CODeL DISTANCE MODE

ASSIGNMENT LETTER
Academic Year 2020
Semester (2)

[Financial Accounting 1B]

[AFE3692]

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 FACULTY OF ECONOMIC & MANAGEMENT SCIENCES

ASSIGNMENT ADMINISTRATION
Faculty/ School Assignment Module Offering Due Date

Faculty of Economic & Assessment 1 Semester 2 19 August 2020

Management Sciences
Grace period (3 days ONLY): 20 – 22 August 2020
Resubmission for Assignment 1 (Semester 2 Modules only): 02 September 2020
Compulsory Vacation School 14 – 18 September

Faculty of Economic & Assessment 2 Semester 2 9 September 2020

Management Sciences
Grace period (3 days ONLY): 10 – 12 September 2020
Resubmission for Assignment 2 (Semester 2 Modules only): 23 September 2020

For modules that will have online tests, all information will be communicated well in
advance. Kindly take note that some modules might have 3/4 assessments. E.g. 2
assignments and 1/2 online tests.
All necessary information will be shared timely.

Good luck!!

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 2020 Distance Mode Assignments

[Financial Accounting 1B – AFE3692]

Dear Student,

Welcome to the University of Namibia and to the Centre for Open, Distance and e-Learning
(CODeL) in particular. We are confident that your studies and hard work will be rewarded with
success. We kindly advise that you obtain all the relevant information and booklets available for
distance students from your nearest UNAM Centre (including the 2020 CODeL Student
Information Letter, Online Assignment Submission Guide and other documents). These
documents will provide guidance on how to approach your studies and will guide you through
your study materials as well as providing useful administrative information in submitting
assignments.

1. Study materials
Your study guide is essentially your “teacher/lecturer”. However, in addition, you are required to
visit the library to consult prescribed books and recommended readings that are indicated in the
study guide as well as browse the Internet in general. You are also responsible to purchase any
prescribed textbooks required for your respective courses/modules. Furthermore, you are
strongly advised to follow the guidelines in the Online Assignment Submission Guide
available on Moodle.

2. Collaborative Learning

CODeL avails all your modules through Moodle, enabling you to interact with your fellow
students online through forum discussions and chats. You can use the same platform to engage
with your lecturers and tutors regarding academic support. Please take advantage of Moodle to
avoid isolation and strengthen your interaction with colleagues, ask for help, and share/receive
resources to aid your learning process. See below how to access forum discussions on Moodle:

Figure 1: Forums in courses

3. Submission of assignments
It is very important to complete and submit a clean, clear and well-argued assignment for
marking. Make sure that you have understood the questions in order to answer them correctly. It
is your responsibility to make sure that every page of the completed assignment is correctly
numbered before submitting your assignment. As from 2017, ALL assignments are submitted

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through the Moodle Learning Management System. This is an online platform where you will
access all your modules and related information such as course outlines, course notes and
other learning materials that your lecturer/tutor may choose to share with you. Moodle is
accessible here: http://elearning.unam.edu.na. You should complete and submit all assignments
on or before the given due date in the assignment letter if you wish to obtain your CA marks and
qualify for examinations. CODeL always updates its assignment covers on an annual and
semester basis. Please ensure that you have used the latest assignment cover. The latest
assignment cover is availed on each course on Moodle.
A user guide is available on how to submit your assignment in each module on the Distance
Education Common Space and you can access it on the Online Support system. Pay close
attention to the following key points listed at the beginning of the guide on:
3.1 How you would know when you have successfully submitted your assignment:
that is when the submission status shows “Submitted for grading”

Figure 2: Assignment submission status

MAKE SURE THE SYSTEM GIVES YOU A CONFIRMATION OF SUBMISSION by the

submission status shown as "Submitted for grading" when done. If that status is NOT
displayed when done, IT DOES NOT COUNT AS A SUBMISSION.

3.2 Errors to avoid when submitting your assignment (committing these errors may
result in you failing to submit your assignments and therefore potentially failing your
course)

a. You are submitting on the correct Module/Course

b. You have selected and uploaded the correct Assignment document from your
computer
c. You are submitting the correct Assignment number for the respective activity
(i.e. Assignment 1, 2, etc.)

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 3.3 How to check the assessment feedback when your assignment has been
graded.

