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Assignment 02 AFE3691 Question 1 (32 Marks) The following information was taken from the accounting records of Lilian Ltd. and is presented to you: Authorized share capital: 800 000 ordinary shares of N$ 1 each 500 000 preference shares of no par value( fixed annual dividend of 1Sc per share Balances on 01 October 20.9 N$ Ordinary share capital Preference share capital Redeemable preference share capital Share premium Retained earnings Revaluation reserve Asset replacement reserve Land The shares were issued as follows: 360 000.00 75 000.00 400 000.00 288 000.00 95 000.00 42 000.00 20 000.00 810 000.00 On 30 November 20.8, 360 000 ordinary shares were issued as N$ 1, 80 each and 200 000 redeemable preference shares were issued at N$ 2, 00 each. The redemption date has been established on the date the shares were issued. The preference shares were issued during January 20.7 at a price of N$ 1, 50 per share. Additional information: It was decided to convert the par value shares on 01 October 20.9 to be in line with the companies incorporated under the Companies Act 71 of 2008. On 01 July 20.10, 150 000 ordinary shares were offered to the public at N$ 2,00 each and 200 000 preference shares at N$ 2, 80 each. On the closing date of the applications on 31 July 20.10, applications for 160 000 ordinary shares and 180 000 preference shares were received. The maximum amount of shares was allotted and the unsuccessful applicants were refunded The following were provisional income tax payments, during the year, for the year ended 30 September 20.10 a) b) c) First payment N$ 75, 000.00 Page 13 of 18 Second payment N$ 90, 000.00 . d) The profit before tax for the year ending 30 September 20.10 amounts to N$ 700, 000.00. Provision needs to be made for income tax at a rate of 28% for companies. Assume that the accounting profit before tax was the same as taxable income. e) 125 000 redeemable preference shares were redeemed on 30 September 20.10 at N$ 2, 00.00 each. This was partly financed by issuing 70 000 preference shares on 30 September 20.10 at N$2, 40 each. The remainder of the redeemable preference shares will be redeemed on 30 September 20.13. f) On September 20.10, the directors decided to declare a divided of 20c per ordinary share to all shareholders that were in possession of shares on that date. The directors also decided to increase the asset replacement reserve with N$ 15 000.00. g) Land was revalued by a sworn appraiser at N$ 850, 000.00 You are required to: 1.1 Prepare the general journal of Lilian Ltd for points a, b and f above. ( 10 Marks) 1.2 Prepare the following accounts in the general ledger of Lilian Ltd for the year ended 30 September 2010: 1.2.1 Retained earnings account (4 Marks) 1.2.2 Income tax account ( 4 Marks) 1.2.3 Define taxable income (2 Marks) 1.3 Prepare the statement of changes in equity of Lilian Ltd for the year ended 30 September 20.10 in accordance with the Companies Act 28 of 2004 and IFRS. (12 Marks) Heinrich Bauer Stahl Ltd is a company that manufactures steel balance was extracted from the products. The following trial records of Heinrich Bauer Stahl on 31 December 2018. Balances Inventory at 1 January 2018: N$ Raw materials Finished goods Work in progress 6,800.00 12,200.00 Transactions Capital Drawings Sales Purchases of raw materials Carriage inwards Factory wages Office salaries Heinrich Bauer: salary and expenses Heating, lights and power for manufacturing Rent Factory insurance Advertising Bank Cash General expenses 30,000.00 4,000.00 180,000.00 36,000.00 1,600.00 37,000.00 33,800.00 20,800.00 5,000.00 7,500.00 1,900.00 2,800.00 7,200.00 650.00 Factory Office 2,400.00 1,500.00 1,300.00 Bad debts Discount received Carriage outwards Plant and machinery, at cost less depreciation Car, at cost less depreciation Trade receivables and payables 3,200.00 750.00 18,200.00 8,400.00 15.400.00 12,000.00 Balances Inventory at 31 December 2018 5,800.00 16,400.00 Raw materials Finished goods Work in progress Additional information: .Heating, lights and power for manufacturing as well as rent are to be apportioned: 4/5 Factory, 1/5 office. Factory insurance is to be apportioned:A Factory' % office . Heinrich Bauers' expenses and salary are to be regarded as selling expense and has sole use of the entity's vehicle. Depreciation for the year should be charged as follows: o Vehicle o Plant and Machinery N$ 3,000.00 N$ 1,000.00 Factory insurance paid in advance at 31 December 2017 was N$ 300.00 and office general expenses unpaid were N$ 150. You are required to: Prepare the following accounts in the general ledger of Heinrich Bauer Stahl Ltd: 1. 2. 3. 4. Raw material inventory (3 Marks) Factory overhead expenses (4 Marks) Finished goods and (3 Marks) Prepare a statement of profit or loss and other comprehensive income for the year ending 31 December 2018. ( 11 Marks) Question 3 (47 Marks) Part 1 (15 Marks) What is the difference between a public company and a private company? (2 Marks) Mention the most important aspects set out in the Memorandum of Incorporation MOI). (4 Marks) 1. 2. 3. List four rights of the shareholders.