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  • 15 Marks

CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)

Classify cryptocurrency holdings in financial statements, addressing IAS 32, IAS 38, and IAS 2.

You have been asked to make a presentation to your team on cryptocurrencies. A snapshot of your draft presentation includes the following:

“Cryptocurrency is a new phenomenon in the financial market. A cryptocurrency is a digital or virtual currency designed to serve as a medium of exchange. Cryptocurrencies are created through cryptography, often with a maximum possible number of ‘coins’ that can exist through solutions to a complex algorithm with their value supported only by the laws of supply and demand. Cryptocurrencies are currently not regulated by government or other similar entity.

The following are some of the types of cryptocurrency in the market:

  • Bitcoin: The first-ever cryptocurrency that started the market awareness and “boom.”
  • Ethereum: A programmable currency that lets developers build different distributed apps and technologies that wouldn’t work with Bitcoin.
  • Ripple: Unlike most cryptocurrencies, it doesn’t use a blockchain to reach a network-wide consensus for transactions. An iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.

There are many merchants – both online and offline – that accept Bitcoin as a form of payment, while Ethereum and Ripple are not yet widely accepted.

Required:

Following your presentation, you are asked how a holding of cryptocurrency should be classified in the financial statements of your clients. (15 Marks)

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  • 20 Marks

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

  1. (a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
  2. (b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
  3. (c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
  4. (d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

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  • 5 Marks

AA – Nov 2015 – L2 – Q3b – Internal Control Systems

Describing internal control procedures an auditor would expect for inventory management.

Describe TWO internal control procedures an auditor would expect the company to put in place in respect of inventories.

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  • 20 Marks

FR – Nov 2015 – L2 – Q2 – Presentation of Financial Statements (IAS 1)

Prepare a statement of profit or loss and other comprehensive income for Well-Being Plc.

The following trial balance has been extracted from the books of Well-Being Plc as at March 31, 2014:

N’000 N’000
Land at cost 360
Building at cost 750
Equipment at cost 588
Vehicles at cost 852
Goodwill 900
Accumulated depreciation:
– Buildings 270
– Equipment 228
– Vehicles 396
Inventory at April 1, 2013 321
Trade receivables and payables 549 351
Allowance for receivables 24
Bank balances 171
Current taxation 18
Ordinary shares of N1 each 600
Retained earnings at April 1, 2013 1,509
Revenue 4,296
Purchases 1,464
Directors’ fees 450
Wages and salaries 828
General distribution costs 303
General administrative expenses 558
Dividend paid 60
Rent received 90
Disposal of vehicle 30
Total 7,983 7,983

Additional information:

  1. The company’s non-depreciable land was valued at ₦900,000 on March 31, 2014, and this valuation is to be incorporated into the accounts.
  2. Depreciation policy:
    • Building: 4% p.a. (straight line)
    • Equipment: 40% p.a. (reducing balance)
    • Vehicles: 25% p.a. (straight line) In all cases, a full year’s depreciation is charged in the year of disposal.
  3. On February 1, 2014, a vehicle used entirely for administrative purposes was sold for ₦30,000 (cost ₦132,000). No other entries were made.
  4. Depreciation is apportioned as follows:
    • Buildings: 50% distribution, 50% administrative
    • Equipment: 25% distribution, 75% administrative
    • Vehicles: 70% distribution, 30% administrative
  5. Inventory at March 31, 2014, is valued at ₦357,000.
  6. Trade receivables include a debt of ₦24,000 to be written off. The allowance for receivables is to be adjusted to 4% of receivables after the write-off.
  7. Current tax for the year ended March 31, 2013, was over-estimated by ₦18,000. Current tax for 2014 is estimated at ₦90,000.
  8. One-quarter of wages and salaries was paid to distribution staff and the remaining three-quarters to administrative staff.
  9. General administrative expenses include bank overdraft interest of ₦27,000.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended March 31, 2014.

 

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  • 30 Marks

FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Hapu Plc and Sege Plc for the year ended December 31, 2014.

Statement of financial position as at December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Assets
Non-current assets:
Property, plant, and equipment 32,000 25,000
Investments 33,500 –
Total non-current assets 65,500 25,000
Current assets
Cash at bank and in hand 9,500 2,000
Trade receivables 20,000 8,000
Inventory 30,000 18,000
Total current assets 125,000 53,000
Equity and liabilities
Share capital 40,000 10,000
Share premium 6,500 –
Retained earnings 55,000 37,000
Total equity 101,500 47,000
Current liabilities 23,500 6,000
Total equity and liabilities 125,000 53,000

Statement of profit or loss for the year ended December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Revenue 125,000 117,000
Cost of sales (65,000) (64,000)
Gross profit 60,000 53,000
Distribution costs (21,000) (14,000)
Administrative expenses (14,000) (8,000)
Profit before taxation 25,000 31,000
Income tax expense (10,000) (9,000)
Profit for the year 15,000 22,000