4. Due Dates
All assignment due dates for 2020 are published on second and third pages of this assignment
letter. With the shift from manual to online assignment submission since 2017, due dates are
automated and non-negotiable. This means that you would be required to submit your
assignments ON or BEFORE the due date set on your assignment (before 11h55 PM). After the
date has passed (i.e. 12h00AM of the next day) the assignment submission will be disabled,
and you would no longer be able to submit your assignment. Please note that assignment
submissions will be open long before the due dates.
Please note that your assignment due dates are on page 2 of this Tutorial Letter. Use this
assignment due dates to set up your calendar tool on your mobile phone or computer to set
reminders for yourself and manage your time. Another way to keep pace with due dates, is by
regularly visiting your Timeline of each of your courses on Moodle on the Course Overview.
Also download the Moodle mobile app to access Moodle on your mobile phone or tablet and
have access to notifications about due dates at your fingertips from Google Play Store for
Android or Apple App Store for IOS.
5. Submission of Assignments
Due to challenges with Internet connectivity and speed, large files may take too long to upload,
which is a big risk if you wait until the last minute to submit your assignments. You are therefore
strongly advised NOT to wait until the final hours of the due dates to submit your assignments to
avoid disappointments. You are also advised to ensure that you are in an area with good
Internet connectivity when submitting your assignments. Timely submission of all assignments
on or before the given due date is crucial for the timely grading and processing of your CA
marks and determining admission to exams.
Take note that assignments should never be submitted directly by email or hard copy to
individual tutors or any other staff members of the University of Namibia.
6. Academic Support
One every Moodle course there is an embedded Academic Support section with materials to
assist you with your writing process (see Figure 3 below). Go through the videos in order to
enhance your writing process and submit better quality assignments.

Figure 3: Academic Support tutorials

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7. Grace Period

A grace period refers to three (3) additional days added after your assignment due date.
The purpose of this grace period is to provide each student with time to verify and or to
make amendments to assignments already submitted. These changes may include
correcting errors like submitting a file to a wrong module or on a wrong assignment;
submitting a wrong file; losing internet connectivity, etc. An example would be that a
student attempting to submit an assignment and they lose internet connection would still
be able to try again the day after at a different place or when the connection has been
restored.

8. Plagiarism Control

It has been observed that some students copy information from the Internet and paste into their
assignments without acknowledging the sources of the information. This is called plagiarism. A
copy of the Policy on Academic Integrity has been provided to you on every course on Moodle.
Please note that plagiarism which includes copying and pasting information from the Internet
would not be tolerated, shall result in your assignments declared null and void and graded as a
“0”. All assignments submitted through Moodle would be checked for plagiarism using
plagiarism detection software. You are therefore strongly urged to acknowledge EVERY source
that you use for your assignment by using the appropriate citations and references following the
referencing style prescribed by your lecturers (APA Referencing guides are available freely
online). Find one here: http://www.uofa.edu/docs/apa-documentation.pdf

Any assignment found with high similarity scores or with evidence of clear attempts to cheat
such as submitting an assignment that is not your own would result in a zero (0) grade.

9. Vacation schools
Attending vacation school is COMPULSORY and the vacation school timetable will be made
available at your nearest UNAM centre and through the UNAM portal.

10. My UNAM Portal and Moodle

We recommend that you regularly (at least twice a week) access your “My UNAM Portal”
(http://my.unam.edu.na) for your registration status and information, and Moodle
(https://elearning.unam.edu.na ) for your learning and assessment information.

Also visit the Distance Education Common Space on Moodle where you can find all necessary
information and user manuals related to your distance mode studies and also engage with other
students studying on distance mode. See additional information under Section 11 below.

11. Online Support (Ticketing) System

An online support system is provided where you can report some of the issues that you may
experience regarding your studies. This system is easily accessible from the Moodle LMS
system.

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 Figure 4: Online ticketing system

You can also make use of the Online Support (Ticketing System) for queries to be responded to
by the responsible person within 48 hours. We recommend you use this system for Help Topics
or issues listed on the system rather than email or telephone calls.

12. Online information, Tutorials and Distance Education Common Space

Information and Tutorials are provided in each course on the Moodle Learning Management
System which you should first familiarise yourself once you first access your courses.

Figure 5: Info-Tutorials on Moodle

Indicated in Figure 4 above, the Distance Student Orientation provides video tutorials on various
activities you would perform such as submitting your assignments, converting your documents
into pdf format, changing your email address, how to check your results when assignments
have been graded and so on.

