XYZ Limited prepared the following assets division of the statement of financial position for presentation to its shareholder XYZ Limited STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2005 N$ ASSETS...


XYZ Limited prepared the following assets division of the statement of financial position for presentation to its shareholder


XYZ Limited


STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2005


N$


ASSETS


Non-current assets


Property, plant and equipment (plant N$ 100 000 + Vehicles N$ 50 000) 150 000


Financial assets (Listed Shares N$10 000 + saving Account N$ 5 000) 15 000


Current Assets


Cash And Equivalents (Petty cash N$ 6 000 – Bank overdraft N$ 2 000) 4 000


Inventory 25 000


Trade and other debtors 36 000


Shareholders for dividends 10 000


Total Assets 240 000


REQUIRED:


Critically discuss the presentation of the above statement on the basis of the Conceptual Framework and IAS1.



QUESTION 2 (20 marks)


ABC is a public company listed on the Namibian Stock Exchange (NSE). The company applies International Financial Reporting Standards (IFRS) to prepare its financial statements and has elected to present its statement of profit or loss and other comprehensive income according to the function of expenses method.


The company’s financial accounting prepared the following statement of profit or loss and other comprehensive income for the year ended 31 December 2012.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR 2012.



N$


Revenue 12 000 000


Cost of Sales (5 000 000)


Gross Profit 7 000 000


Depreciation (1 500 000)


Salaries and wages (6 500 000)


Dividends declared (125 000)


Surplus on revaluation of property, plant and equipment 225 000


Other expenses (8 000 000)


Purchase of property, plant and equipment (4 250 000)


Profit for the year (13 150 000)


Additional information:


1. The following is included in “ Other expenses”:


Income tax expense (150 000)


Interest expense (505 000)


Rental income 50 000


REQUIRED:


(a) Briefly explain to the financial accountant why dividend declared of N$ 125 000 should not be presented in the statement of profit or loss and other comprehensive income as an expense. Your answer should refer to relevant definition in the conceptual framework. (3 marks)


(b) Provide a critical analysis of the above-mention statement of profit and loss and other comprehensive income in term of IAS 1 and Conceptual Framework. (7 marks)


(c) Prepare the statement of profit or loss and other comprehensive income for the year ended 31 December 2012 to comply with Companies Act 71 of 2008 and the requirements of International Financial Reporting Standards (IFRS). (10 marks)



QUESTION 3 (40 marks)


Ms Muteka the management accountant of Dempsey Ltd, appointed a person on 1 June 20.8, who pretended to be an expert in preparation of company financial statements.


The following statement of financial position was prepared on 10 July 20.8 by the new accountant:



Dempsey Limited



Statement of financial statement position as at 30 June 20.8




ASSETS Note N$


Land and buildings at carrying amount 2 376 000


Furniture at carrying amount 3 60 000


Vehicle at carrying amount 3 192 000


Investments 4 34 000


Inventories 5 18 000


Receivables 20 000


Consumables on hand 1 000



N$701 000




INTERESTS


Capital 6 555 000


Reserves 7 20 000


Loan 8 100 000


Payables 9 14 000


Bank overdraft 12 000



N$701 000




Ms Muteka is not satisfied with the format of the above statement of financial position and requests you to assist her. You acquire the following additional information:




1. The reporting period of -Dempsey Ltd ends on 30 June.




2. The buildings are occupied for the purpose of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 1 July 20.6 the land was valued at N$ 100 000 and the buildings at N$ 300 000. Depreciation is written off on buildings at 4% per year on Straight- line method.




3. Furniture and vehicle were purchased on 1 July 20.6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12.5% per year on cost and on vehicle at 20% per year on diminishing balance method. The necessary write-offs for the current year have been made.




4. Investments consist of the following:


10 000 ordinary shares in a listed company, Springbok Ltd N$ 24 000


6 000 ordinary shares in XY (Pty) Ltd N$ 10 000




On 30 June 20.8, the values of the shares in Springbok Ltd and XY (Pty) Ltd were N$ 28 000 and N$ 14 000 respectively.




5. Inventories consist of the following: Merchandise (trading goods) N$ 18 000




6. Dempsey Ltd may issue 400 000 ordinary shares and 200 000 8% preference shares.


On the 30 June 20.8, the company had already issued 250 000 ordinary shares at


N$ 275 000 and 160 000 preference shares at N$ 280 000.




No share were issued during the current year.


Preference shares form part of equity.




7. The reserves consists of the following:




Retained earnings (balance 30 June 20.7, N$ 7 000) N$ 14 000


Replacement reserve N$ 6 000




The ordinary dividends declared are still owing to shareholders, while the preference dividends have been paid.


8. The loan was entered into on 1 July 20.6 at interest rate of 10% per year. The loan is secured by a mortgage bond on land and buildings and is repayable in yearly instalments of N$ 20 000 from 31 December 20.8.




9. Payables consist of the following:


Trade payables N$ 6 000


Current tax payable N$ 3 000


Shareholders for dividends N$ 5 000






REQUIRED:




Prepare the statement of financial position, with the necessary notes, as at 30 June 20.8 and the Statement of changes in equity for the year ended 30 June 20.8 for Dempsey Ltd to comply with the minimum requirements of the Companies Act 71 of 2008 and International Financial Reporting Standards (IFRS).

Sep 16, 2019
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