Question 3 (50 marks) The following information is available for Heritage Limite
ID: 2429447 • Letter: Q
Question
Question 3 (50 marks)
The following information is available for Heritage Limited:
1. The reporting period of Heritage Ltd ends on 30 June of every year.
The following balances are available as at 30 June 20x8
Land and building at cost 400 000
Accumulated depreciation on buildings at 01/07/20x7 12 000
Furniture at cost 80 000
Accumulated depreciation as at 01/07/20x7 10 000
Vehicles at cost 300 000
Accumulated depreciation as at 01/07/20x7 60 000
Investments as at 01/07/20x7 34 000
Bank 96 700
Trade and other receivables 20 000
Ordinary share capital 275 000
Preference share capital 280 000
Retained earnings as at 01/07/20x7 7 000
Replacement reserves 58 250
10% Bank loan 100 000
Payables 33 500
Additional information:
1. 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 20x6, 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.
2. Furniture and vehicles were purchased on 01 July 20x6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on
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vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year still need to be done.
3. The value of the investments is valued at N$ 42 000 as at 30 June 20x8
4. Inventories consist as at 01 June 20x8 amounted to N$ 22 000. Inventories are measured at lower of cost (FIFO) and net realisable value.
5. Authorised share capital for Heritage Ltd is 400 000 ordinary shares at N$ 1,10 each and 200 000 8% preference shares at N$ 1,75 each. The company had already issued 250 000 ordinary shares at N$ 275 000 and 160 000 preference shares at N$ 280 000. The company had issued 25 000 shares at N$ 2,00 during the year. Preference share capital form part of equity.
6. 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.
7. Payables consist of the following:
Trade payables 6 000
Namibian company tax 3 000
Dividend payable 24 500
8. Profit for the year amounted to N$ 60 000.
9. On 30 March 20x8 a new vehicle with a cost price of N$ 55 000 was purchased for use in the delivery of goods to customers.
10. At 30 June 20x8, inventory worth N$ 4 000 were stolen.
Required:
1.1 Prepare the statement of financial position as at 30 June 20x8 to comply with the requirements of IFRS and Companies Act,
1.2 Prepare the following notes to accompany the financial statements and to comply with IFRS and Companies Act:
? Basis of presentation
? Statement of significant accounting policies
? Property, plant and equipment
? Financial assets
? Inventories
? Share capital and
? Non-current liabilities as at 30 june20x8; and
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1.3 The statement of changes in equity for the year ended 30 June 20x8 for Heritage Ltd to comply with the minimum requirements of the Companies Act of 2008 and International Financial Reporting Standards (IFRS). Comparative figures are required were necessary
Explanation / Answer
The First preparing depreciation schedule as follows:
1
2
3
4
5
6
7
8
Assets
Method
Rate of Dep
2006 June
Depn 2006-07
WDV 2007
Dep 2007-08
WDV 2008
Dep 2007-08
WDV
Accumulated Dep= 2+4+6 Column
Land
1,00,000
-
1,00,000
-
1,00,000
-
1,00,000
-
Building
SLM
4%
3,00,000
12,000
2,88,000
12,000
2,76,000
12000
2,64,000
36,000
Furniture
On Cost
12.50%
80,000
10,000
70,000
10,000
60,000
10,000
50,000
30,000
Vehicles
WDV
20%
3,00,000
60,000
2,40,000
48,000
1,92,000
38,400
1,53,600
1,46,400
New Vehicle Purchased
20%
-
-
-
-
55000
2,750
52,250
2,750
Now that we have prepared depreciation schedule, we may prepare our trial balance. Refer to working notes as stated below, this will help you to know from where we have found a particular figure:
Particulars
Opening Value
Closing Value
Notes
Accumulated depreciation on buildings at 01/07/20x7
12,000
36,000
Refer Working Note 1
Land and building at cost
4,00,000
4,00,000
Refer Working Note 1
Furniture at cost
80,000
80,000
Refer Working Note 1
Opening
Accumulated depreciation as at 01/07/20x7
10,000
30,000
Refer Working Note 1
Vehicles at cost
3,00,000
355000
Refer Working Note 1
Accumulated depreciation as at 01/07/20x7
60,000
1,49,150
Refer Working Note 1
Investments as at 01/07/20x7
34,000
42000
Given
Bank
96,700
41,700
=96700 less 55000 on purchase of New Vehicle
Trade and other receivables
20,000
20,000
Ordinary share capital
2,75,000
775000
Refer Statement of Changes in Equity
Preference share capital
2,80,000
280000
Refer Statement of Changes in Equity
Retained earnings as at 01/07/20x7
7,000
67000
Refer Statement of Changes in Equity
Replacement reserves
58,250
58,250
Refer Statement of Changes in Equity
10% Bank loan
1,00,000
1,00,000
Payable
Trade Payables
6,000
6,000
Payable
Tax Payable
3,000
3,000
Payable
Dividend Payble
24,500
24,500
Inventories
18000
FIFO, NRV whichever is lower
Profit for the year
60,000
Now, have a look at statement of changes in equity, which has been asked in question:
Statement of Changes in Equity
Number
Opening Balance
Additions during the Year
Closing Balance
Ordinary Shares issued
2,50,000
2,75,000
5,00,000
7,75,000
Preference Share
1,60,000
2,80,000
-
2,80,000
Profit during the Year
60,000
60,000
Retained Earnings
7,000
-
7,000
Replacement Reserves
58,250
-
58,250
AStatement of Changes in equity shows Movement in Shareholder'sfunds during Year. We have not made adjustment of Dividend payable as same has not been paid yet.
1
2
3
4
5
6
7
8
Assets
Method
Rate of Dep
2006 June
Depn 2006-07
WDV 2007
Dep 2007-08
WDV 2008
Dep 2007-08
WDV
Accumulated Dep= 2+4+6 Column
Land
1,00,000
-
1,00,000
-
1,00,000
-
1,00,000
-
Building
SLM
4%
3,00,000
12,000
2,88,000
12,000
2,76,000
12000
2,64,000
36,000
Furniture
On Cost
12.50%
80,000
10,000
70,000
10,000
60,000
10,000
50,000
30,000
Vehicles
WDV
20%
3,00,000
60,000
2,40,000
48,000
1,92,000
38,400
1,53,600
1,46,400
New Vehicle Purchased
20%
-
-
-
-
55000
2,750
52,250
2,750
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