QUESTION 3 (70 MARKS)
The following account balances appeared in the accounting records of KOORNHOF LTD on 01 June 2014:
Land and buildings at cost 350 000
Motor vehicles at cost 106 000
Computer equipment at cost 36 000
Accumulated depreciation: buildings 7 600
Accumulated depreciation: motor vehicles 52 310
Accumulated depreciation: computer equipment 16 000
Cash and cash equivalents 95 000
Trade and other receivables 65 000
Inventories 15 000
Issued share capital consists of:
Ordinary share capital 500 000
6% Preference share capital (150 000 shares) 350 000
Share premium 500 000
Retained earnings 850 000
Non-current assets revaluation reserve 80 000
10% Long-term loans 300 000
Revenue (comprises of 18% services rendered and 82% sales to customers) 1 000 000
Provision for credit losses 3 250
1. The company’s authorized share capital comprises of:
1.1 1 000 000 ordinary shares of N$ 1 each
1.2 500 000 6 % preference shares of no par value shares
2. The accounting policies for depreciation are as follows:
2.1 Land with a cost price of N$ 160 000 is not depreciated.
2.2 Buildings are depreciated at 2% per annum using the straight-line method.
2.3 Motor vehicles are depreciated at 30% per annum using the diminishing balance method.
2.4 Computer equipment is depreciated on a straight line basis and is expected to have a useful life of
three years with zero residual value.Page 7 of 11
3. 500 0000 ordinary shares were issued on 01 June 2013 at a premium of N$ 1 per share. On 01 January
2015 the directors of the company resolved to convert the ordinary par value shares into no par value
4. On 30 June 2014 Koornhof Ltd traded in a delivery van for N$ 23 000 for a new van with a cost of N$
65 000 and the difference on the purchase price was paid by cheque. The van sold, was purchased on 30
November 2012 for N$ 50 000.
5. Due to the increase in sales demands another sales assistant was hired and a new computer was
purchased for N$ 6 800 cash on 01 September 2014. Installation and transport costs of N$ 400 were paid
for the new computer.
6. The trading merchandise on hand amounted to N$ 12 000 and the cost of inventory should be assigned by
using the first-in; first-out (FIFO) cost formula.
7. Revenue as at 31 May 2015 was N$ 1 500 000 of which 24% comprises of services rendered and the
remainder is goods sold to customers for 2015.
8. On the 01 May 2015 the directors decided to issue bonus share to all the existing shareholders (ordinary
and preference) for every ten shares held, two will be issued as bonus shares. The issue of the bonus
shares will be affected from retained earnings. The shares will be issued at N$ 2.05 for ordinary shares and
N$ 4.45 for the preference shares.
9. Debtors as at 31 May 2015 amounted to N$ 57 000. 6% of outstanding debtors are declared irrecoverable.
10. A provision for credit losses of 5% should be created of outstanding positive debtors.
11. The loan is secured by land and building and 5% of the loan value is repayable every 30 April. No payment
has been made on the loan as at 31 May 2015.
12. Preference share capital forms part of equity.
13. Profit for the year amounted to N$ 875 000.
1. Prepare the extracted statement of profit or loss and other comprehensive income as well as the extracted
statement of financial position of KOORNHOF LTD as at 31 May 2015 to comply with the requirements of
Companies Act and International Financial Reporting Standards (IFRS). (Comparative figures are required).
2. Disclose the following items to comply with the requirements of IFRS and Companies Actfor KOORNHOF
LTD for the year ended 31 May 2015.(30 marks):
2.1 Property, plant and equipment
2.2 Trade and other receivables
2.5 Long term borrowings
3. Prepare the statement of changes in equity for KOORNHOF LTD for the year ended 31 May 2015 to comply
with the requirements of IFRS and Companies Act. (15 marks)
4. What is the purpose of the statement of significant accounting policies and how may it affect the past
performance and present position of a company? (5 marks)