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GFA712S- FINANCIAL ACCOUNTING 320- 2ND OPP- NOV 2023 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07 BOAC
LEVEL: 7
COURSE CODE: GFA 712S
SESSION: January 2024
COURSE NAME: FINANCIALACCOUNTING320
PAPER: THEORYAND CALCULATIONS
DURATION: 3 hours
MARKS: 100
2nd OPPORTUNITY EXAMINATION - QUESTION PAPER
EXAMINER(S)
MODERATOR:
D Kamotho & Ms K Keeja
M Tondota
INSTRUCTIONS
1. Answer ALL questions in blue or black ink only.
2. Capture your full name, student number and assessment number on the first
page.
3. Write clearly and neatly.
4. Start each question on a new page and number the answers clearly.
5. No programmable calculators are allowed.
6. The names of people and businesses used throughout this assessment do not
reflect the
reality and may be purely coincidental.
7. Questions relating to the paper may be raised in the initial 30 minutes
after the start of the paper. Thereafter, candidates must use their initiative
to deal with any perceived error or ambiguities & any assumption made by
the candidate should be clearly stated.
8. Do not write in pencil and do not use tip-ex, as this will not be marked.
9. SHOW ALL WORKINGS!
THIS QUESTION PAPER CONSISTS OF 9 PAGES (excluding the front page)
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Question 1
(15 marks)
a) According to IFRS10, an investor controls an investee if and only if certain conditions are
fulfilled. Identify and briefly explain these conditions
(5 marks)
b) In each of the following cases state which company would be required to prepare group
annual financial statements and name the subsidiaries which would be included in the
group annual financial statements?
Each of the statements i - iv is independent reasons should be given.
i.
Apple Limited holds no shares in Banana Limited but has the power to elect 4 of
Banana Limited's 7 directors. Banana Limited holds 51% of the voting rights of
Carrot Limited.
ii.
Apple Limited holds 40% of Banana Limited's equity shares and voting rights and
Apple Limited and Banana Limited each hold 40% of Carrot Limited's equity
shares and voting rights.
iii. Apple Limited holds all the shares of Banana Limited and Banana Limited holds
95% of the ordinary shares and voting rights of Carrot Limited
iv. Apple Limited holds 45 000 of Banana Limited's 100 000 issued ordinary shares.
Banana Limited has 20 000 options outstanding all of which are held by Apple
Limited. The options are currently exercisable but Apple Limited is currently a
severe cash flow challenge following closures of several division during the Covid-
19 epidemic.
(10 marks)
{Total 15 marks}
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Question 2
{25 marks)
On 1 February 2023 Expansive Ltd purchased 150 000 ordinary shares and 50 000
preference shares in Midlands Ltd, and on 1 March 2023 it purchased 45 000 ordinary
shares in Minic Ltd. All three companies make up their accounts to 30 June in each year.
The following figures were extracted from the companies' records for the year ended 30
June 2023.
Sales
Purchases
Selling expenses
Overhead expenses
Interim dividend paid - 01 Jan 2023
Ordinary shares
Preference Shares
Inventory on hand - as on 30 Jun 2012
Issued share capital
Ordinary share capital - N$ 1 each
9% Preference shares - N$ 1 each
Revenue reserve as at 30 Jun 2012 -
deducting all dividends to that date
Expansive Midlands
N$
N$
900 000 850 000
497 990
45 000
115000
482 580
67 500
52 500
Minic
N$
500 000
221100
45 000
65 000
75 000
49 650
40000
4 500
100 280
34 500
300 000
26 750
200 000
100 000
32 000
100 000
48 000
You also obtain the following additional information:
i. Profits of Midlands Ltd. and Minic Ltd. accrued evenly throughout the year.
ii. Inventories on hand on 30 June 2023 were:
Expansive Ltd
N$ 87 640.
Midlands Ltd
N$ 92 860.
Minic Ltd
N$ 45 600
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iii. Owing to an oversight, corporation tax was not provided on the profits for the year.
The amounts computed are as follows:
Expansive Ltd -N$ 150 000
Midlands Ltd -N$ 108 000
Minic Ltd -N$ 86 400
iv. The following dividends are proposed:
Expansive Ltd. - a final dividend on ordinary shares of 25%.
Midlands Ltd - half yearly dividend on the preference shares and a final dividend on
ordinary shares of 30% and
Minic Ltd. a dividend on ordinary shares of 60%
REQUIRED:
Prepare a consolidated statement of comprehensive income of Expansive Ltd and its
subsidiaries companies incorporating the results of its associated company for the year
ended 30th June 2023 as the requirement of IFRS.Show all your workings. (25 marks)
{Total 25 marks}
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Question 3
(30 marks)
Gitugu Ltd (Gitugu) is a public limited company based in Namibia with shareholdings in two
other companies, Moran Ltd (Moran) and Kahuti Ltd (Kahuti). Statements of Financial
Position are shown below for all three companies as at 31 July 2023.