Updates and information with regard to your studies and related events would be shared in the
Distance Education Common Space which you can access from any course as shown in
screenshot below. All students studying on distance mode are linked this the space where you
can collaborate or discuss general issues.

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 Figure 6: Distance Education Common Space

You will also find the Student Information Letter, your Vacation School Timetable and User
Guides in the Distance Education Common Space.

13. Staff Contact Information

If you study conscientiously, your efforts will be rewarded. Should you need any assistance or
clarification on the module contents, you can reach the relevant staff members at the contact
details as given below:

Tutor: Rosa Shilongo 061-2064538

[email protected]
Student Support Coordinator
Charlene Kaereho 061-2063729 [email protected]
(assignment queries):
Distance Education Officer (CA
Nicholette Mutenda 061-2063093 [email protected]
marks queries):
Examination Officer (Exam marks
Jussy Moyyo 061-2063715 [email protected]
queries):
eLearning Queries
Selma Limbo 061-2063359 [email protected]
Technical Issues

NOTE: For additional information consult the CODeL Prospectus and UNAM General
Information and Regulations Prospectus.

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Serious offence not tolerated at all

Note well: Plagiarism

Plagiarism is “the wrongful appropriation or purloining, and publication as one’s own, of the ideas, or the expression
of the ideas of another” (OED). All published and unpublished material, whether in manuscript, printed or electronic
form, is covered under this description.

The Proctors’ Disciplinary Regulations concerning conduct in examinations (see Part 19.4. and 19.5, p. 52) state that
‘No candidate shall present for an examination as his or her own work any part of the substance of another person’s
work. In any written work (whether thesis, dissertation, essay, coursework, or written examination, or assignment)
passages quoted or closely paraphrased from another person’s work must be identified as quotations or paraphrases,
and the source of the quoted or paraphrased material must be clearly acknowledged.’ In all written work students
must be vigilant in citing the work they have referred to or quoted from (please see further Appendix D). Examples
of plagiarism and detailed advice as to how to avoid it are given on http://www.admin.ox.ac.uk/edc/goodpractice/:
you are strongly advised to consult this website.

It has been observed that some students merely download information from the Internet, copy verbatim from other
printed sources (including the Study Guide, employ other people to do their assignments for them, or plagiarise each
other’s assignments (either directly, that is, word-to-word, or through a re-arrangement of words or paragraphs in
order to deceive the tutor or marker).

These practices constitute very serious academic offences of academic dishonesty, alternatively, intellectual fraud,
which attract very serious and heavy penalties. Students must desist from such practices. Such students may score
very high marks but invariably perform very poorly in examinations. It is in the interest of such students to
endeavour to exercise their own intellectual faculties, do their own research, and personally do the set assignments.

No hardcopies are allowed, all assignment are to be uploaded through Moodle.

 Assignments should be submitted in PDF – only. Kindly save your assignments in PDF format
 Make sure that you submit one assignment as one file/document. Do not create and upload
several folders; do not zip the documents. Have 1 one document/file for 1 (ONE) entire
assignment.
 Assignments for modules with formulas can be handwritten, scanned in one document and
uploaded on Moodle accordingly.
 Make sure you submit a document that is readable and virus free.
 Make sure you upload the right file with the relevant assignment content.
 After submitting your assignment on Moodle do verify on the file you uploaded. Always try to
submit your assignment few days before the due date, this will allow you to double-check all
the nitty-gritties.
NO LATE SUBMISSIONS WILL BE TOLERATED. NO LATE submission due to not adhering to
the above advises or guidance WILL BE ACCEPTED nor ENTERTAINED.

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Assignment 1

Question 1 (30 marks)

A recent graduate Bob, struggled to find work as an Accountant. He was then recruited as a
bookkeeper of Magano Ltd. He is currently occupied with finalizing the financial statements for
the end period 31 May 2019 and reported to face the following challenges:

A transaction, material in value, took place during the year and has the potential impact
on the economic decisions of the users of Magano’s Ltd financial statements, both
currently and potentially in the future. It is projected that the transaction is likely to be
finalised towards the last quarter of the next financial year. The precise details of the
transaction is not available at the present moment. Hence, Mr. Bob is capable of
providing reliable estimations of figures related to this transaction.

