Question 1 (40 marks)

Zambeef is the largest vertically integrated food retailing brand in Zambia. The Group is principally involved in the

production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, stock feed and

flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with

approximately 7,787 hectares of row crops under irrigation which are planted twice a year, and a further 8,694

hectares of rainfed/dryland crops available for planting each year. Zambeefs vision is to be one of the most

accessible and affordable quality protein providers in the Southern Africa region, delivered through the Groups

extensive retail and distribution network.

It continues to pursue a vertically integrated business model which provides strong foundations for growth and

below is the group structure

The presentation currency of Zambeef group is Zambian Kwacha, below is the consolidated statement of financial

position for the year ended 30 September 2019.

Page 2 of 8Page 3 of 8

Consolidated Statement of Financial Position For the year ended 30 September 2019

2019 2019 2018 2018

ASSETS Note ZMW000s USD000s ZMW000s USD000s

Non-current assets

Goodwill 13 166,801 12,636 166,801 13,628

Property, plant and equipment 14 2,841,824 215,290 2,902,221 237,110

Investment in associate 15(e) 12,376 938 15,412 1,259

Deferred tax asset 10(e) 56,525 4,282 47,854 3,910

3,077,526 233,146 3,132,288 255,907

Current assets

Biological assets 16 170,417 12,910 181,674 14,843

Inventories 17 941,159 71,300 639,811 52,272

Trade and other receivables 18 98,025 7,426 156,314 12,771

Assets held for disposal 34 135,357 10,254 - -

Amounts due from related companies 19 41,554 3,148 50,272 4,107

Income tax recoverable 10(c) 2,767 210 3,885 317

1,389,279 105,248 1,031,956 84,310

Total assets 4,466,805 338,394 4,164,244 340,217

EQUITY AND LIABILITIES

Capital and reserves

Share capital 21 3,006 449 3,006 449

Preference share capital 21 1,000 100 1,000 100

Share premium 22 1,125,012 185,095 1,125,012 185,095

Other reserves 2,116,691 60,243 1,986,756 68,916

3,245,709 245,887 3,115,774 254,560

Non-controlling interest (4,881) (370) (8,660) (708)

3,240,828 245,517 3,107,114 253,852

Consolidated Statement of Financial Position (continued)

For the year ended 30 September 2019

2019 2019 2018 2018

Note ZMW000s USD000s ZMW000s USD000s

Non-current liabilities

Interest bearing liabilities 23 228,099 17,280 308,312 25,189

Obligations under finance leases 24 19,297 1,462 20,163 1,647

Deferred liability 25 16,362 1,240 22,611 1,847

Deferred tax liability 10(e) 9,138 692 6,909 565

272,896 20,674 357,995 29,248

Current liabilities

Interest bearing liabilities 23 130,661 9,899 95,247 7,782

Collateral management agreement 23 212,381 16,089 107,213 8,759

Obligations under finance leases 24 21,487 1,628 18,248 1,491

Trade and other payables 26 259,585 19,665 297,390 24,294

Provisions 27 52,914 4,009 42,137 3,443Page 4 of 8

Amounts due to related companies 28 251 19 232 19

Taxation payable 10(c) 1,377 104 2,925 239

Bank overdrafts 20 274,425 20,790 135,743 11,090

953,081 72,203 699,135 57,117

Total equity and liabilities 4,466,805 338,394 4,164,244 340,217

The following information is also available

a)Zamleather limited was acquired by Zambeef group of companies 2 years ago. One of its equipment has been

reported in the above consolidated statement of financial position at cost of K50, 000,000, although its fair value

at the date of acquisition was K60, 000,000. This equipment is depreciated using straight-line method and has a

life span of 10 year with no residue value.

Required

i)Citing relevant financial reporting standards comment on the appropriateness of measurement of the

assets of Zam leather by the group. (4 marks)

ii) Using appropriate journal entries suggest any amendments that should be made to the consolidated

statement of financial for both 2018 and 2019 above.(8 marks)

iii) State the ledger accounts that will be affected by the above treatment stating whether the affected

ledger accounts have been overstated or understated.(6 marks)

b) On 1 June 2019, Master meats Nigeria sold products costing 1,080,000,000 Nigerian Naira (NGN) to Zambeef

PLC (parent company) at a mark-up of 20%. Zambeef PLC made a part payment of 80, 000,000NGN on July 1

2019 and the balance on 31 March 2020. Zambeef PLC was still holding half of these goods in its inventory at the

year.

Exchange rates were as follows.

(1ZMW =35NGN on 1 June 2019, 1ZMW=40NGN on July 1 2019, 1ZMW=29.1NGN on 30 September 2019,

1ZMW= 28NGN on December 2019 and 1ZMW = 27 NGN on 31 March 2019).This transaction has been omitted

in the books of both Master meats Nigeria and Zambeef PLC.

Required

i) Prepare the journal entries that would have been made by Master meats Nigeria and Zambeef PLC. On

June 1, 2019 and on July 1 2019(8 marks)

ii) State the ledger accounts in the above consolidated statement of financial position that will be affect

once the above sales transaction is updated, and explain by how much the said accounts will increase or

decrease. (8 marks)Page 5 of 8

V) Prepare a new group statement of financial position (for the year 2019 only) after taking in account the

adjustments made in (a) and (b) above(6 mark)

The following exchange rates have been applied:

ZMW: USD Average exchange

rate

Closing exchange

rate

Year ended 30 September 2018 9.92 12.24

Year ended 30 September 2019 12.32 13.20