FACULTY COMMERCE, MANAGEMENT AND LAW

DEPARTMENT SCHOOL OF ACCOUNTING

SUBJECT FINANCIAL ACCOUNTING 1 A(AFE 3691)
MARKS 200 MARKS (including 10 marks for layout and presentation)
ASSESSSMENT INDIVIDUAL ASSIGNMENT (Full-time students only)

Instructions to all students:

1. This assignment is compulsory for all students registered for the full time
cohorts. This assignment consists of seven (7) questions, answer all the
questions.

2. This assignment consists of eleven (11) pages, including the cover page.

3. The due date for this assignment is 08 MAY 2023. No late submissions will be accepted.

5. Assignments may ONLY be submitted on MOODLE, email submission or any other

alternative submission will NOT BE ACCEPTED.

6. UNAM-General Regulations; 7.1.7 -Plagiarism: Plagiarism is intellectual theft in the

sense that another person’s creative work, composition, and ideas are appropriated
by another person without permission and without proper acknowledgement of the
original source. It constitutes serious academic fraud. Furthermore, it involves among
other:

a. Copying without quotation marks or paraphrase without acknowledgement

from someone else’s writing;

b. Using someone else’s facts or ideas without acknowledging them;

c. Submitting assignments for one course or module that the student had
submitted for credit for another course or module without the express
permission of both lecturers. The University of Namibia has strict rules to
enforce the Policy. The Policy on Plagiarism is available within the respective
Faculties/Centres/Library, and on the UNAM Website: http://www.unam.na.
Plagiarism is a serious offence. You are not allowed to copy the work of o ther
students. Anyone who will be found guilty will not be assessed. E.g. you will
obtain a 0%

8. The assignment must be typed.

9. Show all your calculations and all figures should be expressed in NAMIBIAN
DOLLARS (N$)

10. All answers must be rounded off to the nearest figure.

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QUESTION 1 (48 Marks)

The following information pertains to The Petit Paris Ltd:

The Petit Paris Ltd was incorporated on 01 January 2017 with authorized share capital
consisting of:
i. 1 000 000 12% preference shares of no par value,
ii. 70 000 10% redeemable preference shares of N$ 3 each; and
iii. 2 000 000 ordinary shares of N$ 2 each

The following balances appeared in the accounting records of The Petit Paris Ltd on 01
January 2022:
Issued share capital: N$
1 000 000 Ordinary share capital of N$ 2 each 2 000 000
70 000 10% Redeemable preference share capital of N$ 3 each 210 000
500 000 12% Stated preference share capital of no par value 1 000 000
Reserves:
Share premium 275 000
Retained earnings 1 875 255
Assets:
Bank 2 505 105
Property, plant and equipment 750 000
Investment 500 000

During the year of 2022, the following transactions took place:

1. The company offered 500 000 ordinary shares and 250 000 12% preference shares to
the public.
2. The full public offer is underwritten by Croissant Brokers Underwriters Ltd for a 5%
underwriter’s commission.
3. The offer for the subscription of shares opened on 01 May 2022 and closed on
27 May 2022.
4. The ordinary shares were offered at a premium of 50c per share, and the
12% preference shares were offered at N$ 2 each.
5. The public subscribed for 300 000 12% preference shares, and 400 000 ordinary
shares and the full amounts payable, were received on the closing date of
27 May 2022.
6. All shares were issued on 11 June 2022, the necessary refunds were made and all
transactions with the underwriter were also concluded on this date.
7. All expenses relating to the issue of shares must be written off against the share
premium account.
8. The 10% redeemable preference shares are redeemable at premium of 50c per share
on 30 October 2022, at the option of the company. In view of the redemption, the board
of directors decided to issue 70 000 ordinary shares at a premium of N$1,50 per share.
The new issue was fully taken up on issue. All transactions took place on 30 October

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 2022. The redemption premium should be written off against the share premium
account.

