QUESTION4 Diagnostics Ltd is a key supplier of medical equipment to hospitals and other health facilities. Diagnostics was incorporated under the Cempanies Act of 2004 in 2012, and is a registered VAT vendor, Al its suppliers are also VAT vendors and VAT is calculated at a rate of 15%. The following infomation was extracted from the records of Dlagnostics Ltd for the reporting porlod ended 31 March 2016. (26 MARKS) Note Dr Cr 12 500 000 Sales Cost of sales Employee benefit expense Dividend income from subsidiary 5 850 000 1720 000 540 000 135 000 Interest income Finance costs Auditors remuneration Other expenses Property, plant and equipment Accumulated depreciation (01 April 2015) Investment in subsidiary Trade recelvables 2010 -278000 224 000 785 000 235 000 9 351 000 5 480 000 4 230 000 5 670 000 2 578 000 8 244 000 2- 3 Inventories Cash and cash equivalents Trade and other payables 2 535 000 Page 5 of7 195 000 Namibian Revenue Service (ROR) Long term borrowings Share capital Retained eamings (01 April 2015) 1 900 000 12 500 000 3 214 000 6. 39 082 000 39 082 000 The following transactions have not yet been recorded: 1. Property, plant and equipment The total depreciation expense for the current reporting period was correctly calculated as N$ 1 207 000 (plant N$902 000 and vehicles N$305 000). An impairment test (subsequent to the calculation of depreciation) revealed that plant with a carrying value of N$2 758 000 has a recoverable amount of N$2 000,000 A vehicle with a cost of N$450 000 and accumulated depreciation of N$145 000 (up to the date of the theft) was stolen during the year. The insurer paid N$330,600 on the claim. Another vehicle with a carrying value of N$325 000 was sold to a second hand dealer for N$402 500 (including VAT) 2. Trade receivables A debt of NS79 800 owed by Vanish Ltd was deemed as irrecoverable. The finance director authorized the write off. Furthermore, after reviewing the rest of the receivables, it was decided that the allowance for doubtful debts should be increased by N$185 000. 3. Inventories A physical stock count on 31 March 2016 revealed that inventory with a cost of N$450 000, had a net realisable value of N$375 000. In addition, it was also discovered that inventory with a cost of N$83 000 was missing 4. Cash and cash equivalents The bank statement for March 2016 was received on 1 April which reflected bank charges of N$1 710 and interest income of N$1 200 that still had to be recorded 5. Long-term borrowings The accountant of Diagnostics Ltd prepared the following amor ization table for a loan that was obtained from First National Bank (FNB) during the year. The loan attracts interest at 8% per annum and is secured by a building with a carrying value of N$2 100 000. The instalment due on 31 March 2016 has been paid on time. Page 6 of 7 Instalment Interest Amortised cost Date NS NS NS 01 April 2015 31 March 2016 31 March 2017 31 March 2018 31 March 2019 31 March 2020 475 867 475 867 475 867 475 867 475 867 152 000 126 091 98 108 67 888 35 249 1 900 000 1 576 133 1 226 356 848 597 440 618 6. Share Capital The issued share capital comprises 100 000 ordinary shares issued at N$100 each and 250 000 5% preference shares issued at N$10 per share. On 1 December 2015, an additional 100 000 ordinary shares were issued at N$105 each and were paid for on the same date. On the same date, an additional 100 000 5% preference shares were issued at N$10 per share. Payment was received on the same day. A dividend of 30 cents per ordinary share was declared on 31 March 2016. 7. Income Tax The income tax expense for the year was correctly calculated as N$664 557 REQUIRED a) Present only the statement of profit or loss for the reporting period ended 31 March 2016 in compliance with IFRS. (25)