FACULTY OF COMMERCE, MANAGEMENT AND LAW Question 3 (35 Marks) Here are the financial statements of Premier Suites Ltd on 31 December 2020 Premier Suites Ltd Abridged Statement of profit or loss& other Comprehensive Income for the year ended 31 December 2020 Revenue Cost of Sales Operating profit before taxation Income tax expense Profit for the Year Notes 2020 239 000 (194 000) 45 000 (9 500) 35 500 Premier Suites Ltd Statement of Financial position as at 31 December 2020 Notes 2020 ASSETS Non-current assets 6 Current assets 2021 316 200 281 000 93 000 34 000 Inventories Account receivables Cash and cash equivalents TOTAL ASSETS 7 61 300 28 000 8 25 800 6000 409 200 315 000 EQUITY AND LIABILITIES | Capital and reserves 381 000 192 500 Ordinary share capital (400 000 ordinary shares) 2 214 000 105 000 Non-distributable reserve: Profit on sale of land 6 000 Distributable reserve: General reserve Retained earnings Preference share capital (100 000 6 % convertible preference shares) Non-current liabilities 8% mortgage debentures 50 000 30000 11 000 17 500 100 000 40 000 0 100 000 Current liabilities Accounts payable Bank overdraft Shareholders for dividends TOTAL EQUITY AND LIABILITIES 3 28 200 24 200 100 000 22.500 17 400 0 2100 4 000 3000 409 200 315 000 FACULTY OF COMMERCE, MANAGEMENT AND LAW Premier Suites Ltd Notes to the financial statements for the year ended 31 December 2020 6. Cost Property, Plant and Equipment Accumulated depreciation Carrying value 2020 2019 2020 2019 2020 2019 19 Land and buildings 268 100 Plant and machinery Vehicles: 58 700 242 100 34 000 11 600 18 000 18 000 9 000 Furniture and fittings 5000 349 800 5.000 3 000 4 500 2000 37 100 9 000 242 100 22 400 13 500 299 100 33 600 18 100 316 200 3000 281 000 Premier Suites Ltd Statement of changes in equity for the year ended 31 December 2020 Ordinary Share capital Preferenc e share capital Profit on expropria tion of land General Retained reserve earnings Total Balance at 1 January 2020 105 000 40 000 30 000 Profit for the year Dividends declared 17 500 35 500 (16 000) New shares issued Profit on sale of land Share issue expenses Inter-reserve transfer Balance 31 December 2020 110 000 60 000 192 500 35 500 (16 000) 170 000 6000 (6 000) (1.000) (1 000) 214 000 100 000 6 000 20 000 50 000 (20 000) 11 000 381 000 Additional information: 1 Favorable market conditions enabled the company to place 200 000 ordinary shares privately with institutional investors at 55c per share and also to issue 60 000 6% preference shares to the public at N$1 per share. The issue of new shares was to redeem the mortgage debentures The company paid share issue expenses of N$1 000 and this amount was written off at 31 December 2020. 2. The company had sold a small plot in December 2020. The cost of the land disposed of was N$4 000 (No other fixed assets were sold or scrapped during the year) 3. Included in the profit before taxation is interest paid of N$5 400, and interest received of NS 1300. 4. Dividends declared consists of: . Ordinary dividends. N$10 000 Preference dividends NS 6000 FACULTY OF COMMERCE, MANAGEMENT AND LAW REQUIRED: 3.1 MARKS Prepare a statement of Cash Flow of Premier Sultes Ltd for the year ended 31 December 2020 to comply with the requirements of IAS 7. Using the direct method. 25 3.2 Prepare the following notes to comply with the requirements of IAS 7 and Companies Act 24 of 2008: 3.2.1 Reconciliation of the profit before tax to cash generated from operating activities. TOTAL 3.2.2 Accounting policy and notes for cash and cash equivalent 35 20