XYZ Limited prepared the following assets division of the statement of financial position for presentation to its shareholder
STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2005
Property, plant and equipment (plant N$ XXXXXXXXXXVehicles N$ 50 XXXXXXXXXX150 000
Financial assets (Listed Shares N$ XXXXXXXXXXsaving Account N$ 5 0 XXXXXXXXXX15 000
Cash And Equivalents (Petty cash N$ 6 000 – Bank overdraft N$ 2 XXXXXXXXXX4 000
Inventory XXXXXXXXXX25 000
Trade and other debtors XXXXXXXXXX36 000
Shareholders for dividends XXXXXXXXXX10 000
Total Assets XXXXXXXXXX240 000
Critically discuss the presentation of the above statement on the basis of the Conceptual Framework and IAS1.
ABC is a public company listed on the Namibian Stock Exchange (NSE). The company applies International Financial Reporting Standards (IFRS) to prepare its financial statements and has elected to present its statement of profit or loss and other comprehensive income according to the function of expenses method.
The company’s financial accounting prepared the following statement of profit or loss and other comprehensive income for the year ended 31 December 2012.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR 2012.
Cost of Sales XXXXXXXXXX)
Gross Profit XXXXXXXXXX
Salaries and wages XXXXXXXXXX)
Dividends declared XXXXXXXXXX)
Surplus on revaluation of property, plant and equipment XXXXXXXXXX
Other expenses XXXXXXXXXX)
Purchase of property, plant and equipment XXXXXXXXXX)
Profit for the year XXXXXXXXXX)
1. The following is included in “ Other expenses”:
Income tax expense XXXXXXXXXX)
Interest expense XXXXXXXXXX)
Rental income 50 000
(a) Briefly explain to the financial accountant why dividend declared of N$ XXXXXXXXXXshould not be presented in the statement of profit or loss and other comprehensive income as an expense. Your answer should refer to relevant definition in the conceptual framework. (3 marks)
(b) Provide a critical analysis of the above-mention statement of profit and loss and other comprehensive income in term of IAS 1 and Conceptual Framework. (7 marks)
(c) Prepare the statement of profit or loss and other comprehensive income for the year ended 31 December 2012 to comply with Companies Act 71 of 2008 and the requirements of International Financial Reporting Standards (IFRS). (10 marks)
Ms Muteka the management accountant of Dempsey Ltd, appointed a person on 1 June 20.8, who pretended to be an expert in preparation of company financial statements.
The following statement of financial position was prepared on 10 July 20.8 by the new accountant:
XXXXXXXXXXStatement of financial statement position as at 30 June 20.8
ASSETS XXXXXXXXXXNote XXXXXXXXXXN$
Land and buildings at carrying amount XXXXXXXXXX XXXXXXXXXX 000
Furniture at carrying amount XXXXXXXXXX XXXXXXXXXX000
Vehicle at carrying amount XXXXXXXXXX XXXXXXXXXX000
Investments XXXXXXXXXX XXXXXXXXXX000
Inventories XXXXXXXXXX XXXXXXXXXX000
Receivables XXXXXXXXXX20 000
Consumables on hand XXXXXXXXXX1 000
Capital XXXXXXXXXX XXXXXXXXXX000
Reserves XXXXXXXXXX XXXXXXXXXX000
Loan XXXXXXXXXX XXXXXXXXXX000
Payables XXXXXXXXXX XXXXXXXXXX000
Bank overdraft XXXXXXXXXX12 000
Ms Muteka is not satisfied with the format of the above statement of financial position and requests you to assist her. You acquire the following additional information:
1. The reporting period of -Dempsey Ltd ends on 30 June.
2. The buildings are occupied for the purpose of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 1 July 20.6 the land was valued at N$ XXXXXXXXXXand the buildings at N$ XXXXXXXXXXDepreciation is written off on buildings at 4% per year on Straight- line method.
3. Furniture and vehicle were purchased on 1 July 20.6 at N$ XXXXXXXXXXand N$ XXXXXXXXXXrespectively. Depreciation is written off on furniture at 12.5% per year on cost and on vehicle at 20% per year on diminishing balance method. The necessary write-offs for the current year have been made.
4. Investments consist of the following:
10 000 ordinary shares in a listed company, Springbok Ltd XXXXXXXXXXN$ 24 000
6 000 ordinary shares in XY (Pty) Ltd XXXXXXXXXXN$ 10 000
On 30 June 20.8, the values of the shares in Springbok Ltd and XY (Pty) Ltd were N$ XXXXXXXXXXand N$ XXXXXXXXXXrespectively.
5. Inventories consist of the following: Merchandise (trading goods) XXXXXXXXXXN$ 18 000
6. Dempsey Ltd may issue XXXXXXXXXXordinary shares and XXXXXXXXXX% preference shares.
On the 30 June 20.8, the company had already issued XXXXXXXXXXordinary shares at
N$ XXXXXXXXXXand XXXXXXXXXXpreference shares at N$ XXXXXXXXXX.
No share were issued during the current year.
Preference shares form part of equity.
7. The reserves consists of the following:
Retained earnings (balance 30 June 20.7, N$ 7 000 XXXXXXXXXXN$ 14 000
Replacement reserve XXXXXXXXXXN$ 6 000
The ordinary dividends declared are still owing to shareholders, while the preference dividends have been paid.
8. The loan was entered into on 1 July 20.6 at interest rate of 10% per year. The loan is secured by a mortgage bond on land and buildings and is repayable in yearly instalments of N$ XXXXXXXXXXfrom 31 December 20.8.
9. Payables consist of the following:
Trade payables XXXXXXXXXXN$ 6 000
Current tax payable XXXXXXXXXXN$ 3 000
Shareholders for dividends XXXXXXXXXXN$ 5 000
Prepare the statement of financial position, with the necessary notes, as at 30 June 20.8 and the Statement of changes in equity for the year ended 30 June 20.8 for Dempsey Ltd to comply with the minimum requirements of the Companies Act 71 of 2008 and International Financial Reporting Standards (IFRS).