Question

QUESTION 1 (30 Marks: 63 minutes)
The following is the trial balance of Eskimo Limited at 31 December 20x8:
ESKIMO LIMITED TRIAL BALANCE AT Debit Credit Retained earnings (1/1/20x8) 145 000 Non- current liabilities: Loan from AB Bank 25 000 Revaluation surplus (1/1/20x8) 20 000 Ordinary share capital 240 000 Revenue: Sales 580 000 Interest income 12 500 Rent income 23 000 Cost of sales 300 000 Interest on bank overdraft 9 500 General expense 113 000 Bad debts expense 20 000 Repairs and maintenance expense 30 000 Marketing expense 22 000 Fuel expense 40 000 Depreciation expense 25 000 Salaries 50 000 Investments in listed companies 50 000 Accounts receivable 250 000 Bank 23 000 Current tax payable 12 800 Inventories 120 000 Accounts payable 225 000 Land 200 000 Equipment: Cost 100 000 Equipment: Accumulated depreciation 40 000 Income tax expense 1 800 Dividends 15 000 1 346 300 1 346 300

Additional information:
? Share capital constitutes 120 000 ordinary shares of no par value. 20 000 shares were issued for N$40 000 on the first day of the year. ? The interest and rental income are incidental to main business operations.

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? Eskimo Limited classified expenses according to their function. Management categorise the functions of the business into the areas of sales, administration and distribution. ? Salaries of N$ 30 000 relate to the administrative function and N$20 000 the distribution function. ? Depreciation on equipment of N$10 000 relates to the administrative function and N$15 000 to the distribution function. ? The bad debts and marketing expenses relate to the administration function. ? The repairs and maintenance and fuel expenses relate to the distribution function. ? Dividends of N$15 000 in respect of the year ended 31 December 20x7 were declared and paid during January 20x8. Dividends of N$20 000 in respect of the year ended 31 December 20x8 were declared on 15 January 20x9 ? There are no movements in other comprehensive income.

Required:
a) Prepare the statement of profit or loss and other comprehensive income (use the expenses by function method) including earnings per share (EPS) of Eskimo Limited for the financial year ended 31 December 20x8 in accordance with International Financial Reporting Standards. b) Prepare the statement of financial position of Eskimo Limited at 31 December 20x8 in accordance with International Financial Reporting Standards. c) Prepare the following notes to the financial statement in accordance with International Financial Reporting Standards: a. Summary of significant policies b. Revenue

Answer 1

Part a:

Income statement
Particulars	Amount ($)	Amount ($)
(A): Revenue:
Sales	580,000.00
Interest income	12,500.00
Rent income	23,000.00
		615,500.00
(B): Expenditures
Cost of sales	300,000.00
Interest on bank overdraft	9,500.00
General expenses	113,000.00
Bad debt expenses	20,000.00
Repaid and maintenance expenses	30,000.00
Marketing expenses	22,000.00
Fuel expenses	40,000.00
Depreciation	25,000.00
Salaries	50,000.00
		609,500.00
Income before taxes (A-B)		6,000.00
Less: Income tax expenses		1,800.00
Profit after tax		4,200.00

Part b:

Balance sheet
	Amount ($)	Amount ($)
Assets
Investment in listed companies	50,000.00
Accounts receivable	250,000.00
Bank	23,000.00
Inventories	120,000.00
		443,000.00
Land	200,000.00
equipment net of accumulated depreciation (100000-40000)	60,000.00
		260,000.00
Total assets		703,000.00
Liabilities and equity:
Loan from Ax bank	25,000.00
Accounts payable	225,000.00
		250,000.00
Ordinary share capital	240,000.00
Retained earnings	134,200.00
Revaluation surplus	20,000.00
		394,200.00
Bank overdraft (Balancing figure) Note 2		58,800.00
Total liabilities and equity		703,000.00

Note 1:

Retained earnings
Opening balance	145,000.00
Add: Profit after tax	4,200.00
	149,200.00
Less: Dividend paid	15,000.00
Balance as on 31st December	134,200.00

Note 2:

Bank overdraft (Balancing figure)
Total assets	703,000.00
Less: Total liabilities before bank overdraft (250000 + 394200)	644,200.00
	58,800.00

Part c:

Notes to accounts:

Significant accounting policies:

The company has followed the fundamental accounting policies in preparation and presentation of financial statements of the company. The financial statements have been prepared based on the books of accounts maintained using double entry system of accounting. The accounting policies have been followed consistently. No changes in accounting policies and principles have been made to prepare and present the financial statement for the year ending on 31^st December, 2018. The depreciation on equipment has been charged in accordance with the applicable accounting standard for depreciation.

Revenue:

Revenue has been recorded in the books of accounts when it has been either received or there is no significant uncertainty in relation to the final receipts of revenue or any part of such revenue. In case of any uncertainty that has arouse subsequent to the recording of revenue necessary provisions have been made in the books of accounts to ensure that the financial statements reflect the financial reality of the organization.