POLYTECHNIC OF NAMIBIA FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE DIPLOMA IN ACCOUNTING AND FINANCE (DAPF) FINANCIAL ACCOUNTING 201 (FAC 611S) TEST 2 QUESTION PAPER Date: 24 April 2015 Duration: 2 hours Total Marks: 50 INSTRUCTIONS / NOTES 1. This test paper is made up of two Questions 2. Answer both questions in black or blue ink 3. Start each question on a new page in your answer script and show all your workings 4. Questions relating to this 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 and any assumption made by the candidate should be clearly stated. 5. This paper consists of 5 pages including the cover page EXAMINERS: E.Mushonga, M. Dikuua, C. Mahindi & A. Makosa MODERATOR: P. Maliti 1 Question 1 You have been appointed the accountant of Degree (Pty) Ltd. The previous accountant had already started finalising the statements of Degree (Pty) Ltd for the year ended 31 December 2014. The competent assistant accountant prepared the following information for purposes of preparing the statement of financial position. 1. The following balances in respect of assets, liabilities and equity were obtained, as at 31 December 2014. Land Buildings (at cost) Plant & equipment Accumulated depreciation - buildings Accumulated depreciation - plant & equipment Investments Trade inventories Trade receivables Allowance for doubtful debts Office supplies on hand (31 Dec 2014) Insurance prepaid (31 Dec 2014) Provisional tax payments Term deposit (term elapses 31 Apr 2015) Bank (favourable) Ordinary share capital Retained earnings Mortgage bond Finance lease loan Trade payables Rent received in advance VAT Control account Income tax payable Shareholders for dividends Short term provisions Note 2 2 2, 4 2 5 3 6 7 4 8 N$ 1,750,000.00 8,700,000.00 7,500,000.00 3,045,000.00 2,400,000.00 2,250,000.00 5,110,000.00 15,985,000.00 1,910,000.00 850,000.00 1,000,000.00 1,980,000.00 215,000.00 1,650,000.00 12,000,000.00 8,015,000.00 7,275,180.00 1,506,794.00 3,922,078.00 96,000.00 (519,948.00) 2,150,000.00 2,000,000.00 1,250,000.00 2. The cost price and accumulated depreciation of property, plant and equipment had been correctly accounted for in the trial balance. 2 3. Included in the statement of profit or loss for the reporting period ended 31 December 2014, is a write-down of the cost price of certain inventory items to the net realisable value thereof. The write down of N$860 000 has not been accounted for in the above list of balances. 4. On 2 January 2014 a plant item was acquired by means of a loan. The useful life of the item is six years. (This plant item has already been appropriately recognised). The following portion of the repayment schedule is applicable: INSTALMENT Total Capital Date N$ 02/01/2014 31/12/2014 31/12/2015 31/12/2016 Loan Instalment 1 Instalment 2 Instalment 3 N$ 473 206 473 206 473 206 293 206 322 527 354 779 Interest per year at 10% per year N$ 180 000 150 679 118 427 Capital amount outstanding N$ 1 800 000 1 506 794 1 184 267 829 488 5. The investments were purchased during 2011 at a cost price of N$1 500 000. 6. At 31 December 2014, Degree Ltd increased the allowance for bad debts by N$40 000. This has not yet been taken into account. 7. The Mortgage bond was incurred on 2 January 2008 to finance the acquisition of the property and is repayable in 20 equal instalments, which repays the capital and the interest. The following portion of the repayment schedule is applicable: INSTALMENT Total Capital Date N$ 02/01/2008 02/01/200802/01/2013 31/12/2014 31/12/2015 Loan Instalment 1 to 6 Instalment 7 Instalment 8 N$ Interest per year at 10% per year N$ Capital amount outstanding 5 258 400 589 473 4 668 927 N$ 8 000 000 7 410 527 876 400 876 400 741 053 727 518 7 275 180 7 126 298 135 347 148 882 8. On 31 May 2013, Degree (Pty) Ltd was sued by the local authority for alleged environmental pollution for an amount of N$1 250 000. 3 Required: Present the above mentioned information in the statement of financial position of Degree (Pty) Ltd as at 31 December 2014 to comply with International Financial Reporting Standards. A summary of significant accounting policies is also required. 