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GFA711S- FINANCIAL ACCOUNTING 310- 1ST OPP- JUNE 2023 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF COMMERCEH, UMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICSA, CCOUNTING& FINANCE
QUALIFICATION : BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07 BOAC
COURSE: FINANCIAL ACCOUNTING 310
DATE: June 2023
DURATION: 3 HRS
LEVEL: 7
COURSE CODE: GFA 711S
SESSION: Jun 2023
MARl<S: 100
EXAMINER{S)
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
Kamotho, D.W., Ketjiganda, A., Garas, E., Kamana, R.,
MODERATOR:
M Tondota
THIS QUESTION PAPER CONSISTS OF _5_ PAGES (including this front page)
INSTRUCTIONS
1. Answer all the questions in blue or black ink
2. Start each question on a new page in your answer booklet & show all your workings
3. Questions relating to this examination 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.
PERMISSIBLE MATERIALS
1. Non programmable scientific or financial calculator
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Question 1
20 Marks
The following items were extracted from the trial balance of Gum ball the limited for the year
ended 28 February 2022
Sales
Cost of sale
Other expenses (not specified)
Loss on disposal of vehicle tax-deductible
Depreciation of machinery
Net profit from inventory damaged by flood (taxable)
(Cost of inventory 50,000, insurance claim 60,000
Loss due to the expropriation of inventories by the government (tax deductible)
Machinery that cost
Accumulated depreciation on machinery as at 28 February 2022
N$
500,000
180,000
120,000
30,000
30,000
10.000
12,000
150,000
60,000
Additional information
The useful life of machinery was originally estimated to be 5 years from the date of purchase. Owing
to technological changes, the remaining useful life as at 28 February 2021 is estimated to only two
years. The change in useful life has yet to be reflected in the trial balance.
The machinery has no residual value.
The company tax rate is 28% and NAMRA (The tax authority) is prepared to allow the additional
wear-and-tear needed to write of the value of the machinery over the remaining useful life. There
are no other non-deductible/non-taxable items.
Required:
Prepare the statement of profit and loss and other comprehensive income of Gumball limited for
the year ended 28 February 2022 so as to comply with the requirement of the international
Financial Reporting standards (IFRS).Only note on profit before tax is required.
[Total: 20 Marks]
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Question 2
20 Marks
Petronella limited, a Namibian Company that manufactures perfumes, bought 16 new fragrance-
testing machines for use in its laboratory plant in Windhoek. The machines were imported from
Paris, a company based in France (currency of Euro's: €) that produces equipment for companies in
the perfume industry.
Details relating to the purchase ofthese machines are as follows:
• The machines were ordered on 25 April 2020.
• The machines were shipped on 15 June 2020.
• The machines arrived in Namibia on 1 September 2020.
• The total invoice price was €30 000, invoiced on a free on-Board basis (FOB).
• Petronella paid the French supplier on 30 September 2020.
The machines needed to be installed before they could be put into operation:
• Installation was completed by Dona Limited on 25 September 2020.
• Dona Limited furnished the company with an invoice for N$60 000.
• The machines were available for use on 1 October 2020 but due to labour unrest, these
were only brought into use on 31 October 2020.
The machines have a residual value of N$50 000, a useful life of 8 years and the appropriate method
of depreciation is straight-line.
Due to the impact of Covid pandemic on the economy, it was determined as at 31 December 2020,
the recoverable amount of the machines is N$400 000.
Petronella's Limited functional and presentation currency is the Namibian Dollar (N$). Its year end
is 31 December.
Date
25 April 2020
15 June 2020
01 September 2020
25 September 2020
30 September 2020
31 October 2020
Spot Rate
NAM dollars (N$}: Euro (€}
13.50:1
13.75:1
13.80:1
14.10:1
14:20:1
14:40:1
Required:
a) Show all journals in the books of Petronella Limited for the year ended 31 December 2020.
Ignore tax.
(12 Marks)
b) Based on the above journal entries, disclose the carrying amount of the machines as item of
Property, plant and equipment would appear in the Statement of financial position of
Petronella Limited for the year ended 31 December 2020, in accordance with International
Financial reporting standards. Notes accounting policies are required. No comparatives
required.
(8 Marks)
[Total: 20 Marks]
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Question 3
30 Marks
Lassie Limited is diamond producing company with warehouses across Namibia. Due operational
expansion of the head office, the company decided to enter into a contract with Snyman Limited
for the lease of three floors of an office building. The exact floors are specified in the contract and
Snyman Limited is not permitted to relocate tenants to other floors of the building.
The commencement date of the lease is 1 July 2020, and the duration of the lease is for 5 years with
the option to extend for further 5 years. Lassie Limited is reasonably certain to exercise the option
to extend the lease.
The lease payments are N$50 000 per annum during the initial term and N$55 000 per annum
during the optional term. All payable in advance.
Lassie Limited incurred initial direct costs of N$20 000, comprising N$15 000 as compensation to
the tenant formerly occupying the three floors and N$5 000 as agents commission. These are paid
on 1 July 2020. Snyman Limited agrees to reimburse the N$5 000 agent's commission.
The interest rate implicit in the lease is not readably determinable. Lassie Limited's incremental
borrowing rate is 5% per annum. The following present value table is provided:
PV factor
Present value of annuity in advance of N$1 for years 1 to 5, discounted at 5%
Present value of annuity in advance of N$1 for years 6 to 10, discounted at 5%
4.5459
3.5619
Required:
a) Calculate the amount to record as the initial lease liability and right of use asset, explaining
your answer.
{10 Marks)
b) Prepare the journal entries in the accounting records of Lassie Limited for the year ended
30 June 2021 and 30 June 2022.
(20 Marks)
Ignore tax.
[Total: 30 Marks]
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Question 4
30 Marks
Extreme limited is a company involved in the entertainment industry.
The following information has been provided to you.
Profit for the year ended 2022
Other comprehensive income for the year ending 2022
Ordinary dividend declared during the year and a 2022
N$ 30 million
Nil
Nil
Extreme limited share capital and potential share capital at 31st December 2022 is as follow:
There are 1 000 000 000 authorised ordinary shares of no-par value, of which 20% are in issue.
There are 400,000 convertible debentures in issue.
These debentures may be converted into ordinary share in a ratio of 200 ordinary shares for every
1 debenture held, (at the option of the debenture holder), on 31st December 2025.
Any debentures not converted at this date will be redeemed at its original issue price.
Finance charges of N$ 1.5 million were incurred on thes·e debentures during 2022. The finance
charges are the tax deductible for tax purposes.
There are no movements in Share capital during 2022.
Required
a) List circumstances on which (cases when) comparative amounts of basic earnings per share in
the current year are restated.
(6 marks)
b) Prepare an extract from the statement of comprehensive income of Extreme limited for the
year ended 31st December 2022, including the disclosure of basic and diluted earnings per
share.
(6 marks)
c) Prepare the earnings per share note for inclusion in the notes to the financial statement of
Extreme limited for the year ended 31st December 2022.
(18 marks)
Financial statement and notes must be in accordance with the International Financial Reporting
Standard (IFRS).
Comparatives are not required.
[Total: 30 Marks]
END OF QUESTION PAPER
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