Question 3 (30 marks) You are a newly appointed auditor of Otjamuise Led and have been presented with this statement of financial position Otjomulise Led Statement of financial position as at 30 September 2018 NS 2018 ASSETS Non-current assets PPE 950,000.00 15,000.00 Long term loans to employees Investments/financial assets Total non-current assets 340,000.00 1,305,000.00 Current assets 320,000.00 Inventory Trade receivables 200,000.00 Taxation 55.000.000 Cash and cash equivalents Sundry expenditure: 5,000.00 12,000.00 Preliminary expenses Ordinary share issue expenses Preference share issue expenses Underwriters commission on preference shares Total current as 10,000.00 9,000.00 14,000.00 685,000.00 TOTAL ASSETS 1,990,000.00 EQUTY AND LIABILITIES Equity Page 15 of 27 Ordinary share capital and share premium 1,030,000.00 Non-distributable reserve 100,000.00 Preference share capital and share premium 242,000.00 Retained eaming 190,000.00 Total equity 1,562,000.00 Non-current liabilities Mortgage debentures 58,000.00 Total non-current liabilities 58,000.00 Current liabilities Trade payables 255,000.00 Bank overdraft 35,000.00 Shareholders for dividends 80,000.00 370,000.00 Total current liabilities TOTAL EQUITY AND LIABILITIES 1.990,000.00 Page 16 of 27 Otjomuise Ltd Notes to the financial statements of 30 September 2018 1. Accounting policies Property, plants and equipment Land and building are valued at cost and land is not depreciated. Buildings are depreciated over the useful life on the straight-line method. Plant and machinery and vehicles are valued at cost and are depreciated on the reducing balance method to their residual value over the expected useful lives of the assets. Inventory Inventory is valued at the lower of cost and net realisable value on FIFO basis. 2. Share capital 2018 Authorised 1 000 000 ordinary shares @ N$ 2 each 80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual dividend of 12c/share) 50 000 redeemable preference shares @ N$ 2.50 each (fixed annual dividend of 14c/share) 1,000,000.00 Issued 500 000 ordinary shares @ N$ 2 each 80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual dividend of 12c/share) 240,000.00 1,240,000.00 The redeemable cumulative preference shares are redeemable at the option of the company since 01 December 2018 as a premium of N$ 0.30c/share. Page 17 of 27 340,000.00 Additional information: The minutes of various directors' meeting revealed the following information: Otjomuise Ltd at the moment has a court case with a potential claim of N$ 250 000 against them. No provision has been made in the accounting records as the directors are hopeful that they with emerge victorious in the case. A contract was signed with a South African company to acquire Plant and machinery at a cost of N$ 320 000. A further acquisition of Plants valued at N$ 70 000 was approved by the directors. It was then decided at the board of directors meeting of Otjomuise Ltd held on 03 October 2018; To redeem the 12% cumulative preference shares of the company on 30 November 2018 To finance this redemption partly by the issue of the maximum number of 14% redeemable preference shares at a premium of 20% (The company will not be able to issue these shares at a higher premium). To pay the backlog in the cumulative preference dividends, last provided for on 30 September 2018 To convert the authorized ordinary shares of par value into ordinary shares on no par value on 31 December 2018. To write off all deferred expenditure in the accounting records immediately before the conversion of par value to par value shares. Share issue expenses amounting to N$ 5 000 have been incurred. You are required to: 1. In point form, list all the items in the above draft statement of financial position that do not comply with the minimum disclosure requirements of the Companies Act and IFRS. NB: provide full details of minimum disclosure requirements. (20 marks) Page 19 of 27 The directors have the authority to issue the balance of the un-issued shares until the nest annual general meeting. Non-distributable reserves 3. Asset replacement reserve Revaluation reserve 2018 60,000.00 40,000.00 100,000.00 Mortgage bond 2018 58,000.00 15% mortgage bond Repayable in monthly instalments of N$ 745.00 5. Property, plants and equipment Accumulated depreciation Land Buildings Plant and machinery Vehicles Cost or valuation 395,000.00 100,000.00 570,000.00 155,000.00 1,220,000.00 50,000.00 240,000.00 60,000.00 300,000.00 20,000.00 Carrying value 395,000.00 100,000.00 330,000.00 95,000.00 920,000.00 30,000.00 Financial assets 1,270,000.00 320,000.00 950,000.00 6. Investments 2018 180,000.00 82,000.00 Listed 100 000 shares in Trutsco Ltd ( market value NS 300 000) Shares in Etosha transport Ltd (market value N$ 60 000) Unlisted 10 000 shares in Dinapama Ltd 5 000 shares in Etambi (Pty) Ltd 18 / 27 68,000.00 10,000.00 Page 18 of 27 2. Prepare the Equity section of a statement of financial position as at 31 December 2018, after the implementation of the decisions taken by the directors on 03 October 2018. Do ignore the results of trading for the three months ended 31 December 2018. Calculations are mandatory and notes to the statement of financial position are not required. (10 marks) THE END OF ASSIGNMENT 1 20 / 27 Page 20 of 27 