Question Tag: Profit and Loss Statement

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  • 30 Marks

FR – May 2022 – L2 – SA – Q1 – Preparation of Financial Statements

Prepare a statement of profit or loss, comprehensive income, changes in equity, and financial position for Endtime PLC.

Endtime PLC is a company based in Benin with the following trial balance for the year ended December 31, 2020:

Additional Information:
(i) Finance costs include full year dividends on preference shares and ordinary share dividends of 2½ kobo paid at the end of the year. Allowances for 4 doubtful debts are no longer necessary as customers paid as at when due from time to time in the past 2 years.

(ii) Severely damaged inventories, which cost N790,000,000 were included in the inventories in the trial balance. This will need to be repaired at a cost of N440,000,000 before a knowledgeable buyer will be interested to pay N940,000,000 at arm’s length transaction.

(iii) As at December 31, 2020, a valuer based in Victoria Island in Lagos was contacted by the company to review its land and buildings. The land and buildings was revalued upward by N13,000,000,000 and a certificate was issued to this effect. The board of directors approved the valuation but it has
not yet been accounted for in the trial balance. The valuer advised that the remaining useful life of the asset is reasonably and reliably estimated to be 20 years. Depreciation is on straight-line basis.

(iv) Depreciation on plant and equipment is charged at 15% on reducing balance basis. The multi-users S&P and Sage was bought on September 30, 2020. The amortisation is at the rate of 12.5% annually. The amortisation is evenly distributed over the year. Besides, software installation, customisation and
handling cost of N800,000,000, training costs of N900,000,000, consultancy fee of N600,000,000 and other general overheads of N850,000,000 on the new software were included in administrative expenses. All depreciations are treated as administrative costs.

(v) On December 30, 2020, a chartered surveyor valued investment property at N14,000,000,000 and the company uses fair value model in IAS 40 – Investment Property.

(vi) Current income tax has been estimated for the year ended December 31, 2020 at N9,000,000,000 and deferred tax provision as at December 31, 2020 is to be adjusted in the income statement to reflect the tax base of the company’s net assets of N12,000,000,000 less than the carrying amounts. The current
company income tax rate is 30%.

vii) The plant held for sale is valued in the trial balance at its carrying amount. A broker is readily available to buy the plant for N6,000,000,000 at a fee of 6% of sales proceed. The sale would take place in January, 2021. Any necessary adjustment is to be treated as cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended December 31, 2020. (13 Marks)
b. Statement of changes in equity for the year ended December 31, 2020. (4 Marks)
c. Statement of financial position as at December 31, 2020. (13 Marks)

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  • 15 Marks

FA – May 2014 – L1 – SB – Q5 – Preparation of Financial Statements

Preparation of profit and loss statement and statement of financial position for Gowell Limited.

The following balances were extracted from the books of Gowell Limited as at 31 December 2012 after the preparation of the Trading account:

Item N’000
Share capital: Authorised, issued, and fully paid: 300 million ordinary shares of N1 each 300,000
Cash at bank and in hand 750
Inventories as at 31 December 2012 91,800
Trade receivables 28,657
Trade payables 22,513
Gross profit from trading account 193,413
Revenue reserve as at 1/1/2012 50,000
Salaries and wages 42,645
Prepayments 900
Bad debts 750
Accrued expenses 789
Directors’ current account 3,750
Finance cost 900
Rents and insurance 2,280
Sundry expenses 6,150
6% Loan notes 30,000
Electricity 1,965
Postages and telephones 1,200
Motor vehicle (cost N37.5 million) 22,500
Office fittings and equipment (cost N98.25 million) 63,525
Retained earnings as at 1 January 2012 33,450
Land and buildings 369,893

Additional Information:
(i) Office fittings and equipment to be depreciated at 15% per annum on cost and motor vehicles at 20% on cost.
(ii) Provisions are to be made for:

  • Directors’ fees N12,000,000
  • Audit fees N5,000,000
    (iii) N822,000 in respect of electricity consumed up to 31 December 2012 has not been posted to the ledger.
    (iv) The Directors have recommended that N30,000,000 be transferred to revenue reserves.

You are required to prepare:
a. The Statements of Profit and Loss of Gowell Limited for the year ended 31 December 2012.
b. The statement of financial position as at 31 December 2012.

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  • 20 Marks

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

BBT, a sole trader, prepared the following Trial Balance from his accounts on 30th September 2016.

