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FAC612S- FINANCIAL ACCOUNTING 202- 2ND OPP- NOV 2023 |
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nAmI BIA unIVERSITY
OF SCIEn CE Ano TECHn OLOGY
FACULTYOF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICS,ACCOUNTINGAND FINANCE
QUALIFICATION: BACHELOROF ACCOUNTING
QUALIFICATIONCODE: 07BOAC
LEVEL: 6
COURSECODE: FAC612S
COURSENAME: FINANCIAL ACCOUNITNG 202
SESSION:JANUARY 2024
DURATION: 3 HOURS
PAPER:THEORY+ CALCULATIONS
MARKS: 100
EXAMINER(S)
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
Mr. C MAHIN DI, Mr. C SIMASIKU and Ms. S IFUGULA
MODERATOR: Dr. D KAMOTHO
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. Do not write in pencil and do not use tip-ex, as this will not be marked.
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. The names of people and businesses used throughout this assessment do not reflect the
reality and may be purely coincidental.
7. Show all workings!
PERMISSABLE MATERIALS
1.
Non- programmable calculator
THIS QUESTION PAPERCONSISTSOF 9 PAGES(Excluding this front page)
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Question 1
(19 marks)
For multiple choice questions, only write down the correct letter in your answer booklet.
e.gl. A
1. IAS 37 _____
to executory contracts ____
they are onerous.
A. Applies; unless
B. Applies; even if.
C. Does not apply; unless
D. Does not apply; regardless of if
(1)
2. Which of the following defines the term "provision"?
A. A deferred liability
B. A contingent liability
C. A liability of an uncertain timing or amount
D. A contractual liability
(1)
3. Which of the following is defined by this statement: "A present obligation of the entity
to transfer economic resources as a result of past events,"?
A. A legal obligation
B. A ·constructive obligation
C. A liability
D. An obligating event
(1)
4. An onerous contract is a contract in which ____
of meeting the obligations under
the contract ____
the economic benefits expected to be received under it.
A. Sunk costs, exceed.
B. Unavoidable costs, exceed.
C. Opportunity costs, are less than
D. Avoidable costs, are less than
(1)
5. Which of the following statements more likely defines the term "restructuring"?
A. A significant change in the scope of the business undertaken by the entity.
B. A significant change in the manner in which business is conducted.
C. A significant change in the political and legal environment that regulates the
reporting matters of an entity.
D. A and B
E. A, Band C
(1)
6. Under which of the following conditions shall a provision be recognised?
A. An entity has a present obligation as a result of a past event.
B. It is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation.
C. A reliable estimate can be made of the amount of the obligation.
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D. A and C
E. All of the above
(1)
7. An entity shall not recognise a contingent liability ___
_
A. Unless an entity has a present liability as a result of a past event
B. Unless it is probable that an outflow of resources embodying economic benefits
will be required to settle this liability
C. Unless a reliable estimate can be made of the amount of this liability
D. None of the above
(1)
8. Contingent assets ____
in financial statements ____
recognition of income that may never be realised.
A. Shall not be recognised, since
B. Shall be recognised; unless
C. Shall be disclosed; even if.
D. Shall be disclosed; unless
this may result in the
(1)
9. The amount recognised as a provision shall ___ _
A. Reflect the best estimate of the expenditure required to settle the present
obligation at the end of the reporting period.
B. Reflect the reasonable assurancethat the entity will face the outflow of benefits
at the end of the reporting period.
C. Be supported by the actuarial valuation report.
D. All of the above
(1)
10. Entity X believes that the cost of cleaning up a site at the end of its life will be reduced
by future changes in technology. Which of the following will most likely not be reflected
in the amount of a provision for cleaning up a site in the entity's financial statements?
A. Expected cost reductions associated with increased experience in applying
existing technology.
B. Expected cost of applying existing technology to a larger or more complex clean-
up operation than has previously been carried out.
C. The development of a completely new technology for cleaning up
D. All of the above
(1)
11. Where the expenditure required to settle a provision is expected to be reimbursed by
another party, ___
_
A. The reimbursement shall be recognised when it is virtually certain that
reimbursement will be received if the entity settles the obligation.
B. The reimbursement shall be treated as a separate asset.
C. The amount of reimbursement recognised shall not exceed the amount of the
provision.
