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Assignment 3 Solution

The statement of changes in equity shows: 1) A prior period error of R15,120 which decreased retained earnings relating to an understatement of depreciation in 2015. 2) Profits for the period of R930,780. 3) An issuance of 100,000 ordinary shares at R15 per share for R1,500,000. 4) A revaluation reserve increase of R120,000 from revaluing assets. 5) Dividends paid of R100,000 comprising R50,000 to ordinary shareholders and R50,000 to preference shareholders. 6) An ending balance as of 31 December 2016 of R5,535

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44 views

Assignment 3 Solution

The statement of changes in equity shows: 1) A prior period error of R15,120 which decreased retained earnings relating to an understatement of depreciation in 2015. 2) Profits for the period of R930,780. 3) An issuance of 100,000 ordinary shares at R15 per share for R1,500,000. 4) A revaluation reserve increase of R120,000 from revaluing assets. 5) Dividends paid of R100,000 comprising R50,000 to ordinary shareholders and R50,000 to preference shareholders. 6) An ending balance as of 31 December 2016 of R5,535

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Thulani Ndlovu
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© © All Rights Reserved
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UNIT 3 ASSIGNM ENT (SOLUTION)

b) AZD Limited
Statement of Changes in Equity for the reporting period ended 31 December 2016
10% Revaluatio
Retained
Share capital Preference n Reserve Total
earnings
shares  
Balance - beginning of period – 1 January
2016 150 000  500 000  - 2 450 000  3 100 000
Correction - prior period error (A1) (15 120) P (15 120)
Restated (Adjusted) balance -
beginning of period  150 000 500 000 - 2 434 880P 3 084 880
Prof it f or the period (A2) 930 780P 930 780
Issue of shares 1 500 000
Ordinary shares (100 000 x R15) 1 500 000
Rev aluation 120 000 120 000
Div idend paid:
Ordinary shares (50 000) P
(150 000 + 100 000 x R0.20)
10% Pref erence shares
(500 000 x 10%) (50 000) 
(100 000)
Balance - end of period – 31 December
2016 1 650 000 500 000 120 000 3 265 660 5 535 660

Calculations R
A1 Prior pe riod e rror
2015 Depreciation:
478 800 x 100/114  420 000
Extra depreciation for 2015 - (420 000 x 25%) – (420 000 x 20%) 21 000  Commented [MT1]: Please be careful here – the calculation
should be for 2015 – if student has the change for 2016 it is incorrect!
After tax amount = 21 000 x 72% 15 120

A2 Profit for the pe riod


2016 Dividend on redeemable preference shares
80 000 x 12%  9 600
(30 000 x R8 x 12%) x 6/12 14 400
Total Dividend 24 000
After tax amount = 24 000 x 72% 17 280 P

Profit for the period – given 948 060


Less: net dividend (A2) (17 280) P
930 780

(25)
AZD Ltd
Note s to the financial s tate m e nts for the re porting pe riod e nding 31 De ce m be r 2016

2. Prior pe riod e rror

Depreciation on machinery changed after the depreciation on manufacturing equipment w as


accelerated from 20% per annum to 25% per annum. This was not accounted for in 2015. Commented [MT2]: Please ensure that this is for a prior period
The effect for the period ended 31 December 2015 w as as follow s:  error not a change in estim ate

Increase in depreciation (21 000) P


Decrease in tax expense 5 880 P
Decrease in profit for the year (15 120) P Commented [MT3]: Mark according to student’s workings
Please ensure that brackets talk to the description
Decrease in property, plant and equipment (21 000) P
Decrease in tax payable 5 880 P
Decrease in equity (15 120) P

8 max (5)

(30)

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