The following possible options are to be considered by Mr. Bob:

a) Postponing the issuance of the 31 May 2019 financial statements until the
transaction is finalised, or
b) Put in use his judgment and making estimations of the figures related to this
transaction that need to be included in the 31 May 2019 financial statements.

Moreover, the act of selecting option 1 (one) will give an impression that the financial
statements for the 2019 financial year may be issued one year late. However, choosing
option 2 (two) means the 2019 financial statements will only comprise of estimations and
not exact information.

As a student for financial accounting at UNAM, he requested that you assist him in
making informative decisions.

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You are required to:

1. Advise Mr. Bob, by providing a comprehensive discussion basing it on the foundation and
enhancing qualitative characteristics of useful financial information as stipulated in the
Conceptual Framework for Financial Reporting. Furthermore, it is to be noted that with reference
to the Conceptual Framework for Financial Reporting, illustrate to him which of the two options
are viable. (25 marks)

2. Briefly discuss what you consider to be the difference between recording and reporting in
practice of accounting. (5 marks)

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Question 2 (40 marks)

Quantum Ltd is a business that has traded for many years. The following balances were extracted
from the general ledger on 30 September 2018.

Quantum Ltd
Trial balance as at 30 September 2018
Dr (N$) Cr (N$)
Sales 2,895,000.00
Purchases 2,100,000.00
Interest on debentures 20,000.00
Salaries 254,000.00
Advertising 31,000.00
Trade receivables 179,000.00
Trade payables 295,000.00
Cash at bank 126,000.00
Dividend payable 50,000.00
Discount receivable 2,530.00
Stationery 45,550.00
Miscellaneous expenses 113,000.00
Bank charges 8,750.00
Allowance for credit losses 8,970.00
Credit losses 1,700.00
Ordinary share capital ( N$ 0.50 per share) 600,000.00
8% Preference share capital 250,000.00
10% debentures 400,000.00
Retained earnings (01 Oct 2017) 242,000.00
General reserve (01 Oct 2017) 171,000.00
Share premium 65,000.00
Land and Building at cost ( 01 Oct 2017) 430,000.00
Building - Accumulated depreciation (01 Oct 2017) 20,000.00

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Plant and Machinery at cost ( 01 Oct 2017) 830,000.00
Plant and Machinery -Accumulated depreciation 222,000.00
Vehicles at cost (01 Oct 2017) 1,275,000.00
Vehicles - Accumulated depreciation (01 Oct 2017) 382,500.00
Inventory (01 Oct 2017) 190,000.00
5,604,000.00 5,604,000.00

Additional information:

1. Inventory as at 30 September 2018 was valued at N$ 220 000.

2. Provide for income tax at 32%

3. Plant which costs N$ 350 000 with a carrying amount of N$ 274 000 on 1 October 2017 was
sold for N$ 300 000 deposited into the bank account, this amount was erroneously omitted from
the business records. Depreciation charge for plant and machinery for the ended 30 September
2018 is N$ 36 000. Plant and machinery relates to production.

4. The property which is mainly used for administrative purposes was acquired five years ago.
The building portion was estimated at a cost N$ 100 000 and the estimated useful life of this
property was fifty years at the time of purchase. As at 30 September 2018, the property was
valued at N$ 800 000.

5. Miscellaneous expenses include N$ 9 000 paid in advance for insurance up to 31 May 2019
and an amount of N$ 15 000 relating to sales commission. Apart from sales commission
miscellaneous expenses relate to administration.

6. Depreciation charge for vehicles for the year ended 30 September 2018 is N$ 75 000. This is
to be allocated as follows:

 Administration: 75%
 Selling and distribution: 25%

7. On 30 September 2018 an invoice for N$ 3 000 was received for advertising.

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8. Allowance for credit losses was to be reduced to N$ 8 000.

9. 8% preference shares are part of equity

10. The management wishes to provide for the following:

 Interest on debentures due

 A transfer to general reserve of N$ 22 000
 Auditors fee N$ 15 750

You are required to:

1. Prepare a statement of profit or loss and other comprehensive income for the year ended 30
September 2018. It should comply with the requirements of the Companies Act 71 of 2008 and
International Financial Reporting Standards (IFRS) (15 marks)

2. Prepare a statement of financial position as at 30 September 2018 to comply with the

requirements of the Companies Act 71 of 2008 and IFRS. (16 marks)

3. Prepare the notes to the financial statements for the following: (9 marks)

3.1 Basis of presentation

3.2 Summary of significant accounting policies

3.3 Trade and other receivables

3.4 Equity

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Question 3 ( 30 marks)

You are a newly appointed auditor of Otjomuise Ltd and have been presented with this statement
of financial position.

