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6 May 2018

Question 3 (50 marks)
The following information is available for Heritage Limited:
1. The reporting period of Heritage Ltd ends on 30 June of every year.
The following balances are available as at 30 June 20x8
Land and building at cost 400 000
Accumulated depreciation on buildings at 01/07/20x7 12 000
Furniture at cost 80 000
Accumulated depreciation as at 01/07/20x7 10 000
Vehicles at cost 300 000
Accumulated depreciation as at 01/07/20x7 60 000
Investments as at 01/07/20x7 34 000
Bank 96 700
Trade and other receivables 20 000
Ordinary share capital 275 000
Preference share capital 280 000
Retained earnings as at 01/07/20x7 7 000
Replacement reserves 58 250
10% Bank loan 100 000
Payables 33 500

Additional information:
1. The buildings are occupied for the purposes of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 01 July 20x6, the land was valued at N$ 100 000 and buildings at N$ 300 000. Depreciation is written off on buildings at 4% per annum on the straight line method. 2. Furniture and vehicles were purchased on 01 July 20x6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on


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vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year still need to be done. 3. The value of the investments is valued at N$ 42 000 as at 30 June 20x8 4. Inventories consist as at 01 June 20x8 amounted to N$ 22 000. Inventories are measured at lower of cost (FIFO) and net realisable value. 5. Authorised share capital for Heritage Ltd is 400 000 ordinary shares at N$ 1,10 each and 200 000 8% preference shares at N$ 1,75 each. The company had already issued 250 000 ordinary shares at N$ 275 000 and 160 000 preference shares at N$ 280 000. The company had issued 25 000 shares at N$ 2,00 during the year. Preference share capital form part of equity. 6. The loan was entered into on 01 July 20x6 at an interest rate of 10% per annum. The loan is secured by a mortgage bond on land and buildings and is repayable in annual instalments of N$ 20 000 from 31 December 20x8. 7. Payables consist of the following:
Trade payables 6 000
Namibian company tax 3 000
Dividend payable 24 500
8. Profit for the year amounted to N$ 60 000. 9. On 30 March 20x8 a new vehicle with a cost price of N$ 55 000 was purchased for use in the delivery of goods to customers. 10. At 30 June 20x8, inventory worth N$ 4 000 were stolen.

Required:
1.1 Prepare the statement of financial position as at 30 June 20x8 to comply with the requirements of IFRS and Companies Act,
1.2 Prepare the following notes to accompany the financial statements and to comply with IFRS and Companies Act:
? Basis of presentation ? Statement of significant accounting policies ? Property, plant and equipment ? Financial assets ? Inventories ? Share capital and ? Non-current liabilities as at 30 june20x8; and


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1.3 The statement of changes in equity for the year ended 30 June 20x8 for Heritage Ltd to comply with the minimum requirements of the Companies Act of 2008 and International Financial Reporting Standards (IFRS). Comparative figures are required were necessary.

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6 May 2018

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QUESTION 1 (30 Marks: 63 minutes)
The following is the trial balance of Eskimo Limited at 31 December20x8:
ESKIMO LIMITED TRIAL BALANCE AT Debit Credit Retained earnings(1/1/20x8) 145 000 Non- current liabilities: Loan from AB Bank 25000 Revaluation surplus (1/1/20x8) 20 000 Ordinary share capital240 000 Revenue: Sales 580 000 Interest income 12 500 Rent income23 000 Cost of sales 300 000 Interest on bank overdraft 9 500General expense 113 000 Bad debts expense 20 000 Repairs andmaintenance expense 30 000 Marketing expense 22 000 Fuel expense 40000 Depreciation expense 25 000 Salaries 50 000 Investments inlisted companies 50 000 Accounts receivable 250 000 Bank 23 000Current tax payable 12 800 Inventories 120 000 Accounts payable 225000 Land 200 000 Equipment: Cost 100 000 Equipment: Accumulateddepreciation 40 000 Income tax expense 1 800 Dividends 15 000 1 346300 1 346 300

Additional information:
? Share capital constitutes 120 000 ordinary shares of no parvalue. 20 000 shares were issued for N$40 000 on the first day ofthe year. ? The interest and rental income are incidental to mainbusiness operations.


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? Eskimo Limited classified expenses according to their function.Management categorise the functions of the business into the areasof sales, administration and distribution. ? Salaries of N$ 30 000relate to the administrative function and N$20 000 the distributionfunction. ? Depreciation on equipment of N$10 000 relates to theadministrative function and N$15 000 to the distribution function.? The bad debts and marketing expenses relate to the administrationfunction. ? The repairs and maintenance and fuel expenses relate tothe distribution function. ? Dividends of N$15 000 in respect ofthe year ended 31 December 20x7 were declared and paid duringJanuary 20x8. Dividends of N$20 000 in respect of the year ended 31December 20x8 were declared on 15 January 20x9 ? There are nomovements in other comprehensive income.