9. On 30 December 2022, at a general meeting of the company it was decided to

declare a dividend of N$0.78 per ordinary share to all shareholders on the share registry
as at that date. The dividend will be paid on 25 January 2023

10. The company declared a before-tax profit of N$ 1 876 203

11. Assume a 32% tax rate for companies
12. The company has a 31 December year-end.

REQUIRED:
1. Record the above transactions (relating to the issue of shares, redemption of shares
and the declaration and payment of the dividends) in the General Journal of The Petit
Paris Ltd (20 marks)

2. Prepare the following accounts in the general ledger as at 31 December 2022:

(13 marks)

2.1 Retained earnings

2.2 Ordinary share capital
2.3 12% Preference share capital

3. Prepare the Statement of changes in equity for the year ended 31 December 2022 for
The Petit Paris Ltd to comply with IFRS and Companies Act 28 of 2004
requirements. (15 marks)

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QUESTION 2 (22 MARKS)
The second assignment which was indicated as (CORRECTED) should be ignored.
This is the updated and corrected as on 28 April 2023
Kim Dash and Kanye East are partners in a business called K&K, a classy dog parlour in one
of the upmarket suburbs of Cape Town. K&K has a December year end. Up to recently Kim
and Kanye were not only business partners, but also madly in love and engaged to be married.
However, a few weeks ago Kanye realised that Kim is having an affair with the shop owner
across the street from K&K. This broke his heart and he broke off the engagement
immediately. Kim and Kanye then decided to dissolve K&K, as they found it difficult to see
each other at work after this ordeal. K&K’s last day of business was 30 June 2022.

Kim & Kanye’s partnership agreement states the following terms and conditions:

• Kim & Kanye share profits and losses in the ratio of 6:4;
• Capital accounts earn interest at 12% per annum and is calculated on opening
balances;
• Current accounts do not earn interest;
• Kim is a specialist dog hair stylist, so she earns a salary of N$20 000 per month while
Kanye earns N$10 000 per month;
• Interest is charged on drawings at 15% per annum.

The trial balance for the previous financial year ended 31 December 2021 is given
below:
Note Debit Credit
(Namibian (Namibian
Dollars) Dollars)
Capital account: Kim 140 000
Capital account: Kanye 1 160 000
Current account: Kim 16 000
Current account: Kanye 19 000
General reserve 20 000
Land and buildings - cost 2 350 000
Equipment - cost 1 30 000
Equipment – accumulated depreciation 1 30 000
Bank 145 500
Loan: Bankned Ltd 3 160 000
Debtors 32 500
Consumable stock 12 000
Creditors 25 000
TOTAL 570 000 570 000

Additional information:

1. During the year, Kanye inherited money from his uncle and he used his inheritan ce to
contribute an additional N$150 000 capital to K&K on 1 March 2022. The partnership
used the full amount of the additional capital contribution to buy state-of-the-art
equipment which enabled them to wash and cut dogs’ hair faster and more efficient than
before.
The equipment was delivered on 15 March 2022 but was only fully installed and ready
for use on 31 March 2022.
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 Equipment is depreciated over 5 years using the straight-line method. The residual value
for this equipment was estimated to be N$15 000. All old equipment was sold for
N$5 000 on 1 May 2022.

2. As per K&K’s policy, land and buildings are not depreciated.

3. The loan from Bankned earns interest at 10% per annum (payable monthly). Annual
capital repayments of N$10 000 are made on 1 May of each year. All payments and
interest has been correctly accounted for up to 30 June 2022.

4. The draft financial statements for the period ended 30 June 2022 shows a preliminary
profit of N$132 750, however, this includes salary withdrawals by Kim of N$40 000 on
1 February 2022 and N$30 000 by Kanye on 1 April 2022. Furthermore, none of the
events noted in note 1 above were accounted for in this preliminary profit.

5. It was decided to transfer the balances of the current accounts to the respective capital
accounts of the partners, before the dissolution entries were passed.

Dissolution of the partnership (30 June 2022):

➢ Debtors amounted to N$22 000 at the end of June. The partners offered a 5%
discount to all debtors if they settled their accounts by 30 June 2022. All debtors
took up this offer except for one of the older clients who’s account will not be
recovered, amounting to N$3 000.

➢ All creditors and the loan to the bank were settled by 30 June 2022. Creditors
amounted to N$14 000.

➢ The inventory on hand on 30 June 2022 at cost price amounted to N$13 500. All
inventories were bought by a competitor of K&K for N$9 400.

➢ Land and buildings was sold for N$1 million before estate agent fees. The lawyers
deducted the estate agent fees of 7.5% before transferring the proceeds to K&K’s
bank account.

➢ The recently installed equipment was sold for N$130 000.