Otjomuise Ltd
Statement of financial position as at 30 September 2018

N$
2018

ASSETS
Non-current assets

PPE 950,000.00

Long term loans to employees 15,000.00

Investments/ financial assets 340,000.00

Total non-current assets 1,305,000.00

Current assets

Inventory 320,000.00

Trade receivables 260,000.00

Taxation 55,000.00

Cash and cash equivalents 5,000.00

Sundry expenditure:

Preliminary expenses 12,000.00

Ordinary share issue expenses 10,000.00

Preference share issue expenses 9,000.00

Underwriters commission on preference shares 14,000.00

Total current assets 685,000.00

TOTAL ASSETS 1,990,000.00

EQUTY AND LIABILITIES

Equity

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Ordinary share capital and share premium 1,030,000.00

Non-distributable reserve 100,000.00

Preference share capital and share premium 242,000.00

Retained earnings 190,000.00

Total equity 1,562,000.00

Non-current liabilities

Mortgage debentures 58,000.00

Total non-current liabilities 58,000.00

Current liabilities

Trade payables 255,000.00

Bank overdraft 35,000.00

Shareholders for dividends 80,000.00

Total current liabilities 370,000.00

TOTAL EQUITY AND LIABILITIES 1,990,000.00

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 Otjomuise Ltd

Notes to the financial statements of 30 September 2018

1. Accounting policies

Property, plants and equipment

 Land and building are valued at cost and land is not depreciated. Buildings
are depreciated over the useful life on the straight-line method.
 Plant and machinery and vehicles are valued at cost and are depreciated on
the reducing balance method to their residual value over the expected
useful lives of the assets.

Inventory

Inventory is valued at the lower of cost and net realisable value on FIFO basis.

2. Share capital

2018
Authorised
1 000 000 ordinary shares @ N$ 2 each

80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual

dividend of 12c/share)

50 000 redeemable preference shares@ N$ 2.50 each ( fixed annual dividend of

14c/share)

Issued
500 000 ordinary shares @ N$ 2 each 1,000,000.00

80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual

dividend of 12c/share) 240,000.00
1,240,000.00

 The redeemable cumulative preference shares are redeemable at the option of the
company since 01 December 2018 as a premium of N$ 0.30c/share.

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  The directors have the authority to issue the balance of the un-issued shares until
the nest annual general meeting.

3. Non-distributable reserves

2018
Asset replacement reserve 60,000.00
Revaluation reserve 40,000.00
100,000.00

4. Mortgage bond

2018
15% mortgage bond 58,000.00
Repayable in monthly instalments of N$ 745.00

5. Property, plants and equipment

Cost or Accumulated
valuation depreciation Carrying value
Land 395,000.00 - 395,000.00
Buildings 100,000.00 - 100,000.00
Plant and machinery 570,000.00 240,000.00 330,000.00
Vehicles 155,000.00 60,000.00 95,000.00
1,220,000.00 300,000.00 920,000.00
Financial assets 50,000.00 20,000.00 30,000.00

1,270,000.00 320,000.00 950,000.00

6. Investments

2018
Listed
100 000 shares in Trutsco Ltd ( market value N$ 300 000) 180,000.00
Shares in Etosha transport Ltd (market value N$ 60 000) 82,000.00
Unlisted
10 000 shares in Dinapama Ltd 68,000.00
5 000 shares in Etambi ( Pty) Ltd 10,000.00

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 340,000.00
Additional information:

The minutes of various directors’ meeting revealed the following information:

 Otjomuise Ltd at the moment has a court case with a potential claim of N$ 250 000
against them. No provision has been made in the accounting records as the directors are
hopeful that they with emerge victorious in the case.
 A contract was signed with a South African company to acquire Plant and machinery at a
cost of N$ 320 000. A further acquisition of Plants valued at N$ 70 000 was approved by
the directors.
 It was then decided at the board of directors meeting of Otjomuise Ltd held on 03
October 2018;
o To redeem the 12% cumulative preference shares of the company on 30
November 2018.
o To finance this redemption partly by the issue of the maximum number of 14%
redeemable preference shares at a premium of 20% (The company will not be
able to issue these shares at a higher premium).
o To pay the backlog in the cumulative preference dividends, last provided for on
30 September 2018.
o To convert the authorized ordinary shares of par value into ordinary shares on no
par value on 31 December 2018.
o To write off all deferred expenditure in the accounting records immediately
before the conversion of par value to par value shares.

