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GFA711S-FINANCIAL ACCOUNTING 320-1ST OPP-NOV 2024 |
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n Am I BI A u n IVE Rs ITY
OF SCIEnCE Ano TECHno LOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07 BOAC
LEVEL: 7
COURSE CODE: GFA 712S
SESSION: November 2024
DURATION: 3 hours
COURSE NAME: FINANCIALACCOUNTING320
PAPER: THEORYAND CALCULATIONS
MARKS: 100
1sroPPORTUNITY EXAMINATION-QUESTION
EXAMINER(S) I D Kamotho & D Muzira
MODERATOR: \\ M Tondota
PAPER
INSTRUCTIONS
1. Answer ALL questions in blue or black ink only.
2. Capture your full name, student number and assessment number on the first
page.
3. Write clearly and neatly.
4. Start each question on a new page and number the answers clearly.
5. No programmable calculators are allowed.
6. The names of people and businesses used throughout this assessment do not
reflect the reality and may be purely coincidental.
7. 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.
8. Do not write in pencil and do not use tip-ex, as this will not be marked.
9. SHOW ALL WORKINGS!
THIS QUESTION PAPER CONSISTS OF 9 PAGES (excluding the front page)
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Question 1
Part A
Alpha Ltd acquired two different entities during the financial year. Both acquisitions took
place on 1 January 2024.
Scenario 1
o Alpha Ltd acquired 80% of Beta Ltd, which operates a retail business. The
purchase consideration was N$1,200,000 in cash.
o On the acquisition date, the identifiable assets and liabilities of Beta Ltd were
as follows:
Property, Plant, and Equipment: N$800,000
Inventories: N$300,000
Trade Receivables: N$150,000
Trade Payables: N$200,000
o The fair value of the non-controlling interest (NCI) was N$300,000.
o The acquisition does meet the definition of a business under IFRS3.
Scenario 2
o Alpha Ltd acquired a group of assets from Gamma Ltd for N$700,000 in cash.
The assets acquired include:
Property, Plant, and Equipment: N$500,000
Inventories: N$150,000
Trade Receivables: N$50,000
o The acquisition does not meet the definition of a business under IFRS3.
Note -Any goodwill arising from the above transactions has not been impaired under both
scenarios where applicable.
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Required:
1. Explain the difference between the two scenarios and show the calculation for
goodwill where applicable
(7 marks)
2. Prepare the journal entries for both scenarios under IFRS3.
{11 marks)
Part B
On 1 January 2024, Zeta Ltd acquired 80% of the equity share capital of Omega Ltd for
N$200,000. At the acquisition date, the fair value of the identifiable net assets of Omega Ltd
was N$240,000. The fair value of the non-controlling interest {NCI) in Omega Ltd was
N$50,000 at the date of acquisition.
Omega Ltd.'s retained earnings at the acquisition date were N$60,000, and their share
capital was N$100,000.
Required:
1. Calculate the goodwill arising on the acquisition in accordance with IFRS3.
(4 marks)
2. Explain what goodwill is and how it is treated in the consolidated financial
statements.
(3 marks)
[Total: 25 MARKS]
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Question 2
Bananas Ltd (Bananas) is a public limited company based in Namibia. It has shareholdings in two other
companies, Grapes Ltd (Grapes) and Oranges Ltd (Oranges). Statements of financial position are
shown below for all three companies as at 31 December 2023.
Statements of Financial Position as at 31 December 2023
Non-current assets
Property, plant & equipment
Investments
Current assets
Inventories
Trade receivables
Cash & bank
Bananas Ltd
(N$ million)
Grapes Ltd (N$ Oranges Ltd (N$
million)
million)
600
160
120
350
60
8
950
220
128
200
60
28
80
30
15
30
18
10
310
108
53
Total assets
1,260
328
181
Equity:
Equity shares capital of N$0.50 each
Share premium
Retained earnings
Non-current liabilities:
8% loan notes
300
120
so
250
90
30
410
85
75
960
295
155
100
0
0
Current liabilities:
Trade payables
Dividends proposed
Total liabilities
150
33
16
so
0
10
300
33
26
Total equity & liabilities
1,260
328
181
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The following additional information is relevant:
i. Bananas purchased 192 million ordinary shares in Grapes on 1 January 2022, when the
retained earnings of Grapes were N$50 million. The consideration was agreed at N$250
million for these shares. N$150 million was paid in cash on the date of purchase, and the
balance was settled using an 8% loan note. This investment has been correctly recorded at
cost in Bananas' books, included under "Investments." The loan note interest was paid during
the year ended 31 December 2022, but no entry has been made to reflect the interest payable
in the current accounting period.
ii. Bananas acquired a 35% holding in Oranges' ordinary shares on 1 January 2023, when
Oranges' retained earnings balance stood at N$70 million. The consideration consisted of an
immediate cash payment of N$60 million. Bananas also obtained the right to appoint 3
directors to Oranges' 9-person board as part of the investment.
