SCC3300 FI TUTORIAL QUESTION
FACULTY OF MANAGEMENT, COMMERCE AND LAW
DEPARTMENT OF ACCOUNTANCY
FINANCIAL REPORTING
2026
FI TUTORIAL PRACTICE QUESTION
SCC3300 FI TUTORIAL QUESTION
QUESTION 1 35 MARKS
MOM Ltd is a company that specialises in the production of mother’s day and women’s day
gifts. As this kind of business is seasonal, the company invests in different kinds of financial
instruments which are held and/or traded throughout the year. MOM Ltd is listed on the JSE
and its financial year ends on 30 September. In 2014, the directors decided to investigate
alternative investment opportunities for their surplus cash holdings.
Bonds
The directors purchased the following listed bonds on an active market traded on JSE. The
terms of the bond were as follows:
Acquisition date / Commencement date 1 October 2014
Maturity date 30 September 2019
Purchase price per bond R475
Transaction costs per bond R50
Number of bonds purchased 1000
Coupon interest rate (payable annually in arrears) 7% per annum
Nominal value of the bond R500
Redeemable at a premium of 10% on 30 September 2019
Shares
MOM Ltd acquired 20 000 Company Y Ltd shares for long-term investment purposes for R15
per share on 1 October 2013. Transaction cost amounted to R5 000. The fair value of these
shares as at 30 September 2014 was R13 per share. This was not deemed to be a significant
reduction below the original cost. As at 30 September 2015 the share price decreased to R11,
50 per share. This was deemed to be a significant reduction below the original cost. At 30
September 2016 the cause of the significant decrease has reversed and the share price
improved to R17, 50 per share. MOM Ltd elected to recognise gains and losses on these equity
instruments in Other Comprehensive Income.
REQUIRED:
a) Prepare journal entries to account for the above mentioned financial instruments in the
financial records of MOM Ltd since acquisition up until the financial period ended 30
September 2016.
Assume that the bonds are classified at amortised cost. (30 Marks)
b) Calculate the cumulative gain/loss balance resulting from the adjustments of the share
fair values that would be reflected in the equity of MOM Ltd’s records. (2 Marks)
c) Present the relevant sections of MOM Ltd’s statement of financial position, for the
reporting period ended 30 September 2016. (3 Marks)
Your answer should include all the financial instruments provided in the question.
Please note: Ignore any tax implications.
Round up to the nearest rand.
Journal narrations are not required.
SCC3300 FI TUTORIAL QUESTION
QUESTION 2 (For submission) 10 MARKS
Accounting discussion regarding appropriate classification of a financial asset
On 31 December 2007 ABC Ltd acquires a listed government bond denominated for its fair
value of R1 000. Management will not actively trade with the bond; but also do not expect to
hold the bond to maturity. The bond will form part of a portfolio of which the main purpose is
to generate interest and capital cash flows for the entity. The bond has five years remaining
to maturity and a principal amount of R1 250, carries fixed interest of 4,7 per cent that is paid
annually. The interest rate is priced to purely compensate for time value of money.
Management did not designate the listed bonds as at fair value through profit or loss.
The entity is preparing financial statements for the financial period ended 31 December 2009.
Required:
Discuss how the listed bond should be classified for subsequent measurement.
QUESTION 3 (For Class submission – 14 July 2026)
On 2 January 2024, Celine Limited issued 10 000 debentures, at a discount of R100 off their
face value of R500, details of which are as follows:
• The debentures are compulsorily redeemable at 10% premium after 4 years.
• The debentures bear interest at 15% per annum payable in arrears.
• The effective interest rate on the debentures is 25.23262%.
• The debentures were neither held for trading nor designated at fair value through profit
or loss.
Celine has a 31 December financial year-end.
Grinder Limited, an unrelated third party, acquired 80% of the debentures issued by Celine on
2 January 2024 for their issue price. Transaction costs of R16 000 were incurred and paid by
Grinder Limited. As Grinder’s intention is to collect contractual cash flows, the debentures
have been classified at amortized cost.
On 2 January 2024, the lifetime expected credit losses on the debentures were R8 500 and
the 12-month expected credit losses were R2 500.
Grinder did not consider the investment to be credit-impaired on acquisition date. There was
no significant increase in the credit risk at year end. There was no change in the expected
credit losses at 31 December 2024 (i.e. the lifetime expected credit losses were R8 500, and
the 12-month expected credit losses were R2 500 on 31 December 2024).