Share issue expenses amounting to N$ 5 000 have been incurred.

You are required to:

1. In point form, list all the items in the above draft statement of financial position that do not
comply with the minimum disclosure requirements of the Companies Act and IFRS. NB: provide
full details of minimum disclosure requirements. (20 marks)

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2. Prepare the Equity section of a statement of financial position as at 31 December 2018, after
the implementation of the decisions taken by the directors on 03 October 2018. Do ignore the
results of trading for the three months ended 31 December 2018. Calculations are mandatory and
notes to the statement of financial position are not required. (10 marks)

The end of assignment 1

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Assignment 2

Question 1 (34 marks)

The new managing director (MD) of Laser & Tiger Ltd has asked you to analyse and give your views on
the relative profitability and liquidity. The following summarised financial statements have been prepared
for two years.

Laser & Tiger Ltd

Statement of financial position as at 30 June 2010
N$ N$
2010 2009

ASSETS
Non-current assets
PPE 150,000.00 120,000.00
Investments in properties 5,000,000.00 4,500,000.00
Investments in subsidiaries 48,000.00 54,000.00
Loan receivable 250,000.00 300,000.00
Goodwill 120,000.00 100,000.00
Total non-current assets 5,568,000.00 5,074,000.00

Current assets
Inventory 76,000.00 35,000.00
Trade receivables 42,000.00 11,000.00
Cash and cash equivalents 1,200,000.00 1,300,000.00
Total current assets 1,318,000.00 1,346,000.00
TOTAL ASSETS 6,886,000.00 6,420,000.00

EQUTY AND LIABILITIES

Equity
Stated capital 3,000,000.00 3,000,000.00
Retained earnings 2,685,000.00 2,430,000.00
Total equity 5,685,000.00 5,430,000.00

Non-current liabilities
Loans from shareholders 120,000.00 100,000.00
Long-term debt 950,000.00 750,000.00
Total non-current liabilities 1,070,000.00 850,000.00

Current liabilities
Trade payables 79,000.00 54,000.00
Provisions 41,000.00 63,000.00
Taxation payables 11,000.00 23,000.00

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Total current liabilities 131,000.00 140,000.00
TOTAL EQUITY AND LIABILITIES 6,886,000.00 6,420,000.00
Additional information:

1. Included in other income is interest income of N$ 34 000 (2009: N$ 40 000).

2. 20% of all sales (revenue) were made on credit.

3. Purchases on N$ 150 000 and N$ 120 000 were made on credit in 2010 and 2009 respectively.
All other purchases were for cash.

You are required to:

1. Use the information in respect of Laser & Tiger Ltd 2010 and 2009 financial year, to write a
report to the MD analysing the results. (NB: calculate the ratios I.R.O working capital and
formulas are crucial)

1.1 Report format (3 marks)

1.2 Gross profit percentage (2 marks)

1.3 Net profit percentage (2 marks)

1.4 ROABT (2 marks)

1.5 ROCE (2 marks)

1.6 Days inventory on hand (2 marks)

1.7 Debtors collection period (2 marks)

1.8 Creditors collection period (2 marks)

2. Discuss what each of the above seven ratios tells you about the efficiency and the profitability
of Laser & Tiger Ltd in 2010. (17 marks)

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Question 2 (32 marks)

These balances and totals are from Bantu Ltd for the year ended 30 June 2020.

Real accounts section 30-Jun-19 30-Jun-20

Inland Revenue: Income Tax 12,000.00 15,000.00
Shareholders for dividends 15,000.00 20,000.00
Nominal accounts section 30-Jun-20
Income tax expense 38,000.00
Under-provision for taxation in the previous year 3,200.00
Dividends
Interim 18,000.00
Final 20,000.00

You are required to:

1. Calculate the amount of dividends and taxation paid. (12 marks)

2. Mention five advantages of cash flow accounting. (10 marks)

3. Why does AIS 7 require gross amounts rather than net amounts to be disclosed in a statement
of cash flows? (4 marks)

4. List and describe briefly the three main areas of business activity used to classify cash flows
and outflows on the statement of cash flows. (6 marks)

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Question 3 (36 Marks)

Here are the financial statements of Diamonds Ltd on 30 September 2018.

