FAC3701 - Assignment 2 - Semester 2 / 2018 - Suggested Solution
FAC3701 Semester 2 2018 Assignment 2 Unique Assignment Number: 875774
Please Note: • The solutions for assignments 1 & 2 can be purchased separately for R100 each ; or • The solutions for both assignments can be purchased together for R180
As we have learnt in Auditing, an inherent limitation of internal control is the potential for human error, so please let me know should you discover any possible errors in the solution. Also, if you are struggling to understand a certain topic in the assignment, I will be more than happy to discuss it with you. So, please feel free to to send me a message. Thanks =)
Preview of Assignment 2 Solution: 1)
3
- It is an adjustment to the carrying amount, not the tax base
2)
4
- See calculation 1 below
MCQs Solution: 1)
3
- It is an adjustment to the carrying amount, not the tax base
2)
4
- See calculation 1 below
3)
4
- Errors are fixed retrospectively, therefore PBT will only be adjusted in the prior period
4)
3
- For questions 4 & 7, see calculation 2 below
5)
2
- CA: 430 000 (new method) TB: 450 000 (old method as SARS does not accept new method)
6)
3
- CA 430 000 - TB 420 000 = TD 10 000. So, as the CA > TB: 10 000 x 28% = R2 800 DTL
7)
4
- For questions 4 & 7, see calculation 2 below
8)
1
- 2017: 6 375 000 (given); 2018: 5 737 500 (6 375 000 - (6 375 000 x 10%))
9)
5
- 2017: 6 250 000 (7 500 000 - (7 500 000/6)); 2018: 5 000 000 (6 250 000 - (7 500 000/6))
10)
2
- Capital is equal to the net assets or equity of the entity
Abbreviations used: CA: Carrying Amount; TB: Tax Base; TD: Temporary Difference; DTL: Deferred Tax Liability, and PBT: Profit before tax
Calculation 1: Prior Period Error: Increase In Expense (786 600 - 96 600) Decrease in Current Tax Expense (690 000 x 28%) Decrease In Profit Decrease in Trade Receivables Increase in VAT input account
(786 600 x 100/114)
Decrease in Current Tax Liability (690 000 x 28%) Decrease in Equity
2017 R 690 000 (193 200) 496 800 786 600 (96 600) 690 000 (193 200) 496 800
Calculation 2: Change in Accounting Policy: (Increase)/Decrease in Cost of Sales (Increase)/Decrease in Tax Expense Increase/(Decrease) in Profit Increase/(Decrease) in Inventory (Increase)/Decrease in Current Tax Liability (Increase)/Decrease in Deferred Tax Liability Increase/(Decrease) in Equity Increase/(Decrease) in Retained Earnings at the beginning of the year
Inventory FIFO WAM Decrease/Increase in Cost of Sales and Inventory
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2018 R 40 000 (11 200) 28 800
2017 R (10 000) 2 800 (7 200)
1/3/2016 R -
10 000
(30 000)
(20 000)
(2 800) 7 200
8 400 (21 600)
5 600 (14 400)
(21 600)
(14 400)
2016 Difference 2017 Difference 2018 R R R R R 430 000 490 000 430 000 (450 000) (520 000) (420 000) (20 000) (10 000) (30 000) 40 000 10 000
