Assignment Task

Question

1. RCL Foods Limited (“RCL Foods”) is a South African food manufacturer that produces a wide range of branded foods and private label food products. RCL Foods makes use of its own route-to-market supply chain specialist, called Vector, to distribute its food products.

Required

Perform the following analyses on RCL Foods Limited based on the above extract: 

• SWOT analysis 
• PESTEL analysis
• Entities perform a SWOT analysis to identify various factors pertaining to the specific entity in each of the four (4) categories in the SWOT analysis. Entities then proceed by reacting in a specific manner to each of the four categories. For example, for each of the “weaknesses” identified a reparation plan is made, while for each “opportunity” it is decided how to exploit it if possible and wise. For each of RCL Foods Limited “threats” that was identified in quetion 1.1, explain how the entity is or can mitigate that risk. 
• Only an environmental evaluation as referred to in the Socially Responsible Investment (“SRI”) index.

2. The following two cases are separate, individual case studies and do not relate to each other:

Case 1 - MR OTHON JACKSON

Mr Othon Jackson has been approached by three Financial Brokers from different entities. All have offered him a 9-year annuity for an initial purchase price of R33 700 however the terms attached to each annuity (Annuity A, Annuity B and Annuity C) are different.

Annuity A offers an interest rate of 12.4% compounded annually and quarterly payments of R1 980.

Annuity B offers 10.95% interest semi-annually compounded and annual payments of R2 350 made in advance.

Annuity C offers 11.4% interest monthly compounding and monthly payments of R1 050 made in advance.

Case 2 - MISS JENNIFER ROBERTS

Miss Jennifer Roberts and her friends are eager to go on a holiday trip once they have finished their studies two years from today.

Miss Jennifer Roberts drafted a budget of the amount she will be able to deposit into a savings account each quarter.

According to this budget, Miss Jennifer Roberts will be able to deposit R290 into the savings account at the end of the first quarter. She will be able to pay 6.7% more into the savings account in the second quarter. In the third quarter, she will only be able to pay a deposit which will be equal to a 4.1?crease compared to the previous deposit. In quarter four, she will be able to increase her deposit made with 5.6%, compared to her previous payment made. She will be able to match quarter 4’s deposit in quarter 5. Unfortunately, due to obligatory other expenses to be incurred, Miss Jennifer Roberts will not be able to make a payment into the savings account in quarter six, but in quarter seven she will aim to aid this, by depositing R940 into the savings account, which she will increase with 8.1% in the next quarter’s payment.

The savings account offers an interest rate of 9.5% quarterly compounding per year. Furthermore, Miss Jennifer Roberts has R430 currently available, which she wishes to deposit into the savings account immediately after opening the savings account 

Required

• Refer to CASE 1: MR OTHON JACKSON. Assist Mr Othon Jackson by calculating the current worth of Annuity A, Annuity B and Annuity C, respectively. Supplement your assistance by concluding whether or not Mr Othon Jackson should pursue each annuity and which annuity should ultimately be purchased. Round to two decimals where required.
• Refer to CASE 2: MISS JENNIFER ROBERTS. Assist Miss Jennifer Roberts by calculating the amount she would have saved up at the end of two years. Round to two decimals where required.

3. Summa Laude (Pty) Ltd (“Summa Laude”) is an entity that owns various properties that the entity rents out as student accommodation.

Summa Laude has identified a property (hereafter referred to as “Property 26”) that, after thorough market research on the quantity and accommodation specification of student accommodation demand in the area, has been concluded to have a high probability of being a profitable investment. Property 26 can be purchased at a price of R1 637 000.

Summa Laude currently only has R250 000 cash at hand to allocate to the Property 26 purchase, according to the entity’s cash flow budget. The entity intends to allocate the R250 000 to the purchase, and have also entered negotiations with Fluxul-DeNumerar Bank for the remaining finance required.

Fluxul-De-Numerar Bank has indicated that the bank is willing to provide the loan to Summa Laude. The loan will have a 10.9% monthly compounding interest rate and a 3-year period attached to it. Repayment must occur in equal annual instalments.

Required

Assist Summa Laude (Pty) Ltd by drafting the loan amortisation schedule. Round to two decimals where applicable. Show all calculations

4. Blue Crane Ltd is a large manufacturing company with a 31 December year-end. The company consists of various divisions that each manufacture a specific product.

One of the company’s divisions specialises in the manufacturing of various types of potato chips and Blue Crane Ltd has a very special recipe that they use in the manufacture of their potato chips. Due to this special recipe, there is a very high demand for Blue Crane Ltd’s potato chips.

The board of directors decided that they needed to expand their potato chip manufacturing division to keep up with the high demand for these particular products. For this expansion, the construction of a brand-new manufacturing plant was approved by the board of directors. At the latest board meeting, the management accountant prepared a presentation showing the costs incurred during the construction of the manufacturing plant between 1 January 2024 to 31 July 2024.

The following costs were incurred to construct the manufacturing plant:

Required

• Prepare extracts from the statement of financial position as at 31 December 2024 for Blue Crane Ltd showing all the balances relating to the manufacturing plant structure, refer to notes 1 and 2. Comparative figures are required and notes to the financial statements are not required. 
• Prepare all the general journal entries required to account for the machine, refer to note 3, in the records of Blue Crane Ltd for the financial year ending 31 December 2024.
• Prepare all the general journal entries required to account for the supportive base, refer to note 4, in the records of Blue Crane Ltd for the financial year ending 31 December 2024.

5. You are the audit manager on the audit of Blue Ivy (Pty) Ltd.

The financial manager of Blue Ivy (Pty) Ltd provided you with the following list of provisions they included in the company’s 31 December 2023 financial statements:

Required

• When the amount of a liability is based on an estimate, as opposed to being a definite amount, this is called a provision. Identify and discuss what will qualify as a provision in terms of the requirements of IAS 37 of the International Financial Reporting Standards. Your response should include the definition of a provision and the recognition criteria in terms of IAS 37. 
• Discuss whether each of the provisions made by Blue Ivy (Pty) Ltd are valid provisions as at 31 December 2023 to comply with the requirements of International Financial Reporting Standards. Include reasons for each item.

6. Invest4U (Pty) Ltd is a company with a December financial year-end.

To raise capital for an expansion project the company’s board of directors approved the issue of debentures to the public.

On 1 July 2023, Invest4U (Pty) Ltd issued 150 10?bentures with a principal value of R5 000 each. Transaction costs amounting to R1 800 were incurred with the issue of the debentures. The transaction cost was paid for in cash.

The interest on the debentures is payable bi-annually in arrears, starting 31 December 2023.

The debentures are redeemable on 30 June 2028 at a premium of R20 each.

Required

Prepare extracts from the statement of profit or loss and other comprehensive income for the year ended 31 December 2024 and the statement of financial position as at 31 December 2024 for Invest4U (Pty) Ltd showing all the balances relating to the debentures.

• Comparative figures are required.
• Notes to the financial statements are not required.
• Round all interest rates to 4 decimals and round amounts to the nearest Rand.
• You can assume all amounts to be material.