Diamond Ltd

Abridged statement of profit or loss and other comprehensive income for the
year ended 30 September 2018
N$
Gross profit 2,400,000.00
Other operating expenses (1,580,000.00)
Operating profit 820,000.00
Operating income
Profit on sale of equipment 12,000.00
Profit from operations 832,000.00
Financing activities
Investment income - dividends 68,000.00
Interest on mortgage bond (164,000.00)
Profit before tax 736,000.00
Income tax (187,040.00)
Profit for the year 548,960.00
Other comprehensive income
Re-valuation of land buildings 850,000.00
Total comprehensive income 1,398,960.00

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 Diamond Ltd
Statement of financial position as at 30 September 2018
N$ N$
2018 2017

ASSETS
Non-current assets 4,416,400.00 2,940,000.00
PPE 3,782,000.00 2,620,000.00
Investments at costs 634,400.00 320,000.00

Current assets
Inventory 2,685,000.00 2,750,000.00
Trade receivables 825,000.00 675,000.00
Cash and cash equivalents 70,560.00 29,000.00
TOTAL ASSETS 7,996,960.00 6,394,000.00

EQUTY AND LIABILITIES

Equity & reserves 5,060,960.00 3,972,000.00
Share capital 2,500,000.00 2,275,000.00
Reserves 995,000.00 200,000.00
Retained earnings 1,565,960.00 1,497,000.00

Non-current liabilities 1,750,000.00 1,200,000.00

Mortgage bond 1,750,000.00 1,200,000.00

Current liabilities
Trade payables 645,000.00 720,000.00
Inland revenue - Income Tax 61,000.00 92,000.00
Shareholders for dividends 408,000.00 348,500.00
Inland Revenue - dividends withholding tax 72,000.00 61,500.00
TOTAL EQUITY AND LIABILITIES 7,996,960.00 6,394,000.00

Additional information:

1. The company maintains a gross profit percentage of 40 % on sales.

2. Other operating expenses include:

Depreciation on equipment N$ 164 000 and

Loss on scrapping of equipment – N$ 16 000

3. The authorized share capital consist of:

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 5 000 000 no par value ordinary shares
2 500 000 8% redeemable preference shares with a par value of N$ 2.25.

4. Issued share capital consists of:

2018 2017
N$ N$

Stated capital 1,600,000.00 1,150,000.00

8% Redeemable preference shares 900,000.00 1,125,000.00

2,500,000.00 2,275,000.00

The original issue of ordinary shares was at N$ 1.15

5. Reserves consist of the following:

2018 2017
N$ N$

Share premium 145,000.00 200,000.00

Revaluation reserve 850,000.00 -

995,000.00 200,000.00
6. It is the company policy to declare dividends at the end of the financial year with the payment being
made during the month of October in the following financial year.

7. Immediately after the dividends were declared, the company redeemed 100 000 redeemable preference
shares at N$ 2.80 each. This was partially financed by the issue of 200 000 ordinary shares at N$ 1.25
each. An additional issue of ordinary shares at N$ 1.25 each. An additional issue of ordinary shares was
made during the same price to help finance the purchase of Land and Buildings, which were purchased to
expand the operations.

8. The carrying values of PPE were:

2018 2017
N$ N$
Land & Buildings 3,000,000.00 1,800,000.00

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 Equipment 782,000.00 820,000.00
3,782,000.00 2,620,000.00

9. Land and buildings were revalued for the first time during the current financial year. Equipment with
the cost price of N$ 80 000 and accumulated depreciation of N$ 62 000 was sold during the year and
replaced with new equipment. Equipment with a book value of N$ 16 000 was scrapped during the
financial year.

You are required to:

1. Prepare a statement of Cash Flow for Diamond Ltd for the year ended 30 September 2018 to conform
to the requirement of IAS 7 using direct method. Show all your workings. (25 marks)

2. Prepare the note reconcile the profit before tax to cash generated from operating activities.
(11 marks)
end of assignment 2

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