Question 1 30 Marks The following are the financial statements of the Pessy Ltd group for the year ending 31 December 2014. PESSY LTD NS SESSY LTD NS ASSETS Property, plant and equipment Investment in Sessy Ltd at fair value Trade receivables Total assets 1 125 000 226 000 760 000 148 000 1134 000 175 000 1 300 000 EQUITY AND LIABILITIES Share capital (180 000/220 000 shares) 180 000 220 000 Mark-to-market reserve 40 000 Retained earnings: Balance on 1 January 2014 684 000 580 000 Profit for the year 230 000 200 000 Gain on sale of land and buildings 300 000 Total equity and liabilities 1 134 000 1 300 000 Notes 1. Pessy Ltd paid N$720 000 for an 80% interest in Sessy Ltd on 1 January 2012 when the owner's equity of the latter comprised the following: Share capital $220 000 Retained eamings $350 000 On the acquisition date, Pessy Ltd valued the land and buildings of Sessy Ltd, with carrying amount of N$ 500 000 at N$ 700 000. This revaluation was not recorded in the books of Sessy Ltd. 2. Pessy Ltd classified the equity investment in Sessy Ltd under IFRS 9 in its separate financial statemer and recognized fair value adjustments in a mark-to-market reserve. 3 The fair value adjustment of N$ 40 000 was made in the current year. I 4. Pessy Ltd elected to measure the non-controlling interests in the acquire at their proportionate share of the acquiree's identifiable net assets at the acquisition date. 5. During 2014, Sessy Ltd sold the land and buildings referred to above for NS 800 000. REQUIRED Prepare the consolidated financial statements of the Pessy Ltd group for the year ending 31 December 2014. The consolidated statement of profit or loss and other comprehensive income should be included. Show all your workings. Pro-forma journals are not required Question 2 (20 Marks) You are the accountant of Khomas Ltd, the holding company of a diversified group with various affiliations in commerce and industry. The financial year-end of the company is 30 June 2015 and the financial statements were presented to the board of directors on 5 September 2015 for final approval. The following events have taken place: 1 On 3 July 2015 the company acquired 4 000 000 shares at 735 cents each in Caprivi Ltd, a listed cash shell. This share-holding represents 75,73% of the total issued share capital of the company. Caprivi Ltd is listed under the financial services sector of the Namibian Stock Exchange and its main asset is N$ 41 million in cash, of which N$ 8 million is due to preference shareholders. According to stock exchange regulations regarding cash shells, the company has six months in which to acquire suitable assets in order to retain its listing. Caprivi Ltd is presently examining a number of alternatives in this regard. Khomas Ltd made an offer to the minority shareholders of Caprivi Ltd of 735 cents per share for all or a portion of their ordinary shares. The offer expired on 12 August 2015. 2. Timothy Hafeni resigned as director with effect from 1 August 2015. 3. On 2 August 2015 the company sold a large non controlling interest in Omaheke Ltd. The investment in this company was included in unlisted investments in subsidiaries at cost at 30 June 2015. 4. On 2 September 2015 a N$2 million claim had been instituted against one of the companies in the group for an alleged infringement of patent rights. The directors are convinced that the claim is malicious, but nevertheless the company's legal advisers have been instructed to investigate the possibility of the claim being successful. 5. Erongo Ltd was granted an unlimited guarantee on 20 July 2015 for the use of the Schlip railway siding for which the group will make good any operating loss until 1 January 2025. The research department of Khomas Ltd developed a product during June 2015 that willrovide a exceptional contribution to profits in future. 6. REQUIRED: a. Identify each of the above-mentioned situations as an adjusting or non-adjusting event. If it is not applicable, state the fact, and discuss the reason for every conclusion. (6) Briefly discuss the effect of the events on the financial statements of Khomas Ltd at 30 June 2015. (14) b. Assume that all amounts are material and that the company is a going concern notwithstanding the effect of the above events on the financial statements. Question 3 30 Marks Omaheke Limited's share capital as at 01 January 2014 was as follows: 500 000 ordinary shares issued at N$0.50 each 200 000 8% non cumulative non-redeemable preference shares issued at N$2 each On 30 September 2014, the company announced a rights issue of 1 ordinary share for every 4 shares held at a price of N$2.20. The market price at this date was N$2.50. All the shareholders took up the offer on this date. The results of operations of Omaheke Limited are as follows: OMAHEKE LIMITED RESULTS OF OPERATIONS FOR THE YEAR ENDED 31 DECEMBER 2014 2014 NS Profit before tax Income tax expense Profit for the period Ordinary dividend declared Preference dividend declared Retained earnings for the year Retained earnings beginning of the year Retained earnings - end of the year 750 000 (400 000) 350 000 (40 000) (32 000) 278 000 568 000 846 000 2013 NS 730 000 (300 000) 430 000 (30 000) (32 000) 368 000 200 000 568 000 REQUIRED a) Calculate the earnings per share and dividend per share (13) b) Prepare the earnings per share and dividend per share note for inclusion in the notes to the financial statements for the year ending 31 December 2014 (4) c) Prepare an extract of the statement of changes in equity for the year ending 31 December 2014. (13) Comparatives are required Question 4 20 Marks a) What are the two measurement models allowed for investment properties? (2) b) List the four scenarios under which a transfer may be made into investment property or from investment property from/to another asset (8) c) When is a property allowed to be transferred from investment property to inventory? (2) d) ABC Ltd a property developer, acquired a fixed property on 1 January 2015 at a cost of N$1 000 000, with the intention to develop and sell it at a profit. On 1 April 2015, when the fair value of the property was N$ 1 040 000, ABC Ltd however entered into an agreement to lease the property to XYZ Ltd in terms of an operating lease, for a period of two years. The fair value of the property amounted to N$1 060 000 on 31 December 2015 (year end). ABC Ltd accounts for investment property at fair value. Show journal entries to record the above transactions. Journal narrations are not required (8) THE END