FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION

DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE

QUALIFICATION: BACHELOR OF ACCOUNTING

QUALIFICATION CODE: 07BOAC LEVEL: 6

COURSE CODE: FAC611S COURSE NAME: FINANCIAL ACCOUNTING 201

DATE: 11 MAY 2024 PAPER: THEORY AND CALCULATIONS

DURATION: 1 HOUR 30 MINUTES MARKS: 50

2024 - TEST THREE

EXAMINER(S) Ms. P. Erkie, Ms. G. Kafula, Mr. C. Mahindi, Mr. C Simasiku and Ms. L Dala

MODERATOR: Dr. D. Kamotho

INSTRUCTIONS
1. Capture your full name, student number and assessment number on the first page.
2. Answer ALL the questions and manage your time properly.
3. Number each page correctly.
4. Write clearly and neatly.
5. Do not write in pencil and do not use tip-ex, as this will not be marked.
6. The names of people and businesses used throughout this assessment do not reflect
the reality and may be purely coincidental.
7. SHOW ALL WORKINGS!

THIS QUESTION PAPER CONSISTS OF 4 PAGES (Including this front page)

1
QUESTION 1 (25 Marks)
PART A (10 marks)
Multiple choice questions:
Select the correct answer from the options presented by writing the only the letter that
corresponds to the correct answer in your answer sheet.
1. Under the revaluation model, an asset is carried at its fair value after accounting for
any accumulated depreciation and accumulated impairment losses.
a. True
b. False (2)

2. When an exchange of one item of property, plant and equipment (PPE) for of
another item of PPE lacks commercial substance, the value of the asset received is:
a. carried at the fair value of the asset given up.
b. carried at the fair value of the asset received.
c. carried at the carrying amount of the asset given up. (2)

3. Investment property after initial measurement can subsequently be carried using:

a. The cost model.
b. The revaluation model.
c. The fair value model.
d. Either option A or C
e. Either option A or B (2)

4. Under the fair value model of Investment property, depreciation is not taken into
account:
a. True
b. False (2)

5. When an item of property, plant and equipment is subsequently classified as

investment property carried under the fair value model, the transfer will be recorded
by the following steps:
a. Account for depreciation and impairment under IAS16 – Property, plant and
equipment and IAS36 Impairment of assets then transfer the asset to
investment property at its carrying amount.
b. Account for depreciation and impairment under IAS16 – Property, plant and
equipment and IAS36 Impairment of assets then revalue the asset to its fair
value before transferring the asset to investment property.
c. Account for depreciation and impairment under IAS16 – Property, plant and
equipment and IAS36 Impairment of assets then transfer the asset to
investment property before revaluing it to its fair value. (2)

2
PART B (8 marks)
State whether the following statements are true or false, justify your answer with
reasons:
i. The recoverable amount is the higher of the value in use and the fair value. (2)
ii. The recoverable amount for an intangible asset must be calculated annually. (3)
iii. If an asset is impaired the decrease in the carrying amount of will be recognised as an
impairment loss in other comprehensive income if it is measured under the
revaluation model (3)
PART C (7 marks)
i. Explain how the value in use of an asset is determined. (4)
ii. Provide the definition of fair value (3)

Question 2 (15 marks)

Jenga Enterprises is a manufacturing entity operating in Windhoek with a year end of 30 April.
The following information relates to one of its machines that it uses in its production process.
The machine was acquired on 1 May 2022 at a cost of N$250,000. On the date of acquisition,
it was estimated that the useful life of the machine is 5 years with a nil residual value.
On 30 April 2023 it was deemed that the machine was not producing output as expected and
thus an impairment test was performed. On this date the fair value less costs of disposal
amounted to N$190,000 while the value in use was determined to be N$175,000.
On 30 April 2024, it was determined that the market had recovered sufficiently and thus there
was an increase in the demand for the products produced by the machine. At this date the
fair value less costs to sell was determined to be N$145,000 while the value in use was
determined to be N$200,000.

Required:
Show all workings!
a) Provide all the general journal entries relating to the machine for the reporting period
ended 30 April 2023. (5)
b) Provide all the general journal entries relating to the machine for the reporting period
ended 30 April 2024. (10)
(5 marks workings, 5 marks journals)

3
Question 3 (10 marks)
Innovations Limited owns a Patent A that it purchased for N$800,000 on 1 May 2023. This
patent had a useful life of 3 years at acquisition with a residual value of N$200,000. On 31
December 2023, an opportunity arose to invest in another patent, Patent B. However, as
Innovations Limited had limited cash reserves, they decided to sell Patent A. IFRS 5 criteria
for non-current assets held for sale were met on 31 January 2024. The following information
relating to Patent A was available:
31 December 2023:
Fair value less costs to sell: N$550,000
Value in use N$620,000
31 January 2024:
Fair value less costs to sell: N$570,000
Value in use N$600,000

The reporting date is 30 April 2024. There has been no change in fair value since the patent
was reclassified as a non-current asset held for sale.

Required:
Provide all the journal entries for the reporting period ended 30 April 2024. Your journals
should clearly distinguish whether the patent is an Intangible Asset (IA), or a non-current asset
held for sale (NCAHFS). (10)
END OF ASSESSMENT!