D. A and C
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E. All of the above
(1)
12. When does the obligation arise for the sale of an operation?
A. When an entity has taken the decision to sell an operation
B. When an entity has announced a decision to sell an operation publicly
C. When an entity has found a potential purchaser
D. When an entity has a binding sale agreement
(1)
13. Which of the following expenditures shall be included in the restructuring provision?
A. Retraining costs
B. Marketing costs
C. Staff relocation costs
D. All of the above
E. None of the above
(1)
14. IAS 10 states that if an entity declares dividends after the reporting period, the entity
____
those dividends as a liability at the end of the reporting period.
A. shall recognise.
B. shall not recognise.
C. is encouraged to recognise.
D. is encouraged not to recognise.
(1)
15. Which types of events does IAS 10 identify?
A. Those that provide evidence of conditions that existed before the end of the
reporting period.
B. Those that provide evidence of conditions that existed at the end of the
reporting period.
C. Those that are indicative of conditions that arose after the reporting period.
D. Band C
E. All of the above
(1)
16. Which of the following are examples of adjusting events after the reporting period that
require an entity to adjust the amounts recognised in its financial statements, or to
recognise items that were not previously recognised?
A. The settlement after the reporting period of a court case that confirms that the
entity had a present obligation at the end of the reporting period.
B. The determination after the reporting period of the cost of assets purchased, or
the proceeds from assets sold, before the end of the reporting period.
C. Discovery of fraud or errors that show that the financial statements are
incorrect.
D. A and B
E. All of the above
(1)
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17. If an entity receives information after the reporting period about conditions that existed
at the end of the reporting period, it ____
that relate to those conditions, in the
light of the new information.
A. shall update disclosures.
B. shall update financial statements but leave disclosures unchanged.
C. shall not update disclosures.
D. shall not update financial statements
(1)
18. An entity sells goods with a warranty under which customers are covered for the cost of
repairs of any manufacturing defects that become apparent within the first six months
after purchase. If minor defects were detected in all products sold, repair costs of 1
million would result. If major defects were detected in all products sold, repair costs of 5
million would result.
The entity's past experience and future expectations indicate that, for the coming year,
75 per cent of the goods sold will have no defects, 20 per cent of the goods sold will
have minor defects and 5 per cent of the goods sold will have major defects. What isthe
expected cost of repairs of the entity?
A. N$400,000
B. N$450,000
C. N$500,000
D. N$550,000
(2)
Question 2
(26 marks)
The following information appears in the records of Nicodemus Ltd for the reporting period end
31 December 2023.
Notes
i. Investment in listed shares
1
ii. Investment in unlisted shares
1
iii. Loan to Barnabas
2
iv. Receivables
3
V. Ordinary share capital (100,000 shares)
vi. Redeemable preference shares
4
Retained earnings
Allowance for credit losses
3
N$
100,000
50,000
120,000
380,000
200,000
100,000
150,000
19,000
Additional information:
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1. Investment in equity instruments
1.1.
Investment in Listed shares
Nicodemus Ltd acquired the listed investment on 1 January 2023 and does not
intend to sell this investment in the near future. The investment comprises
10,000 shares with a market value of N$14 per share on 31 December 2023.
1.2.
Investment in unlisted shares
The unlisted shares were acquired on 1 October 2023 for speculative purposes
and the company wanted to sell this investment at the first available
opportunity in 2023. The 5,000 shares were valued by the directors at N$65,000
on 31 December 2023, using reliable valuation techniques.
2.
Loan to Barnabas
The loan is a receivable amount which originated on 1 January 2022. The intention is to
hold the loan to collect contractual cashflows from it. The applicable interest rate is
14.5% per annum compounded annually and is repayable in full on 31 December 2025.
Interest is repayable annually in arrears. The interest for 2023 was received on 29
December 2023.
3. The accountant for Nicodemus Limited has for the first time provided an allowance of
doubtful debts based on 5% of outstanding receivables. According to your calculations,
based on cashflow projections, the expected cashflow from outstanding receivables on
31 December 2023 is N$375,000.
4. The 100,000 compulsorily redeemable preference shares pay dividends at a market
related rate of rate of 10c per share per annum and will be redeemed on 31 November
2026.
Required:
a. For items i to iv above:
• Classify the items as a financial instrument or non-financial instrument. If it is a
financial instrument, indicate what type of financial instrument it is, e.g.
Financial Instrument - Financial Asset; Financial Instrument- Financial Liability
etc.
(6)
• Where the item is a financial instrument, indicated indicate in which category
the financial instrument will be measured, e.g. Financial asset at fair value
through profit or loss, etc.
(6)
Use a tabular format as below:
Item
i.