Required:
a) Prepare the statement of profit or loss and other comprehensiveincome (use the expenses by function method) including earnings pershare (EPS) of Eskimo Limited for the financial year ended 31December 20x8 in accordance with International Financial ReportingStandards. (15 marks) b) Prepare the statement of financialposition of Eskimo Limited at 31 December 20x8 in accordance withInternational Financial Reporting Standards. (12 marks) c) Preparethe following notes to the financial statement in accordance withInternational Financial Reporting Standards: (3 marks) a. Summaryof significant policies b. Revenue

QUESTION 3 30 MARKS


Namic Inclusive CC is currently preparing budgets for the three months of the trading year. You have been provided with the following information:

Trading;

January February March Sales in Units 50 000 units 55 000 units 60 000 units

Sales are expected to increase to 75 000 units per month from 1 April as the company increases production capacity. The selling price for each unit has been set at N$90.00 per unit. All sales are on credit. 30% of sales is received in the month that the sale is made and the balance is received in the following month.

The following notes were also presented.

1. The cost of raw material for each unit of production is N$ 30.00. Namic inclusive cc holds a closing stock equal to 40% of raw material required for the next month`s production. Raw material is paid in the month following the purchase.

2. The company values closing stock of units produced on a variable costing basis. Company policy is to hold a maximum of 20% of finished units required for sales in the forthcoming month as closing stock.

3. Labour cost of production are variable at N$ 20.00 per unit. All costs are paid in the month incurred.

4. Other manufacturing overhead are N$ 8.00 per unit variable and N$ 12.00 per unit fixed. The fixed component is based on a production level of 55 000 units per month. Depreciation amounting to N$ 30 000.00 per month is included in this figure. All overheads are paid for the in the month incurred.

5. Other company costs excluding interest payable amount to N$ 5.00 variable per unit sold and further N$ 250 000.00 fixed per month. These costs are paid for in the month incurred.








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Statement of Financial Position as at 01 January 2017

Issued Share Capital N$ 10 000 000 Accumulated Profit N$ 1 517 000 N$ 11 517 000 Fixed Assets Land and Building N$ 5 000 000 Machinery and equipment N$ 2 750 000 Other Assets N$ 1 000 000 Current Assets Stock – Raw Material N$ 612 000 Stock – Finished goods N$ 580 000 Debtors – Sales N$ 2 835 000 Cash and Bank N$ 180 000 Less: Current Liabilities Creditors – Raw Material N$ 1 440 000 N$ 11 517 000

The company will raise long term loan on the 01 February 2017 for N$ 500 000 at an annual interest rate of 12% payable monthly as incurred. The interest charge has not been included in the information provided above. Interest is paid in the month after it is incurred.

Machinery costing N$ 350 000 will be purchased on 01 March 2017, monthly depreciation on the asset is budgeted to be N$ 5000.00 per month. The depreciation has not been accounted for in the information provided above.

REQUIRED:

3.1 Prepare a sales budget (3) 3.2 Prepare a production budget (4) 3.3 Indicate the closing value of debtors and closing stock for the months of January to march 2017 inclusive (3) 3.4 Prepare a material purchases budget by units as well as in value also indicate the closing creditors budget for each month of January to March 2017 (10) 3.5 Prepare a cash budget for each month of January to March 2017 inclusive (10)

QUESTION 1 30 MARKS The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd: Statement of financial position as at 31 December 2018 Mega Ltd Ultra Ltd ASSETS Property, plant and equipment 270 000 340 000 Investment in Ultra Ltd: 48 000 shares at fair value 350 000 - (cost: N$ 330 000) Trade receivables 80 000 23 500 Inventories 350 000 218 000 Bank 65 000 - Total assets 1 115 000 581 500 EQUITY AND LIABILITIES Share capital 400 000 240 000 Mark-to-market reserve 20 000 10 000 Retained earnings 375 000 240 000 Long-term borrowings 43 000 21 000 Trade and other payables 277 000 23 500 Bank overdraft - 47 000 Total equity and liabilities 1 115 000 581 500 Statement of profit or loss and other comprehensive income for the year ended 31 December 2018 Mega Ltd Ultra Ltd Revenue 927 000 1 628 000 Cost of sales -472 000 -725 000 Gross profit 455 000 903 000 Other expenses -287 100 -472 000 Dividend received from Ultra Ltd 94 000 - Profit before tax 261 900 431 000 Income tax expense -198 000 -128 000 Profit for the year 63 900 303 000 Other comprehensive income Items that will not be reclassified to profit or loss Mark-to-market reserve 4 000 1 000 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 67 900 304 000 Extract from the Statement of changes in equity for the year ended 31 December 2018 Mark-to-market reserve Retained earnings Mega Ltd Ultra Ltd Mega Ltd Ultra Ltd Balance at 1 Jan 2018 15 000 8 000 215 000 170 000 Changes in equity for 2018 Total comprehensive income for the year: Profit for the year 63 900 303 000 Other comprehensive income for the year 4 000 1 000 Dividends -108 000 -120 000 Balance at 31 December 2018 19 000 9 000 170 900 353 000 Additional information: On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of: Share capital N$ 260 000 Mark-to-market reserve N$ 3 000 Revaluation reserve N$ 7 000 Retained earnings N$ 135 000 Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interest’s share was N$8,50 per share, based on market prices. Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications. REQUIRED Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks

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