REQUIRED:
a) Prepare journals for Celine to record the financial instrument over its four-year life.
b) Prepare the journal entries to account for the debentures in the financial statements of
Grinder Limited for the year ended 31 December 2024.
SCC3300 FI TUTORIAL QUESTION
QUESTION 4
Part A
On 2 January 20X7 Parlour Limited purchased 16 000 unlisted ordinary shares in Charades
(Pty) [Link] purchase price was R3.75 per share. In addition, Parlour paid brokerage
fees of R1 per share.
The fair value on date of purchase was R3.33 per share. The investment in Charades Limited’s
ordinary shares at R3.75 per share shall be because the fair value determined by a private
consultancy did not reflect the synergy that this investment was expected to generate. The fair
value of R3.33 was determined using discounted cash flows, which was considered a level 3
input.
• The fair value was R4.00 on 31 December 20X7.
• Charade Limited did not declare dividends in 20X7.
Parlour classified this investment at fair value through profit or loss.
REQUIRED:
Using Parlour Limited’s general journal, provide all the necessary journal entries to account
for this investment for the year ended 31 December 20X7.
Ignore tax.
Ignore expected credit losses. (SCC4300 scope)
Part B
On 2 January 20X7, Parlour Limited purchased 120 000 listed ordinary shares in Guess
Limited.
• The purchase price was R75 per share. In addition, Parlour paid brokerage fees of R1
750.
• The fair value on date of purchase was R75.50 per share.
• The fair value had grown to R84 per share on 31 December 20X7.
• Guess Limited declared dividends of R1 per share on 20 December 20X7. Parlour
received these on 30 December 20X7.
• Parlour classified this investment at fair value through other comprehensive income.
REQUIRED:
Using Parlour Limited’s general journal, provide all the necessary journal entries to account
for this investment for the year ended 31 December 20X7.
Ignore expected credit losses.
Ignore tax.
SCC3300 FI TUTORIAL QUESTION
QUESTION 5 (For tutorial submission 17 July 2026)
Moth Limited requires additional capital to fund expansion of the business.
With this in mind, Moth issued 300 000 debentures at a price of R42 per debenture. The issue
date was 1 January 2021.
• The debentures offer a coupon rate of 13% on the face value of R35.
• The debentures are compulsorily convertible into ordinary shares on a 2 for 1 basis on 31
December 2024.
• The debentures were not designated at fair value through profit or loss on initial
recognition.
• An appropriate discount rate for debentures of this nature is 21%.
• The coupon payments have always been paid on due date.
REQUIRED:
Journalize the entries required to account for the above information for the years ended 31
December 2021 to 2024.
QUESTION 6
Pickle Limited has two classes of preference shares in issue: A-class and B-class.
Part A (For tutorial submission 17 July 2026)
The details of the A-class preference shares are as follows:
• Pickle issued 1 200 000 8% A-class cumulative preference shares on 1 January 20X1,
at an issue price of R11 each.
• The dividends are non-discretionary.
• To minimise the potential liquidity problems at maturity, Pickle Limited allowed holders
the option to either convert the preference shares into ordinary shares or redeem them
at R11 each on 31 December 20X4.
• On 31 December 20X4, 75% of the shareholders converted their A-class preference
shares into ordinary shares and 25% of the shareholders opted for the cash buy-back
instead.
• The market interest rate for these preference shares is 12%.
• These preference shares were not designated at fair value through profit or loss on
initial recognition.
• All contractual cash flows for the A-class preference shares occurred on due date, 31
December.
REQUIRED:
SCC3300 FI TUTORIAL QUESTION
Using Pickle Limited’s General Journal, show all transactions related to the A-class preference
shares for the years ended 31 December 2021 to 2024.
Part B
The details of the B-class preference shares are as follows:
• 400 000 12% compulsory convertible preference shares were issued on 1 January
20X2.
• The dividends thereon are non-discretionary.
• The shares were issued at C2 each.
• The shares are convertible on 31 December 20X6 into ordinary shares.
• The market interest rate for similar shares is 15%.
• These preference shares were issued in order to raise long-term capital to finance a
variety of projects and were not designated at fair value through profit or loss.
• All contractual cash flows for the B-class preference shares occurred on due date, 31
December.
Required:
Using Pickle Limited’s General Journal, show all transactions related to the B-class preference
shares for the years ended 31 December 2022 to 2024.
Ignore tax.