iii. The group's accounting policy is to value non-controlling interests (NCI) at their
proportionate share of identifiable net assets at the acquisition date.
iv. On 1 January 2022, certain property owned by Grapes had a fair value of N$30 million in
excess of its carrying value. The building portion, comprising 80% of the total value, had a
remaining useful economic life of 12 years at the acquisition date.
v. During the financial year ended 31 December 2023, Grapes sold goods worth N$80 million
to Bananas, with a 25% mark-up on cost. Grapes' usual mark-up on goods sold is 50%. Of
these goods, one-fifth remained in Bananas' closing inventory at year-end.
vi. Recorded in Bananas' books is an intra-group trade payable of N$25 million owed to Grapes
at year-end. However, Grapes' records show a balance of N$28 million owed by Bananas. It
was found that Grapes had mistakenly charged an extra N$3 million in interest for late
payments, which was later waived.
vii. Bananas has not recorded any dividends receivable from its group companies. Both
Banana and Orange companies have proposed dividends, as reflected in their current
liabilities. Oranges' proposed dividend relates solely to the post-acquisition period. No other
dividends were paid or proposed during the year.
viii. Goodwill was reviewed for impairment as of the reporting date, resulting in an
impairment loss of N$4 million for Grapes' goodwill and a N$2 million impairment loss on the
investment in Oranges.
ix. All workings may be rounded to the nearest N$0.l million.
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REQUIRED:
Prepare the consolidated statement of financial position for the Bananas group as at 31
December 2023 in accordance with International Financial Reporting Standards.
(25 marks)
[Total: 25 MARKS]
Question 3
The following statements of profit or loss and other comprehensive income relate to Grape
Ltd (Grape) and its investee companies, Peach Ltd (Peach) and Plum Ltd (Plum).
Statements of Profit or Lossand Other Comprehensive Income for Year Ended 31
December 2023:
Income Statement Items
Revenue
Cost of Sales
Gross Profit
Operating Expenses
Finance Costs
Other Income
Investment Income
Profit Before Taxation
Taxation
Profit for the Year
Other Comprehensive Income (net of tax)
Total Comprehensive Income for the Year
Grape Ltd {N$
million)
1,800
-700
1,100
-450
-70
15
so
645
-95
550
80
630
Peach Ltd
(N$ million)
900
-400
500
-280
-40
-
-
180
-40
140
30
170
Plum Ltd {N$
million)
600
-250
350
-170
-30
-
-
150
-25
125
25
150
Additional Information:
1. Grape Ltd acquired a 60% holding in the equity of Peach Ltd on 1 July 2023. On that
date, the fair value of certain machinery owned by Peach was N$120 million in
excess of its book value. This machinery had a useful economic life of 6 years from
the date of acquisition. Depreciation charges are included in cost of sales. The
revised values were not incorporated into the books of Peach.
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2. Goodwill on the acquisition of Peach was reviewed for impairment on 31 December
2023, and an impairment loss of N$12 million was found necessary. No previous
impairment losses had been recognized on goodwill. Impairment losses are to be
recorded as part of operating expenses. Non-controlling interests in Peach are
measured at their proportionate share of net asset of the identifiable net assets of
Peach at the acquisition date.
3. During the year, Grape Ltd sold goods to Peach Ltd for N$30 million. These goods
were sold by Grape at a mark-up on cost of 25%. Half of these goods remained in
Peach's inventory at 31 December 2023. At 31 December 2022, there were goods
valued at N$5 million in Peach's inventory that had been supplied by Grape during
2022 on the same terms.
4. Peach Ltd declared a dividend of N$50 million during the year. Grape Ltd recognized
its share of this dividend within "investment income."
5. Since acquisition, Grape Ltd has managed the administration of the group and
invoiced Peach N$5 million for its share of these costs. Grape recorded this
transaction within "other income," and Peach recorded it within "operating
expenses."
6. On 1 July 2023, Grape Ltd acquired a 30% holding in Plum Ltd. Grape exercises
significant influence over Plum as a result of this acquisition.
7. On 1 July 2023, immediately after purchasing shares in Plum, Grape Ltd sold
equipment to Plum for N$35 million, recording a profit of N$8 million. This profit is
included within "other income" in the books of Grape.
REQUIRED:
Prepare the Consolidated Statement of Profit or Lossand Other Comprehensive Income
for the Grape Ltd Group for the year ended 31 December 2023, in accordance with IFRS.
Clearly show your workings for the Retained earnings and NCI in the statement. (25 marks)
[Total: 25 MARKS]
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Question 4
Apple PLChas a number of subsidiaries, including Orange Ltd, which was acquired during
the year ended 31 December 2023.
