or purchases of equipment
have occurred since then.

(a) Prepare the statement of profit or loss and other comprehensive income of Ngcobo Ltd for the financial year ended 28 February 2021. Your answer must comply with the
requirements of International Financial Reporting Standards (IFRS).
(b) Prepare the note “profit before tax” that should accompany the statement of profit or loss and other comprehensive income of Ngcobo Ltd for the financial year ended
28 February 2021. Your answer must comply with the requirements of International
Financial Reporting Standards (IFRS).

Transcribed Image Text:

The following balances were extracted from the books of Ngcobo Ltd for the financial year ended 29 February 2021: Total sales (including VAT at 15%) (note 1) Bank charges. Salaries and wages (note 2) Advertising Auditors' remuneration Fees for audit. Expenses - Distribution cost Other operating expenses (including finance cost and depreciation) Lease payments (note 3) Other operating income (note 5). Proceeds on sale of motor vehicle. Equipment at carrying amount. Motor vehicles at cost (note 7). Accumulated depreciation: Motor vehicles (note 7). Investments (note 6). Loan to Maraisane Limited.. Long-term loan: HL Bank (Cr) (note 4) Income tax expense... Additional information: 1. 2. 3. ● ● R 2 300 000 12 850 500 000 27 500 ● 10 000 2 000 Ngcobo Ltd maintains a gross profit percentage of 40% on turnover. Included in salaries and wages is the directors' remuneration of R150 000 per annum. Ngcobo Ltd entered into a non-cancellable lease on 1 July 2020 to lease a printing machine for the use of the company. The contract is a lease in terms of IFRS 16. The following information is applicable to the lease contract: The initial lease term is three years. An initial payment of R8 526 was made. The lease payments are R3 000 per month for the first 6 months. The lease payments thereafter are R2 000 per month until the end of the three years. All actual lease payments made by Ngcobo Ltd are included in the operating expenses above. 67 000 92 500 24 000 19 000 42 500 24 000 120 000 30 000 230 000 40 000 45 000 37 000 Ngcobo Ltd has the option to extend the lease term by a further two years at R1 000. At the commencement of the lease term Ngcobo Ltd is reasonably certain that it will exercise the option to extend the lease term by a further two years. 5% of every lease payment goes towards covering the maintenance costs incurred by and is to be paid for by the lessor. These values are similar to those with costs for similar maintenance services rendered by third parties. The following balances were extracted from the books of Ngcobo Ltd for the financial year ended 29 February 2021: Total sales (including VAT at 15%) (note 1) Bank charges. Salaries and wages (note 2) Advertising Auditors' remuneration Fees for audit. Expenses - Distribution cost Other operating expenses (including finance cost and depreciation) Lease payments (note 3) Other operating income (note 5). Proceeds on sale of motor vehicle. Equipment at carrying amount. Motor vehicles at cost (note 7). Accumulated depreciation: Motor vehicles (note 7). Investments (note 6). Loan to Maraisane Limited.. Long-term loan: HL Bank (Cr) (note 4) Income tax expense... Additional information: 1. 2. 3. ● ● R 2 300 000 12 850 500 000 27 500 ● 10 000 2 000 Ngcobo Ltd maintains a gross profit percentage of 40% on turnover. Included in salaries and wages is the directors' remuneration of R150 000 per annum. Ngcobo Ltd entered into a non-cancellable lease on 1 July 2020 to lease a printing machine for the use of the company. The contract is a lease in terms of IFRS 16. The following information is applicable to the lease contract: The initial lease term is three years. An initial payment of R8 526 was made. The lease payments are R3 000 per month for the first 6 months. The lease payments thereafter are R2 000 per month until the end of the three years. All actual lease payments made by Ngcobo Ltd are included in the operating expenses above. 67 000 92 500 24 000 19 000 42 500 24 000 120 000 30 000 230 000 40 000 45 000 37 000 Ngcobo Ltd has the option to extend the lease term by a further two years at R1 000. At the commencement of the lease term Ngcobo Ltd is reasonably certain that it will exercise the option to extend the lease term by a further two years. 5% of every lease payment goes towards covering the maintenance costs incurred by and is to be paid for by the lessor. These values are similar to those with costs for similar maintenance services rendered by third parties.

Answer rating: 100% (QA)

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