4 Question 2 The register for property, plant & equipment of Dijkman (Pty) Ltd is presented to you. As the accountant you are required to prepare all the entries and calculations, and satisfy all disclosure requirements regarding property, plant & equipment in the financial statements of the company for the financial year ended 30 June 20.5. A summary of the register of property, plant and equipment at 1 July 20.4 is as follows: N$ Furniture: Cost Accumulated depreciation 22 000 8 000 Motor vehicles: Cost Accumulated depreciation 60 000 31 000 Machinery: Cost: Machine A Machine B Machine C Accumulated depreciation: Machine A Machine B Machine C 15 000 63 000 18 000 7 000 3 000 Land: Cost 150 000 Additional information: 1. The following rates and methods of depreciation are applicable: Property, plant and equipment are accounted for on the cost model. Land – no depreciation Furniture – 10% straight line Motor vehicles – 20% straight line Machinery – 20% reducing balance method The assets have no residual values. 5 2. On 31 December 20.4 a delivery vehicle with an original cost of N$18 000 was sold for N$7 500 and this amount was credited to the motor vehicle account. On 1 July 20.4 the accumulated depreciation of the vehicle amounted to N$11 000. 3. Machine B was obtained and put into operation on 30 June 20.4. 4. Land consists of stand no.65 in the northern industrial area and was purchased in 20.0. The board of directors estimated the current market value of the property to be N$200 000 at 30 June 20.5. The land is not classified as an investment property. 5. The current market value of the other assets does not differ materially from their carrying amounts. 6. No other transactions relating to property, plant & equipment took place during the year. YOU ARE REQUIRED TO: Disclose the property, plant and equipment in the statement of financial position and in the notes to the financial statements of Dijkman (Pty) Ltd for the year ended 30 June 20.5 so as to comply with IAS 16. (30 marks) END OF PAPER 6 Degree (Pty) Ltd Statement of Financial Position as at 31 December 2014 N$ Marks Working ASSETS Non-current assets Property Plant and equipment Investment in NSX listed shares Total non-current assets 12 505 000.00 2 250 000.00 14 755 000.00 √√√ √ Current assets Inventories (5110000-860000) Trade receivables (15985000-1950000) Other curent assets (850000+1000000) Other financial investments Cash and cash equivalents Total current assets 4 250 000.00 14 035 000.00 1 850 000.00 215 000.00 1 650 000.00 22 000 000.00 √√ √√ √√ √ √ Total Assets 36 755 000.00 EQUITY AND LIABILITIES Equity Share capital Retained Earnings Total Equity 12 000 000.00 8 015 000.00 20 015 000.00 √ √ 8 310 565.00 √√ 4 538 026.00 √√√ 471 409.00 170 000.00 2 000 000.00 1 250 000.00 8 429 435.00 √√ √√ √ √ Non-current liabilities Long term borrowings (1184267+7126298) Current liabilities Trade and other payables (3922078+96000+519948) Current portion of long-term borrowings (322527+148882) Current Tax payable (2150000-1980000) Shareholders for dividends Short-term provisions Total Equity and liabilities 36 755 000.00 Total Marks =25/25 *20 Workings 7 1 Cost 1) Acc Dep Property Plant and Equipment Land 1 750 000 Buildings 8 700 000 Plant & Equipment 7 500 000 Carrying amount 12 505 000 1 750 000 5 655 000 5 100 000 3 045 000 2 400 000 QUESTION 2– PROPERTY, PLANT & EQUIPMENT SOLUTION STATEMENT OF FINANCIAL POSITION OF DIJKMAN (PTY) LTD AS AT 30 JUNE 20.5 Note N$ 2 244 200 ASSETS: Non-current assets: Property, plant and equipment NOTES TO THE ANNUAL FINANCIAL STATEMENTS OF DIJKMAN (PTY) LTD FOR THE YEAR ENDED 30 JUNE 20.5 1. Accounting policy 1.1 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation, except for land which is not depreciated, and which is carried at cost. The remaining assets are depreciated according to the following rates and methods: Furniture at 10% according to the straight-line method Motor vehicles at 20% according to the straight-line method Machinery at 20% according to the reducing balance method 8 √ √ √ 2. Property, plant and equipment Land Furniture Motor vehicles Machinery Total COST: Cost at 1 July 20.4 150 000 22 000 60 000 96 000 - - (18 000) - 150 000 22 000 42 000 96 000 310 000 2.5 Accumulated depreciation at 1 July 20.4 - 8 000 31 000 10 000 49 000 2.5 Disposal - (12 800) - (12 800) 2 Charge for the year - 2 200 10 200 17 200 29 600 5 Accumulated depreciation at 30 June 20.5 - 10 200 28 400 27 200 65 800 2.5 Carrying amount at 1 July 20.4 150 000 14 000 29 000 86 000 279 000 2.5 Carrying amount at 30 June 20.5 150 000 11 800 13 600 68 800 244 200 2.5 Disposals Cost at 30 June 20.5 328 000 2.5 (18 000) 1 DEPRECIATION: - 9