Question Tag: Profit or Loss Statement

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CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)

valuate discontinuation conditions and prepare profit or loss statement for Bamgbose Plc with comparative figures.

Question

Bamgbose Plc. is a long-established travel agent, operating through a network of retail outlets and online store. In recent years, the business has seen its revenue from the online store grow strongly, and that of retail outlets decline significantly. On July 1, 2017, the board decided to close the retail network at the financial year end of December 31, 2017, and put the buildings up for sale on that date. The directors are seeking advice regarding the treatment of the buildings in the statement of financial position as well as the treatment of the trading results of the retail division for the year. The following figures are available at December 31, 2017:

Carrying amount of buildings: ₦30.0 million
Fair value less costs to sell of buildings: ₦25.8 million
Other expected costs of closure: ₦5.85 million

Required:

(i) Outline the conditions which must be met in order to present the results of an operation as “discontinued” and the accounting treatment that applies when such a classification is deemed appropriate. (5 Marks)

(ii) Draft the statement of profit or loss for Bamgbose Plc. for year ended December 31, 2017, together with the comparative figures for 2016, taking the above information into account. (8 Marks)

Answer

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Tags: Accounting Treatment, Closure Costs, Discontinued Operations, Held for Sale, IFRS 5, Non-current Assets, Profit or Loss Statement, Revenue
Level: Level 3

Topic: Impairment of Assets (IAS 36)
Series: MAY 2018

FR – May 2016 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare profit or loss statement and financial position statement for Gbenga Nig. Plc for the year ending December 31, 2015, following IFRS standards.

Question

GBENGANIG Plc. Trial balance as at December 31, 2015 is shown below:

Account	Debit (N)	Credit (N)
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables – 31/12/15		8,625
Inventories – finished goods – 31/12/14	276,750
Work-in-progress – 31/12/14	49,125
Inventories – raw materials at cost-31/12/14	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorized and issued 900,000 ordinary shares of N0.50 each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings-31/12/14		425,250
Patents and trademarks	323,250
Freehold property at cost	375,000
Leasehold property at cost	112,500
Amortization of leasehold property – 31/12/14	22,500
Plant and equipment at cost	225,000
Accumulated depreciation – plant and equipment – 31/12/14		102,750
Furniture and fittings at cost	75,000
Accumulated depreciation – furniture and fittings – 31/12/14		23,625
Motor vehicles at cost	112,500
Accumulated depreciation – motor vehicles 31/12/14		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
Total	4,183,500	4,183,500

Additional Information:

A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
Inventories at December 31, 2015 were:
- Raw materials: N168,900
- Finished goods: N413,025
- Work-in-progress: N56,700
Legal and professional expenses include solicitor’s fees of N7,500 for the purchase of new freehold land.
Provision is to be made for a full year’s interest on the loan notes.
The leasehold land and buildings have an unexpired life of 40 years as of December 31, 2014.
Depreciation for the year is charged as follows:
- Plant and equipment at 8% on cost (production)
- Furniture and fittings at 10% on cost (administration)
- Motor vehicles at 20% on carrying amount (25% to administration and 75% to selling/distribution).
Income tax for the year is estimated at N68,900.
A dividend of N2.25 per ordinary share is recommended by the directors. No dividend was paid in the prior year.

Required:

a. Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2015.
b. Prepare a statement of financial position as at December 31, 2015, in accordance with International Financial Reporting Standards.

Answer

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Tags: Financial Position, IAS Compliance, Profit or Loss Statement, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: MAY 2016

AA – May 2017 – L2 – SA – Q1 – Audit Evidence

Analysis and identification of unusual features in Abricon Nigeria Ltd.'s profit and loss for audit purposes.

Question

The following is the statement of Profit or Loss and other comprehensive income of ABRICON NIGERIA LIMITED for the year ended December 31, 2016.

ABRICON NIGERIA LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016

Requirements:

(a) Perform analytical tests on the figures given. (16 Marks)

(b) Identify unusual features. (8 Marks)

(c) Provide possible explanations why some apparently unusual items were not selected in (b) above. (6 Marks)

Answer

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Tags: Analytical procedures, Financial Ratios, Income Statement Analysis, Profit or Loss Statement
Level: Level 2

Topic: Audit evidence
Series: MAY 2017

FR – May 2024 – L2 – SA – Q1 – Statement of Cash Flows (IAS 7)

Preparation of financial statements for Adama PLC, including profit or loss, changes in equity, and memo on EPS and ROCE.