REQUIRED

(a) Prepare the capital accounts of the partners in the general ledger in order to calculate
the amount that must be paid to each partner upon the dissolution of the partnership.
You may assume that there were enough cash funds available to settle outstanding
capital balances. (22 marks)

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QUESTION 3 (30 Marks)

Croissant, Muffin and Crème Danish are in partnership and the profit-sharing ratio is 5:2:3
The statement of financial position of the partnership 01 January 2021 is as follows:

ASSETS N$
Property 190 000
Plant and equipment 85 000
Current assets 15 000
290 000

EQUITY
Capital Croissant 40 000
Capital Muffin 120 000
Capital Crème Danish 80 000
Current account Croissant 5 000
Current account Muffin (10 000)
Current account Crème Danish 20 000
Replacement reserve 20 000
General reserve 15 000
290 000

On 01 January 2021 Crème Danish decided to retire under the following conditions:
1. The property has to be re-valued up to N$200 000.
2. Goodwill is estimated at N$50 000, but should not be recorded in the books of the new
partnership.
3. All reserves must be written back.
4. The new profit – sharing ratio for Croissant and Muffin is 2:2.
5. Crème Danish will receive N$10 000 cash and the rest should be converted to a loan.

REQUIRED:

1. Prepare the capital accounts in column format to display the withdrawal of Crème
Danish. The accounts must be balanced and closed-off. (21 marks)
2. Prepare the statement of financial position of the new partnership on 02 January
2021. (9 marks)

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QUESTION 4 (20 Marks)
Mr Sun and Mr Moon are partners in a solar power business named Big Bang Solar (“BBS”).
They specialise in the installation and planning of solar systems for houses, office buildings
and farms. Mr Sun and Mr Moon share profits and losses in the ratio 3:2 according to their
partnership agreement.
The following trial balance was extracted from the financial records of the partnership on
31 December 2021:

Dr Cr
N$ N$
Capital – Sun 381 000
Capital – Moon 234 000
General Reserve 200 000
Current account – Sun 90 000
Current account – Moon 60 000
Bank 90 000

Venus is a specialist in the solar industry. Due to the prospects of business growth Mr Sun and
Mr Moon decided to admit Venus as from 01 January 2022 as a partner under the following
terms and conditions:

• Venus will receive 1/5 of the profits and losses.

• Mr Sun and Mr Moon will contribute in the ratio 2:1 towards Venus’s 1/5 profit share.
• Venus must pay N$170 000 for her 1/5 share in the partnership’s assets.
• The assets of the partnership were revalued on 1 January 2022 and the revaluation
account revealed a surplus of N$60 000.
• The new partnership agreement states, inter alia:
o The partners will not make use of current accounts anymore; therefore all current
accounts must be closed off to their capital accounts.
o Mr Sun and Mr Moon will pay in or draw cash in order for Sun, Moon and Venus’s
capital will be the same as their profit sharing ratio.
o The accounting records will not show any goodwill.

REQUIRED:

Prepare the general ledger capital accounts for all the partners immediately after the admission
of Venus. (20 marks)

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QUESTION 5 (10 Marks)

Beulah Trading is an entity with a 30 June year-end. The entity manufactures school shoes.
Shoes that are manufactured by Beulah Trading are transferred to the sales department at a
mark-up of 30% on cost.

The following costs were recorded in the books of Beulah Trading for the year ended 30
June 2022:

N$
Raw materials inventory on 1 July 2021 45 000
Raw materials purchased 156 400
Labour cost 89 000
Raw materials inventory on 30 June 2022 67 900
Depreciation 4 500
Power and water consumption 7 500
Insurance 2 350
Maintenance 749
Selling and general administrative costs 1 950
Work-in-progress on 1 July 2021 15 000
Work-in-progress on 30 June 2022 9 300

The records of the sales department showed the following:

N$
Inventory on 1 July 2021 (150 pairs) 167 000
Inventory on 30 June 2022 (80 pairs) 68 000

1 500 pairs of shoes with a selling price of N$ 460 000 were sold during the year by the sales
department.

REQUIRED:
Prepare the following general ledger accounts: (10)
i. Raw materials.
ii. Work-in-progress.
iii. Finished goods.
iv. Allowance for unrealised profit.

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Question 6 (25 Marks)

The following Trial Balance at 30 June 2022 was extracted from the ledger accounts of
PP DISTRIBUTORS CC.
ACCOUNT DESCRIPTION DR CR

Members salaries 30 000

Members contribution 450 000
Sales 1 675 000
Cost of Sales 897 000
Retained Earnings: 01 July 2021 54 200
Interim profit Distribution : Piet 45 000
: Plessis 45 000
Loan to members: Plessis 80 000
Allowance for credit losses 4 600
Investment: West Rand Mines (Pty) Ltd 205 000
Inventories : Trade Inventories 107 500
: Consumable Inventories 13 000
: Packaging Material 17 000
Land and Buildings 520 000
Motor Vehicles 180 000
Furniture 77 000
Equipment 120 000

Prepaid tax: Inland revenue 40 000

Accounts receivable 95 000
Accrued expense 11 600
Accumulated depreciation: Furniture 21 000

Accumulated depreciation: Equipment 19 000

Investment Income 10 300

Long term loan: Bouland Bank 310 000

Accounts Payable 106 500

Bank 25 600

Petty cash 600

Bad debts 1 400

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 Salaries and wages 101 000
Distribution costs 77 000
Other operating expenses 62 000
Loan from member: Piet 96 900
Finance costs 20 000
2 759 100 2 759 100

Additional Information:-
1. The corporation has two members, Piet and Plessis who holds equal interest.