(4 Marks) 4. Explain the factors that determine the classification of redeemable preference shares as either an equity or liability (5 Marks) Part 2 (32 Marks) These balances were extracted from the books of Tembo Ltd as at 31 January 2018: Debit Credit Retained earnings (31 January 2018) Interest payable Long term loan Application and allotment Shareholders for ordinary dividends Stated share capital (2 000 000 ordinary shares) Preference share capital and shareholders for preference dividends are not known 12,994,000.00 175,312.50 2.250,000.00 2,691,000.00 30,000.00 4,000,000.00 Additional information: On 28 February 2018 Tembo Ltd issued 877 000 ordinary shares and applications worth N$ 60 000.00 were returned due to an oversubscription. Underwriting commission was not accrued in the in the previous final year and the underwriter was paid a commission of 2 %. Tembos accounting policy with respect to share issue costs is to minimize distributable reserves. The final dividend was paid on 03 February 2019. Tembo Ltd had issued 15 000, N$ 3, 6% cumulative preference shares on the 01 February 2016. Preference shares have never been issued at a premium and in case of preference shares declared they are then paid on 01 February. Furthermore, Tembo Ltd declared and paid an ordinary interim dividend of 7 cents per share on 15 February 2018 and declared a final dividend of N$ 0.05c per share on 30 January 2019 The first dividend ever to be paid by Tembo Ltd was the N$ 30 000.00 ordinary dividend of the prior year. The simple interest payable on the outstanding balance of the long term loan bears at 8.5%. The interest is payable annually on 28 February and the two capital repayments of NS Page 17 of 18 350 000 and N$ 400 000.00 were made on 31 June 2018 and 31 December respectively. The net profit in the statement of profit or loss and comprehensive income is N$ 3 827 000.00 for the year ended 31 January 2019. This is before any of the information above has been taken into account. You are required to: 1. Calculate the price at which each ordinary share was issued in the current year (4 Marks) 2. Prepare all journal entries relating to the share issue, to be processed in 2019 financial year. (4 Marks) 3. What does the accounting policy say on distributable reserves with relation to the underwriter commission? (3 Marks) 4. Calculate the dividends paid to ordinary shareholders during the year ended 31 January 2019. (4 Marks) 5. Calculate the dividends paid to preference shareholders during the year ended 31 January 2019. (4 Marks) 6. Calculate the Final net profit. (4 Marks) 7. Calculate the closing retained earnings. (6 Marks) 8. How would you determine the total asset value of Tembo Ltd? (3 Marks) Assignment 02 AFE3691 Question 1 (32 Marks) The following information was taken from the accounting records of Lilian Ltd. and is presented to you: Authorized share capital: 800 000 ordinary shares of N$ 1 each 500 000 preference shares of no par value( fixed annual dividend of 1Sc per share Balances on 01 October 20.9 N$ Ordinary share capital Preference share capital Redeemable preference share capital Share premium Retained earnings Revaluation reserve Asset replacement reserve Land The shares were issued as follows: 360 000.00 75 000.00 400 000.00 288 000.00 95 000.00 42 000.00 20 000.00 810 000.00 On 30 November 20.8, 360 000 ordinary shares were issued as N$ 1, 80 each and 200 000 redeemable preference shares were issued at N$ 2, 00 each. The redemption date has been established on the date the shares were issued. The preference shares were issued during January 20.7 at a price of N$ 1, 50 per share. Additional information: It was decided to convert the par value shares on 01 October 20.9 to be in line with the companies incorporated under the Companies Act 71 of 2008. On 01 July 20.10, 150 000 ordinary shares were offered to the public at N$ 2,00 each and 200 000 preference shares at N$ 2, 80 each. On the closing date of the applications on 31 July 20.10, applications for 160 000 ordinary shares and 180 000 preference shares were received. The maximum amount of shares was allotted and the unsuccessful applicants were refunded The following were provisional income tax payments, during the year, for the year ended 30 September 20.10 a) b) c) First payment N$ 75, 000.00 Page 13 of 18 Second payment N$ 90, 000.00 . d) The profit before tax for the year ending 30 September 20.10 amounts to N$ 700, 000.00. Provision needs to be made for income tax at a rate of 28% for companies. Assume that the accounting profit before tax was the same as taxable income. e) 125 000 redeemable preference shares were redeemed on 30 September 20.10 at N$ 2, 00.00 each. This was partly financed by issuing 70 000 preference shares on 30 September 20.10 at N$2, 40 each. The remainder of the redeemable preference shares will be redeemed on 30 September 20.13. f) On September 20.10, the directors decided to declare a divided of 20c per ordinary share to all shareholders that were in possession of shares on that date. The directors also decided to increase the asset replacement reserve with N$ 15 000.00. g) Land was revalued by a sworn appraiser at N$ 850, 000.00 You are required to: 1.1 Prepare the general journal of Lilian Ltd for points a, b and f above. ( 10 Marks) 1.2 Prepare