FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING & AUDITING

BACC 237: FINANCIAL REPORTING FOR COMPANIES
ASSIGNMENT 1
SEMESTER 1 OF 2024

Instructions
• All assignments must be typed using New Times Roman font size 12, 1.5 line spaced,
referenced using 6th Edition APA Guidelines, justified both sides, include a
standardized cover page and uploaded as a SINGLE PDF file.

• It is the responsibility of the student to upload their assignments in time to avoid

inconveniences due to internet failure, system failure, power outages or any other
unforeseen circumstances. NO submission extensions will be granted by the
Department after the deadline.

• All queries for this assignment must be directed to the Course Leader whose contact
details are on the List of Course Leaders available on My Vista.

• Plagiarism is a serious academic offence. Credit will be given for well written and
referenced assignments. Please refer to the Tutorial Letter and other resources for
more information on academic writing.

Question one
This question comprises of two unrelated parts
Part (a)

T&H Ltd purchased the plant on 1 January 2018 at a cost of $3000 000. The plant is
depreciated on a straight-line basis over ten years, it has a residual value of $200 000 and it is
subsequently measured using the revaluation model. The first revaluation of the plant to its
fair value was performed on 31 December 2020. The fair value was determined by using cost
approach in accordance with IFRS 13 and the net replacement cost on 31 December 2020
was $ 2 450 000. No revaluation was performed on 31 December 2019 since carrying amount
did not differ materially with fair value. It is the company policy that Revaluations are
performed at the end of a financial year and depreciation of the current year is based on
the fair values determined at the end of the year.
Required

Calculate the replacement cost at 1 January 2020 and the revaluation surplus. Show, with the
aid of journals, how the surplus will be accounted for in the financial statements.

Ignore any income tax implications. [10]

Part (b)

Outspan Holdings (Out-Span) holds 100% interest in City-Bolts Ltd (City-Bolts). City-Bolts
has a business unit that manufactures and sells bolts in Belmont, Bulawayo. The assets used
in the business unit qualify to be a Cash Generating Unit (CGU). The following information
relates to the carrying amounts of assets at 31 December 2019.
$
Machinery 33 600
Equipment 36 000
Furniture 50 400
Goodwill 30 000
150 000
At the same date there were indications that the business unit might have been impaired. The
only fair value less costs to sell of individual asset where an active market was available was
furniture and its fair value amounted to $45 600 net of costs to sell. A professional valuer
estimated the value in use of the business unit at $ 98 400 and the fair value less costs to sell
the whole at $84 000.
Required
1. With the aid of examples, discuss 4 indicators that are considered in assessing
whether assets are likely to be impaired.
2. Calculate the impairment loss, if any, of the CGU and demonstrate how it will be
allocated.
3. Present a journal to illustrate the accounting treatment of impairment in the books of
City-Bolts Ltd. [15]

Question 2
The following information was extracted from the books of Dolphins Ltd (Dolphins) for the
years ended 31 December
2019 2018
Number of Ordinary shares at beginning of year 1 000 1 000
Ordinary shares issued on 30/09/2019 1 200 -
Capitalisation issue of equity shares on 15/10/2019 440 -
500 12% Preference shares at beginning of the year $500 $500
Profit for the year $5 000 $4 400
Ordinary dividends $2 000 $1 600
2000 15% dentures $4 000 -

Additional Information
1. On 1 July 2019 the company issued 2000 ($2) debentures at a fair value of $1 each, that
can be converted in 2021 at the option of the holder into 1 000 ordinary shares.
2. The capitalisation issue was done on the basis of 1 for 5 shares held.
The tax rate for the two periods was 25%
Required
Calculate and disclose the basic and diluted earnings per share of Dolphins Ltd for the year
ended 31 December 2019.
[25]

Question three
Table-Mine Ltd (Tee-M) operates a diamond mine in Manicaland. The following is the
statement of financial position of the company as at 31 July 2023.
Table-Mine Ltd Statement of Financial Position as at 31 July 2023.
2023 2022
Assets $000 $000 $000 $000
Non-current assets
PPE at cost 490 000 450 000
Accumulated depreciation (370 000) 120 000 (330 000) 120 000
Investments at cost 19 000 44 000
139 000 164 000
Current assets
Inventories 289 000 176 000
Trade receivables 205 000
(231-26 (allowance))
(106-4(allowance) 102 000
Prepayments 13 000 12 000
Cash on 7-day deposit - 50 000
Cash at bank - 507 000 59 000 399 000
646 000 563 000
Equity and liabilities
Equity
Ordinary share capital 230 000 180 000
Preference share capital 20 000 20 000
Share premium 30 000 -
Retained earnings 158 000 213 000
438 000 413 000
Liabilities
Non-current
14% debentures - 40 000
12% debentures 30 000 -
Current liabilities
14% debentures 40 000 -
Trade payables 60 000 55 000
Accruals 9 000 8 000
Amount owing (non-current 20 000 -
assets)
Taxation 9 000 47 000
Bank overdraft 40 000 178 000 - 110 000
646 000 563 000

Additional information
1. Equipment which has cost $30 000 during the to 31 July 2020 was sold in February
2023 for $10 000. The company depreciates equipment at 20% per annum on cost
with full charge in the year of acquisition and none in the year of disposal. Some of
the equipment was more than 5years old on 31 July 2023.
2. Non-current assets investments which had cost $25 000 some years ago were sold
during the year for $21 000.
3. Dividends received during the year were $5 000. Dividends totalling $100 000 were
paid during the year.
4. The 14% debentures were issued many years ago and are now due to be redeemed on
1 January 2024. A fresh issue of 12% debentures was made on 31 July 2023.
5. Interest paid during the year (including debenture interest) was $8 000. All the interest
was paid at the due date and no interest was accrued at either the start or the end of
the year.
6. Taxation shown as a liability on 31 July 2022 was paid in full during the year to 31
July 2023
7. In January 2023 the company issued 50 000 $1 ordinary shares at a premium of $0.6
per share.
8. The cash on 7-day deposits ranks as a cash equivalent.

Required
a) Prepare Table-Mine Ltd`s Statement of Cash Flows for year ended 31 July 2023 in
accordance with the requirements of IAS 7 using the indirect method.
b) Comment briefly in the significance of the information provided by the company`s
statement of cash flows prepared in b above. [25]