Question 1 (15 Marks) 1. Using the definition as per the Conceptual Framework for financial reporting, briefly explain how to prove that the following items are assets and /or liabilities: 1.1 Equipment (3 marks) 1.2 Provision for legal costs (3 marks) 1.3 Investment in shares (2 marks) 2. Casa Blanca Hotel operates a catering service specializing in business luncheons for large corporations around Okahandja. Casa Blanca Hotel requires customers to place their orders 2 weeks in advance of the scheduled events. Casa Blanca Hotel invoices its customers on the 10th of the month following the date of service and requires that payment be made within 30 days of the invoice date. According to the Conceptual Framework of financial reporting, when should Casa Blanca Hotel recognize revenue related to its catering service? (4 marks) 3. In January 2021, LES Trading Ltd doubled the amount of its outstanding shares by selling on the market an additional 10,000 shares to finance an expansion of the business. You propose that this information be shown by a note on the statement of financial position as at December 31, 2021. The Chief Executive Officer objects, claiming that this sale took place after December 31, 2021 and therefore should not be shown. Explain your position by making reference to the Conceptual Framework for financial reporting. (3 marks)

Question 2 ( 20 Marks) Jive Ltd publishes magazines. On 01 April 2021, it receives N$25 000 from a subscriber for a 12 month subscription period, from 01 April 2021 to 31 March 2022. The financial year end of Jive Ltd is 31 December YOU ARE REQUIRED TO:

a) Prepare the journal entry to be recognized on receipt of the cash from the subscriber on 01 April 2021. (2 marks)

b) Calculate the amount of income to be recognized in respect of the subscription for the year ended 31 December 2021 and explain why this is recognized as income. Justify your answer using the Conceptual Framework. (5 marks)

c) Calculate the amount of the asset or liability to be recognized on the statement of financial position in relation to the subscription at 31 December 2021 and explain why this is recognized as an asset or liability. Justify your answer using the Conceptual Framework. (6 marks)

d) State the recognition criteria of the Conceptual Framework. (4 marks)

e) Describe measurement in terms of the Conceptual Framework and state the measurement bases. (3 marks)

Question 3 (30 Marks) Inceptus (Pty) Ltd has asked you to help prepare the financial statements for the year ended 30 September 2021. The Trial balance of the company as at 30 September 2021 is set out below: Trial Balance as at 30 September 2021 Dr Cr N$000 N$000 Ordinary Share Capital 21 000 Interest 900 Trade Receivables 20 200 Trade Payables 15 490 6% Long term loan 30 000 Distribution costs 12 800 Administrative expenses 8 228 Purchases 99 540 Sales 134 840 Retained earnings 17 820 Bank 1 930 Inventories as at 1 October 2020 20 730 Share Premium 5 000 Land (cost) 35 900 Buildings (cost) 12 800 Fixtures and fittings (cost) 6 950 Motor Vehicles (cost) 17 320 Office Equipment (cost) 5970 Buildings- accumulated depreciation 9 020 Fixtures and fittings- accumulated depreciation 4 370 Motor Vehicles- accumulated depreciation 10 030 Office Equipment- accumulated depreciation 2 320 Allowance for credit losses 620 Returns inwards 456 Returns outwards 714 Dividend 7 500 251 224 251 224 Other information: 1) The authorized share capital of the company, all of which has been issued consists of ordeinary shares with a par value of N$0.50 each. 2) Inventories at the close of business on 30 September 2021 were valued at cost at N$13 870 000. 3) The corporation tax charge for the year has been calculated as N$5 190 000. 4) The land has been revalued up by professional valuers by N$3 200 000