Insurance Claims – NBC Institute

FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

Question

Mr. Pamona owns a corner shop in Lagos. On 30 December 2012, vandals looted his shop, stole all his inventories and cash of ₦75,000. Mr. Pamona was fully insured against theft and he has asked you to prepare his accounts to enable him estimate his insurance claim. Your investigation revealed the following:

i. Net assets on 1 January 2012:

Furniture and fittings:
Cost: ₦900,000
Accumulated depreciation: ₦(400,000)
Carrying value: ₦500,000
Inventories: ₦2,700,000
Trade receivables: ₦430,000
Prepayments (rates): ₦30,000
Cash in bank: ₦2,140,000
Cash float in till: ₦30,000
Trade payables: ₦1,650,000
Accrued electricity: ₦40,000

ii. Bank statements for nine months from 1 January 2012 show the following:
Receipts:

Cash and cheques lodged: ₦20,060,000
Investment income: ₦182,000
Total: ₦20,242,000

Payments:

Trade payables: ₦17,850,000
Rent (1 January – 31 December): ₦1,200,000
Electricity: ₦155,000
Insurance – theft: ₦45,000
Insurance – life: ₦107,000
Telephone: ₦83,000
Total: ₦19,440,000

iii. The following were paid in cash from the till:

Trade payables: ₦2,400,000
Drawings (per month): ₦295,000

iv. Mr. Pamona’s gross profit margin on sales has averaged 20% in recent years.

v. The furniture and fittings are now estimated to be worth only ₦200,000.

vi. A cheque for ₦52,000 in respect of the telephone bill for the quarter ended 30 September 2012 was not shown in the bank statements until 3 October 2012.

vii. Rates for the period 1 April to 1 October, 2012, amounting to ₦75,000 were still outstanding.

viii. Trade receivables and payables were ₦270,000 and ₦1,900,000 respectively on 30 September 2012.

You are required to prepare Mr. Pamona’s:
a. Statement of Profit or Loss for the nine-month period ended 30 September 2012. (10 Marks)
b. Statement of Financial Position as at that date. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Insurance Claims, Statement of Financial Position, Statement of Profit or Loss, Theft
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

Question

Abuakwa Ltd (Abuakwa) is a multinational mining group that is involved in different operations. The draft financial statements for the year ended 31 March 2019 show the following:

Financial Statement Extracts	2019 (draft)	2018 (audited)
Revenue	GH¢30.60 million	GH¢28.08 million
Profit before tax	GH¢3.12 million	GH¢3.00 million
Total net assets	GH¢29.76 million	GH¢27.24 million

You are the manager responsible for the audit for the year ended 31 March 2019. You have just visited the client’s premises to review the audit team’s work to date. The audit senior has drafted the following “points for the attention of the manager”.

a) On 12 March 2019, an explosion occurred in one of Abuakwa’s premises, destroying about one quarter of the premises. Luckily, the explosion happened at night when the premises were empty, and there were no injuries to any persons. Structural engineers and surveyors are currently assessing the stability of the remainder of the premises, and it is, as yet, unclear whether they can be repaired or will need to be demolished and rebuilt in their entirety.

In the last few days, notifications have been received from the owners of four nearby businesses claiming that the structural integrity of their premises may have been compromised by the impact of the explosion.

They also advised that structural engineers are currently assessing their premises to ensure they are still safe. These business owners have formally notified Abuakwa that if their premises were adversely affected by the explosion, they will claim an “appropriate and justifiable” level of compensation from Abuakwa.

Abuakwa’s insurers have been informed but at this point are refusing to comment on the situation until, they say, all the facts are clear in relation to the explosion and its effects.

(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Contingent Liabilities, Explosion, Insurance Claims, Subsequent Events
Level: Level 3

Topic: Audit evidence, Reporting, The audit approach
Series: MAY 2019

FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

Question

i. Net assets on 1 January 2012:

Furniture and fittings:
Cost: ₦900,000
Accumulated depreciation: ₦(400,000)
Carrying value: ₦500,000
Inventories: ₦2,700,000
Trade receivables: ₦430,000
Prepayments (rates): ₦30,000
Cash in bank: ₦2,140,000
Cash float in till: ₦30,000
Trade payables: ₦1,650,000
Accrued electricity: ₦40,000

ii. Bank statements for nine months from 1 January 2012 show the following:
Receipts:

Cash and cheques lodged: ₦20,060,000
Investment income: ₦182,000
Total: ₦20,242,000

Payments:

Trade payables: ₦17,850,000
Rent (1 January – 31 December): ₦1,200,000
Electricity: ₦155,000
Insurance – theft: ₦45,000
Insurance – life: ₦107,000
Telephone: ₦83,000
Total: ₦19,440,000

iii. The following were paid in cash from the till:

Trade payables: ₦2,400,000
Drawings (per month): ₦295,000

iv. Mr. Pamona’s gross profit margin on sales has averaged 20% in recent years.

v. The furniture and fittings are now estimated to be worth only ₦200,000.

vi. A cheque for ₦52,000 in respect of the telephone bill for the quarter ended 30 September 2012 was not shown in the bank statements until 3 October 2012.

vii. Rates for the period 1 April to 1 October, 2012, amounting to ₦75,000 were still outstanding.

viii. Trade receivables and payables were ₦270,000 and ₦1,900,000 respectively on 30 September 2012.

You are required to prepare Mr. Pamona’s:
a. Statement of Profit or Loss for the nine-month period ended 30 September 2012. (10 Marks)
b. Statement of Financial Position as at that date. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Insurance Claims, Statement of Financial Position, Statement of Profit or Loss, Theft
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

Question

Abuakwa Ltd (Abuakwa) is a multinational mining group that is involved in different operations. The draft financial statements for the year ended 31 March 2019 show the following:

Financial Statement Extracts	2019 (draft)	2018 (audited)
Revenue	GH¢30.60 million	GH¢28.08 million
Profit before tax	GH¢3.12 million	GH¢3.00 million
Total net assets	GH¢29.76 million	GH¢27.24 million

Abuakwa’s insurers have been informed but at this point are refusing to comment on the situation until, they say, all the facts are clear in relation to the explosion and its effects.

(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Contingent Liabilities, Explosion, Insurance Claims, Subsequent Events
Level: Level 3

Topic: Audit evidence, Reporting, The audit approach
Series: MAY 2019

Question Tag: Insurance Claims

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FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

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FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

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Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

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FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

You're reporting an error for "FA – May 2013 – L1 – SB – Q3 – Financial Statements Preparation"

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

You're reporting an error for "Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin"

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