Investment in listed shares
I Classification
I?
l Measurement
b. For the items included in additional information 1, provide the appropriate adjusting
journal entries for the reporting period ended 31 December 2023 in the records of
Nicodemus Limited. Show account classification (SPL,SFP,OCIetc.).
(7)
c. Prepare an extract to the statement of financial position of Nicodemus Limited as at 31
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December 2023 for the items classified i to iv above.
(7)
Question 3
(28 marks)
The following information has been provided for Samson Ltd, a construction company. The
financial year ended is 31 December 2023.
The statements of financial position and statement of profit or loss (before tax expenses) are
shown below.
Samson Ltd
Statement of profit or loss for the year ended 31 December 2023
Revenue
2,402,000
Cost of sales
1,910,000
Gross profit
492,000
Operating expenses
400,000
Profit from operations
92,000
Finance costs
12,000
Profit before tax
80,000
Samson Ltd
Statement of financial position as at 31 December 2023
Non-current assets
Property, plant and equipment
Current assets
Inventories
Trade receivables
Cash and cash equivalents
Equity
Share capital
Retained earnings
Non-current liabilities
Liability for product warranty costs
Deferred tax liability (from 2022)
Current liabilities:
Trade payables
Additional information:
550,000
130,000
350,000
95,000
1,125,000
500,000
412,368
8,000
9,632
195,000
1,125,000
i. The wear and tear allowance for the year ended 31 December 2023 is N$103 000.
Depreciation included in operating costs was N$85 000. The cost of the property, plant
and equipment was N$800 000. Accumulated wear and tear for tax purposes amounted
to exactly N$208 000 as at pt January 2023.
ii. During 2023, the company increased the liability for product warranty costs by N$2 500.
Product warranty costs are not tax deductible until the company pays claims. In 2023
claims paid amounted to N$3 100.
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iii. Expensesfor promotion included in operating expenses amounted to N$900.Theseare
not deductible for tax purposes.
iv. Tax rate for 2023 was 30% (2022, 28%).
Required:
a) Calculate the current tax payable for the year ended 31 December 2023.
(8)
b) Disclose the income tax expense note for the year ended 31 December 2023. (9)
c) Calculate the deferred tax balance for the year ended 31 December 2022.
(5)
d) Calculate the deferred tax balance for the year ended 31 December 2023.
(2)
e) Disclose the deferred tax note in the financial statements for the year ended 31
December 2023.
(4)
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Question 4
The financial statements of Mash Ltd are as follows:
Statement of financial position as at 31 December
Non-current assets
Property, Plant and Equipment
Intangible Assets
Investments
2023
N$
630,000
380,000
250,000
Current Assets
Inventories
Trade receivables
Short term investments
Cash in hand
Total Assets
592,000
150,000
390,000
50,000
2,000
1,222,000
Equity and Liabilities
Equity
Share capital (N$1 ordinary shares)
Revaluation reserve
Retained earnings
620,000
360,000
100,000
160,000
Liabilities
Non-current liabilities
Long-term loan
Deferred taxation
170,000
100,000
70,000
Current liabilities
Trade payables
Bank overdraft
Taxation
Shareholders for dividends
432,000
127,000
85,000
120,000
100,000
Total Liabilities
Total Equity and Liabilities
602,000
1,222,000
27 Marks
2022
N$
530,000
305,000
200,000
25,000
418,000
102,000
315,000
1,000
948,000
491,000
300,000
91,000
100,000
50,000
50,000
407,000
119,000
98,000
110,000
80,000
457,000
948,000
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Mash Limited
Statement of profit or loss for the year ended 31 December 2023
N$
Revenue
2,553,000
Cost of Sales
-1.814,000
Gross Profit
739,000
Distribution costs
- 125,000
Administrative expenses
- 264,000
Operating profit
350,000
Interest received
25,000
Interest paid
- 75,000
Profit on ordinary activities before tax
300,000
Taxation
- 140,000
Profit after Tax
160,000
Additional information:
i. The proceeds of the sale of fixed asset investments amounted to N$ 30,000.
ii. Fixtures and fittings, with an original cost of N$85,000 and a carrying amount of
N$45,000 were sold for N$32,000 during the year.
iii. The following additional information is available in relation to Property, Plant and
equipment:
31-Dec
31-Dec
2023
2022
Cost
720,000
595,000
Accumulated depreciation - 340,000 - 290,000
Carrying amount
380,000
305,000
Required:
Prepare the statement of cashflows for the reporting period ended 31 October 2023 in
accordance with IFRSusing the indirect method.
(27)
END OF QUESTION PAPER
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