Question 1 (15 Marks)

1. Using the definition as per the Conceptual Framework for financial reporting, briefly explain how to prove that the following items are assets and /or liabilities:

1.1 Equipment (3 marks)

1.2 Provision for legal costs (3 marks)

1.3 Investment in shares (2 marks)

2. Casa Blanca Hotel operates a catering service specializing in business luncheons for large corporations around Okahandja. Casa Blanca Hotel requires customers to place their orders 2 weeks in advance of the scheduled events. Casa Blanca Hotel invoices its customers on the 10th of the month following the date of service and requires that payment be made within 30 days of the invoice date. According to the Conceptual Framework of financial reporting, when should Casa Blanca Hotel recognize revenue related to its catering service? (4 marks)

3. In January 2021, LES Trading Ltd doubled the amount of its outstanding shares by selling on the market an additional 10,000 shares to finance an expansion of the business. You propose that this information be shown by a note on the statement of financial position as at December 31, 2021. The Chief Executive Officer objects, claiming that this sale took place after December 31, 2021 and therefore should not be shown. Explain your position by making reference to the Conceptual Framework for financial reporting. (3 marks)