Question Tag: Investment

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  • 15 Marks

AAA – May 2016 – L3 – Q6 – Audit Reporting

Discuss audit work and written representation letter for legal claims, outstanding balances, and investments.

Bob Removals Limited is a removals company. In the year ended December 31, 2015, the company made a trading profit of N800,000. You are the manager in charge of the audit.
The following issues have arisen:

(i) A customer is suing the company for N1 million for damage caused to antique furniture. The company is defending the claim and believes that the furniture was a reproduction as opposed to antique and therefore worth only N100,000.
(ii) A balance due from Safe Storage in respect of sub-contract work, of N300,000, has been outstanding for over six months. Your firm has been asked by Bob Removals’ accountant not to write to Safe Storage for direct confirmation of this amount as the latter company objects to such letters. You have been assured by the accountant that the relationship between the two companies is good and that the outstanding balance will be paid.
(iii) Bob Removals has recently invested in four new removal vans and is currently carrying out extensive refurbishment of its premises. As a result of this expenditure, the company has reached its overdraft limit of N500,000.

Required:

For each of the above issues:
a. State, with reasons, the audit work that you would expect to find when undertaking your review of the audit working papers for the year ended December 31, 2015.
b. Draft the relevant sections dealing with these issues of the written representation letter you would wish the directors to sign.

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  • 5 Marks

ATAX – May 2017 – L3 – Q4a – Tax Incentives and Reliefs

List five incentives provided by the Federal Government of Nigeria to attract investors to the solid minerals sector.

Oil and Gas are major sources of revenue for the Federal Government of Nigeria (FGN). This has become a burden to the government due to its inability to control the volume of production and price. To ameliorate this burden, the FGN is seeking alternative sources of revenue, and solid minerals have been identified.

Required:
State FIVE incentives put in place by the Federal Government of Nigeria (FGN) to attract potential investors to the solid minerals sector. (5 Marks)

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  • 10 Marks

ATAX – May 2019 – L3 – Q7a – Taxation of Specialized Businesses

Provide a report on fiscal incentives in Nigeria’s oil and gas sector, including gas production, exploitation of associated gas, and free trade zone investments.

The Federal Government of Nigeria, in the third quarter of 2018, announced the discovery of a huge hydro-carbon deposit in the Chad Basin area of Borno State. This information has attracted interest from local and foreign investors in the Nigerian oil and gas sector. One such foreign investor is a Japanese billionaire, Mr. Sun Nagasaki, who has investments in oil and gas operations in the Middle East and Latin America.

Mr. Nagasaki is, however, not familiar with the regulations guiding operations and the incentives available to investors in the oil and gas sub-sector in Nigeria. You have been appointed as a tax consultant by Mr. Nagasaki’s representative in Nigeria.

Required:
a. Draft a report addressed to Mr. Nagasaki explaining the following issues of interest:

i. Fiscal incentives available in the gas production phase (2 Marks)
ii. Six incentives for the encouragement of exploitation and utilization of associated gas for commercial purposes (downstream operations) (3 Marks)
iii. Six incentives and fiscal measures that favour and encourage large investment in oil and gas free trade zones (4 Marks)

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  • 1 Marks

BMF – Nov 2020 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identify why banks are considered important financial intermediaries.

Banks are important financial intermediaries because they:
A. Create new debt
B. Are the only source of debt finance
C. Are the only source of long-term finance
D. Operate between investors and borrowers
E. Take deposits from all their customers

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  • 1 Marks

BMF – Nov 2020 – L1 – SA – Q8 – Basics of Business Finance and Financial Markets

Calculate the compound interest earned on a deposit over 11 years at 6.50%, compounded quarterly.

What is the amount of interest earned by a deposit of N414,000 for 11 years at 6.50% compounded quarterly?
A. N427,455
B. N427,467
C. N437,455
D. N437,467
E. N447,467

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  • 10 Marks

QTB – May 2016 – L1 – SB – Q2a – Mathematics

This question requires calculating the compound interest rate using logarithms.

A barber invests N100,000 for 5 years. At the end of the investment period, he receives a cash transfer of N120,600 as final settlement of the investment.

Required:
Use logarithm (to base 10) to determine the compound interest rate on the investment.

