Reference no: EM131175837

Financial Accounting

Assignment 1

Question 1

STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2012
	P LTD	S LTD
ASSETS
Fixed property	70 000	48 500
Plant	6 400	5 000
Gross carrying amount	10 000	12 500
Accumulated depreciation	(3 600)	(7 500)
Furniture	2 500	1 500
Gross carrying amount	5 000	5 000
Accumulated depreciation	(2 500)	(3 500)
Investment in S Ltd at fair value:37 500 shares (cost: $52 500)	52 500	-
Investment in unlisted shares	-	12 500
Current account: S Ltd	10 000	-
Trade receivables	22 500	11 500
Inventories	8 000	14 000
Bank	26 925	31 875
Total assets	198 825	124 875
EQUITY AND LIABILITIES
Share capital (100 000/50 000 shares)	100 000	50 000
Retained earnings	77 325	49 000
Current account: P Ltd	-	4 375
Dividend payable	5 000	7 500
Trade & other payables	16 500	14 000
Total equity and liabilities	198 825	124 875

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012
	P LTD	S LTD
Revenue	100 000	75 000
Cost of sales	(55 000)	(55 000)
Gross profit	45 000	20 000
Other expenses	(15 075)	(4 525)
Dividend received	5 625	500
Interest received	2 400
Profit before tax	37 950	15 975
Income tax expense	(10 625)	(4 475)
PROFIT FOR THE YEAR	27 325	11 500
Other comprehensive income for the year	-	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	27 325	11 500

EXTRACT FROM THE STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012
	P LTD	S LTD
Balance at 1 July 2011	60 000	45 000
Changes in equity for 2012
Total comprehensive income for the year:
Profit for the year	27 325	11 500
Ordinary dividend paid and provided	(10 000)	(7 500)
Balance at 30 June 2012	77 325	49 000

Additional information

1. P Ltd acquired the interest in S Ltd on 30 June 2009 when the equity of S Ltd was as follows;
Share Capital           $50 000
Retained earnings    $17 500

2. On 1 January 2010, S Ltd sold non-depreciable fixed property with an original cost price of $25 000 to S Ltd for $28 500. The property is classified as property, plant and equipment and still in possession of S Ltd.

3. On 30 June 2011, S Ltd sold furniture that cost $6 250 and on which accumulated depreciation to the amount of $1 250 was recognized to P Ltd for $5 000. P Ltd classifies this furniture under property, plant and equipment.

4. S Ltd purchases all its inventories from P Ltd at cost price plus 25%. Total inventories to the value of $37 500 were sold to S Ltd by P Ltd during the reporting period. Inventories in the records of S Ltd were $12 500 on 1 July 2011. At the end of the reporting period, S Ltd owed P Ltd $11 500 in respect of the inventories purchased from P Ltd. These amounts are included in trade receivables and trade & other payables.

5. On 30 June 2010, S Ltd sold 2 machines with a carrying amount of $9 000 each to P Ltd for a total amount of $20 000. P Ltd uses the plant in the production of inventories. Both companies write off depreciation on plant at 20% per annum on the diminishing balance method. On 29 June 2012, P Ltd sold one of the machines at a slight profit that was set off against other expenses.

6. Assume that the identifiable assets acquired and the liabilities assumed at acquisition date are shown at their acquisition-date fair values, as determined in terms of IFRS 3.

7. P Ltd classified the equity investment in S Ltd under IFRS 9 in its separate financial statements and recognized fir value adjustments in a mark-to-market reserve (other comprehensive income).

8. P Ltd elected to measure any non-controlling interests in an acquiree at their proportional share of the acquiree's identifiable net assets.
9. Ignore deferred tax implications

Required
Prepare the following consolidated statements for the P Ltd Group for the reporting period ended 30 June 2012.
a) Consolidated statement of financial position.

b) Consolidated statement of changes in equity.

c) Analysis of owner's equity.

Question 2

The following are the financial statements of Jack Ltd and its subsidiary Jill Ltd for the year ended 31 December 2007.

STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2007
	JACK LTD	JILL LTD
ASSETS
Property, plant and equipment at carrying amount	55 000	77 500
Land and buildings	25 000	65 000
Machinery	20 000	7 500
Vehicles	10 000	5 000
Investment in Jill Ltd at fair value	74 000	-
40 000 ordinary shares	55 000	-
12 500 10% Preference shares	15 000	-
Current account	4 000	-
Inventories	12 500	15 000
Trade receivables	7 500	15 000
Total assets	149 000	107 500
EQUITY AND LIABILITIES
Share capital: Ordinary (100 000/50 000 shares)	100 000	50 000
Share capital:10% Preference (25 000 shares)	-	25 000
Mark-to-market reserve	6 500	-
Retained earnings	22 500	25 000
Current account- Jack Ltd	-	2 500
Trade & other payables	20 000	5 000
Total equity and liabilities	149 000	107 500

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 DECEMBER 2007
	JACK LTD	JILL LTD
Revenue	45 250	37 000
Cost of sales	(20 000)	(13 000)
Gross profit	25 250	24 000
Other expenses	(2 500)	(4 000)
Other income received from Jill Ltd:	22 750	20 000
Ordinary dividend	2 000	-
Preference dividend	1 250	-
Interest received	250	-
Management fees	2 000	-
Profit before tax	28 250	20 000
Income tax expense	(12 500)	(10 000)
PROFIT FOR THE YEAR	15 750	10 000
Other comprehensive income for the year
Fair value adjustments on equity investments	1 500	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	17 250	10 000

	EXTRACT FROM THE STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007
		Mark-to-market reserve	Retained earnings
		JACK LTD	JACK LTD	JILL LTD
Balance at 1 January 2007		5 000	11 750	20 000
Changes in equity for 2007
Total comprehensive income for the year:
Profit for the year			15 750	10 000
Other comprehensive income for the year		1 500
Ordinary dividend paid		-	(5 000)	(2 500)
Preference dividend paid		-	-	(2 500)
Balance at 31 December 2007		6 500	22 500	25 000

Additional information

1. Jack Ltd acquired the share investments in Jill Ltd on 1 June 20.5, when the retained earnings of Jill Ltd was $19 500. At the acquisition date, the assets and liabilities were considered to be fairly valued and there were no unaccounted for contingent liabilities. Jack Ltd paid $50 000 for the investment in ordinary shares and $13 500 for the investment in preference shares.

2. Jack Ltd classified the equity investment in Jill Ltd under IFRS 9 in the separate financial statements and recognized any fair value adjustments in the mark-to-market reserve
(other comprehensive income). The fair values of the investments at 31 December 20.6 were as follows:
Investment in ordinary shares $54 000
Investment in preference shares $14 500

3. Since March 2007, Jill Ltd has purchased certain inventories from Jack Ltd. The selling price of the inventories is cost plus 33.33%. Included in the inventories of Jill Ltd on 31 December 20.7 are inventories purchased at an invoice price of $500 from Jack Ltd. Inventories invoiced at $1 500 were in transit to Jill Ltd on 31 December 2007. Total purchases from Jack Ltd in Jill Ltd's records amounted to $7 500 before the inventories in transit had been accounted for.

4. Jack Ltd elected to measure the non-controlling interests at its proportionate share of the acquiree's identifiable net assets at the acquisition date.

5. Ignore tax implications

Required:
a) Prepare the analysis of owners' equity of Jill Ltd .

b) Prepare the analysis of preference shareholders' equity of Jill Ltd.

c) Prepare the pro forma consolidation journal entries with regards to the above transactions. Journal narrations are not required.

Question 3

The following are the financial statements of the Pessy Ltd group for the year ending 31 December 2014.

	PESSY LTD N$	SESSY LTD N$
ASSETS
Property, plant and equipment	226 000	1 125 000
Investment in Sessy Ltd at fair value	760 000	-
Trade receivables	148 000	175 000
Total assets	1 134 000	1 300 000
EQUITY AND LIABILITIES
Share capital (180 000/220 000 shares)	180 000	220 000
Mark-to-market reserve	40 000	-
Retained earnings:
Balance on 1 January 2014	684 000	580 000
Profit for the year	230 000	200 000
Gain on sale of land and buildings	-	300 000
Total equity and liabilities	1 134 000	1 300 000

Notes

1. Pessy Ltd paid N$720 000 for an 80% interest in Sessy Ltd on 1 January 2012 when the owner's equity of the latter comprised the following:
Share capital $220 000
Retained earnings $350 000

On the acquisition date, Pessy Ltd valued the land and buildings of Sessy Ltd, with a carrying amount of N$ 500 000 at N$ 700 000. This revaluation was not recorded in the books of Sessy Ltd.

2. Pessy Ltd classified the equity investment in Sessy Ltd under IFRS 9 in its separate financial statements and recognized fair value adjustments in a mark-to-market reserve.

3. The fair value adjustment of N$ 40 000 was made in the current year.

4. Pessy Ltd elected to measure the non-controlling interests in the acquire at their proportionate share of the acquiree's identifiable net assets at the acquisition date.

