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FAC612S-FINANCIAL ACCOUNTING 202-1ST OPP-NOV 2025 |
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n Am I BI A u n IVER s: ITY
OF SCIEnCE AnD TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BGAC
LEVEL: 6
COURSE CODE: FAC612S
COURSE NAME: FINANCIAL ACCOUNTING 202
DATE: October 2025
DURATION: 3 HOURS
PAPER: THEORY AND CALCULATIONS
MARKS: 100
EXAMINER(S)
FIRST OPPORTUNITY EXAMINATION PAPER
Dr. D. R. Muzir9, Ms. A Gustav, Ms. V. Ueitele, Mr. M, Nghiludile and Mr. C.
Mahindi
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. SHOWALLWORKINGSI
THIS QUESTION PAPER CONSISTS OF 4 PAGES (excluding this front page)
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QUESTION 1
(25 marks)
Part A
(15 marks)
Erongo Pharma (Pty) Ltd is a pharmaceutical manufacturing and distribution company based
in Swakopmund, Namibia, with a financial year-end of 30 June.
During the final stages of the audit for the year ended 30 June 2025, the following
independent events were identified for consideration under IAS 37 - Provisions, Contingent
Liabilities and Contingent Assets:
Case 1: Possible Contamination of Medicines
In May 2025, management of Erongo Pharma received a report from one of their regional
distribution managers indicating that certain refrigerated medicines (mainly vaccines and
insulin products) may have been stored outside the required temperature range during transit
due to a refrigerated truck malfunction.
Although there were no reported customer complaints or returns by 30 June 2025, internal
quality control flagged a small batch as potentially unsafe. Based on past practices and internal
safety policies, management decided to quietly remove the affected batch from pharmacies
in early July and conduct voluntary quality testing at an estimated cost of N$750,000. The cost
of these tests and removal had already begun by 30 June 2025, although no public
announcement or formal recall occurred.
Case 2: Dispute with Logistics Provider
In July 2025, Erongo Pharma terminated a logistics contract with a third-party provider,
Namibian Med Logistics, after repeated delivery delays of critical medicines. MedLogistics is
claiming damages of N$1,100,000, alleging wrongful termination. Legal counsel advised that
although the outcome is uncertain, it is possible Erongo Pharma may have to pay a partial
settlement, but the claim is unlikely to succeed in full.
Required:
a) Discuss how the cases should be classified in terms of IAS 37 - Provisions, Contingent
Liabilities and Contingent Assets, and motivate your classification.
(8)
b) Prepare journal entries for the year ended 30 June 2025, if no journal entry is to be
passed explain why?
(3)
c) Disclose the cases(where applicable) in the notes to the financial statements for the
year ended 30 June 2025 in terms of IFRS.
(4)
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Part B
(10 marks)
Erongo Pharma (Pty) Ltd (year-end 30 June 2025} financial statements were issued for
authorization on 25 July 2025. You have been presented with the following events:
1. On 2 July 2025, the company discovered that a batch of insulin shipped on 28 June 2025
was stored outside the recommended temperature range. Corrective testing and disposal
costs are estimated at N$600,000.
2. On 10 July 2025, the company's share price fell by 20% due to a general stock market
decline.
3. On 15 July 2025, a customer filed a lawsuit for a contract breach that occurred on 5 May
2025. Legal counsel advised that a settlement may be required.
4. On 1 August 2025, the company announced plans to expand its manufacturing facility next
year, with estimated costs of N$5 million.
5. On 5 August 2025, one of the company's major suppliers filed for bankruptcy, which may
affect future supply of raw pharmaceutical ingredients.
Required:
For each of the above events, indicate whether it is an Adjusting Event or a Non-Adjusting
Event according to IAS 10 - Events After the Reporting Period, and briefly explain why. (10}
QUESTION 2
(35 marks)
You have been provided with the following financial statements of Waterfront Limited for
the reporting period ended 31 December 2024.
Waterfront Limited
Statement of Profit or Loss for the year ended 31 December 2024
Sales
Cost of sales
Gross profit
Operating Expenses
Selling expenses
Administration expenses
Loss on disposal of equipment
Depreciation
Profit before tax
Income tax expense
Profit for the period
$
300,000
(200,000)
100,000
(26,000}
10,000
7,000
1,000
8,000
74,000
(29,600)
44,400
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Waterfront Limited
Statement of financial position as at 31 December 2024
ASSETS
Non-Current assets
Equipment
Current assets
Inventories
Accounts receivable
Selling expenses paid in advance
Bank
TOTAL ASSETS
2024
N$
85,000
85,000
109,800
60,000
12,000
1,200
36,600
194,800
EQUITY AND LIABILITIES
Equity
Share capital
Retained earnings
Non-current liabilities
Loan
Current liabilities
Accounts payable
Administration expenses payable
Current tax payable: income tax
TOTAL EQUITY AND LIABILITIES
144,400
110,000
34,400
10,000
10,000
40,400
20,600
800
19,000
194,800
2023
N$
80,000
80,000
70,500
40,000
20,000
1,500
9,000
150,500
110,000
100,000
10,000
20,000
20,000
20,500
10,000
500
10,000
150,500
Additional information:
a) Equipment costing $15,000 was purchased during the year when certain other
equipment was traded in as part of the purchase price.
Required:
a) Prepare the statement of cash flows of Waterfront Limited for the year ended 31
December 2024, using the direct method.
(25)
b) Prepare the reconciliation of profit before tax with cash generated from operations
note of Waterfront Limited for the year ended 31 December 2024.
(10)
Question 3
(40 marks)
Tee Limited has an authorised share capital of 300 000 ordinary shares of no par value and
100 000 redeemable preference shares of no par value. Its issued share capital consists of
200 000 ordinary shares issued for a total of N$215,000 and 100 000 16% redeemable
preference shares issued at N$1. In terms of the Memorandum of Incorporation of the
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company, the preference shares are redeemable at a premium of 3% of the issue price at the
option of the company any time after 1 April 2023.
The preference shares were redeemed at a premium of 3% of the issue price on 30 June 2025.
All dividends due had been paid on 29 June 2025. The dividends on preference shares were
discretionary (non-mandatory}.
In order to finance the redemption, on 30 June 2025 the company issued 30 000 N$1
debentures at a discount of 2% and the minimum number of ordinary shares required at
N$1.25
The directors are satisfied that the company's assets, fairly valued, exceed its liabilities and
that the company will be able to pay its debts as they become due.
Retained earnings at 30 June 2024 amounted to 60 000. The profit for the year ending 30 June
2025 has been correctly calculated as N$80,000.
Required:
a) Discuss how the preference shares will be classified in the records of Tee Limited.
(5}
b) Provide the general journal entries to account for the redemption of the preference
shares on 30 June 2025.
(10}
Workings
(4)
c} Show the relevant extracts of the following financial statements in terms of the
International Financial Reporting Standards. (Notes are not required but comparatives
are required}
i. the statement of financial position as at 30 June 2025, and
(9 .5}
ii. the statement of changes in equity for the reporting period ended 30 June 2025.
(11.5}
END OF EXAMINATION QUESTION PAPER
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