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  • 20 Marks

FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated profit or loss and other comprehensive income for Adanna Plc and its subsidiary Ebuka Ltd for the year ended December 31, 2017.

Adanna Plc has a subsidiary, Ebuka Limited. The statement of profit or loss and other comprehensive income for the companies is as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2017

Adanna Plc (N’000) Ebuka Limited (N’000)
Revenue 986,546 614,206
Cost of Sales (593,204) (365,903)
Gross Profit 393,342 248,303
Other Income 57,850 12,420
Distribution Costs (69,496) (40,562)
Administrative Expenses (158,624) (95,036)
Other Expenses (32,108) (15,814)
Finance Costs (20,600) (10,220)
Profit Before Tax 170,364 99,091
Income Tax Expense (51,110) (26,727)
Profit for the Year 119,254 72,364
Other Comprehensive Income:
Gain on Revaluation 68,166 29,202
Total Comprehensive Income 187,420 101,566

Additional Information:

  1. Adanna Plc acquired 75% of the issued equity shares of Ebuka Limited three years ago. Goodwill on acquisition was N280 million. The recoverable amount of goodwill at the year-end was N268 million, marking the first time the recoverable amount had fallen below the initial recognition.
  2. During the year, Ebuka Limited invoiced goods worth N300 million to Adanna Plc. A quarter of these goods were included in Adanna Plc’s inventory at the year-end. Ebuka Limited invoices goods at cost plus 25%.
  3. Ebuka Limited’s distribution costs include depreciation of an asset subject to a fair value increase of N155 million on acquisition. The asset is being depreciated on a straight-line basis over ten years.
  4. Adanna Plc’s other income includes an intercompany management charge of N10 million to Ebuka Limited, which was recognized as administrative expenses by Ebuka Limited.

Required: Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for Adanna Plc Group for the year ended December 31, 2017.

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  • 15 Marks

FR – May 2018 – L2 – Q5a – Preparation of Financial Statements

Prepare statements of profit or loss and financial position for Head Office, Branch, and the combined entity using trial balances provided.

The following trial balances for the year ended 31 December 2017 were obtained from the Head Office and Branch of Compassionate Grounds Ltd.

Additional information: i) The branch deposited GH¢800,000 on behalf of the head office in the bank on 31 December 2017. No record of this transaction had been made in head office books. ii) All goods sold by the branch are supplied from the head office at cost plus 25%. At 31 December 2017, goods to the value of GH¢10 million were in transit to the branch. iii) Inventories at 31 December 2017, excluding goods in transit were as follows:

  • Branch at markup: GH¢8,000
  • Head Office at cost: GH¢14,500

Required:
Prepare for the head office, branch, and combined entity of Compassionate Grounds Limited:

  • Statement of profit or loss for the year ended 31 December 2017
  • Statement of financial position as at 31 December 2017

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  • 20 Marks

FR – May 2018 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017 after acquisition of Navrongo Ltd.

On 1 April 2017, Tamale Ltd acquired 60% of the 4 million ordinary shares of Navrongo Ltd in a share exchange of two shares in Tamale Ltd for three shares in Navrongo Ltd. The issue of shares has not yet been recorded by Tamale Ltd. At the date of acquisition, shares in Tamale Ltd had a market value of GH¢6 each. Below are the summarised draft financial statements of both companies.

Statements of Profit or Loss for the year ended 30 September 2017

Tamale Ltd (GH¢’000) Navrongo Ltd (GH¢’000)
Revenue 85,000 42,000
Cost of Sales (63,000) (32,000)
Gross Profit 22,000 10,000
Distribution Cost (2,000) (2,000)
Administrative Expenses (6,000) (3,200)
Finance Cost (300) (400)
Profit Before Tax 13,700 4,400
Income Tax Expense (4,700) (1,400)
Profit for the Year 9,000 3,000

