You have recently been appointed as the senior financial accountant at Soft Serve Ltd. Soft Serve Ltd operates a chain of ice cream stores along the Atlantic coastline in Cape Town. While preparing the financial statements for the financial year ended 28 February 2021 you encountered the following issues: Issue 1 During the current financial year Soft Serve Ltd commissioned the manufacture of a new machine that will revolutionise the ice cream industry. The machine is set to create custom made ice cream flavours according to consumer needs in seconds. The following costs was incurred in respect of the machine: Parts and Components R750 000 Specialised Thermostat Control Mechanism R250 000 Custom made mixing tools R550 000 Branding and posters to be displayed in all stores R300 000 Influencer/Blogger marketing campaign R150 000 Import Duties R30 000 The ice cream machine was completed on 1 November 2020 and was taken to the Sea Point Promenade for testing on customers. Sales of ice creams during this test run amounted to R75 000 and the cost of the ingredients and staff amounted to R35 000 The machine was brought into use from 1 December 2020. The machine is depreciated in accordance with the unit of production method. It is expected to produce 15 000 units over its useful life. Soft serve units sold during the test run amounted to 75 units and a further 450 units were sold since 1 December 2020. Issue 2 Due to the increase in foot traffic in the stores after the completion of the machine described above, Soft Serve Ltd no longer required the use of its ice cream truck. Soft Serve Ltd decided to exchange the ice cream truck it owned with four smaller delivery vehicles owned by a retail chain SparTacus (Pty) Ltd. The exchange occurred on 28 February 2021. The ice cream truck had an initial cost of R200 000 and it’s carrying value on 1 March 2020 was R180 000. The trucks are depreciated on a straight‐line basis at 10% p.a. At 28 February 2021 the following fair values were determined: Ice Cream Truck R220 000 Delivery Vehicles R160 000 Required: Prepare the journal entries for Soft Serve Ltd to account for Issue 1 and 2 in the financial records for the financial year ended 28 February 2021. Narrations are not required. Issue 1 Issue 2
You have recently been appointed as the senior financial accountant at Soft Serve Ltd. Soft Serve
Ltd operates a chain of ice cream stores along the Atlantic coastline in Cape Town. While
preparing the financial statements for the financial year ended 28 February 2021 you encountered
the following issues:
Issue 1
During the current financial year Soft Serve Ltd commissioned the manufacture of a new machine
that will revolutionise the ice cream industry. The machine is set to create custom made ice cream
flavours according to consumer needs in seconds.
The following costs was incurred in respect of the machine:
Parts and Components R750 000
Specialised Thermostat Control Mechanism R250 000
Custom made mixing tools R550 000
Branding and posters to be displayed in all stores R300 000
Influencer/Blogger marketing campaign R150 000
Import Duties R30 000
The ice cream machine was completed on 1 November 2020 and was taken to the Sea Point
Promenade for testing on customers. Sales of ice creams during this test run amounted to
R75 000 and the cost of the ingredients and staff amounted to R35 000
The machine was brought into use from 1 December 2020. The machine is
accordance with the
useful life. Soft serve units sold during the test run amounted to 75 units and a further 450 units
were sold since 1 December 2020.
Issue 2
Due to the increase in foot traffic in the stores after the completion of the machine described
above, Soft Serve Ltd no longer required the use of its ice cream truck. Soft Serve Ltd decided to
exchange the ice cream truck it owned with four smaller delivery vehicles owned by a retail chain
SparTacus (Pty) Ltd. The exchange occurred on 28 February 2021.
The ice cream truck had an initial cost of R200 000 and it’s carrying value on 1 March 2020 was
R180 000. The trucks are depreciated on a straight‐line basis at 10% p.a.
At 28 February 2021 the following fair values were determined:
Ice Cream Truck R220 000
Delivery Vehicles R160 000
Required:
Prepare the
financial records for the financial year ended 28 February 2021.
Narrations are not required.
Issue 1
Issue 2
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