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FAC612S-FINANCIAL ACCOUNTING 202- 2ND OPP- JAN 2025 |
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nAmlBIA UnlVERSITY
0 F SCIEnCE An D TECHn OLOGY
FACULTYOF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE:
07BGAC
07BOAC / LEVEL: 6
COURSE CODE: FAC612S
COURSE NAME: FINANCIALACCOUNTING202
DATE: JANUARY2025
DURATION: 3 HOURS
PAPER: THEORYAND CALCULATIONS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION PAPER
EXAMINER(S) Ms. P.Erkie, Mr. C. Mahindi and Ms. A. Gustav
MODERATOR: Dr. S. Dzomira
INSTRUCTIONS
1. Capture your full name, student number and assessment number on the first page.
2. Answer ALL the questions and manage your time properly.
3. Number each page correctly
4. Write clearly and neatly.
5. Do not write in pencil and do not use tip-ex, as this will not be marked.
6. The names of people and businesses used throughout this assessment do not reflect the
reality and may be purely coincidental.
7. SHOW ALL WORKINGS!
THIS QUESTION PAPER CONSISTS OF 5 PAGES (excluding this front page)
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QUESTION 1
(25 marks)
You are the financial accountant of Mining Ltd, a company with a 31 December year end.
Mining Ltd has recently been expanding its operation and undertook the following project. On
1 January 2022 Mining Ltd erected a mining shaft at cost of N$ 5 000 000. The company has
an obligation in terms of applicable legislation to dismantle the shaft in 3 year's time on 31
December 2024.
On 1 January 2022, the expected dismantling cost is N$1,000,000 which equivalents to
N$578,704 in present value.
Mining Ltd accounts for PPE on the cost model and provides for depreciation over the useful
life of the asset. The applicable discount rate is 20% pa.
On 31 December 2023, the estimated costs to dismantle the shaft increased to N$ 2 000 000
which is equivalent to N$ 1 666 667 present value as at that date.
Required:
a) Explain how a provision for dismantling costs meets the definition of a liability and a
provision.
(5)
b) Prepare the 2022, 2023 and 2024 general journal entries to account for the
transactions of Mining Ltd. Journal narrations are required.
(20)
QUESTION 2
(28 MARKS)
Transent Communications Ltd (Transent) is a newly incorporated company in Namibia,
operating in the telecommunications industry with a 31 May year end. The authorised ordinary
shares of the company consists of 100 000 no par value shares.
The following transactions related to the share capital of the company took place during the
reporting period ended 31 May 2024.
• Legal costs (Start-up/preliminary) costs of N$15,000 were paid on 1 June 2023. These
costs were incurred in setting up the company registration and finalising the
memorandum of incorporation.
• Transent has four directors, each of whom purchased for cash, 2,000 ordinary shares
at the initial issue price of N$10 per share. The issue took place on 4 June 2023 and
resulted in share issue costs N$1,200.
• On 1 July 2023 the directors published a prospectus with an invitation to the public to
apply for shares in the company. This invitation offered 50 000 ordinary shares at N$12
per share and expired on 31 August 2023. Applications for 75 000 ordinary shares had
been received by 31 August 2023. The full value per share application was received
into a trust fund which was then transferred to the company on 3 September 2023.
• After due consideration, the board of directors decided to limit the allotment to the
original offer of 50 000 shares and refunded the surplus cash received. The allotment
and refund took place on 5 September 2023. Share issue costs totalling N$8 000 were
paid on the same date.
• The total comprehensive income for the year ended 31 May 2024 has been correctly
calculated as N$125 000.
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REQUIRED:
a) Provide all the general journal entries relating to the share transactions of Transent
Communications Ltd for the reporting period ended 31 May 2024. Journal narrations
are required. Show account classifications (SPL, SFP, SCE etc.).
(20)
b) Prepare the Statement of changes in equity of Transent Communications Ltd for the
reporting period ended 31 May 2024.
(8)
QUESTION 3
(30 MARKS)
You have been presented with the following financial statements of Pesa Limited for the year
ended 31 December 2024.
Assets
Non-Current Assets
Property, Plant and Equipment
Investments at cost
2024
N$
253,000
235,000
18,000
2023
N$
160,000
150,000
10,000
Current Assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total Assets
83,000
50,000
33,000
336,000
90,000
30,000
40,000
20,000
250,000
Equity and Liabilities
Ordinary share capital
Revaluation Reserve
Retained Earnings ·
268,000
113,000
35,000
120,000
172,000
97,000
75,000
Non-current liabilities
Long term loans
17,000 48,000
Current liabilities
Bank overdraft
Current portion of long-term loan
Current tax payable
51,000
21,000
7,000
6,000
30,000
14,000
5,000
Trade and other payables
Total Equity and Liabilities
17,000 11,000
336,000 250,000
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Pesa Limited
Statement of profit or loss for the year ended 31 December
2024
Gross Profit
Operating income
Other income
Dividend income
Interest expense
Profit before tax
Income tax
Profit after tax
192,500
105,900
12,000
3,000
900
120,000
46,800
73,200
Additional information:
1. Ordinary dividends of N$28,200 were paid during the year.
2. Cash paid to suppliers and employees amounts to N$245,050.
3. The gross profit percentage is 55%.
4. Depreciation for the year is included in determining the operating profit and amounts
to: N$20,000 for machinery and N$1,050 for buildings.
5. Included in other income is:
o Profit on sale of machinery N$5,000
o Proceeds from the sale of land N$35,000. The carrying amount of this land
was N$20,000.
6. Land was revalued on 1 January 2024.
7. During 2024, machinery with a cost price of N$10,000 was sold for N$8,950 and was
not replaced. On 31 December 2024, new machinery was purchased to expand
operations.
8. Property, plant and equipment comprises the following:
Machinery and Equipment
Cost
Accumulated depreciation
Carrying amount
Land and Buildings
Cost
Revaluation
Accumulated depreciation
2024
215,000
62,450
152,550
2023
150,000
- 48,500
101,500
85,000
2,550
82,450
50,000
- 1,500
48,500
REQUIRED:
a) Prepare the statement of cashflows for the year ended 31 December 2024 using the
direct method.
(20)
b) Prepare the reconciliation of profit before tax with cash generated from operations for
Pesa Limited for the year ended 31 December 2024.
(10)
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QUESTION 4
(17 MARKS)
Lostit limited issues 2000 convertible bonds at the start of 2024. The bonds have a three-year
term and are issued at par with the face value of N$1,000 per bond, giving total proceeds of
N$2 000 000. Interest is payable annually in arrears at the nominal annual interest rate of 6%.
Each bond is convertible at any time up to maturity into 250 ordinary shares.
When the bonds are issued, the prevailing market interest rate for similar debt without
conversion options is 9%.
Required.
a) Discuss in detail whether the issue of debentures is a compound financial instrument.
(7)
b} Calculate the value of the liability and equity component in the bond?
(10)
END OF EXAMINATION QUESTION PAPER
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