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27 Aug 2018


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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Beverley Smith
Beverley SmithLv2
29 Aug 2018

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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
Page 13 of 21
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

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


Page 13 of 21

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


Page 14 of 21

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.

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.


Page 16 of 21

? 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

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