Statements of Financial Position as at 30 September 2017

Tamale Ltd (GH¢’000) Navrongo Ltd (GH¢’000)
Assets
Non-Current Assets
Property, Plant and Equipment 40,600 12,600
Current Assets 16,000 6,600
Total Assets 56,600 19,200
Equity and Liabilities
Ordinary Shares 10,000 4,000
Retained Earnings 35,400 6,500
Equity 45,400 10,500
Non-Current Liabilities
10% Loan Notes 3,000 4,000
Current Liabilities 8,200 4,700
Total Equity and Liabilities 56,600 19,200

The following information is relevant:

i) At the date of acquisition, the fair values of Navrongo Ltd’s assets were equal to their carrying amounts with the exception of an item of plant, which had a fair value of GH¢2 million in excess of its carrying amount. It had a remaining life of five years at that date (straight-line depreciation is used). Navrongo Ltd has not adjusted the carrying amount of its plant as a result of the fair value exercise.

ii) Sales from Navrongo Ltd to Tamale Ltd in the post-acquisition period were GH¢8 million. Navrongo Ltd made a markup on cost of 40% on these sales. Tamale Ltd had sold GH¢5.2 million (at cost) as at 30 September 2017.

iii) Other than where indicated, profit or loss items are deemed to accrue evenly on a time basis.

iv) Navrongo Ltd’s trade receivables at 30 September 2017 include GH¢600,000 due from Tamale Ltd which did not agree with Tamale Ltd’s corresponding trade payable. This was due to cash in transit of GH¢200,000 from Tamale Ltd to Navrongo Ltd. Both companies have positive bank balances.

v) Tamale Ltd has a policy of accounting for any non-controlling interest at fair value. The fair value of the non-controlling interest in Navrongo Ltd at the date of acquisition was estimated to be GH¢5.9 million. Consolidated goodwill was not impaired at 30 September 2017.

Required:
a) Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017.

(8 marks)

b) Prepare the consolidated statement of financial position for Tamale Ltd as at 30 September 2017.

(12 marks)

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  • 20 Marks

FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated profit or loss and other comprehensive income for Adanna Plc and its subsidiary Ebuka Ltd for the year ended December 31, 2017.

Adanna Plc has a subsidiary, Ebuka Limited. The statement of profit or loss and other comprehensive income for the companies is as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2017

Adanna Plc (N’000) Ebuka Limited (N’000)
Revenue 986,546 614,206
Cost of Sales (593,204) (365,903)
Gross Profit 393,342 248,303
Other Income 57,850 12,420
Distribution Costs (69,496) (40,562)
Administrative Expenses (158,624) (95,036)
Other Expenses (32,108) (15,814)
Finance Costs (20,600) (10,220)
Profit Before Tax 170,364 99,091
Income Tax Expense (51,110) (26,727)
Profit for the Year 119,254 72,364
Other Comprehensive Income:
Gain on Revaluation 68,166 29,202
Total Comprehensive Income 187,420 101,566

Additional Information:

  1. Adanna Plc acquired 75% of the issued equity shares of Ebuka Limited three years ago. Goodwill on acquisition was N280 million. The recoverable amount of goodwill at the year-end was N268 million, marking the first time the recoverable amount had fallen below the initial recognition.
  2. During the year, Ebuka Limited invoiced goods worth N300 million to Adanna Plc. A quarter of these goods were included in Adanna Plc’s inventory at the year-end. Ebuka Limited invoices goods at cost plus 25%.
  3. Ebuka Limited’s distribution costs include depreciation of an asset subject to a fair value increase of N155 million on acquisition. The asset is being depreciated on a straight-line basis over ten years.
  4. Adanna Plc’s other income includes an intercompany management charge of N10 million to Ebuka Limited, which was recognized as administrative expenses by Ebuka Limited.

Required: Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for Adanna Plc Group for the year ended December 31, 2017.

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  • 15 Marks

FR – May 2018 – L2 – Q5a – Preparation of Financial Statements

Prepare statements of profit or loss and financial position for Head Office, Branch, and the combined entity using trial balances provided.

