Suggested Solution – Financial Accounting 2.
2
Assessment 1 – 26 August 2024
Total Marks 70
Case 1 = 24 marks
2. Time value of money and Provisions = 18 Marks
FV = - 18 million; N = 18 ; I = 12% ; PMT = 0 ; Compute PV = 2 340 712, 62 – 1 Mark each
Dr Cr
1 /1/ 2022
Asset – Plant (1) 2 340 712.62
Provision for environment costs (1) 2 340 712.62
Initial recognition of discounted environmental costs
31/12/2022
Finance costs (1) 280 885.51
Provision for environment costs (1) 280 885.51
Increase as a results of time value of money
Depreciation (2) 130 039.59
Accumulated depreciation and impairment losses (1) 130 039.59
31/12/2025
Finance costs (1) 394 623.92
Provision for environment costs (1) 394 623.92
Increase as a results of time value of money
31/12/2039
Provision for environment costs (1) 18 000 000
Environment costs (2) 500 000
Bank (1) 17 500 000
Actual environmental costs after 18 years
5. Presentation of financial Statements – 6 marks
Sasol Ltd
Statement of Financial Position } (1)
As at 31 December 2023
2023 2022
Non – current assets
Property, plant and equipment 2 080 633.44(1) 2 210 673.03 (1)
Current Liabilities
Provision for environment costs (1) 2 936 189.91(1) 2 621 598.13(1)
Case 2 = 10 marks
1. Provisions and Contingencies – 10 Marks
Identify the issue / matter
Whether the clean – up costs / rehabilitation costs can be recognized as liability or provision.(1)
Provision by definition is a liability of which the amount or the timing is uncertain. (1)
Discussion of the definition:
Present liability (whether legal or constructive)
There exist no present legal obligation (1) – there is no law that compels Sasol Ltd to clean –
up/rehabilitate the local river, (1)
Nor is present constructive obligation,
No public statement that has been made over the matter (1)
No established pattern of past practice, since this is the first of such incident. (1)
From the past event
The spillage of the contents that contaminated the local river (1)
With outflow of economic resources
In an event that Sasol Ltd cleans up/rehabilitate the contaminated local river, bank is likely to
decrease representing an outflow of economic resources. (1)
Recognition criteria:
Relevance:
Probability of an outflow of economic resources
More likely than not unless stated otherwise (1)
Faithful representation:
The amount can be reliably estimated, R1 000 650 (1)
Therefore, clean – up / rehabilitation costs cannot be recognized as a liability or provision (1) since
although the recognition criteria has been met, the definition of a liability has not been met.(1) Sasol Ltd
can still change its intention. (1)
Maximum 10 marks
Case 3 = 4 Marks
3. Events After Reporting Period - 1 Mark each
2.1 Non – adjusting event
2.2 Adjusting event
2.3 Non – adjusting event
2.4 Non – adjusting event
Case 4 = 32 marks
4. Equity transactions and financial liabilities
General Journal – 25 marks
Date Details Debit Credit
2022 Bank (430 125x R5) (1) 2 150 625
Apr 1 Ordinary Share Capital (1) 2 150 625
Ordinary Share Capital (1) 23 118
Bank (1) 23 118
June 30 Retained Earnings (1) 615 326.25
Ordinary Share Capital (1) 615 326.25
250 000+ 430 125/5x1 = 586 025 x R1.05
Nov 30 Preference dividends (1 500 000x12%) (1) 180 000
Bank (1) 180 000
Dec 31 Ordinary dividends ( 3 516 150 x R0.15) (1) 527 422.50
Dividends payable (1) 527 422.50
2023
Sep 1 Bank (100 500 x R3 .15) (1) 316 575
Ordinary share capital (1) 316 575
Oct 30 Ordinary share capital / Treasury shares (1) 169 287.50
Bank (1) 169 287.50
(930 125 x R1.82)
Nov 30 Preference dividends (1 500 000x12%) (1) 180 000
Bank (1) 180 000
Dec 1 12% Redeemable Preference Share Capital 500 000
(1)
Premium on redemption (500 000x15.5%) (1) 77 500
Redeemable preference shareholders (1) 577 500
Bank (1) 577 500
15% Debentures (1) 577 500
Redeemable preference shareholders (1) 577 500
Bank (1) 577 500
Dec 31 Ordinary dividends (2 686 525x R0.10) (1) 268 652.50
Dividends payable (1) 268 652.50
Presentation of financial statements – 7 marks
Sasol Ltd
Statement of changes in equity } 1/2
For the period ended 31 December 2022
Ordinary Pref Revaluati Retained Total
Capital Capital surplus earnings
Balance at 1 Jan 2022 2 000 000 1 500 000 120 000 5 300 000 8 920 000
Share issues 2 150 625 (1) 2 150 625
Share issue expenses (23 118) (1) (23 118)
Total comprehensive 115 000 750 000.50 1/2 865 000.50
income (1)
Preference div (120 000) 1/2 (120 000)
declared
Ordinary dividends (527 422.50) 1/2 (527 422.50)
declared
Capitalisation issue 615 326.25(1) ( 615 326.25)(1) 0
Balance at Dec 2022 4 742 833.25 1 500 000 235 000 4 787 251.75 11 265 085
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