QUESTION 5 (15 Marks)

Sweety Haven (Pty) Ltd (Sweety Haven) is a company which manufactures sweets and chocolates.

The following is an extract from the trial balance of Sweety Haven for the year ended 31 December 2021:

Credit (N$)

Ordinary share capital (1 million shares) 1 250 000

12% redeemable cumulative preference shares (187 500 shares) 393 750

Retained earnings 287 500

Revaluation surplus reserve 715 005

General reserve 187 333

Bank overdraft 75 000

Additional information:

1. Sweety Haven has the following authorised share capital:

2 500 000 Ordinary shares of no par value; and

250 000 12% redeemable preference shares of no par value

2. On 01 July 2021, the company decided to convert the ordinary shares of no par value shares into ordinary shares having a par value of N$ 1.20 each.

3. The preference shares were issued on 1 January 2016 at N$2 each, and are redeemable at the option of the shareholders on 31 December 2021 at a premium of 10 cents. The shareholders elected to have their preference shares redeemed on this date at N$2.10 per share. The redemption should be financed as follows:

o As many ordinary shares at an issue price of N$1.25 each as are necessary to have sufficient cash for the redemption;

o 250 debentures of N$250 each;

o The directors are satisfied that the companys assets, fairly valued, exceed the liabilities and that the company will be able to pay its debts as they become due;

o The dividends on the preference shares are to be paid by extending the existing bank overdraft;

o Share issue costs amount to N$22 500. These costs are to be paid by extending the bank overdraft.

4. At year-end, the directors declared ordinary dividends for the year at 30 cents per share. This must still be accounted for in the records of Sweety Haven.

5. The share issue expenses should be written off against the share premium account.

6. The profit before tax amounted to N$ 1 715 333. A tax rate of 30% on companies is applicable.

REQUIRED: Prepare the statement of changes in equity of Sweety Haven for the year ended 31 December 2021 to comply with the requirements of IFRS