You are the financial manager of AZD Ltd, a manufacturer of state of the art sound equipment and have
been provided with the following financial information.
Authorised share capital
1 000 000 ordinary shares
200 000 10% non-redeemable preference shares
100 000 12% redeemable preference shares
Issued share capital
150 000 ordinary shares issued at R1 per share
50 000 10% non-redeemable preference shares issued at R10 per share
10 000 12% redeemable preference shares at R8 per share
The following balances existed as at 1 January 2016:
R
Ordinary share capital 150 000
Retained earnings 2 450 000
10% Non-redeemable preference shares 500 000
12% Redeemable preference shares 80 000
Additional Notes:
1. In order to raise capital to fund the construction of a new production facility, management issued the
following shares on 1 July 2016:
• 100 000 ordinary shares at R15 per share.
• 30 000 12% redeemable preference shares. The redeemable preference shares are redeemable
at the option of the holder of the preference shares after 10 years from the date of issue.
2. During a review of the financial records you discover that the junior accountant had not recognised
the dividend on all the redeemable preference shares in issue in the financial records for the current
reporting period.
3. The directors of the company declared a final dividend of 20c per share on 30 December 2016 to be
paid to ordinary shareholders on 2 February 2017.
4. Profit for the current reporting period amounted to R948 060.
5. At a meeting of the board of directors on 20 December 2015 it was decided to accelerate the
depreciation on the manufacturing equipment to 25% per annum. At acquisition date (1 January
2015), the equipment was to be depreciated at 20% per annum. The cost of the equipment was
R478 800 (including 14% VAT). Upon closer inspection you find that the junior accountant did not
adjust the depreciation rate in 2015 however for 2016 the depreciation was accounted for correctly.
6. A piece of land which was purchased in 2014 for R500 000 was revalued on 30 November 2016 for
the first time. The land was valued at R620 000 as at 30 November 2016.
7. The applicable tax rate is 28%.
REQUIRED:
a) Prepare the Statement of Changes in Equity for AZD Ltd for the reporting period ended 31 December
2016. (25)
Notes: The total column is NOT required.
b) Disclose point 5 above as a note to the financial statements of AZD Ltd for the reporting period ended
31 December 2016 in accordance with IAS 8 (Accounting policies, changes in accounting estimates
and prior period errors)