QUESTION $3$

Marks

$4$

$6$

$35$ MARKS

Quest Ltd is a manufacturing company in Swakopmund. Below is the details of its plant and

building:

Plant

Quest Ltd completed the construction of a new plant on $1$ July $2020$ at a cost of N$$8000000.$

The plant has been available for use at the same date but was only put into use at

$30$ September $2020$ due to the lack of technical expertise.

The following assumptions were made at completion of the plant: $-$ Expected economic useful life $-$ Residual value

$20$ years

N$$500000$

On $2$ January $2023,$ the plant had a fair value of N$$7000000$ and costs to sell amount to N$$200$

$000.$ The value in use was determined to be N$$6900000.$

The plant is accounted for according to the cost model.

On $2$ January $2023,$ a contract was signed for the sale of the plant to Malawi Ltd$.$ The expected

selling date is $31$ August $2023.$ The time period until completion of the sales transaction is

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beyond Quest Ltd$$s control and there is sufficient evidence that the company remains

committed to its plan to sell the asset.

The fair value at $30$ June $2023$ was N$$6950000$ and the expected cost to sell remained

unchanged.

Building

Quest Ltd owns a building which was acquired for rental income. During the year, Quest Ltd

decided to use the building for administrative purpose and moved into the building on $1$

March $2023.$

The following information relates to the building:

Fair value on $30$ June $2022$

Fair value on $1$ March $2023$

Total useful life of building

Remaining useful life on $1$ March $2023$

Residual value

Gross replacement value on $30$ June $2023$

N$$7300000$

N$$7500000$

$25$ years

$240$ months

N$$300000$

N$$9500000$

$$ Quest Ltd depreciates all buildings on the straight$-$line basis.

$$ Investment property is valued using the fair value model.

$$ Building is measured according to the revaluation model using the gross replacement

value method and revaluations take place at year$-$end.

REQUIRED:

$($a$)$ Explain the IFRS $5,$ Non$-$current Asset Held For Sale, requirements for a sale

to be highly probable.

Marks

$5$

$($b$)$ Prepare all the journal entries relating to the plant for the year ended

$30$ June $2023$ in the financial statements of Quest Ltd$.$

$18$

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Narrations are NOT required

$($c$)$ Prepare all the journal entries relating to the building for the year ended $30$

June $2023$ in the financial statements of Quest Ltd$.$

$.$

Narrations are NOT required

Total marks

$12$

$35$

QUESTION $4$

$15$ MARKS

Guess Limited is a company operating in the textile industry. The following Issues were

identified by the accountant for the current year ended $30$ June $2024,$ no adjustments have yet

been processed:

Issue $1$:

$$ The bookkeeper erroneously credited revenue with Pay$-$as$-$you$-$earn $($PAYE$)$ of

N$ $250000$ owing to the tax authorities in $2023.$

$$ As a result, the current tax in $2023$ had been incorrectly estimated by the accountant

and the incorrect figures were submitted on the $2023$ tax returns.

$$ This error did not affect the salaries and wages expense, nor the amount paid to

employees.

Additional information:

$$ Ignore tax.

$$ All amounts are considered to be material.

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Page $17$ of $19$

REQUIRED: Marks

$($a$)$ Write a memo to the accountant of Guess Limited wherein you define the

term $$events after the reporting period$$ and explain the difference between

an adjusting event and a non$-$adjusting event as per IAS $10$: Events after the

reporting period. $6$

$($b$)$ Prepare all the adjusting journal entries necessary to prepare the financial

statements for the year ended $30$ June $2024.$

Narrations are required $3$

$($c$)$ Prepare the correction of error note of Guess Limited for the year ended $30$

June $2024$ in accordance with International Financial Reporting Standards. $6$

Total marks $15$