The following trial balances for the year ended 31 December 2017 were obtained from the Head Office and Branch of Compassionate Grounds Ltd.

Additional information: i) The branch deposited GH¢800,000 on behalf of the head office in the bank on 31 December 2017. No record of this transaction had been made in head office books. ii) All goods sold by the branch are supplied from the head office at cost plus 25%. At 31 December 2017, goods to the value of GH¢10 million were in transit to the branch. iii) Inventories at 31 December 2017, excluding goods in transit were as follows:

  • Branch at markup: GH¢8,000
  • Head Office at cost: GH¢14,500

Required:
Prepare for the head office, branch, and combined entity of Compassionate Grounds Limited:

  • Statement of profit or loss for the year ended 31 December 2017
  • Statement of financial position as at 31 December 2017

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  • 20 Marks

FR – May 2018 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017 after acquisition of Navrongo Ltd.

On 1 April 2017, Tamale Ltd acquired 60% of the 4 million ordinary shares of Navrongo Ltd in a share exchange of two shares in Tamale Ltd for three shares in Navrongo Ltd. The issue of shares has not yet been recorded by Tamale Ltd. At the date of acquisition, shares in Tamale Ltd had a market value of GH¢6 each. Below are the summarised draft financial statements of both companies.

Statements of Profit or Loss for the year ended 30 September 2017

Tamale Ltd (GH¢’000) Navrongo Ltd (GH¢’000)
Revenue 85,000 42,000
Cost of Sales (63,000) (32,000)
Gross Profit 22,000 10,000
Distribution Cost (2,000) (2,000)
Administrative Expenses (6,000) (3,200)
Finance Cost (300) (400)
Profit Before Tax 13,700 4,400
Income Tax Expense (4,700) (1,400)
Profit for the Year 9,000 3,000

Statements of Financial Position as at 30 September 2017

Tamale Ltd (GH¢’000) Navrongo Ltd (GH¢’000)
Assets
Non-Current Assets
Property, Plant and Equipment 40,600 12,600
Current Assets 16,000 6,600
Total Assets 56,600 19,200
Equity and Liabilities
Ordinary Shares 10,000 4,000
Retained Earnings 35,400 6,500
Equity 45,400 10,500
Non-Current Liabilities
10% Loan Notes 3,000 4,000
Current Liabilities 8,200 4,700
Total Equity and Liabilities 56,600 19,200

The following information is relevant:

i) At the date of acquisition, the fair values of Navrongo Ltd’s assets were equal to their carrying amounts with the exception of an item of plant, which had a fair value of GH¢2 million in excess of its carrying amount. It had a remaining life of five years at that date (straight-line depreciation is used). Navrongo Ltd has not adjusted the carrying amount of its plant as a result of the fair value exercise.

ii) Sales from Navrongo Ltd to Tamale Ltd in the post-acquisition period were GH¢8 million. Navrongo Ltd made a markup on cost of 40% on these sales. Tamale Ltd had sold GH¢5.2 million (at cost) as at 30 September 2017.

iii) Other than where indicated, profit or loss items are deemed to accrue evenly on a time basis.

iv) Navrongo Ltd’s trade receivables at 30 September 2017 include GH¢600,000 due from Tamale Ltd which did not agree with Tamale Ltd’s corresponding trade payable. This was due to cash in transit of GH¢200,000 from Tamale Ltd to Navrongo Ltd. Both companies have positive bank balances.

v) Tamale Ltd has a policy of accounting for any non-controlling interest at fair value. The fair value of the non-controlling interest in Navrongo Ltd at the date of acquisition was estimated to be GH¢5.9 million. Consolidated goodwill was not impaired at 30 September 2017.

Required:
a) Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017.

(8 marks)

b) Prepare the consolidated statement of financial position for Tamale Ltd as at 30 September 2017.

(12 marks)

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