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FAR811S-ADVANCED FINANCIAL ACCOUNTING -1ST OPP-JUNE 2024 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE
QUALIFICATION : BACHELOR OF ACCOUNTING HONOURS
QUALIFICATION CODE: 08 BOAH
COURSE CODE: FAR811S
SESSION: June 2024
LEVEL: 8
COURSE NAME: ADVANCEDFINANCIALACCOUNTING
AND REPORTING
PAPER: THEORYAND CALCULATIONS
DURATION: 3 hours
MARKS: 100
EXAMINER(S)
FINAL ASSESSMENT - i5t Opportunity
D W Kamotho
MODERATOR: Dr E Wealth
INSTRUCTIONS
1. Answer ALL questions in blue or black ink only.
2. Write clearly and neatly.
3. Start each question on a new page and number the answers clearly.
4. No programmable calculators are allowed.
5. 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.
6. Any resemblance to any people, places, organisations or anything is purely
coincidental.
THIS QUESTION PAPER CONSISTS OF 6 PAGES (excluding the front page)
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Question 1
This question has two parts which are independent of each other.
(25 marks)
Part A
Indicate whether the below statements are true or false in regard to the requirements of
IFRS 13: Fair value measurement and briefly justify your answer.
a) Fair value is an entity-specific measurement.
(2)
b) IFRS 13 Fair value measurement must be applied when measuring and disclosing "fair
value less cost of disposal" being a term referred to in IAS36 Impairment of assets. (2)
c) Fair value is measured in terms of the most advantageous market, unless a most
advantageous market does not exist, in which case we must measure the fair value in
the terms of the principal market instead.
(2)
d) The most advantageous market is defined as a market that maximizes the amount that
would be received to sell the asset or minimize the amount that would be paid to transfer
the liability after taking into account the transaction costs.
(3)
e) The asset principal market is a market that offers the highest volume or activity relating
to that asset.
(2)
f) The highest and best use of an asset must be considered when measuring the fair value
of any asset.
f.11
Total for Part A
(15)
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Part B
Aliena limited functions as an asset management company, employing a variety of trading
techniques to unlock value for its client. Presently they are busy with the preparation of their
financial statement for the current financial year ended 31st December 2023.
You are employed by the entity as a technical expert on IFRS, and as such you are actively
involved in the preparation of the financial statements. At the moment there is one particular
issue that is causing difficulties for the management, and you have been asked to provide an
opinion on the matter.
The company had purchased 1,000,000 shares in Rock Limited on the advice of a
consultancy, Future Analyst. Rock Limited is a company listed on the local security exchange,
NSX. The shares were purchased because they had, historically, been trading very well and
. the Analysts at the future analyst had convinced management, at the time of the purchase,
that the share would continue to do well into the future.
At the current reporting date, the NSX showed that Rock limited was trading at a bid price of
N$360 and an ask price of N$300 with a bid-ask spread of N$60.
However, in the process of gathering information, you requested an opinion from an expert at
Reiters Inc. on the absorption capacity of the market where Aliena limited to sell its entire
holding. The expert responded by saying that he concluded that the full absorption at the
current security price would not be possible. Accordingly, the bid price was N$330 and they
ask the price N$270 and the bid-ask spread is N$60.
Required.
Explain with reference to IFRS 13 Fair value measurement, how the fair value of this
investment in shares should be measured and identify whether the input into this calculation
would be considered level 1, level 2 or Level 3 inputs?
(10)
(25 marks)
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Question 2
(25 marks)
Trade store CC is a general dealer doing business in the country. The following items among
others (inter alia) are included in the revenue of N$781 340 for the year ended 31 December
2023.
1. Layby Sales
Payments have been made on the following parcels in the storeroom, and these are included
in the revenue of N$781,340.
Invoice number.
3161
4031
4056
5315
Selling price including
VAT at 14%.
342
171
513
410
Balance outstanding
52
104
311
352
Experience has shown that Layby sales, of which more than 80% have been collected, will be
completed. Trade Store CC can sell the layby goods to other customers and replace them with
the same items during the Layby period.
