99 1! I'IFIITIIBIFI UNIVERSITY EXAMINER(S) clearly stated. perceived error or ambiguities & any assumption made by the candidate should be

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1 I I'IFIITIIBIFI UNIVERSITY OF SCIENCE nnd TECHI IOLOGY FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE QUALIFICATION: BACHELOR OF TECHNOLOGY IN ACCOUNTING QUALIFICATION CODE: 23BACF LEVEL: 7 COURSE CODE: FAC31ZS COURSE NAME: FINANCIAL ACCOUNTING BB SESSION: JANUARY 2018 PAPER: THEORY DURATION: 3 HOURS MARKS: 100 SECOND OPPORTUNITY EXAMINATION QUESTION PAPER EXAMINER(S) Ms. W Gertze MODERATOR: Ms. I Van Rensburg INSTRUCTIONS 99 1! This question paper is made up of four (4) questions. Answer ALL the questions and in blue or black ink. Start each question on a new page in your answer booklet. Questions relating to this examination may be raised in the initial 30 minutes after the start of the paper. Thereafter, candidates must use their initiative to deal with any perceived error or ambiguities & any assumption made by the candidate should be clearly stated. THIS QUESTION PAPER CONSISTS OF 6 PAGES (Including this front page)

2 Question 1 (22 marks) Taxes Ltd has a profit before tax of N$ for the year ended 31 December in calculating this figure, the following information was correctly accounted for in terms of lfrss: (i) Rent income received in advance (i.e. in respect of 2017): (taxable in 2016). (ii) Interest income of N is still receivable (taxable in 2016) (iii) Electricity of NSZ 400 is due for 2016 but has not yet been paid (deductible in 2016) (iv) The water bill for the first month of 2017 has been paid: N (deductible in 2016) (v) Dividend income of NSSOO was earned during 2016 (exempt from tax) (vi) A fine of N was incurred during 2016 ( not deductible for tax purposes) (vii) Depreciation of N$8 000 was expensed during the year. The asset was purchased for N and is being depreciated over 7 years. The tax authority allows a capital allowance of 10% of this cost. (viii) Research costs expensed in 2016 amounted to N The tax authority allows research costs to be written off over 4 years. (ix) The provision for leave pay was increased by N$7 200 in Leave pay is only tax deductible in the year that payment is made to employees. No payments for leave pay were made in (x) Income tax is 30%. Required: a) Define the following terms: i. Temporary difference ii. iii. Taxable profits Tax base iv. Deferred tax liability 8 marks b) Calculate the current tax and show the related journal for the year ended 31 December marks

3 if Dividends The Question 2 (32 marks) The following relates to Topcop Ltd for the year Profit for the year N$ (2016: N ) ended 31 December This profit includes a profit on sale of plant (before tax) N$ (2016: 0). 1 January 2004: ordinary shares were issued at N$5 each. 30 September 2016: there was a right issue on a basis of 1 ordinary share issued for every 5 already held at a price of N$6.00. The market price of the ordinary shares immediately before the rights issue was N$7.SO per share. 31 May 2017: ordinary shares were issued at a price of N55 per share. There options in existence, each of which allows the holder to acquire four shares at a strike price of N$7 per share. The options have already vested but will only expire in many years to come. The average market price per ordinary share for 2016 and 2017 was N$8.00. These options were in existence throughout 2016 and Preference shares in issue are convertible (at the option of the preference shareholders) into ordinary shares on 31 December not converted, the preference shares will be redeemed on 31 December of N are incurred annually on these preference shares (these have been correctly accounted for as finance charges). preference shares were in existence throughout 2016 and There are no components of other comprehensive income. Income tax is levied at 30% Required: 3) Calculate the basic EPS for the year ended 31 December 2016 and 2017 showing clearly your calculation of the weighted number of shares 10 marks bl Calculate the diluted EPS for the year ended 31 December 2016 and 2017 showing clearly your calculation of the ranking and testing for dilutive. 16 marks C) Calculate the Headline Earnings Per Share for both years, showing the reconciliation of basic earnings to headline earnings. 6 marks

4 Question 3 (36 marks) The following trial balance information is provided: DESERT LTD TRIAL BALANCE AS AT 30 June Account NS OOO N$ 000 Property, plant and equipment Investments (long term) Accounts receivable Inventory Investment income receivable 400 Bank 800 Investments (shortterm) Administration and selling expenses Loss on disposal of investments 400 Interest expense Tax expense Dividends declared Share capital Dividends payable Accounts payable Accumulated depreciation Bank overdraft 500 Tax payable Interest payable Longterm loan Gross profit Investment income 400 Accumulated profit Additional information (i) Depreciation of N$ was provided in during (ii) Equipment with a cost of N$ were sold during the year and a loss of N$ was incurred. (iii) An investment acquired for N$ during the year was disposed of before the yearend. (iv) Long term loans amounting to N were repaid during the year. (v) Namib Ltd marks up its goods for resale by 50% on cost in order to calculate its selling price

5 You are required to prepare: (a) A full statement of cash flows for the period ended 30 June 2017 using the direct method. 20 marks (b) A partial statement of cash flows, up to cash generated from operations, for the period ended 30 June 2017, using the indirect method. 11 marks NB: prepare an income statement for the period as part of your workings 5 marks

6 Question 4 (10 marks) Gim Ltd s financial statements for the year ended 31 December 2016 were presented to the board of directors for authorisation for issue on 20 March The following events took place after the reporting date: 1. During the auditors execution of the debtors circularisation on 02 January 2017, it was discovered that an error had been made on one of the invoices sent out. The sale transaction was recorded as N$ but should have been only N$ On 4 February 2017, Gim Ltd received notice from Fargon Ltd that a dividend of 10 cents per ordinary share was declared and authorised by the annual general meeting on 31 January 2017 to shareholders registered on 31 December Gim Ltd has owned ordinary shares in Fargon Ltd for the past three years, representing 3% of its issued share capital. 3. On 25 February 2017, a material design defect was discovered in one of the company s new vehicles. Production ofthe vehicle had commenced on 01 October 2016 and considerable costs will have to be incurred to correct the defect. The following estimates have been made: Costs to repair Cost related to defects in units sold To recover To repair Cost to recover and repair units manufactured in NS Additional information: 1. The income tax rate is 28%. 2. All amounts are material and the company is a going concern notwithstanding the effects of the above events. Required: Briefly discuss how the events in each of the above cases will affect the financial statements.

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- The (a I'IHITIIBIFI UNIVERSITY OF SCIEI'ICE HI'ID TECHI'IOLOGY MANAGEMENT SCIENCES ACCOUNTING DEPARTMENT QUALIFICATION : BACHELOR OF ACCOUNTING AND FINANCE QUALIFICATION CODE: ZBBACF LEVEL: 7 COURSE: