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FAC611S- FINACIAL ACCOUNTING 201- 1ST OPP- JUNE 2023 |
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nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICS,ACCOUNTINGAND FINANCE .
QUALIFICATION:BACHELOROF ACCOUNTING
QUALIFICATIONCODE: 07BOAC
LEVEL: 6
COURSECODE: FAC611S
COURSENAME: FINANCIALACCOUNITNG 201
SESSION:JUNE 2023
DURATION: 3 HOURS
PAPER:THEORY
MARKS: 100
EXAMINER(S}
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
Dr. A SIMASIKU, Mr. C MAHINDI, 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 3 PAGES(Excluding this front page)
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Question 1
(50 marks)
Omaheke Limited is a company with a 31 May year end. It operates in various industries
throughout Namibia. On 1 June 2020, it acquired a machine for N$2,000,000 cash that would be
used to manufacture medical items such as surgical gloves and face masks that would be used
in the fight of the COV1D19pandemic.
On 1 September 2022, management decided to dispose of the machine due to a decline in the
demand for surgical gloves and face masks. On this date management decided to advertise the
machine at a reasonable price in relation to the prevailing market values. The target time frame
for completion of the sale was 1 February 2023. Management was adamant that the sale of the
machine should be completed as soon as possible so that they could use the funds to invest
another machine that would be used to manufacture medication.
On 31 May 2023 the machine remained unsold, however, management are still committed to
selling the machine.
You have been presented the following information regarding the machine:
Date
31-May-21
31-May-22
01-Sep-22
31-May-23
Details
Recoverable amount
Recoverable amount
Fair value
Costs to sell
Value in use
Fair value
Costs to sell
Value in use
Amount N$
1,750,000
750,000
625,000
85,000
?
580,000
40,000
500,000
The value in use was on 1 September 2022 is based on cashflows on N$740,000 and the
applicable present value factor was determined to be 0.750.
The machine has always been measured using the cost model with depreciation provided on a
straight-line basis over a useful life of 5 years with a nil residual value.
REQUIRED:
a) Discuss with reasons how the machine should be classified and measured during the
reporting period ended 31 May 2023. Your discussion should not include presentation
and disclosure. Figures are not required in your discussion.
(10)
b) Provide the general journal entries to account for the machine in the records of
Omaheke Limited for the reporting periods 31 May 2022 and 31 May 2023. Clearly
indicate the whether the machine is classified as property, plant, and equipment (PPE)
or a non-current asset held for sale (NCAHFS).
(27)
c) Prepare the property, plant and equipment reconciliation note of Omaheke Limited for
the reporting period ended 31 May 2023.
(7)
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d) Discuss the IFRS5 criteria which must be satisfied in order for a non-current asset to
be classified as held for sale.
(6)
Question 2
(30 marks)
Kitchen Essentialss Limited is an on line business that focuses on selling a wide variety of kitchen
products. The entity has a 31 May year end.
Kitchen Essentialss operates a website that is divided into two main sections:
• One section showcases the various kitchen products of the entity (marketing); and
• the other section deals with orders placed by customers (sales).
On 30 September 2022, the company's website was attacked malware which completely
rendered the website inaccessible even after numerous attempts to do so. On 1 June 2022 the
website had a carrying amount of N$120,000 and a remaining useful life of 2 years. The policy
of the company was to amortise the website over its total useful life of 3 years with a nil
residual value.
As a result of the destruction of the old website, a new website had to be created. This took
place between 1 October 2022 and 31 December 2022. The total costs to create the website
amounted to N$433,000 which was paid by cash.
The following details relate to the new website for the period 1 October 2022 to 31 December
2022:
Description
Feasibility study (toga uge whether the
on line store is till feasible)
Customer surveys (to gauge what
products customer would like to buy)
Licensesto operate the website
Professiona I fees (to design the
website)
Upgrade fees (Occurred after 31 May
2023 and will be required every 6
months thereafter)
Sales N$
46,000
34,500
11,500
115,000
20,000
Marketing N$
23,000
48,000
11,500
103,500
20,000
The website was available for use on 1 January 2023 and is estimated to be in use for an
estimated period of 5 years after which it will need to be redesigned.
REQUIRED:
a) Provide the general journal entries in the records of Kitchen Essentials Limited to
account for the old website for the reporting period ended 31 May 2023.
(10)
b) Provide the general journal entries in the records of Kitchen Essentials Limited to
account for the new website for the reporting period ended 31 May 2023. Clearly
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,I
distinguish between research expenditure and development expenditure and show
account classifications (SPL,SFPetc.).
(9)
c) Prepare the Intangible asset reconciliation note of Kitchen Essentials Limited for the
reporting period ended 31 May 2023.
(11)
Question 3
(20 marks)
Tower Heights Limited is a property company based in Windhoek with a 31 December year end.
In addition to land and buildings that it owns for day-to-day administrative activities, it has land
and buildings that are sold in the ordinary course of business as well as buildings that it leases
out to tenants in terms of operating leases.
The following information relates to an office building that it acquired on 1 January 2021 as a
cost of N$4,200,000 via an electronic funds transfer (EFT). It was immediately leased out in
terms of an operating lease until 30 June 2022. On 1 July 2022 the company took occupation of
the building and began to use it as its administrative headquarters.
The fair values of the property were determined as follows:
• 31 December 2021- N$4,500,000
• 1 July 2022 -
N$5,200,000
• 31 December 2022 - N$5,300,000
Tower Heights Limited depreciates buildings at a rate of 4% per annum on the straight-line basis
from the date the buildings are classified as property, plant and equipment. The company uses
the cost model to account for property, plant and equipment and the fair value model for
investment properties.
On 1 December 2022, Tower Heights acquired a plot of land for N$1,000,000 cash whose use
has yet to be determined.
REQUIRED:
a) Discusshow the office building will be classified in the records ofTower Heights Limited
on 1 January 2021. Provide the appropriate definition to justify your answer. (5)
b) Provide the general journal entries to account for the office building for the reporting
periods ended 31 December 2021 and 2022. Clearly indicate whether the property is
investment property (IP) or property, plant and equipment (PPE).
(10)
c) Disclose the investment property reconciliation note of Tower Heights Limited for the
reporting period ended 31 December 2022.
(5)
END OF QUESTION PAPER
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