Reference no: EM132658053

Ms Ben, the Management Accountant of Leopard Ltd, appointed a person on 01 June 20.8, who pretended to be an expert in the preparation of company financial statements.

The following statement of financial position was prepared on 10 June 20.8 by the new accountant:

Statement of financial position

ASSETS

Land and building at carrying amount         367,000

Furniture at carrying amount                    60,000

Vehicles at carrying amount                    192,000

Investments                                          34,000

Inventories                                           19,000

Receivables                                           20,000

TOTAL                                                 701,000

INTERESTS

Capital 555,000

Reserves 20,000

Loan 100,000

Payables 14,000

Bank overdraft 12,000

TOTAL 701,000

Ms Ben is not satisfied with the format of the above statement of financial position and request you to assist her. You acquire the following additional information:

1. The reporting period of Leopard Ltd ends on 30 June.

2. The buildings are occupied for the purposes of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 01 July 20.6, the land was valued at N$ 100 000 and buildings at N$ 300 000. Depreciation is written off on buildings at 4% per annum on the straight line method.

3. Furniture and vehicles were purchased on 01 July 20.6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year have been done.

4. The investments were acquired on 01 May 20.7 and consist of the following:

• 10 000 ordinary shares in a listed company, Cheetah Ltd N$ 24 000
• 6 000 ordinary shares in Lion (Pty) Ltd N$ 10 000
• On 30 June 20.8 the values of the shares in Cheetah Ltd and Lion (Pty) Ltd were N$ 28 000 and N$ 14 000 respectively.

5. Inventories consist of the following as at 30 June 20x8:

• Trading goods N$ 18 000
• Insurance paid in advance N$ 1 000

Inventories are measured at lower of cost (FIFO) and net realisable value.

6. The authorised share capital of Leopard Ltd consist of 400 000 ordinary shares of N$ 1,10 each and 200 000 8% preference shares of N$ 1,75 each. On the 01 July 20.6, the company issued 250 000 ordinary shares and 160 000 preference shares. No shares were issued during the current year. Preference share capital form part of equity.

7. The reserves consist of the following:

• Retained earnings (balance at 30 June 20.7, N$ 7 000) 14 000
• Replacement reserve (balance at 30 June 20.7, N$ 3 000) 6 000

The ordinary dividends declared are still owing to the shareholders, while the preference dividends of N$ 19 200 have been paid.

8. The loan was entered into on 01 July 20x6 at an interest rate of 10% per annum. The loan is secured by a mortgage bond on land and buildings and is repayable in annual instalments of N$ 20 000 from 31 December 20x8.

9. Payables consist of the following:

Trade payables 6 000

Namibian current tax payable 3 000

Shareholder for dividends 5 000

Required:

Question 1. Critically evaluate the presentation of the statement of financial of Leopard Ltd as at 30 June 20.8 above according to the requirements of IAS.

Question 2. Use your knowledge of IAS 1 and the requirements of the Namibian Companies Act 28 of 2004 Section 294 and prepare the corrected statement of financial position for Leopard Ltd as at 30 June 20.8. Comparative figures are required as far as information is available.