You are a newly appointed auditor of Otjomuise Ltd and have been presented with this statementof financial position.

Otjomuise Ltd

Statement of financial position as at 30 September 2018

N$

ASSETS

Non-current assets

PPE 950,000.00

Long term loans to employees 15,000.00

Investments/ financial assets 340,000.00

Total non-current assets 1,305,000.00

Current assets

Inventory 320,000.00

Trade receivable 260,000.00

Taxation 55,000.00

Cash and cash equivalents 5,000.00

Sundry expenditure:

Preliminary expenses 12,000.00

Ordinary share issue expenses 10,000.00

Preference share issue expenses 9,000.00

Underwriters commission on preference shares 14,000.00

Total current assets 685,000.00

TOTAL ASSETS 1,990,000.00

EQUTY AND LIABILITIES

Equity

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 earnings 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

Total current liabilities 370,000.00

TOTAL EQUITY AND LIABILITIES

1,990,000.00

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. Buildingsare depreciated over the useful life on the straight-line method.

Plant and machinery and vehicles are valued at cost and are depreciated onthe reducing balance method to their residual value over the expecteduseful 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)

Issued

500 000 ordinary shares @ N$ 2 each

1,000,000.00

80 000 redeemable cumulative preference shares @N$ 3 each (fixed annual

dividend of 12c/share) 240,000.00

Total 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.

The directors have the authority to issue the balance of the un-issued shares untilthe nest annual general meeting.

3. Non-distributable reserves

2018

Asset replacement reserve 60,000.00

Revaluation reserve 40,000.00

Total 100,000.00

4. Mortgage bond

2018

15% mortgage bond 58,000.00

Repayable in monthly instalments of N$ 745.00

5. Property, plants and equipment

Cost or Accumulated carrying

valuation depreciated value

Land 395,000 - 395,000

Buildings 100,000 - 100,000

Plant and machinery

570,000.00 240,000.00 330,000.00

Vehicles 155,000.00 60,000.00 95,000.00

Ttotal

1,220,000.00 300,000.00 920,000.00

Financial assets

50,000.00 20,000.00 30,000.00

Ttotal

1,270,000.00 320,000.00 950,000.00

6. Investments

Listed 2018

100 000 shares in Trutsco Ltd ( market value N$ 300 000) 180,000.00

Shares in Etosha transport Ltd (market value N$ 60 000) 82,000.00

Unlisted

10 000 shares in Dinapama Ltd 68,000.00

5 000 shares in Etambi ( Pty) Ltd 10,000.00

Total 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;

o To redeem the 12% cumulative preference shares of the company on 30

November 2018.

o 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 beable to issue these shares at a higher premium).

o To pay the backlog in the cumulative preference dividends, last provided for on

30 September 2018.

o To convert the authorized ordinary shares of par value into ordinary shares on no

par value on 31 December 2018.

o To write off all deferred expenditure in the accounting records immediatelybefore 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 notcomply with the minimum disclosure requirements of the Companies Act and IFRS. (20 marks)

NB: providefull details of minimum disclosure requirements.

2. Prepare the Equity section of a statement of financial position as at 31 December 2018, afterthe implementation of the decisions taken by the directors on 03 October 2018. Do ignore theresults of trading for the three months ended 31 December 2018. Calculations are mandatory andnotes to the statement of financial position are not required. (10 marks)