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  • 5 Marks

QTB – May 2015 – L1 – SB – Q3b – Mathematics

This question involves expressing the interest rate in terms of future value and principal investment for a 3-year investment.

Mr. Taiwo invested a certain amount of money P, at an annual interest rate r, for a period
of 3 years. The future value of this investment is given by

Express r in terms of S and P

 

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  • 1 Marks

BF – Nov 2015 – L1 – SA – Q10 – Investment Decisions

Identifying the correct formula for calculating Net Present Value (NPV) of an investment.

The formula for calculating Net Present Value (NPV) of an investment is:
A. Σₜ=₁ⁿ [(Cₜ / (1 + r)ᵗ)] – C₀
B. Σₜ=₀ⁿ [(Cₜ / (1 + r)ᵗ)] – C₀
C. Σₜ=₀ⁿ [(C₀ / (1 + r)ᵗ)] – C₀
D. Σₜ=₁ⁿ [(C₀ / (1 + r)ᵗ)] – C₀
E. Σₜ=₁ⁿ [(Cₜ / (1 + r)ᵗ)] + C₀

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  • 20 Marks

CR – May 2020 – L3 – Q1 – Consolidated Statement of Financial Position

Prepare the consolidated statement of financial position for Phato Ltd and its subsidiaries as at 30 September 2019, including relevant calculations for goodwill, non-controlling interest, and asset impairments.

Phato Ltd, is a Public Limited Liability Company which operates in the service sector in Ghana. Phato Ltd has a business relationship with two other Ghanaian companies, Sakara Ltd and Saadi Ltd, which are public limited liability companies too. The draft statements of financial position of these three companies are as below as at 30 September 2019.

Phato Ltd GH¢ million Sakara Ltd GH¢ million Saadi Ltd GH¢ million
Assets:
Non-current assets
Property, plant, and equipment 460.0 150.0
Investment in subsidiaries
Sakara Ltd 365.0
Saadi Ltd 160.0
Investment in Azuri Ltd 24.0
Intangible assets 99.0 15.0
Total Non-current assets 948.0 325.0
Current assets 447.5 240.0
Total assets 1,395.5 565.0
Equity and liabilities:
Equity:
Share capital 460.0 200.0
Other components of equity 36.5 18.5
Retained earnings 447.5 221.0
Total equity 944.0 439.5
Non-current liabilities 247.5 61.5
Current liabilities 204.0 64.0
Total liabilities 451.5 125.5
Total equity and liabilities 1,395.5 565.0

Additional relevant information:

  1. Phato Ltd, on 1 October 2017, acquired 60% of the equity interests of Sakara Ltd. The cost of the investment comprised cash of GH¢360 million. At acquisition, the fair value of the non-controlling interest in Sakara Ltd was estimated at GH¢146 million. The fair value of the identifiable net assets acquired totaled GH¢417.5 million, including retained earnings of GH¢159.5 million and other components of equity at GH¢13.5 million. The excess in fair value results from non-depreciable land.
  2. Sakara Ltd, on 1 October 2018, acquired 70% of Saadi Ltd for GH¢160 million. The fair value of non-controlling interest was estimated at GH¢36 million. The fair value of the identifiable net assets of Saadi Ltd at acquisition was GH¢181 million, retained earnings GH¢53 million, and other components of equity GH¢10 million.
  3. Phato Ltd acquired a 14% interest in Azuri Ltd for GH¢9 million on 1 October 2017. On 1 April 2019, Phato Ltd acquired an additional 16% interest in Azuri Ltd for GH¢13.5 million, achieving significant influence.
  4. Phato Ltd purchased patents for GH¢5 million and incurred other development costs for product development.
  5. Impairment tests were conducted on Sakara Ltd and Saadi Ltd.

Required:
Prepare the consolidated statement of financial position for the Phato Ltd Group as at 30 September 2019.

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  • 6 Marks

BL – Nov 2013 – L1 – SB – Q6c – Law of Trusts

Listing three types of authorized securities under the Trustee Investments Act.

Ade is a Trustee of the Estate of late Konga. Konga’s Will empowered the Trustees of his Estate to invest in securities authorized by the Trustee Investments Act.