2. COD Sales.
The following COD invoices have not been collected at 31st December 2023 and are included
in the receivables and revenue.
• Invoice number 4136 amounting to N$363 vat exclusive was delivered to a farm where
only one employee was home. The money will be collected when the farmer visits the town
again. The farmer is creditworthy.
• Invoice number 5110, amounting to N$123 vat exclusive was paid by cheque. The cheque
was accidentally postdated to 15th January 2024.
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3. Branch Sales
Invoice at a sales value of N$27,300 vat exclusive was delivered to a farm store (branch) and
is included in the revenue. The following balances are applicable to the branch:
Branch inventory account at selling Price
Branch gross profit account (branch adjusted
account)
1st of January
2023
Dr/Cr N$
9000
(3000)
31st December
2023
Dr/Cr N$
12000
(4000)
4 Consignment Inventory
Consignment inventory consisting of braai tools with a sales value of N$ 9000 excluding VAT
is held at a local butchery was paid by the butchery, which is treated as a receivable to Trade
Store CC. The N$ 9000 is included in the revenue.
5. Undelivered goods
Goods with the selling price of N$3600, excluding VAT, invoiced on 31 December 2023 have
not yet been delivered nor is there a signed receipt for them.
6. Additional information.
All selling prices are strictly determined at cost plus 50%. The cost of all inventories excluding
Layby Sales on the premises of Trade Store CC at 31st December 2023 amounted to N$
211,700. The VAT rate is 14%.
Required
a) Calculate the amount of revenue that Trade Store CC may recognize for the year ending
31 December 2023.
(15)
b) Calculate the value of inventory on hand of Trade Store CC at 31st December 2023.
(10)
Your answer must comply with the requirement of the international Financial Reporting
Standards (IFRS) and workings are required.
(25 marks)
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Question 3
(25 marks)
Button limited raised to specific loans to fund construction of a building (a qualifying asset).
• Loan A, 10% raised, 1 January 2023: N$500,000.
• Loan B, 15% raised one June 2023 N$400,000.
N$100,000 of the Loan B capital was repaid on 31 July 2023. No other loan capital was
repaid. Interest was payable (compounded) annually on 31 December.
The only other interest income earned during the year was interest on the investment of
surplus funds from the specific loans in a 6% interest account. This interest is not
compounded.
Additional information
Construction costs paid for as follows.
• 31 March 2023 - N$ 300,000
• 30 April 2023 - N$ 100,000
• 31 July 2023 - N$ 220,000
• Commencement date - 01 March 2023.
• Cessation date - 31 August 2023.
Required.
a) Calculate the amount of borrowing costs that must be capitalized in terms of IAS 23
(17)
b) Journalise the borrowing costs for the year ended 31st December 2023.
(8)
(25 marks)
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Question 4
This question has two independent parts.
(25 marks)
General information
Big Vans Ltd entered into a lease contract with Super Foods Ltd for the lease of a refrigerated
delivery van on 1 January 2023. The lease instalment amounts to N$6 000 annually in arrears
for the duration of the three-year lease term. The lease is non-cancellable.
The interest rate implicit in the lease is 4.48%.
PART A - As a manufacturer
Big Vans Ltd is a manufacturer of delivery vans. The van in respect of this lease was
manufactured at a cost of N$12 000. The company uses the gross method for recording and
disclosing the lease in their accounts.
Required:
a) Determine the gross investment in the lease, the net investment in the lease and the
unearned finance income.
(4)
b) Prepare the journal entries in the accounting records of Big Vans Ltd for the year ended
31 December 2023.
(1 0)
Ignore tax.
PART B - As a Finance house
Big Vans Ltd is a finance house and purchases the vehicle on 1 January 2023 at a cost of
N$16 500. The company uses the net method for recording and disclosing the lease in their
accounts.
Required:
a) Determine the gross investment in the lease, the net investment in the lease and the total
of the unearned finance income.
(4)
b) Prepare the journal entries in the accounting records of Big Vans Ltd for the year ended
31 December 2023.
(7)
Ignore tax.
(25 Marks)
END OF QUESTION PAPER
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