Faculty
Commerce, Management & Law
School
School of Accounting
Subject
Advanced Financial Accounting 1
Subject Code
AAF5981
Due Date
3 May 2024
Duration
10 Days
Marks
50 Marks
INDIVIDUAL ASSIGNMENT
Examiner
C. MHAKA
Moderator
DR. E. GWANGWAVA
Instructions to candidates:
1. Make sure that you are writing the correct examination.
2. Make sure that you hand in the correct answer book
3. Show all calculations, where applicable.
4. Start each question on a new page.
5. No pencil work will be marked.
6. Answer all the questions using:
• Appropriate arrangement and presentation;
• Clarity of explanation;
• Logical argument; and
• Clear and concise language.
7. Use of a non-programmable pocket calculator is permissible.
8. Manage your time wisely 30 Minutes reading & 180 Minutes writing.
9.Round all amounts to the nearest NAD and all percentages to two decimal places.
10.Assume that all amounts are material except where the contrary is stated.
11.Smart watches are NOT allowed.
12.Hand in your answer sheet on time, no answer sheet will be accepted after the
examination time.
QUESTION
50 Marks
JackQueen (Pvt) Ltd (“JackQueen”) is a company that is involved in a lot of business activities,
including, fishing, mining and manufactures playing cards for big casinos all over Namibia.
The company’s accountant approached you to assist in addressing the following transactions
for the year ended 31 December 2023.
Playing cards Machine
The company invests a lot of money in cards manufacturing machinery. One of their plants
situated in Windhoek is called the ‘Card Roller’. The Card Roller was acquired on 1 January
2020 at a cost of $11 000 000 (excluding VAT). On 1 January 2020 the company estimated
that the asset would be used for a period of 10 years and would be depreciated over this life
on a straight-line basis. The company believed that they will obtain 10% of the initial cost of
the plant when the plant is finally retired from use. This amount has been agreed with Scrap it
for Cash (Pty) Ltd, a scrap yard situated in Rundu. They are the only company that buys such
machinery for scrap metal. NAMRA grants a wear-and-tear allowance over 3 years on the cost
of this asset.
It is the company policy to subsequently measure plant using the revaluation model with
reference to the net replacement value. The company revalues its plant at the end of every
two years. When the plant is revalued, the accumulated depreciation is restated
proportionately with the change in the gross carrying amount of the asset. Revaluation
surpluses are realised to retained earnings as the relevant asset is depreciated. The plant was
revalued for the first time on 31 December 2021. At that date the cash price for a similar new
plant amounted to $12 500 000 (excluding VAT). Also, on the Business news as at 31
December 2021 was the following headline: “Scrap it for Cash has been scraped due to low
profits”. On 1 January 2023 the carrying amount of the Card Roller amounted to $8 750 000.
On 31 December 2023 a new plant similar to the Card Roller was selling for $10 000 000
(excluding VAT). Tax rate is 31%.
Closure of Swakopmund fishing division
On 15 December 2023 the board of JackQueen decided to close down its Fishing division at
Swakopmund while maintaining the Walvis Bay fishing division. Before reporting date (31
December 2023), the decision was not communicated to any of those affected and no other
steps were taken to implement the decision.
The Bally property
On 1 January 2023 JackQueen acquired a property (Bally property) at a cost of N$16 million.
The value of the land was insignificant and therefore the whole purchase price was ascribed
to the buildings. At the date of acquiring the building the useful life was established to be 20
years.
NAMRA allows a building allowance of 5% on this property. Base cost is equal to historical
cost. Building allowances are not apportioned over time.
It is the intention of ABC Limited and JacKQueen (Pty) Ltd to recover the future economic
benefit of this building through use when owner occupied.
JackQueen let the property out to Keys Ltd for the first 6 months at N$15 500 a month and
thereafter started using the property as owner occupied on 1 July 2023.
JackQueen accounts for the property as an investment property using the fair value model in
terms of IAS 40 Investment Property and owner occupied using the cost model straight-line
model.
Fair value of the property on respective dates:

1 July 2023
N$16.7 million
Assume that lease payments should be accounted for as income or expenses in profit or loss
(i.e. the leases are not finance leases).
REQUIRED:
(a)
Marks
Prepare all the journal entries to account for the Playing cards 25
machine transaction in the books of Jack Queen for the financial year
ended 31 December 2023.
Clearly indicate whether each entry is accounted for in profit or loss
(P/L), other comprehensive income (OCI), statement of changes in
equity (SCE) or statement of financial position (SFP).
Journal entries relating to deferred tax are required. Journal entries
relating to the transfer of the revaluation surplus to retained earnings
are NOT required.
(b)
Discuss the Accounting treatment of the closure of the Swakopmund 10
fishing division in accordance with applicable IFRSs.
(c)
Prepare the pro-forma journal entries required to account for the Bally
property (including taxation) in the financial statements for the year 15
ended 31 December 2023.
Total marks
50 Marks
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