Question

a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:

Additional information:

The value of the freehold land and buildings includes a land element of N266,800,000, and the estimated remaining life of the buildings at July 1, 2021, was 25 years. Depreciation on buildings is charged 65% to cost of sales and 35% to administrative expenses.
The revenue includes N69,250,000 for an item of office equipment disposed of on November 30, 2021. The equipment had a carrying value of N46,060,000 at the date of sale. The equipment cost N75,000,000 when acquired three years ago.
Included in the cost of sales is N82,600,000 incurred in the manufacture of new office equipment, which was put to use by Adama PLC on February 1, 2022.
All office equipment is depreciated at 15% per annum using the reducing balance method, charged to cost of sales. Depreciation on all motor vehicles is at 20% per annum on a straight-line basis and charged to distribution costs. Depreciation is charged in full in the year of acquisition and no charge in the year of disposal.
Following the conclusion of winding-up proceedings for one of Adama PLC’s customers, it was resolved to write off the sum of N26,450,000 due from the customer and to make an allowance for doubtful receivables of 2½% on the continuing trade receivables.
The financial assets are equity instruments held at fair value through profit or loss, and they suffered an impairment loss of N12,700,000 at the year-end.
The 3% redeemable loan notes were issued on October 1, 2021, under terms that provided for a large premium on redemption in 2025. These terms were interpreted by the finance director to mean an effective interest rate of 6½% per annum.
The income tax expense for the year ended June 30, 2022, is estimated at N143,552,000, while the deferred tax payable for the same period is N12,520,000. There was an over-provision of N25,664,000 in respect of income tax for the previous trading year.
The suspense account balance represents the corresponding credit entry for shares issued at a premium of 15 kobo per share, arising from the issue of 400,000 ordinary shares made during the year.
The directors recommended a 20 kobo final dividend per ordinary share for the year and a transfer of N38,900,000 to the general reserve.

Required: Prepare for Adama PLC the following financial statements:

Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
Statement of changes in equity for the same period. (4 Marks)
Statement of financial position as of June 30, 2022. (10 Marks)

b. Some new trainee accountants in your organization discussed Earnings Per Share (EPS) and Return on Capital Employed (ROCE) as the best ratios for analyzing an entity’s financial performance. The finance director has requested a memo explaining these ratios and highlighting their limitations.

Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)

Answer

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Tags: Comprehensive Income, Earnings Per Share, Financial Analysis, Financial Position, Profit or Loss Statement, Ratios, Return on Capital Employed
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2023

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

Preparation of a statement of profit or loss for Emeka's business.

Question

Emeka produces and distributes “Zobo” and has provided you with the following information for the year ended 31 December 2012:

Office rent and rates: N681,000
Inventories at 1 January 2012:
- Raw materials: N6,375,000
- Work-in-progress: N3,750,000
- Finished goods: N4,500,000
Manufacturing wages: N14,100,000
Revenue: N42,000,000
Carriage on raw materials: N210,000
General expenses: N3,375,000
Carriage on sales: N375,000
Discount allowed: N300,000
Discount received: N420,000
Depreciation of factory machinery: N675,000
Purchase of raw materials: N22,500,000
Factory overhead expenses: N6,000,000
Selling and distribution cost: N6,750,000
Office salaries: N3,975,000
Royalty: N1,500,000

Additional information:

Inventories at 31 December 2012:
- Raw materials: N4,875,000
- Work-in-progress: N5,235,000
- Finished goods: N6,000,000

You are required to:
Prepare the statement of profit or loss for the year ended 31 December 2012.

Answer

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Tags: Accounting Adjustments, Closing Inventories, Financial Statements, Manufacturing Accounts, Profit or Loss Statement
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2013

FR – May 2017 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare consolidated financial statements for a parent and subsidiary, including profit or loss, statement of changes in equity, and statement of financial position.