Dr (GHȼ) Cr (GHȼ)
Sales 181,200
Sales returns 1,810
Purchases 79,310
Discounts received 1,520
Carriage outwards 420
Rent and rates 30,800
Insurance 780
Salaries 20,400
Motor expenses 6,200
General expenses 7,450
Irrecoverable debts 240
Allowance for receivables 280
Drawings 12,100
Loan interest 600
10% Loan 8,000
Motor vehicles 20,000
Accumulated depreciation for motor vehicles 7,600
Equipment 48,050
Accumulated depreciation for Equipment 15,890
Inventory at 1st October 2015 6,200
Receivables 15,000
Payables 16,120
Bank 1,250
Capital 20,000
250,610 250,610

The following information is also available: i) The closing inventory as at 30th September 2016 was valued at GHȼ6,480. At 30th September 2016, loan interest owing amounted to GHȼ200; rent owing was GHȼ450; whilst insurance was prepaid by GHȼ120. ii) BBT had included his son’s school fees of GHȼ1,400 in general expenses. iii) Receivables have been analysed as follows:

GHȼ
Current month 8,000
30 to 60 days 4,000
60 to 90 days 2,000
Over 90 days 1,000

Allowance to be made for receivables is as follows:
30 to 60 days: 1%
60 to 90 days: 2.5%
Over 90 days 5%: (after writing off GHȼ500)

iv) One half of the 10% loan is repayable during the year ending 30th September
2016, and the balance after that date.
v) Depreciation is to be provided for as follows.

  • Equipment: 10% per annum on cost using the straight line method. There were no additions or disposals during the year.
  • Motor vehicles: 20% per annum by the reducing balance method. There were no additions or disposals during the year.

Required:

a) Prepare, for BBT, the Statement of profit or loss for the year ended 30th September 2016. (12 marks)

b) Prepare, for BBT, the Statement of Financial Position as at 30th September 2016. (8 marks)

 

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  • 20 Marks

IMAC – MAY 2021 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit and loss statements for QQQ Ltd using marginal and absorption costing techniques.

The following data has been extracted from the operating records of QQQ Ltd for the last two quarters of the year to 31 December 2020:

Quarter 3 4
Production units 7,000 8,500
Sales units 5,500 9,500
Description Amount (GH¢)
Selling price per unit 100
Direct material cost per unit 20
Direct labour cost per unit 15
Variable overheads per unit 10
  • Fixed production overheads are budgeted at GH¢120,000 for a budgeted production of 8,000 units per quarter. These overheads are absorbed on a per unit of production basis.
  • Non-production overheads comprised:
    • Fixed administration expenses GH¢40,000 per quarter
    • Selling and distribution expenses 10% of sales

Required:
a) Prepare a statement of profit or loss for each quarter using the Marginal Costing technique. (10 marks)

b) Prepare a statement of profit or loss for each quarter using the Absorption Costing technique. (10 marks)

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  • 30 Marks

FR – May 2022 – L2 – SA – Q1 – Preparation of Financial Statements

Prepare a statement of profit or loss, comprehensive income, changes in equity, and financial position for Endtime PLC.

Endtime PLC is a company based in Benin with the following trial balance for the year ended December 31, 2020:

Additional Information:
(i) Finance costs include full year dividends on preference shares and ordinary share dividends of 2½ kobo paid at the end of the year. Allowances for 4 doubtful debts are no longer necessary as customers paid as at when due from time to time in the past 2 years.

(ii) Severely damaged inventories, which cost N790,000,000 were included in the inventories in the trial balance. This will need to be repaired at a cost of N440,000,000 before a knowledgeable buyer will be interested to pay N940,000,000 at arm’s length transaction.

(iii) As at December 31, 2020, a valuer based in Victoria Island in Lagos was contacted by the company to review its land and buildings. The land and buildings was revalued upward by N13,000,000,000 and a certificate was issued to this effect. The board of directors approved the valuation but it has
not yet been accounted for in the trial balance. The valuer advised that the remaining useful life of the asset is reasonably and reliably estimated to be 20 years. Depreciation is on straight-line basis.

(iv) Depreciation on plant and equipment is charged at 15% on reducing balance basis. The multi-users S&P and Sage was bought on September 30, 2020. The amortisation is at the rate of 12.5% annually. The amortisation is evenly distributed over the year. Besides, software installation, customisation and
handling cost of N800,000,000, training costs of N900,000,000, consultancy fee of N600,000,000 and other general overheads of N850,000,000 on the new software were included in administrative expenses. All depreciations are treated as administrative costs.

(v) On December 30, 2020, a chartered surveyor valued investment property at N14,000,000,000 and the company uses fair value model in IAS 40 – Investment Property.

(vi) Current income tax has been estimated for the year ended December 31, 2020 at N9,000,000,000 and deferred tax provision as at December 31, 2020 is to be adjusted in the income statement to reflect the tax base of the company’s net assets of N12,000,000,000 less than the carrying amounts. The current
company income tax rate is 30%.

vii) The plant held for sale is valued in the trial balance at its carrying amount. A broker is readily available to buy the plant for N6,000,000,000 at a fee of 6% of sales proceed. The sale would take place in January, 2021. Any necessary adjustment is to be treated as cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended December 31, 2020. (13 Marks)
b. Statement of changes in equity for the year ended December 31, 2020. (4 Marks)
c. Statement of financial position as at December 31, 2020. (13 Marks)

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  • 15 Marks

FA – May 2014 – L1 – SB – Q5 – Preparation of Financial Statements

Preparation of profit and loss statement and statement of financial position for Gowell Limited.

