HFAC231-1 Financial Accounting for Companies Formative Assessment 2 | BCC

Instructions: 

• This paper consists of 3 questions.
• It is based on units 5 - 8 (Chapters 5, 6 and 13) of your study guide.
• Answer all the questions.
• If you choose to type your assessment, use: Font: Arial; Font size: 12 and Line spacing: 1.5.
• Show all calculations and references to sections of the Standards where applicable.
• Round to two decimals, unless otherwise stated.
• The SAICA Competency Framework Reference at the end of a question is for recordkeeping and will inform you which SAICA Competency is covered in the question.
• Copyleaks does not apply to this assessment.

Question 1 (49 marks) 

1.1) (35 marks) 

Prepare the inventory note disclosing the balances of each category of inventory for Primark Ltd for the year ending 30 June 2025. 

• Include detailed calculations and considerations for each category.
• Round all answers to two decimals.
• Your answer must comply with the requirements of IAS 2: Inventories.
• Accounting policy notes are not required. 
• Comparative figures are not required. 
• Ignore all tax implications

1.2 (14 marks) 

• Calculate the cost of sales figure that would need to be disclosed in the statement of profit or loss and other comprehensive income for Primark Ltd for the year ended 30 June 2025. 

HFAC231-1 Learning outcomes: 

• Calculate the cost of inventory (including manufactured inventory) concerning purchased and manufactured inventory.
• Calculate the cost of inventory under IAS 2 by applying the most appropriate costing method or formula (specific identification, first-in-first-out or weighted average cost).
• Distinguish between direct and indirect costs, and determine the appropriate portion of these costs to be included in the cost of manufactured inventory.
• Recognise inventory on hand at the reporting date at the lower of cost or net realisable value.
• Calculate the net realisable value for inventory on hand at the reporting date, and record and report any adjustments required to the carrying amount of inventory. 
• Recognise the cost of inventory sold during the reporting period as well as any other costs not included in the carrying amount of inventory on hand in the cost of sales. 
• Identify the different classifications of inventory, draft an appropriate accounting policy note for inventory and present inventory in the financial statements of an entity to meet the disclosure requirements of IAS 2, Inventories.

Question 2 (29 marks) 

Prepare Baker Ltd's Statement of Cash Flows for the year ended 31 March 2025 using the indirect method under IAS 7: Statement of Cash Flows. Show all workings clearly and reference accordingly. Comparative figures are not required.

HFAC231-1 Learning outcomes: 

Identify 'cash and cash equivalents' and report movements during the year in the statement of cash flows. 

Present a statement of cash flows using the direct method and the indirect method. 

Prepare the reconciliation of profit or loss before interest and taxation to cash generated from operations using the indirect method. 

Prepare a statement of cash flows where there are accounting issues such as the following: 

• The acquisition, sale, depreciation, impairment and revaluation of property, plant and equipment 
• The purchase, sale and revaluation of financial instruments
• Transactions affecting the equity of an entity, such as share buybacks, capitalisation issues, dividends and transfers between reserves, and the acquisition of a business. 

Outline the disclosure requirements of IAS 7, Statement of Cash Flows, including the disclosure of the operating, investing and financing activities.

Question 3 (22 marks)

Prepare the general journal entries to account for the rights issue in the records of Roots Ltd for the financial year ended 31 December 2024.

• Journal dates are required.
• Journal narrations are not required.
• All amounts should be rounded to the nearest Rand.
• Show all calculations and references clearly.

HFAC231-1 Learning outcomes: 

• Identify transactions with members that should be included in the statement of changes in equity.
• Identify and record changes in equity.
• Explain the circumstances in which share capital could change, and how these changes should be recorded and reflected on a statement of changes in equity.
• Identify the nature of different classes of shares and their accounting implications.