FNA220 - Financial Accounting - Financial Accounting Assignment Help

Assignment Task

Question One
Below is the trial balance for Freemann LTD at 31 December 2017:
R’000 R’000
Property – carrying amount 1 January 2017 (note (iv)) 18,000
Ordinary shares R1 at 1 January 2017 (note (iii)) 20,000
Other components of equity (Share premium) at
1 January 2017 (note (iii)) 3,000
Revaluation surplus at 1 January 2017 (note (iv)) 800
Retained earnings at 1 January 2017 6,270
Draft proft for the year ended 31 December 2017 2,250
4% Convertible loan notes (note (i)) 8,000
Dividends paid 3,620
Cash received from contract customer (note (ii)) 1,400
Cost incurred on contract to date (note (ii)) 1,900
Inventories (note (v)) 4,310
Trade receivables 5,510
Cash 10,320
Current liabilities 1,940
43,660 43,660
The following notes are relevant:
i. On 1 January 2017, Freemann LTD issued 80,000 R100 4% convertible loan notes. The loan notes can be converted to equity shares on 31 December 2019 or redeemed at par on the same date. An equivalent loan without the conversion rights would have required interest of 6%. Interest is payable annually in arrears on 31 December each year. The annual payment has been included in finance costs for the year. The present value of R1 receivable at the end of each year, based on discount rates of 4% and 6%, are: 4% 6%
End of year 1 0·962 0·943
End of year 2 0·925 0·890
End of year 3 0·889 0·840

ii. During the year, Freemann LTD entered into a contract to construct an asset for a customer, satisfying the performance obligation over time. The contract had a total price of R14m. The costs to date of R1·9m are included in the above trial balance. Costs to complete the contract are estimated at R7·1m.
At 31 December 2017, the contract is estimated to be 40% complete. To date, Freemann LTD has received R1·4m from the customer and this is shown in the above trial balance.
iii. Freemann LTD made a 1 for 5 bonus issue on 31 December 2017, which has not yet been recorded in the above trial balance. Freemann LTD intends to utilise the share premium as far as possible in recording the bonus issue.

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