Question

Ghanbetter is a 90% subsidiary of Asonbata, acquired one year ago for GH¢4 billion, when the retained earnings of Ghanbetter were GH¢800 million. Below are the financial statements of the companies:

Statement of Profit or Loss for the year ended 31 December, 2016

Additional Information:
i) During the year Asonbata sold goods to Ghanbetter for GH¢100 million. These goods were sold at a margin of 20%, and one quarter remained in inventory at the year-end.

ii) During the year Ghanbetter sold goods to Asonbata for GH¢180 million. These goods were sold at a mark-up of 50%, and one half remained in inventory at the year-end.

iii) At the year-end, there were no outstanding inter-company current account balances.

iv) At the date of acquisition, the fair value of Ghanbetter’s net assets was equal to their carrying value, except for an item of plant that had a fair value of GH¢200 million in excess of its carrying value and a remaining useful life of four years.

v) Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose.

vi) Both companies have paid a dividend during the year. The dividend distributed by Asonbata was GH¢200 million, and that of Ghanbetter GH¢100 million. The investment income that Asonbata has recognised is the dividend received from Ghanbetter shortly before the year-end.

Required:
Prepare the Consolidated Statement of Financial Position, Statement of Changes in Equity, and Consolidated Statement of Profit or Loss for Asonbata for the year ended 31 December, 2016.

Answer

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Topic: Group Financial Statements and Consolidation
Series: MAY 2017

FR – Aug 2022 – L2 – Q3 – Preparation of Financial Statements

Prepare the Statement of Profit or Loss and Financial Position for Morontuo Plc for the year ended 31 December 2021, along with all relevant workings.

Question

Morontuo Plc deals in electrical and other household appliances. It has a fleet of vehicles used in the distribution of these goods. The company is preparing its financial statements for the year ended 31 December 2021. Below is the trial balance for the period:

Additional Information:

i) The company repairs goods returned by customers for minor or major defects. It estimates that 25% of goods sold would have minor defects and 15% would have major defects. Estimated repairs cost for minor and major defects is GH¢8 million and GH¢2 million respectively. This effect has not been incorporated in the trial balance.

ii) Morontuo rents some of its vehicles and routinely sells them after some time. Vehicles X and Y (GH¢3.5 million and GH¢2 million respectively) used for rental services were acquired on 1 January 2021. Vehicle Y was sold on 1 December 2021 for GH¢1.88 million, which remains unpaid. The effects of the decision to sell the vehicles have not been incorporated.

iii) Suspense account represents interest and principal payments on a loan from Alpha Bank contracted on 1 July 2021. The loan is repayable in monthly instalments of GH¢1 million over 3 years, with 24% annual interest.

iv) Inventory includes slow-moving finished goods costing GH¢15 million. These were sold at 98% of their carrying amounts in January 2022.

v) Current tax for the year is estimated at GH¢15.8 million.

Required:

Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 and the Statement of Financial Position as at that date in accordance with IFRS. Include all relevant workings.

Answer

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Tags: Depreciation, Financial Position, Inventory, Loan Repayment, Profit or Loss Statement, Tax
Level: Level 2

Topic: Preparation of Financial Statements
Series: AUG 2022

FA – May 2020 – L1 – Q4 – Preparations of accounts from Incomplete Records | Preparation of financial statements of a sole trader

This question involves preparing a statement of profit or loss and a statement of financial position for a sole trader from incomplete records.

Question

On 30 June 2019, the accounting records of Kofi, a sole trader, were partly destroyed by fire. The following list of assets, liabilities, and equity as at 30 June 2018 is available:

Assets, Liabilities, and Equity	Amount (GH¢)
Plant and equipment – cost	200,000
– Accumulated depreciation	72,000
Office fixtures– cost	50,000
– Accumulated depreciation	5,000
Inventory	30,500
Trade receivables and prepayments – Note (iv)	35,000
Trade payables and accrued expenses – Note (iv)	17,600
Bank overdraft	8,850
Loan (10% interest per annum)	95,000
Capital	117,050

The following summary of receipts and payments for the year to 30 June 2019 has been extracted from the bank statements:

Receipts	Amount (GH¢)
Capital introduced	22,000
From credit customers	427,500

Payments	Amount (GH¢)
Cash drawings – Note (v)	22,450
Loan repayments – Note (vii)	20,000
To credit suppliers	175,600
Rent	22,000
Wages	90,000
Office expenses	12,500