You are required to:
State THREE of such authorized securities, without stating the limit of the investment. (6 Marks)

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  • 15 Marks

AAA – May 2016 – L3 – Q6 – Audit Reporting

Discuss audit work and written representation letter for legal claims, outstanding balances, and investments.

Bob Removals Limited is a removals company. In the year ended December 31, 2015, the company made a trading profit of N800,000. You are the manager in charge of the audit.
The following issues have arisen:

(i) A customer is suing the company for N1 million for damage caused to antique furniture. The company is defending the claim and believes that the furniture was a reproduction as opposed to antique and therefore worth only N100,000.
(ii) A balance due from Safe Storage in respect of sub-contract work, of N300,000, has been outstanding for over six months. Your firm has been asked by Bob Removals’ accountant not to write to Safe Storage for direct confirmation of this amount as the latter company objects to such letters. You have been assured by the accountant that the relationship between the two companies is good and that the outstanding balance will be paid.
(iii) Bob Removals has recently invested in four new removal vans and is currently carrying out extensive refurbishment of its premises. As a result of this expenditure, the company has reached its overdraft limit of N500,000.

Required:

For each of the above issues:
a. State, with reasons, the audit work that you would expect to find when undertaking your review of the audit working papers for the year ended December 31, 2015.
b. Draft the relevant sections dealing with these issues of the written representation letter you would wish the directors to sign.

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  • 5 Marks

ATAX – May 2017 – L3 – Q4a – Tax Incentives and Reliefs

List five incentives provided by the Federal Government of Nigeria to attract investors to the solid minerals sector.

Oil and Gas are major sources of revenue for the Federal Government of Nigeria (FGN). This has become a burden to the government due to its inability to control the volume of production and price. To ameliorate this burden, the FGN is seeking alternative sources of revenue, and solid minerals have been identified.

Required:
State FIVE incentives put in place by the Federal Government of Nigeria (FGN) to attract potential investors to the solid minerals sector. (5 Marks)

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  • 10 Marks

ATAX – May 2019 – L3 – Q7a – Taxation of Specialized Businesses

Provide a report on fiscal incentives in Nigeria’s oil and gas sector, including gas production, exploitation of associated gas, and free trade zone investments.

The Federal Government of Nigeria, in the third quarter of 2018, announced the discovery of a huge hydro-carbon deposit in the Chad Basin area of Borno State. This information has attracted interest from local and foreign investors in the Nigerian oil and gas sector. One such foreign investor is a Japanese billionaire, Mr. Sun Nagasaki, who has investments in oil and gas operations in the Middle East and Latin America.

Mr. Nagasaki is, however, not familiar with the regulations guiding operations and the incentives available to investors in the oil and gas sub-sector in Nigeria. You have been appointed as a tax consultant by Mr. Nagasaki’s representative in Nigeria.

Required:
a. Draft a report addressed to Mr. Nagasaki explaining the following issues of interest:

i. Fiscal incentives available in the gas production phase (2 Marks)
ii. Six incentives for the encouragement of exploitation and utilization of associated gas for commercial purposes (downstream operations) (3 Marks)
iii. Six incentives and fiscal measures that favour and encourage large investment in oil and gas free trade zones (4 Marks)

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  • 1 Marks

BMF – Nov 2020 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identify why banks are considered important financial intermediaries.

Banks are important financial intermediaries because they:
A. Create new debt
B. Are the only source of debt finance
C. Are the only source of long-term finance
D. Operate between investors and borrowers
E. Take deposits from all their customers

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  • 1 Marks

BMF – Nov 2020 – L1 – SA – Q8 – Basics of Business Finance and Financial Markets

Calculate the compound interest earned on a deposit over 11 years at 6.50%, compounded quarterly.

What is the amount of interest earned by a deposit of N414,000 for 11 years at 6.50% compounded quarterly?
A. N427,455
B. N427,467
C. N437,455
D. N437,467
E. N447,467

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  • 10 Marks

QTB – May 2016 – L1 – SB – Q2a – Mathematics

This question requires calculating the compound interest rate using logarithms.

A barber invests N100,000 for 5 years. At the end of the investment period, he receives a cash transfer of N120,600 as final settlement of the investment.

Required:
Use logarithm (to base 10) to determine the compound interest rate on the investment.