Statements of Financial Position as at 31 July 2023
Non-current assets:
Property, plant & equipment
Investments
Current assets:
Inventories
Trade receivables
Cash & bank
Total assets
Gitugu
Ltd
NS
million
758
1,200
1958
235
188
100
523
2481
Moran
Ltd
NS
million
326
40
366
153
134
36
323
689
Kahuti
Ltd
NS
million
159
25
184
65
42
20
127
311
Equity:
Equity share capital of N$1 each
Other equity reserves
Retained earnings
Current liabilities:
Contingent consideration
Trade payables
Taxation
Dividends proposed
Total equity & liabilities
1000
400
100
200
30
80
977
112
70
2177
542
250
38
161
127
46
25
20
15
80
-
-
304
147
61
2481
689
311
The following additional information should be taken into account in so far as it is
relevant:
i. Gitugu bought 320 million ordinary shares in Moran on 1 August 2022, when the other
equity reserves of Moran were N$20 million and the retained earnings of Moran were
N$132 million. The consideration was agreed at N$800 million. This was satisfied by the
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issue of 200 million equity shares by Gitugu at an agreed fair valuation of N$750 million,
plus N$S0 million to be paid by Gitugu on 31 July 2023 if the profit target for the year
(N$15 million) was met by Moran. The contingent element of the consideration was
recorded at its fair value of N$38 million at 1 August 2022. As it turned out, significant
losses were incurred by Moran in the year to 31 July 2023. Consequently, nothing is
payable by Gitugu on 31 July 2023 under this part of the deal. No entry has been made by
Gitugu to reflect this change in expectation.
ii. The group accounting policy is to value any Non-Controlling Interests (NCI} at their fair
value at the acquisition date. On the date, Gitugu acquired its interest in Moran, the fair
value of the NCI in Moran was N$130 million.
iii. At 1 August 2022, some equipment held by Moran had a fair value N$25 million in excess
of its carrying value. This equipment had a remaining useful economic life of 5 years at
that date.
iv. Gitugu bought a 30% holding in the ordinary shares of Kahuti on 1 August 2022, when the
other equity reserves of Kahuti were N$75 million and the retained earnings balance in
Kahuti' books stood at N$60 million. The consideration consisted of an immediate cash
payment of N$112 million. Gitugu exerts significant influence over Kahuti as a result of
this shareholding. Other investments are held by all three companies. These are equity
investments and not more than 5% of the issued share capital is held in any of these
individual entities.
v. During the financial year ended 31 July 2023, Moran sold goods to Gitugu for N$30 million.
These goods were sold at a mark-up on cost of 100%. Of these goods, 40% of these goods
remained in the inventory of Gitugu at 31 July
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vi. 2023: N$2.S million of the cost of these goods remains unpaid by Gitugu at 31 July 2023.
(vi) No dividends were paid or proposed in the year by any of the companies.
vii. Due to the unexpected losses incurred by Moran during the year, an impairment review
was undertaken on 31 July 2023 and goodwill was found to be impaired by 60% of its
acquisition value. There was no impairment necessary in respect of the investment in
Kahuti.
Note: All workings should be rounded to the nearest N $0.lm.
REQUIRED:
a) Prepare the Consolidated Statement of Financial Position for the Gitugu group as at 31
July 2023 in accordance with International Financial Reporting Standards. (24 marks)
b) IFRS3 - Business Combinations permits two methods for valuing non-controlling interest
at acquisition. Discuss how the initial calculation and subsequent treatment of goodwill
arising on the acquisition of Moran would have differed had the non-controlling interest
been measured using the proportionate share of the identifiable net assets at the
acquisition date.
(3 marks)
c) Recalculate the goodwill on this basis.
(3 marks)
[Total: 30 Marks]
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Question 4
(30 Marks)
Sassuolo Ltd has a number of subsidiaries, one of which, Brianz Ltd was acquired during the
year ended 31 December 2022.
The draft consolidated financial statements for the year ended 31 December 2022 are as
follows:
Consolidated Statement of Profit or Lossof Sassuolo Ltd for the year ended 31
December 2022
Profit from operations
Interest
Share of profits of associates
Profit before taxation
Taxation
$000
1,210
{100)
1,110
240
(1,350)
{482)
868
Non-controlling interest
Group profit
{104)
764
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Statements of Financial Position are as follows:
Assets
Non-current assets
Property, plant and equipment
Intangibles
Investment in associates
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Sassuolo Ltd
consolidated
at 31/12/2022
$000
Sassuolo Ltd
consolidated
at 31/12/
2021
$000
Brianz Ltd
at acquisition
$000
4,730
2,610
610
350
310
-
520
500
-
5,600
3,420
610
740
610
150
390
350
85
40
85
20
6,770
4.465
865
Equity and liabilities
$1 ordinary shares
Share premium
Retained earnings
Non-controlling interest
Non-current liabilities
Long term loans
Current liabilities
Trade payables
Taxation
Total Equity and Liabilities
1,400
1,000
500
300
200
100
1,615
865
80
3,315
2,065
680
580
610
--
3,895
2,675
680
1,900
1,100
-
520
480
75
455
210
110
6,770
4.465
865
Additional information:
1. Sassuolo Ltd issued 400,000 $1 ordinary shares at a premium of 25 cent and paid a
cash consideration of $197,500 to acquire 75% of Brianz Ltd. At the date of acquisition,
Brianz Ltd.'s assets and liabilities were recorded at their fair value with the exception
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of some plant which had a fair value of $90,000 in excess of its carrying value. Goodwill
on acquisition was $120,000.
2. The property, plant and equipment during the year to 31 December 2022 shows plant
with a carrying value of $800,000 which was sold for $680,000. Total depreciation for
the year was $782,000.
REQUIRED:
Prepare a consolidated statement of cash flows in accordance with IAS 7 Statement of Cash
Flows for the year ended 31 December 2022 using the indirect method.
(30 marks)
Show all the relevant workings.
{Total: 30 Marks}
END OF QUESTION PAPER
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