The following balances were extracted from the books of Gowell Limited as at 31 December 2012 after the preparation of the Trading account:

Item N’000
Share capital: Authorised, issued, and fully paid: 300 million ordinary shares of N1 each 300,000
Cash at bank and in hand 750
Inventories as at 31 December 2012 91,800
Trade receivables 28,657
Trade payables 22,513
Gross profit from trading account 193,413
Revenue reserve as at 1/1/2012 50,000
Salaries and wages 42,645
Prepayments 900
Bad debts 750
Accrued expenses 789
Directors’ current account 3,750
Finance cost 900
Rents and insurance 2,280
Sundry expenses 6,150
6% Loan notes 30,000
Electricity 1,965
Postages and telephones 1,200
Motor vehicle (cost N37.5 million) 22,500
Office fittings and equipment (cost N98.25 million) 63,525
Retained earnings as at 1 January 2012 33,450
Land and buildings 369,893

Additional Information:
(i) Office fittings and equipment to be depreciated at 15% per annum on cost and motor vehicles at 20% on cost.
(ii) Provisions are to be made for:

  • Directors’ fees N12,000,000
  • Audit fees N5,000,000
    (iii) N822,000 in respect of electricity consumed up to 31 December 2012 has not been posted to the ledger.
    (iv) The Directors have recommended that N30,000,000 be transferred to revenue reserves.

You are required to prepare:
a. The Statements of Profit and Loss of Gowell Limited for the year ended 31 December 2012.
b. The statement of financial position as at 31 December 2012.

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  • 20 Marks

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

BBT, a sole trader, prepared the following Trial Balance from his accounts on 30th September 2016.

Dr (GHȼ) Cr (GHȼ)
Sales 181,200
Sales returns 1,810
Purchases 79,310
Discounts received 1,520
Carriage outwards 420
Rent and rates 30,800
Insurance 780
Salaries 20,400
Motor expenses 6,200
General expenses 7,450
Irrecoverable debts 240
Allowance for receivables 280
Drawings 12,100
Loan interest 600
10% Loan 8,000
Motor vehicles 20,000
Accumulated depreciation for motor vehicles 7,600
Equipment 48,050
Accumulated depreciation for Equipment 15,890
Inventory at 1st October 2015 6,200
Receivables 15,000
Payables 16,120
Bank 1,250
Capital 20,000
250,610 250,610

The following information is also available: i) The closing inventory as at 30th September 2016 was valued at GHȼ6,480. At 30th September 2016, loan interest owing amounted to GHȼ200; rent owing was GHȼ450; whilst insurance was prepaid by GHȼ120. ii) BBT had included his son’s school fees of GHȼ1,400 in general expenses. iii) Receivables have been analysed as follows:

GHȼ
Current month 8,000
30 to 60 days 4,000
60 to 90 days 2,000
Over 90 days 1,000

Allowance to be made for receivables is as follows:
30 to 60 days: 1%
60 to 90 days: 2.5%
Over 90 days 5%: (after writing off GHȼ500)

iv) One half of the 10% loan is repayable during the year ending 30th September
2016, and the balance after that date.
v) Depreciation is to be provided for as follows.

  • Equipment: 10% per annum on cost using the straight line method. There were no additions or disposals during the year.
  • Motor vehicles: 20% per annum by the reducing balance method. There were no additions or disposals during the year.

Required:

a) Prepare, for BBT, the Statement of profit or loss for the year ended 30th September 2016. (12 marks)

b) Prepare, for BBT, the Statement of Financial Position as at 30th September 2016. (8 marks)

 

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  • 20 Marks

IMAC – MAY 2021 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit and loss statements for QQQ Ltd using marginal and absorption costing techniques.

The following data has been extracted from the operating records of QQQ Ltd for the last two quarters of the year to 31 December 2020:

Quarter 3 4
Production units 7,000 8,500
Sales units 5,500 9,500
Description Amount (GH¢)
Selling price per unit 100
Direct material cost per unit 20
Direct labour cost per unit 15
Variable overheads per unit 10
  • Fixed production overheads are budgeted at GH¢120,000 for a budgeted production of 8,000 units per quarter. These overheads are absorbed on a per unit of production basis.
  • Non-production overheads comprised:
    • Fixed administration expenses GH¢40,000 per quarter
    • Selling and distribution expenses 10% of sales

Required:
a) Prepare a statement of profit or loss for each quarter using the Marginal Costing technique. (10 marks)

b) Prepare a statement of profit or loss for each quarter using the Absorption Costing technique. (10 marks)

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