The draft consolidated financial statements for the year ended 31 December 2023 are as
follows:
Consolidated Statement of Comprehensive Income of Apple PLCfor the year ended 31
December 2023:
Description
Profit from operations
Interest
Share of profits of associates
Profit before taxation
Taxation
Non-controlling interest
Group profit
N$ '000
1,500
-150
1,350
300
1,650
-600
1,050
-150
900
Statements of Financial Position:
Assets
Non-current assets
Property, plant, and equipment
Intangibles
Investment in associates
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Apple PLC
(31/12/2023)
Apple PLC
(31/12/2022)
Orange Ltd
(At
Acquisition)
6,500
450
700
7,650
1,000
500
80
9,230
5,500
400
650
6,550
800
400
50
7,800
1,200
0
0
1,200
300
100
30
1,630
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Equity and liabilities
Ordinary shares (N$1 each)
Share premium
Retained earnings
Non-controlling interest
Non-current liabilities
Long-term loans
Current liabilities
Trade payables
Taxation
Total equity and liabilities
2,000
400
2,500
700
5,600
2,500
600
530
9,230
1,600
300
2,000
600 -
4,500
2,000
500
300
7,800
800
200
250
1,250
0
100
280
1,630
Additional information:
1. Apple PLCissued 600,000 N$1 ordinary shares at a premium of 30 cents and paid a
cash consideration of N$240,000 to acquire 80% of Orange Ltd. At the date of
acquisition, Orange Ltd's assets and liabilities were recorded at their fair value,
except for a building, which had a fair value of N$150,000 in excess of its carrying
value. The revaluation was subsequently recorded in the books of accounts before
year end.
2. During the year, property, plant, and equipment with a carrying value of
N$1,000,000 were sold for N$800,000. Total depreciation for the year was
N$950,000.
Required:
Prepare a consolidated statement of cash flows in accordance with IAS 7 for the year ended
31 December 2023. Note that the reconciliation of profit before tax to cash generated
from operations is required.
(25 marks)
[Total: 25 MARKS]
END OF QUESTION PAPER
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P[esent Value !able
Year
1
2
3
4
5
6
7
8
9
10
lli
0.990
0.980
0.971
0.961
0.951
0.942
0.933
0.923
0.914
0.905
11%
1 0.901
2 0.812
3 0.731
4 0.659
5 0.593
6 0.535
7 0.482
8 0.434
9 0.391
10 0.352
1 0.826
2 0,683
3 0.564
4 0.467
5 0.386
6 0.319
7 0.263
8 0.218
9 0.180
10 0.149
lli
0.980
0.961
0.942
0.924
0.906
0.888
0.871
0.853
0.837
0.820
1.lli
0.893
0.797
0.712
0.636
0.567
0.507
0.452
0.404
0.361
0.322
0.820
0.672
0.551
0.451
0.370
0.303
0.249
0.204
0.167
0.137
lli
0.971
0.943
0.915
0.888
0.863
0.837
0.813
0.789
0.766
0.744
ll%
0.885
0.783
0.693
0.613
0.543
0.480
0.425
0.376
0.333
0.295
ll%
0.813
0.661
0.537
0.437
0.355
0.289
0.235
0.191
0.155
0.126
£&
0.962
0.925
0.889
0.855
0.822
0.790
0.760
0.731
0.703
0.676
MJ,
0.877
0.769
0.675
0.592
0.519
0.456
0.400
0.351
0.308
0.270
M%
0.806
0.650
0.524
0.423
0.341
0.275
0.222
0.179
0.144
0.116
lli
0.952
0.907
0,864
0.823
0.784
0.746
0.711
0.677
0,645
0.614
1lli
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247
Zlli
0.800
0.640
0.512
0.410
0.328
0.262
0.210
0.168
0.134
0.107
lli
0,943
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
0.558
0.862
0.743
0.641
0.552
0.476
0.410
0.354
0.305
0.263
0.227
0.794
0.630
0.500
0.397
0.315
0.250
0.198
0.157
0.125
0.099
lli
0,935
0.873
0.816
0.763
0.713
0.666
0.623
0.582
0.544
0.508
1lli
0.855
0.731
0.624
0.534
0.456
0.390
0.333
0.285
0.243
0.208
Zlli
0.787
0.620
0.488
0.384
0.303
0.238
0.188
0.148
0.116
0.092
0.926
0.857
0.794
0.735
0.681
0.630
0.583
0.540
0.500
0.463
1J!y,
0.847
0.718
0.609
0.516
0.437
0.370
0.314
0.266
0.225
0.191
ll%
0.781
0.610
0.477
0.373
0.291
0.227
0.178
0.139
0.108
0.085
0.917
0.842
0.772
0.708
0.650
0.596
0.547
0.502
0.460
0.422
ll!,
0.840
0.706
0.593
0.499
0.419
0.352
0.296
0.249
0.209
0.176
0.775
0.601
0.466
0.361
0.280
0.217
0.168
0.130
0.101
0.078
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
0.833
0.694
0.579
0.482
0.402,
0.335
0.279
0.233
0.194
0.162
0.769
0.592
0.455
0.350
0.269
0.207
0.159
0.123
0.094
0.073
9