the following accounts in the general ledger of Lilian Ltd for the year ended 30 September 2010: 1.2.1 Retained earnings account (4 Marks) 1.2.2 Income tax account ( 4 Marks) 1.2.3 Define taxable income (2 Marks) 1.3 Prepare the statement of changes in equity of Lilian Ltd for the year ended 30 September 20.10 in accordance with the Companies Act 28 of 2004 and IFRS. (12 Marks) Heinrich Bauer Stahl Ltd is a company that manufactures steel balance was extracted from the products. The following trial records of Heinrich Bauer Stahl on 31 December 2018. Balances Inventory at 1 January 2018: N$ Raw materials Finished goods Work in progress 6,800.00 12,200.00 Transactions Capital Drawings Sales Purchases of raw materials Carriage inwards Factory wages Office salaries Heinrich Bauer: salary and expenses Heating, lights and power for manufacturing Rent Factory insurance Advertising Bank Cash General expenses 30,000.00 4,000.00 180,000.00 36,000.00 1,600.00 37,000.00 33,800.00 20,800.00 5,000.00 7,500.00 1,900.00 2,800.00 7,200.00 650.00 Factory Office 2,400.00 1,500.00 1,300.00 Bad debts Discount received Carriage outwards Plant and machinery, at cost less depreciation Car, at cost less depreciation Trade receivables and payables 3,200.00 750.00 18,200.00 8,400.00 15.400.00 12,000.00 Balances Inventory at 31 December 2018 5,800.00 16,400.00 Raw materials Finished goods Work in progress Additional information: .Heating, lights and power for manufacturing as well as rent are to be apportioned: 4/5 Factory, 1/5 office. Factory insurance is to be apportioned:A Factory' % office . Heinrich Bauers' expenses and salary are to be regarded as selling expense and has sole use of the entity's vehicle. Depreciation for the year should be charged as follows: o Vehicle o Plant and Machinery N$ 3,000.00 N$ 1,000.00 Factory insurance paid in advance at 31 December 2017 was N$ 300.00 and office general expenses unpaid were N$ 150. You are required to: Prepare the following accounts in the general ledger of Heinrich Bauer Stahl Ltd: 1. 2. 3. 4. Raw material inventory (3 Marks) Factory overhead expenses (4 Marks) Finished goods and (3 Marks) Prepare a statement of profit or loss and other comprehensive income for the year ending 31 December 2018. ( 11 Marks) Question 3 (47 Marks) Part 1 (15 Marks) What is the difference between a public company and a private company? (2 Marks) Mention the most important aspects set out in the Memorandum of Incorporation MOI). (4 Marks) 1. 2. 3. List four rights of the shareholders.(4 Marks) 4. Explain the factors that determine the classification of redeemable preference shares as either an equity or liability (5 Marks) Part 2 (32 Marks) These balances were extracted from the books of Tembo Ltd as at 31 January 2018: Debit Credit Retained earnings (31 January 2018) Interest payable Long term loan Application and allotment Shareholders for ordinary dividends Stated share capital (2 000 000 ordinary shares) Preference share capital and shareholders for preference dividends are not known 12,994,000.00 175,312.50 2.250,000.00 2,691,000.00 30,000.00 4,000,000.00 Additional information: On 28 February 2018 Tembo Ltd issued 877 000 ordinary shares and applications worth N$ 60 000.00 were returned due to an oversubscription. Underwriting commission was not accrued in the in the previous final year and the underwriter was paid a commission of 2 %. Tembos accounting policy with respect to share issue costs is to minimize distributable reserves. The final dividend was paid on 03 February 2019. Tembo Ltd had issued 15 000, N$ 3, 6% cumulative preference shares on the 01 February 2016. Preference shares have never been issued at a premium and in case of preference shares declared they are then paid on 01 February. Furthermore, Tembo Ltd declared and paid an ordinary interim dividend of 7 cents per share on 15 February 2018 and declared a final dividend of N$ 0.05c per share on 30 January 2019 The first dividend ever to be paid by Tembo Ltd was the N$ 30 000.00 ordinary dividend of the prior year. The simple interest payable on the outstanding balance of the long term loan bears at 8.5%. The interest is payable annually on 28 February and the two capital repayments of NS Page 17 of 18 350 000 and N$ 400 000.00 were made on 31 June 2018 and 31 December respectively. The net profit in the statement of profit or loss and comprehensive income is N$ 3 827 000.00 for the year ended 31 January 2019. This is before any of the information above has been taken into account. You are required to: 1. Calculate the price at which each ordinary share was issued in the current year (4 Marks) 2. Prepare all journal entries relating to the share issue, to be processed in 2019 financial year. (4 Marks) 3. What does the accounting policy say on distributable reserves with relation to the underwriter commission? (3 Marks) 4. Calculate the dividends paid to ordinary shareholders during the year ended 31 January 2019. (4 Marks) 5. Calculate the dividends paid to preference shareholders during the year ended 31 January 2019. (4 Marks) 6. Calculate the Final net profit. (4 Marks) 7. Calculate the closing retained earnings. (6 Marks) 8. How would you determine the total asset value of Tembo Ltd