5. During 2014, Sessy Ltd sold the land and buildings referred to above for N$ 800 000.

REQUIRED

Prepare the consolidated financial statements of the Pessy Ltd group for the year ending 31 December 2014. The consolidated statement of profit or loss and other comprehensive income should be included.Show all your workings. Pro-forma journals are not required

Assignment 2

Question 1

Shipengo Limited owns two buildings as follows:
• a head office building located in Windhoek; and
• another office building located in Rehoboth

Windhoek building
• The office building located in Windhoek is used as Shipengo Limited's head office.
• The building was purchased on 1 January 2015 at a cost of N$ 1 200 000.
• A fire broke out on 30 June 2015, and completely destroyed this building.

Rehoboth building
• The property in Rehoboth was leased under an operating lease to a tenant, Kapana Limited. Kapana Limited was paying a monthly rental of N$ 15 000. After the fire, Shipengo Limited urgently needed new premises for its head office. Since Kapana Limited was always late in paying their lease rentals, Shipengo Limited decided to immediately evict them and move their head office to this building situated in Rehoboth.
• The building in Rehoboth was purchased on 1 January 2015 for N$ 500 000.
• On 30 June 2015, the fair value of the building in Rehoboth was N$ 950 000.
• There was no change in fair value at 31 December 2015.
• The total useful life was estimated to be 10 years from the date of purchase and the residual value was estimated to be nil.

Shipengo Limited uses:
• The cost model to measure its property, plant and equipment; and
• The fair value model for its investment properties
• Buildings are depreciated over 10 years.

REQUIRED

a) Define "investment Property" and "owner occupied property".

b) Journalise the above transactions in the books of Shipengo Limited for the year ended 31 December 2015. Journal narrations are required.

c) Disclose the investment property note and the profit before tax note in Shipengo Limited's financial statements for the year ended 31 December 2015.

Question 2

Hafeni Limited changed its inventory valuation method from weighted average method to FIFO as this will result in fairer presentation as the matching of revenue and expenses will be improved.

The effect of the change is as follows:

Year-end inventory balances	2015 N$	2014 N$	2013 N$	2012 N$
Weighted average method (old method)	15 000	14 000	12 000	10 000
FIFO method (new method)	18 000	15 000	14 000	11 000

The draft financial statements before the change in accounting policy are as follows:

HAFENI LIMITED DRAFT STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015
	2015 N$	2014 N$
Revenue	1 200 000	900 000
Cost of sales	(420 000)	(350 000)
Gross profit	780 000	550 000
Other costs	(220 000)	(200 000)
Profit before tax	560 000	350 000
Income tax expense	(235 200)	(136 500)
Profit for the year	324 800	213 500
Other comprehensive income for the year	-	-
Total comprehensive income for the year	324 800	213 500

HAFENI LIMITED DRAFT STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015
	Retained earnings N$
Balance: 1/1/2014	67 500
Total comprehensive income: 2014	213 500
Balance: 31/12/2014	281 000
Total comprehensive income: 2015	324 800
Balance : 31/12/2015	605 800

REQUIRED

Prepare the statement of profit or loss and other comprehensive income, statement of changes in equity, statement of financial position and the relevant notes of Hafeni Limited for the year ended 31 December 2015 in accordance with International Financial Reporting Standards.

Question 3

Omaheke Limited's share capital as at 01 January 2014 was as follows:
- 500 000 ordinary shares issued at N$0.50 each
- 200 000 8% non cumulative non-redeemable preference shares issued at N$ 2 each

On 30 September 2014, the company announced a rights issue of 1 ordinary share for every 4 shares held at a price of N$2.20. The market price at this date was N$2.50. All the shareholders took up the offer on this date.

The results of operations of Omaheke Limited are as follows:

OMAHEKE LIMITED RESULTS OF OPERATIONS FOR THE YEAR ENDED 31 DECEMBER 2014
	2014 N$	2013 N$
Profit before tax	750 000	730 000
Income tax expense	(400 000)	(300 000)
Profit for the period	350 000	430 000
Ordinary dividend declared	(40 000)	(30 000)
Preference dividend declared	(32 000)	(32 000)
Retained earnings for the year	278 000	368 000
Retained earnings - beginning of the year	568 000	200 000
Retained earnings - end of the year	846 000	568 000

REQUIRED

a) Calculate the earnings per share and dividend per share.

b) Prepare the earnings per share and dividend per share note for inclusion in the notes to the financial statements for the year ending 31 December 2014.

c) Prepare an extract of the statement of changes in equity for the year ending 31 December 2014.
Comparatives are required.