Question 1 (25 Marks: 50 minutes)

VIRTUAL AIR (PTY) LTD is a small company which, because of its aggressive advertising campaigns, has a significant profile. The company is engaged in the manufacturing of gas filled hot air balloons. At 31 December 2020 (the companys yearend is 31 December) the following trial balance was extracted from its books:

Accounts Details	Debit	Credit
Bank overdrafts		7 266
Furniture and office equipment at cost	19 725
Listed investment at cost	5 120
Loan secured by notarial bond		125 000
Loose tools, valuation	3 260
Accumulated depreciation: Fixtures and office equipment		6 225
Provisional tax paid	11 200
Unlisted investments	2 260
Retained income		51 163
Stated capital (Authorised share capital of 500 000 share of no par value)		193 621
Inventories	280 473
Accounts payable		123 439
Vehicle at cost	25 620
Accumulated depreciation : vehicles		10 250
Accounts receivable	197 747
	519 803	519 803

Most of the closing entries had been passed already. You are able to ascertain that: o The following depreciation rates are applicable:

o Furniture and office equipment-10% on the straight line method o Vehicles- 25% on the straight line method

o The listed investment were acquired for speculative purposes.

o Inventory are valued at lower of cost and net realisable value on a FIFO basis

o An interim dividend of N$ 5 000 was declared and paid on 01 October 2020 and a final dividend of N$ 5 000 was declared on 30 December 2020. This dividend will be paid on 18 January 2021.

o Normal taxation amounted to N$23 441.

o The loan of N$ 125 000 is to be repaid in five (5) years time and is secured by a notarial bond.

REQUIRED:

1. Prepare the statement of financial position for VIRTUAL AIR (PTY) LTD as at 31 December 2020 to comply with the requirements of IFRS and Companies Act. (10 marks)

2. Prepare the following accounting policies and notes to comply with the requirements of IFRS and Companies Act to accompany the financial statements with regard to: (15 marks)

2.1 Property, plant and equipment

2.2 Long-term borrowings

2.3 Inventories

2.4 Listed investments