Statement of changes in equity (extract) for the year ended December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Retained earnings brought forward 40,000 15,000
Retained profit for the year 15,000 22,000
Retained earnings carried forward 55,000 37,000

Additional Information:

  1. Hapu Plc owns 80% of Sege’s shares, purchased in 2011 for ₦20.5 million when Sege’s retained earnings stood at ₦7 million.
  2. Included in Sege’s inventory as of December 31, 2014, were goods purchased from Hapu for ₦3.9 million, with a 30% profit margin on cost. Total sales from Hapu to Sege amounted to ₦6 million.
  3. Hapu Plc and Sege Plc proposed dividends of ₦2 million and ₦2.5 million respectively, not yet accounted for.
  4. Goodwill impairment tests indicate no impairment in accordance with IFRS 3 and IAS 36.

Required:
Prepare the consolidated statement of profit or loss and the consolidated statement of financial position for Hapu Plc and Sege Plc as at December 31, 2014.

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  • 12 Marks

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

c. State the main factors that IAS 8 requires management of a company to consider in selecting and applying accounting policies in the absence of any IFRS and identify the alternative accounting policies on the following items in the financial statements:

i. Inventories
ii. Depreciation

(12 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q28 – Accounting for Inventories (IAS 2)

Identifying the accounting concept that guides the treatment of known losses and inventory valuation.

Borox Limited makes provision for all known losses and values its inventories at the lower of cost and net realizable value. Which accounting concept is the company complying with?

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  • 1 Marks

FA – May 2012 – L1 – SA – Q24 – Accounting for Inventories in Accordance with IAS 2

Identifying the most appropriate basis for apportioning inventory holding costs among departments.

The most appropriate basis for apportioning inventory holding costs among departments is to use the value of:

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  • 1 Marks

FA – May 2012 – L1 – SA – Q11 – Recording Financial Transactions

Identifying the correct accounting treatment for sales returns on a cash and carry basis.

Goods sold on cash and carry basis returned by a customer is treated in the account by:

A. Debiting Sales and Crediting Cash
B. Debiting Sales and Crediting Accounts Payable
C. Debiting Inventory and Crediting Cash
D. Debiting Inventory and Crediting Bank
E. Debiting Sales and Crediting Accounts Receivable.

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  • 15 Marks

CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)

Classify cryptocurrency holdings in financial statements, addressing IAS 32, IAS 38, and IAS 2.

You have been asked to make a presentation to your team on cryptocurrencies. A snapshot of your draft presentation includes the following:

“Cryptocurrency is a new phenomenon in the financial market. A cryptocurrency is a digital or virtual currency designed to serve as a medium of exchange. Cryptocurrencies are created through cryptography, often with a maximum possible number of ‘coins’ that can exist through solutions to a complex algorithm with their value supported only by the laws of supply and demand. Cryptocurrencies are currently not regulated by government or other similar entity.

The following are some of the types of cryptocurrency in the market:

  • Bitcoin: The first-ever cryptocurrency that started the market awareness and “boom.”
  • Ethereum: A programmable currency that lets developers build different distributed apps and technologies that wouldn’t work with Bitcoin.
  • Ripple: Unlike most cryptocurrencies, it doesn’t use a blockchain to reach a network-wide consensus for transactions. An iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.

There are many merchants – both online and offline – that accept Bitcoin as a form of payment, while Ethereum and Ripple are not yet widely accepted.

Required:

Following your presentation, you are asked how a holding of cryptocurrency should be classified in the financial statements of your clients. (15 Marks)

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  • 20 Marks

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

  1. (a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
  2. (b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
  3. (c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
  4. (d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

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  • 5 Marks

AA – Nov 2015 – L2 – Q3b – Internal Control Systems

Describing internal control procedures an auditor would expect for inventory management.

Describe TWO internal control procedures an auditor would expect the company to put in place in respect of inventories.

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  • 20 Marks

FR – Nov 2015 – L2 – Q2 – Presentation of Financial Statements (IAS 1)

Prepare a statement of profit or loss and other comprehensive income for Well-Being Plc.

The following trial balance has been extracted from the books of Well-Being Plc as at March 31, 2014:

N’000 N’000
Land at cost 360
Building at cost 750
Equipment at cost 588
Vehicles at cost 852
Goodwill 900
Accumulated depreciation:
– Buildings 270
– Equipment 228
– Vehicles 396
Inventory at April 1, 2013 321
Trade receivables and payables 549 351
Allowance for receivables 24
Bank balances 171
Current taxation 18
Ordinary shares of N1 each 600
Retained earnings at April 1, 2013 1,509
Revenue 4,296
Purchases 1,464
Directors’ fees 450
Wages and salaries 828
General distribution costs 303
General administrative expenses 558
Dividend paid 60
Rent received 90
Disposal of vehicle 30
Total 7,983 7,983

Additional information:

  1. The company’s non-depreciable land was valued at ₦900,000 on March 31, 2014, and this valuation is to be incorporated into the accounts.
  2. Depreciation policy:
    • Building: 4% p.a. (straight line)
    • Equipment: 40% p.a. (reducing balance)
    • Vehicles: 25% p.a. (straight line) In all cases, a full year’s depreciation is charged in the year of disposal.
  3. On February 1, 2014, a vehicle used entirely for administrative purposes was sold for ₦30,000 (cost ₦132,000). No other entries were made.
  4. Depreciation is apportioned as follows:
    • Buildings: 50% distribution, 50% administrative
    • Equipment: 25% distribution, 75% administrative
    • Vehicles: 70% distribution, 30% administrative
  5. Inventory at March 31, 2014, is valued at ₦357,000.
  6. Trade receivables include a debt of ₦24,000 to be written off. The allowance for receivables is to be adjusted to 4% of receivables after the write-off.
  7. Current tax for the year ended March 31, 2013, was over-estimated by ₦18,000. Current tax for 2014 is estimated at ₦90,000.
  8. One-quarter of wages and salaries was paid to distribution staff and the remaining three-quarters to administrative staff.
  9. General administrative expenses include bank overdraft interest of ₦27,000.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended March 31, 2014.

 

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  • 30 Marks

FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Hapu Plc and Sege Plc for the year ended December 31, 2014.

Statement of financial position as at December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Assets
Non-current assets:
Property, plant, and equipment 32,000 25,000
Investments 33,500 –
Total non-current assets 65,500 25,000
Current assets
Cash at bank and in hand 9,500 2,000
Trade receivables 20,000 8,000
Inventory 30,000 18,000
Total current assets 125,000 53,000
Equity and liabilities
Share capital 40,000 10,000
Share premium 6,500 –
Retained earnings 55,000 37,000
Total equity 101,500 47,000
Current liabilities 23,500 6,000
Total equity and liabilities 125,000 53,000

Statement of profit or loss for the year ended December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Revenue 125,000 117,000
Cost of sales (65,000) (64,000)
Gross profit 60,000 53,000
Distribution costs (21,000) (14,000)
Administrative expenses (14,000) (8,000)
Profit before taxation 25,000 31,000
Income tax expense (10,000) (9,000)
Profit for the year 15,000 22,000

Statement of changes in equity (extract) for the year ended December 31, 2014

Hapu Plc (₦’000) Sege Plc (₦’000)
Retained earnings brought forward 40,000 15,000
Retained profit for the year 15,000 22,000
Retained earnings carried forward 55,000 37,000

Additional Information:

  1. Hapu Plc owns 80% of Sege’s shares, purchased in 2011 for ₦20.5 million when Sege’s retained earnings stood at ₦7 million.
  2. Included in Sege’s inventory as of December 31, 2014, were goods purchased from Hapu for ₦3.9 million, with a 30% profit margin on cost. Total sales from Hapu to Sege amounted to ₦6 million.
  3. Hapu Plc and Sege Plc proposed dividends of ₦2 million and ₦2.5 million respectively, not yet accounted for.
  4. Goodwill impairment tests indicate no impairment in accordance with IFRS 3 and IAS 36.

Required:
Prepare the consolidated statement of profit or loss and the consolidated statement of financial position for Hapu Plc and Sege Plc as at December 31, 2014.

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  • 12 Marks

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

c. State the main factors that IAS 8 requires management of a company to consider in selecting and applying accounting policies in the absence of any IFRS and identify the alternative accounting policies on the following items in the financial statements:

i. Inventories
ii. Depreciation

(12 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q28 – Accounting for Inventories (IAS 2)

Identifying the accounting concept that guides the treatment of known losses and inventory valuation.

Borox Limited makes provision for all known losses and values its inventories at the lower of cost and net realizable value. Which accounting concept is the company complying with?

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  • 1 Marks

FA – May 2012 – L1 – SA – Q24 – Accounting for Inventories in Accordance with IAS 2

Identifying the most appropriate basis for apportioning inventory holding costs among departments.

The most appropriate basis for apportioning inventory holding costs among departments is to use the value of:

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  • 1 Marks

FA – May 2012 – L1 – SA – Q11 – Recording Financial Transactions

Identifying the correct accounting treatment for sales returns on a cash and carry basis.

Goods sold on cash and carry basis returned by a customer is treated in the account by:

A. Debiting Sales and Crediting Cash
B. Debiting Sales and Crediting Accounts Payable
C. Debiting Inventory and Crediting Cash
D. Debiting Inventory and Crediting Bank
E. Debiting Sales and Crediting Accounts Receivable.

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