Tsangoni CC is a company which manufactures, sells and services mountain bikes in Cape Town, South Africa. The financial

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Tsangoni CC is a company which manufactures, sells and services
mountain bikes in Cape Town, South Africa. The financial director
of the company, Ingiphile, is struggling with the preparation of
the financial statements for the year ended 31 August 2021 and has
asked for your assistance. Bicycle frames: Tsangoni CC imports the
majority of its bicycles and the parts required for maintenance
from Europe. On 1 February 2021, an order for the shipment of
bicycle frames was placed by Ingiphile. The terms of the order were
as follows: Date of order 1/2/2021 Supplier Sensa Bicycles Ltd
(Netherlands) Customer Tsangoni CC Product 10 "Sensa Romagna"
frames Shipping date 1/3/2021 Price R5 000 per frame Payment terms
Full payment to be made on 1/3/2022 Shipping terms FOB shipping
point The shipment was made on 1 March 2021, and the inventory was
received on 27 May 2021. A fair interest rate of 12% applies.
Property. Plant and Equipment (PPE): PPE is comprised of two
assets: a servicing machine and a delivery vehicle. Tsangoni CC
purchased the servicing machine for the servicing of bicycles for
R110 000 on 1 September 2019. Ingiphile felt that the consumption
of future economic benefits would be best represented by the number
of bicycles it serviced, which was estimated to be 750 bicycles.
The servicing machine serviced 34 bicycles from 1 September 2019 to
31 August 2020 (the previous financial year) and 43 bicycles from 1
September 2020 to 31 August 2021 (the current financial year). The
machine could be sold at the end of its useful life for R4 000.
Tsangoni CC purchased the delivery vehicle for R120 000 on 1
October 2020. Ingiphile estimated the useful life to be 5 years.
The vehicle can be sold at the end of its useful life for R12 000
if costs of R2 000 are incurred to have it serviced. 1.1 Discuss
when and at what amount the bicycle frames should be initially
recorded in the financial statements of Tsangoni CC. You should
apply the relevant definition and recognition criteria as per the
Conceptual Framework in your discussion. 1.2 Prepare all the
general journal entries relating to the purchase of bicycle frames
for the year ended 31 August 2021. 1.3 Calculate the opening
balance of the accumulated depreciation: PPE: servicing machine
account (balance at 1 September 2020) and the total depreciation
expense. 1.4 Assume that at the end of the year, Ingiphile found
that the delivery vehicle had a value in use of R84 000 and could
be sold for R87 000 if R8 000 was incurred to prepare it for sale.
At what amount would PPE: delivery vehicle be shown on the
statement of financial position as at 31 August 2021?