Question

Question 3
The following information is available for Heritage Limited:
1. The reporting period of Heritage Ltd ends on 30 June of every year.
The following balances are available as at 30 June 20x8
Land and building at cost 400 000
Accumulated depreciation on buildings at 01/07/20x7 12 000
Furniture at cost 80 000
Accumulated depreciation as at 01/07/20x7 10 000
Vehicles at cost 300 000
Accumulated depreciation as at 01/07/20x7 60 000
Investments as at 01/07/20x7 34 000
Bank 96 700
Trade and other receivables 20 000
Ordinary share capital 275 000
Preference share capital 280 000
Retained earnings as at 01/07/20x7 7 000
Replacement reserves 58 250
10% Bank loan 100 000
Payables 33 500
Additional information:
1. The buildings are occupied for the purposes of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 01 July 20x6, the land was valued at N$ 100 000 and buildings at N$ 300 000. Depreciation is written off on buildings at 4% per annum on the straight line method.
2. Furniture and vehicles were purchased on 01 July 20x6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on
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vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year still need to be done.
3. The value of the investments is valued at N$ 42 000 as at 30 June 20x8
4. Inventories consist as at 01 June 20x8 amounted to N$ 22 000. Inventories are measured at lower of cost (FIFO) and net realisable value.
5. Authorised share capital for Heritage Ltd is 400 000 ordinary shares at N$ 1,10 each and 200 000 8% preference shares at N$ 1,75 each. The company had already issued 250 000 ordinary shares at N$ 275 000 and 160 000 preference shares at N$ 280 000. The company had issued 25 000 shares at N$ 2,00 during the year. Preference share capital form part of equity.
6. The loan was entered into on 01 July 20x6 at an interest rate of 10% per annum. The loan is secured by a mortgage bond on land and buildings and is repayable in annual instalments of N$ 20 000 from 31 December 20x8.
7. Payables consist of the following:
Trade payables 6 000
Namibian company tax 3 000
Dividend payable 24 500
8. Profit for the year amounted to N$ 60 000.
9. On 30 March 20x8 a new vehicle with a cost price of N$ 55 000 was purchased for use in the delivery of goods to customers.
10. At 30 June 20x8, inventory worth N$ 4 000 were stolen.
Required:
1.1 Prepare the statement of financial position as at 30 June 20x8 to comply with the requirements of IFRS and Companies Act,
1.2 Prepare the following notes to accompany the financial statements and to comply with IFRS and Companies Act:
? Basis of presentation
? Statement of significant accounting policies
? Property, plant and equipment
? Financial assets
? Inventories
? Share capital and
? Non-current liabilities as at 30 june20x8; and
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1.3 The statement of changes in equity for the year ended 30 June 20x8 for Heritage Ltd to comply with the minimum requirements of the Companies Act of 2008 and International Financial Reporting Standards (IFRS). Comparative figures are required were necessary

Answer 1

Solution

The First preparing depreciation schedule as follows:

			1	2	3	4	5	6	7	8
Assets	Method	Rate of Dep	2006 June	Depn 2006-07	WDV 2007	Dep 2007-08	WDV 2008	Dep 2007-08	WDV	Accumulated Dep= 2+4+6 Column
Land			1,00,000	-	1,00,000	-	1,00,000	-	1,00,000	-
Building	SLM	4%	3,00,000	12,000	2,88,000	12,000	2,76,000	12000	2,64,000	36,000
Furniture	On Cost	12.50%	80,000	10,000	70,000	10,000	60,000	10,000	50,000	30,000
Vehicles	WDV	20%	3,00,000	60,000	2,40,000	48,000	1,92,000	38,400	1,53,600	1,46,400
New Vehicle Purchased		20%	-	-	-	-	55000	2,750	52,250	2,750

Now that we have prepared depreciation schedule, we may prepare our trial balance. Refer to working notes as stated below, this will help you to know from where we have found a particular figure:

	Particulars	Opening Value	Closing Value	Notes
	Accumulated depreciation on buildings at 01/07/20x7	12,000	36,000	Refer Working Note 1
	Land and building at cost	4,00,000	4,00,000	Refer Working Note 1
	Furniture at cost	80,000	80,000	Refer Working Note 1
Opening	Accumulated depreciation as at 01/07/20x7	10,000	30,000	Refer Working Note 1
	Vehicles at cost	3,00,000	355000	Refer Working Note 1
	Accumulated depreciation as at 01/07/20x7	60,000	1,49,150	Refer Working Note 1
	Investments as at 01/07/20x7	34,000	42000	Given
	Bank	96,700	41,700	=96700 less 55000 on purchase of New Vehicle
	Trade and other receivables	20,000	20,000
	Ordinary share capital	2,75,000	775000	Refer Statement of Changes in Equity
	Preference share capital	2,80,000	280000	Refer Statement of Changes in Equity
	Retained earnings as at 01/07/20x7	7,000	67000	Refer Statement of Changes in Equity
	Replacement reserves	58,250	58,250	Refer Statement of Changes in Equity
	10% Bank loan	1,00,000	1,00,000
Payable	Trade Payables	6,000	6,000
Payable	Tax Payable	3,000	3,000
Payable	Dividend Payble	24,500	24,500
	Inventories		18000	FIFO, NRV whichever is lower
	Profit for the year		60,000

Now, have a look at statement of changes in equity, which has been asked in question:

Statement of Changes in Equity	Number	Opening Balance	Additions during the Year	Closing Balance
Ordinary Shares issued	2,50,000	2,75,000	5,00,000	7,75,000
Preference Share	1,60,000	2,80,000	-	2,80,000
Profit during the Year			60,000	60,000
Retained Earnings		7,000	-	7,000
Replacement Reserves		58,250	-	58,250

AStatement of Changes in equity shows Movement in Shareholder'sfunds during Year. We have not made adjustment of Dividend payable as same has not been paid yet.