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  • 5 Marks

QTB – May 2015 – L1 – SB – Q3b – Mathematics

This question involves expressing the interest rate in terms of future value and principal investment for a 3-year investment.

Mr. Taiwo invested a certain amount of money P, at an annual interest rate r, for a period
of 3 years. The future value of this investment is given by

Express r in terms of S and P

 

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  • 1 Marks

BF – Nov 2015 – L1 – SA – Q10 – Investment Decisions

Identifying the correct formula for calculating Net Present Value (NPV) of an investment.

The formula for calculating Net Present Value (NPV) of an investment is:
A. Σₜ=₁ⁿ [(Cₜ / (1 + r)ᵗ)] – C₀
B. Σₜ=₀ⁿ [(Cₜ / (1 + r)ᵗ)] – C₀
C. Σₜ=₀ⁿ [(C₀ / (1 + r)ᵗ)] – C₀
D. Σₜ=₁ⁿ [(C₀ / (1 + r)ᵗ)] – C₀
E. Σₜ=₁ⁿ [(Cₜ / (1 + r)ᵗ)] + C₀

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  • 20 Marks

CR – May 2020 – L3 – Q1 – Consolidated Statement of Financial Position

Prepare the consolidated statement of financial position for Phato Ltd and its subsidiaries as at 30 September 2019, including relevant calculations for goodwill, non-controlling interest, and asset impairments.

Phato Ltd, is a Public Limited Liability Company which operates in the service sector in Ghana. Phato Ltd has a business relationship with two other Ghanaian companies, Sakara Ltd and Saadi Ltd, which are public limited liability companies too. The draft statements of financial position of these three companies are as below as at 30 September 2019.

Phato Ltd GH¢ million Sakara Ltd GH¢ million Saadi Ltd GH¢ million
Assets:
Non-current assets
Property, plant, and equipment 460.0 150.0
Investment in subsidiaries
Sakara Ltd 365.0
Saadi Ltd 160.0
Investment in Azuri Ltd 24.0
Intangible assets 99.0 15.0
Total Non-current assets 948.0 325.0
Current assets 447.5 240.0
Total assets 1,395.5 565.0
Equity and liabilities:
Equity:
Share capital 460.0 200.0
Other components of equity 36.5 18.5
Retained earnings 447.5 221.0
Total equity 944.0 439.5
Non-current liabilities 247.5 61.5
Current liabilities 204.0 64.0
Total liabilities 451.5 125.5
Total equity and liabilities 1,395.5 565.0

Additional relevant information:

  1. Phato Ltd, on 1 October 2017, acquired 60% of the equity interests of Sakara Ltd. The cost of the investment comprised cash of GH¢360 million. At acquisition, the fair value of the non-controlling interest in Sakara Ltd was estimated at GH¢146 million. The fair value of the identifiable net assets acquired totaled GH¢417.5 million, including retained earnings of GH¢159.5 million and other components of equity at GH¢13.5 million. The excess in fair value results from non-depreciable land.
  2. Sakara Ltd, on 1 October 2018, acquired 70% of Saadi Ltd for GH¢160 million. The fair value of non-controlling interest was estimated at GH¢36 million. The fair value of the identifiable net assets of Saadi Ltd at acquisition was GH¢181 million, retained earnings GH¢53 million, and other components of equity GH¢10 million.
  3. Phato Ltd acquired a 14% interest in Azuri Ltd for GH¢9 million on 1 October 2017. On 1 April 2019, Phato Ltd acquired an additional 16% interest in Azuri Ltd for GH¢13.5 million, achieving significant influence.
  4. Phato Ltd purchased patents for GH¢5 million and incurred other development costs for product development.
  5. Impairment tests were conducted on Sakara Ltd and Saadi Ltd.

Required:
Prepare the consolidated statement of financial position for the Phato Ltd Group as at 30 September 2019.

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  • 6 Marks

BL – Nov 2013 – L1 – SB – Q6c – Law of Trusts

Listing three types of authorized securities under the Trustee Investments Act.

Ade is a Trustee of the Estate of late Konga. Konga’s Will empowered the Trustees of his Estate to invest in securities authorized by the Trustee Investments Act.

You are required to:
State THREE of such authorized securities, without stating the limit of the investment. (6 Marks)

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