Floyd Garden World Original

Floyd Garden World 25 MARKS
Floyd Garden World (Pty) Ltd (‘FG World’) was incorporated on 1 August 2015 by Floyd
Green. The entity is mainly involved with the maintenance of gardens for office parks and
shopping centres. The entity is registered for value-added tax (VAT) and you may assume
that all VAT documentation for input VAT and output VAT are correct and kept on file. The
VAT rate applicable on all past and current transactions is 15%. FG World decided on a
31 July financial year end at the commencement date and the statement of profit or loss
classifies expenses according to the ‘function of expenses’ method.
The following information was provided to you:
Inventory related information
1. FG World had opening inventory, mainly consisting of fertilizer and top soil on hand
at the beginning of the current financial year, amounting to R320 900. There were no
inventory write downs during the previous financial year.
2. Total garden product purchases per invoices exclusive of VAT for the year amounted
to R1 912 000. Due to FG World’s prompt payments to creditors a total discount of
R36 000 exclusive of VAT was received. At year end the balance for allowance for
settlement discount on inventory purchases amounted to R9 800.
3. At year end the value of closing inventory, determined through the first in first out
method of inventory valuation, amounted to R344 000. The net realisable value was
determined at R318 000 (exclusive of VAT).
Administration expenses
1. Staff remuneration as per the general ledger account at year end amounted to
R1 114 000.
2. Included in this amount is directors remuneration for services rendered as executive
directors to the value of R450 000, and remuneration for non-executive directors,
also for director’s services of R175 000.
3. Auditors remuneration paid for during the year amounts to R67 000 for consultation
services rendered. On 25 July 2018 an invoice was received from Coopers Auditing
Inc. firm. The amount per the invoice was R48 300 and relates to auditing services
conducted during June 2018 and July 2018.
4. Telephone expense per the general ledger account at year end amounts to R92 000.
5. Water and electricity per the general ledger account at year end amount to
R126 000.
6. Rent paid as per the general ledger account at year end amounts to R155 000.
7. Stationary as per the general ledger account at year end amounts to R24 900.
Sales and distribution expenses
1. Depreciation and any other expense relating to vehicles are classified as distribution
expenses. Depreciation and any other related information supplied on vehicles must
still be taken into account for the current year.
Other operating expenses
1. Bank charges as per the general ledger account as at 31 July 2018 amounts to
R18 600. The bank statement for July 2018 was only printed on 3 August 2018 and
revealed bank charges for July 2018 of R644 and due to the fact that FG World was
in overdraft for a few days in July 2018 interest charged amounted to R1 800.
2. Repairs on machinery as per the general ledger account at year end amounts to
R6 000.
3. All machinery related expenses including depreciation on machinery must be
categorised under ‘Other operating expenses’. Depreciation on machinery must still
be provided for.
Property, plant and equipment related information
Vehicles
1. FG World owns two delivery vehicles.

2. The Toyota was purchased on 1 September 2016 at a cost price exclusive of VAT of
R590 000. At acquisition date it was estimated that the vehicle will have a VAT
exclusive residual value of R50 000.
3. The Isuzu was purchased on 1 February 2016 for R630 000 exclusive of VAT, and
the residual value was also estimated at R50 000 exclusive of VAT.
4. All vehicles are depreciated by making use of the straight line method at 25% per
annum.
5. On 1 October 2017 the Toyota was traded in on a new Ford Ranger which had a total
invoice price of R684 250. An electronic transfer of funds amounting to R373 750
was done to settle the amount due on the Ford Ranger. The estimated residual value
on the Ford Ranger was estimated at R85 000 (exclusive of VAT).
Machinery
1. All machinery from date of acquisition must be depreciated on the straight line
method over the estimated economical useful life of four years.
2. Machinery consist out of 10 lawn mowers and 10 weed-eaters and all were
purchased on 1 December 2016.
3. The lawn mowers had a total cost of R180 000 exclusive of VAT and the weed-eaters
a total cost of R90 000 exclusive of VAT. At date of acquisition the financial manager
made the decision not to provide for a residual value on the lawn mowers nor on the
weed-eaters. New information came to light during the current financial year and it
was decided to take into account residual values on both the lawn mowers and
weed-eaters. The lawn mowers are deemed to have an estimated residual value of
R2 000 per lawn mower and the weed-eaters R1 000 per weed-eater. These residual
values are exclusive of VAT.
4. After some investigation to the useful life of the lawn mowers and weed-eaters it was
found that the remaining useful life on 31 July 2018 was 16 months.
5. Change in estimates will be recorded by application of the cumulative catch up
method.
Land
1. FG World owns land that was purchased in 2016 for R270 000 exclusive of VAT. The
intention is to build a warehouse on this land, which will only take place in 2019.
During the current financial year, a sworn appraiser B&S Appraisers valued the land
at a fair value of R350 000. The directors elected to measure the land at its’ revalued
amount at year end.
MARKS
REQUIRED Sub-
Total
total
(a) Present the ‘Profit before tax’ note pertaining to the statement of
profit or loss and other comprehensive income of
Floyd Garden World (Pty) Ltd for the year ended 31 July 2018
according to IAS 1 Presentation of Financial Statements. 24.0
Comparative figures can be ignored.
WARNING: Marks will be deducted for unnecessary information

disclosed.
Communication skills – presentation 1.0 25
TOTAL MARKS 25

Floyd Garden World Original

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Floyd Garden World 25 MARKS

The following information was provided to you:

Inventory related information

Sales and distribution expenses

Property, plant and equipment related information

1. FG World owns two delivery vehicles.

WARNING: Marks will be deducted for unnecessary information

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