Lupane State University ag meh ntl FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING AND FINANCE BACHELOR OF COMMERCE HONOURS DEGREE IN ACCOUNTING AND FINANCE PARTIV FIRST SEMESTER EXAMINATION FINANCIAL REPORTING [COAF 4101] DECEMBER 2022 DURATION: 3 HOURS INSTRUCTIONS Answer all four (4) questions. Begin each question on a new page. . Specify your format of study (Conventional/Parallel/Block) on the top right corner of your answer sheet cover, INFORMATION 1. Marks for each question are as indicated 2. Questions may be answered in any order. ‘This paper consists of seven printed pagesQuestion 1 [25 marks] The following are financial statements of three Companies, Green, Blue and Brown for the year ended 31 December 2021, Green holds shares in Blue and Brown. Green Blue Brown Non-current assets $ s $ Property Plant and Equipment 444,000.00 228,000.00 312,000.00 Investments 261,600.00 705,600.00 228,000.00 312,000.00 Current assets Inventories 192,000.00 120,000.00 216,000.00 Receivables 204,000.00 108,000.00 120,000.00 Cash 60,000.00 48,000.00 12,000.00 456,000.00 276,000.00 348,000.00 1,161,600.00 504,000.00 660,000.00 Equity Ordinary shares of $1 each 240,000.00 96,000.00 60,000.00 Share premium 120,000.00 96,000.00 36,000.00 Retained earnings 681,600.00 240,000.00 480,000.00 1,041,600.00 432,000.00 576,000.00 Current liabilities Payables 120,000.00 72,000.00 41,161,600,00 504,000.00 1. The value of Green's investments are: 4 us ake, ABW> In Blue $153,600 ® In Brown $108,000 2. 57 600 shares in Blue and 18 000 shares in Brown were acquired when retained earnings were $24,000 and $180,000 respectively ales 5. When Green acquired shares in Blue, the fair value of PPE in Zama was $60,000 ligher than its net book value, whilst the fair value of inventories was $240,000 lower than its net book value. The inventory was sold before the year end 4. Depreciation pertaining fair value adjustments since acquisition amounts to $6,000 5. During the year Green sold inventories to Blue for $19,200. The inventory had originally cost Green $12,000. Half of these inventories have been sold by Blue. 6. The Group policy is to value non-controlling interest at full (or fair) value. The fair value of non-controlling interest at acquisition was$108,000 Required Prepare a Consolidated Statement of Financial Position of the Green Group, (incorporating the Associate) [25 marks] ‘Question 2 [25 marks] ‘The following is an Income Statement for Vunguza company and its subsidiary, Phephula company for the year ended 31 December 2¢21 Vunguza—Phephula $ $ Sales revenue 3,300,000.00 1,500,000.00 Cost of sales 1,980,000.00 900,000.00 Gross profit 1,320,000.00 600,000.00 Administartive expenses (815,000.00) (450,000.00) Dividend from Phephuta 72,000.00 Profit before tax 1,077,000.00 150,000.00 Income tax expense 195,000.00) (30,000.00) Profit for the year 882,000.00 120,000.00 Note Dividend paid 600,000.00 90,000.00Profit retained 282,000.00 30,000.00 Retained earnings brought forward 1,380,000.00 318,000.00 Retained earnings carried forward 1,662,000.00 348,000.00 Additional information a) Issued share capital: Vunguza~15 000 000 shares of $1 each Phephula ~ 3 000 000 shares of $1 each. b) Vunguza company purchased 75% shares in Phephula company in 2014 when the retained earnings of Phephula company stood at $168,000.00 Required Prepare the Vunguza group consolidated income statement for the year ended 31 December 2021 and extracts from the statement of changes in equity showing retained earnings and non-controlling interest [25 marks] Question 3 [25 marks] The following are statement of financial position for Gogoza Limited as at 31 December 2021 and income statement for the year ended 31 December 2021. Statement of Financial Position 2021 2020 Non current assets Property Plant and equipment 654,000.00 528,000.00 Current assets Inventories 246,000.00 — 352,000.00 Trade receivables 190,000.00 174,000.00 w= \ Short term investments 130,000.00 60,000.00 Cash at bank and in hand $58,000.00 : . 624,000.00 586,000.00 1,278,000.00 1,114,000.00Equity Share capital- $1 shares Share premium Revaluation surplus Retained earnings Non current liabilities 10% debentures Current liabilities Income statement Revenue Cost of Sales Gross profit Distribution costs Administrative expenses Finance income Profit before tax Income tax expense Profit for the year Dividends paid in the period Additional information 400,000.00 60,000.00 132,000.00 142,000.00 734,000.00 200,000.00 344,000. 1,278,000,00 240,000.00 194,000.00 82,000.00 516,000.00 300,000.00 298,000.00 1114,000.00 946,000.00 458,000.00 488,000.00 152,000.00 96,000.00 12,000.00 252,000.00 24,000.00 158,000.00 $79, 0000.1. Property plant and equipment Property plant and equipment consists of freehold plant and equipment and freehold premises. During 2019 items of plant and equipment which originally cost $80,000.00 were disposed of resulting in a loss of $12,000.00. The items had a net book value of $56,000.00 at the date of disposal. 2. Short term investments Short term investments meet the definition of cash and cash equivalents as per IAS 7, Statement of Cash Flows. 3. Current liabilities Current liabilities consist of the following: 2021 2020 Bank overdraft 44,000.00 Trade payables 252,000.00 140,000.00 Interest payable 21,000.00 9,000.00 Income tax payable 117,000.00 162,000.00 390,000.00 355,000.00 4, 10% debentures On 1 May 2021 $100,000.00 of 10% debentures were converted into $100,000.00 of $1 ordinary shares. 5. Depreciation Depreciation charge for the year included in the statement of profit or loss was $86,000.00 Required Prepare a statement of cash flows for Gogoza Limited for the year ended 31 December 2021 [25 marks] Question 4 [25 marks] | {a) Didizela Limited had a cash generating unit which comprised of a building $120,000.00; plant and equipment $24,000.00; goodwill $40,000.00 and current assets $80,000.00. An impairment review revealed that the cash generating unit had | a recoverable amount of $200,000.00. Required i. Show how the impairment loss is allocated [10 marks} ii, Outline the accounting treatment of impairment loss [5 marks]{b) Briefly explain each of the following terms as used in IAS 12, Income taxes i. Deductible temporary differences [2 marks] ll. Taxable temporary differences [2 marks} iii, Deferred tax assets [2 marks} iv. Deferred tax liabilities [2 marks} v. Tax base [2 marks} END OF EXAMINATION PAPER