Question 3 (30 marks) You are a newly appointed auditor of Otjamuise Led and have been presented with this statement of financial position Otjomulise Led Statement of financial position as at 30 September 2018 NS 2018 ASSETS Non-current assets PPE 950,000.00 15,000.00 Long term loans to employees Investments/financial assets Total non-current assets 340,000.00 1,305,000.00 Current assets 320,000.00 Inventory Trade receivables 200,000.00 Taxation 55.000.000 Cash and cash equivalents Sundry expenditure: 5,000.00 12,000.00 Preliminary expenses Ordinary share issue expenses Preference share issue expenses Underwriters commission on preference shares Total current as 10,000.00 9,000.00 14,000.00 685,000.00 TOTAL ASSETS 1,990,000.00 EQUTY AND LIABILITIES Equity Page 15 of 27 Ordinary share capital and share premium 1,030,000.00 Non-distributable reserve 100,000.00 Preference share capital and share premium 242,000.00 Retained eaming 190,000.00 Total equity 1,562,000.00 Non-current liabilities Mortgage debentures 58,000.00 Total non-current liabilities 58,000.00 Current liabilities Trade payables 255,000.00 Bank overdraft 35,000.00 Shareholders for dividends 80,000.00 370,000.00 Total current liabilities TOTAL EQUITY AND LIABILITIES 1.990,000.00 Page 16 of 27 Otjomuise Ltd Notes to the financial statements of 30 September 2018 1. Accounting policies Property, plants and equipment Land and building are valued at cost and land is not depreciated. Buildings are depreciated over the useful life on the straight-line method. Plant and machinery and vehicles are valued at cost and are depreciated on the reducing balance method to their residual value over the expected useful lives of the assets. Inventory Inventory is valued at the lower of cost and net realisable value on FIFO basis. 2. Share capital 2018 Authorised 1 000 000 ordinary shares @ N$ 2 each 80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual dividend of 12c/share) 50 000 redeemable preference shares @ N$ 2.50 each (fixed annual dividend of 14c/share) 1,000,000.00 Issued 500 000 ordinary shares @ N$ 2 each 80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual dividend of 12c/share) 240,000.00 1,240,000.00 The redeemable cumulative preference shares are redeemable at the option of the company since 01 December 2018 as a premium of N$ 0.30c/share. Page 17 of 27 340,000.00 Additional information: The minutes of various directors' meeting revealed the following information: Otjomuise Ltd at the moment has a court case with a potential claim of N$ 250 000 against them. No provision has been made in the accounting records as the directors are hopeful that they with emerge victorious in the case. A contract was signed with a South African company to acquire Plant and machinery at a cost of N$ 320 000. A further acquisition of Plants valued at N$ 70 000 was approved by the directors. It was then decided at the board of directors meeting of Otjomuise Ltd held on 03 October 2018; To redeem the 12% cumulative preference shares of the company on 30 November 2018 To finance this redemption partly by the issue of the maximum number of 14% redeemable preference shares at a premium of 20% (The company will not be able to issue these shares at a higher premium). To pay the backlog in the cumulative preference dividends, last provided for on 30 September 2018 To convert the authorized ordinary shares of par value into ordinary shares on no par value on 31 December 2018. To write off all deferred expenditure in the accounting records immediately before the conversion of par value to par value shares. Share issue expenses amounting to N$ 5 000 have been incurred. You are required to: 1. In point form, list all the items in the above draft statement of financial position that do not comply with the minimum disclosure requirements of the Companies Act and IFRS. NB: provide full details of minimum disclosure requirements. (20 marks) Page 19 of 27 The directors have the authority to issue the balance of the un-issued shares until the nest annual general meeting. Non-distributable reserves 3. Asset replacement reserve Revaluation reserve 2018 60,000.00 40,000.00 100,000.00 Mortgage bond 2018 58,000.00 15% mortgage bond Repayable in monthly instalments of N$ 745.00 5. Property, plants and equipment Accumulated depreciation Land Buildings Plant and machinery Vehicles Cost or valuation 395,000.00 100,000.00 570,000.00 155,000.00 1,220,000.00 50,000.00 240,000.00 60,000.00 300,000.00 20,000.00 Carrying value 395,000.00 100,000.00 330,000.00 95,000.00 920,000.00 30,000.00 Financial assets 1,270,000.00 320,000.00 950,000.00 6. Investments 2018 180,000.00 82,000.00 Listed 100 000 shares in Trutsco Ltd ( market value NS 300 000) Shares in Etosha transport Ltd (market value N$ 60 000) Unlisted 10 000 shares in Dinapama Ltd 5 000 shares in Etambi (Pty) Ltd 18 / 27 68,000.00 10,000.00 Page 18 of 27 2. Prepare the Equity section of a statement of financial position as at 31 December 2018, after the implementation of the decisions taken by the directors on 03 October 2018. Do ignore the results of trading for the three months ended 31 December 2018. Calculations are mandatory and notes to the statement of financial position are not required. (10 marks) THE END OF ASSIGNMENT 1 20 / 27 Page 20 of 27