2. At the members meeting conducted in March 2022 it was resolved that:-

i. Members will be paid a further profit distribution of N$ 25 000 each at year end.
ii. Due to an increase in operations a new Motor vehicle had to be acquired. On the 01
April 2022 a vehicle with a cost price of N$ 180 000 was acquired. No vehicles existed
prior to this acquisition. The correct entries were processed to record the purchase of
the vehicle.
iii. No assets were sold during the year.
iv. The loan from Piet, accrues interest at a rate of 8% per annum. No fixed repayment
terms were agreed upon and the loan is unsecured. Interest has not be taken into
account yet.
v. No interest will be levied on Loans to member: Plessis, as it has always been done in
the past. No interest accrual will be made for the year ended 30 June 2022.
vi. Land and Buildings was revaluated for the first time this year. Jacobus Oosthuizen, a
sworn valuator was appointed to value the property and he attached a value of
N$ 740 000 at 30 June 2022.

3. Depreciation for the current year has not been accounted for. It has been the policy of the
entity to depreciate assets as follows:-
a. Furniture : 20 % p.a on reducing balance basis
b. Equipment : 10% p.a on straight line basis
c. Motor Vehicles: 20% p.a on straight line basis

4. Total taxation expense for the year was calculated to be N$ 67 500, but no entry has been
made to record this yet.
5. A debtor with a balance of N$ 550 must still be written off as irrecoverable. Allowance for
credit losses must be adjusted to 6% of the outstanding debtors at year end.

YOU ARE REQUIRED

1. Prepare the Statement of profit or loss and other comprehensive income of PP
Distributors for the year ended 30 June 2022. No notes are required. (14 marks)

2. Prepare the ASSETS section of the Statement of financial position as at 30 June 2022.
(11 marks)

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QUESTION 7 (35 Marks)

Guess and Bvlgari were in partnership sharing profits and losses in the ratio 2: 1 their abridged
statement of financial position as at 31 March 2022 was:

ASSETS (N$) EQUITY & LIABILITIES (N$)

Equipment at carrying value 5 600 Capital : F Guess 5 000
Vehicle at carrying value 1 400 S Bvlgari 4 000
Inventory 3 500 Current accounts: F Guess 2 000
Account receivable 6 500 S Bvlgari (1 000)
Bank 1500 Long – term borrowings 3 000
Accounts payable 5 500
18 500 18 500

i. The partnership was sold to Fashion House Ltd as going concern. The company was
incorporated with a registered capital of 20 000 ordinary shares of N$1 each.
ii. The partnership paid N$450 and Fashion House Ltd N$1 000 for expenses for the
transfer.
The agreement was as follows:
1. Guess would take over one vehicle at book value, that is N$800, and Bvlgari would
take over the other vehicle at N$1 100.
2. Fashion House Ltd would take all assets and liabilities with the exception of bank
and vehicles.
3. The assets were taken over at these valuation amounts:
▪ Goodwill N$4 800
▪ Equipment N$5 000
▪ Inventory at carrying value N$3 500
▪ Accounts receivable at carrying value less an allowance for bad debts at
10%.
4. Fashion House Ltd upon taking transfer would immediately pay off the loan.
5. Fashion House Ltd would pay N$1 650 in cash and the rest in shares. The shares
were divided between Guess and Bvlgari in the profit-sharing ratio.
6. The available cash would be divided between Guess and Bvlgari in the profit –
sharing ratio. The shares would be divided between Guess and Bvlgari in order to
clear the outstanding capital accounts to nil.

You are required to:

1. Draw up the realisation account to show the necessary entries pertaining to the sale of
the partnership. (10 marks)
2. Calculate the purchase consideration that Fashion House Ltd should pay for the
acquisition of the partnership. (8 marks)
3. Calculate and show how the available cash would be divided between Guess and
Bvlgari in their profit-sharing ratio. (7 marks)
4. Draw up the capital accounts of the partners (in columnar form) in the general ledger.
(10 marks)

*****The end*****
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