In preparing the statement of profit or loss and statement of financial position at 30 June 2019, the following further information is relevant:

Notes
i) Inventory at 30 June 2019 was GH¢27,850.
ii) Depreciation is to be provided as follows:

Plant and equipment 20% per annum, reducing balance basis
Office equipment 10% per annum on cost
iii) During the year, Kofi introduced a motor vehicle valued at GH¢5,000 into the business. It is to be depreciated over 4 years on the straight-line basis with a full year’s depreciation charge in the year of acquisition.
iv) Prepayments and accrued expenses as at 30 June 2018 were:
Rent paid in advance GH¢2,500
Accrued wages GH¢4,300
v) Cash drawings during the year included GH¢6,750 for wages, GH¢4,200 for cash payments to suppliers, and GH¢2,600 for advertising leaflets (of which half are yet to be distributed). The remainder was Kofi’s personal expenditure.
vi) The bank balance per the bank statement as at 30 June 2019 after adjusting for unpresented cheques was GH¢106,700. Any difference is assumed to be cash takings (i.e., in respect of cash sales).
vii) Loan repayments include interest amounting to GH¢9,500.
viii) At 30 June 2019 the following assets and liabilities existed:
Rent paid in advance GH¢2,700
Accrued wages GH¢5,250
Amounts due to suppliers GH¢12,200
Amounts due from customers GH¢22,300
ix) On 3 July 2019, Kofi’s major customer, Yaw, went into liquidation owing GH¢16,000. A statement from the customer’s liquidator indicates that Kofi should expect to recover 20 pesewas for every GH¢1 owing.

Required:
Prepare Kofi’s statement of profit or loss for the year ended 30 June 2019 and a statement of financial position as at that date. Ignore taxation. (20 marks)

Answer

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Tags: Financial Statements, Incomplete Records, Profit or Loss Statement, Statement of Financial Position
Level: Level 1

IMAC – MAY 2020 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit or loss statements using marginal and absorption costing for Smooth Sailing Ltd.

Question

Additional information:
Fixed production overheads are budgeted to be GH¢40,000 per month for a budgeted monthly
production of 20,000 units. Production overheads are absorbed on a unit of production basis.
Required:
a) Using marginal costing principles, prepare a statement of profit or loss for the THREE (3)
months to September 2019. (10 marks)
b) Using absorption costing principles, prepare a statement of profit or loss for the THREE (3)
months to September 2019. (10 marks)

Answer

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Tags: Absorption Costing, Marginal Costing, Profit or Loss Statement
Level: Level 1

Topic: Marginal Costing and Absorption Costing
Series: MAY 2020

CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)

valuate discontinuation conditions and prepare profit or loss statement for Bamgbose Plc with comparative figures.

Question

Carrying amount of buildings: ₦30.0 million
Fair value less costs to sell of buildings: ₦25.8 million
Other expected costs of closure: ₦5.85 million

Required:

Answer

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Tags: Accounting Treatment, Closure Costs, Discontinued Operations, Held for Sale, IFRS 5, Non-current Assets, Profit or Loss Statement, Revenue
Level: Level 3

Topic: Impairment of Assets (IAS 36)
Series: MAY 2018

FR – May 2016 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare profit or loss statement and financial position statement for Gbenga Nig. Plc for the year ending December 31, 2015, following IFRS standards.

Question

GBENGANIG Plc. Trial balance as at December 31, 2015 is shown below:

Account	Debit (N)	Credit (N)
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables – 31/12/15		8,625
Inventories – finished goods – 31/12/14	276,750
Work-in-progress – 31/12/14	49,125
Inventories – raw materials at cost-31/12/14	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorized and issued 900,000 ordinary shares of N0.50 each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings-31/12/14		425,250
Patents and trademarks	323,250
Freehold property at cost	375,000
Leasehold property at cost	112,500
Amortization of leasehold property – 31/12/14	22,500
Plant and equipment at cost	225,000
Accumulated depreciation – plant and equipment – 31/12/14		102,750
Furniture and fittings at cost	75,000
Accumulated depreciation – furniture and fittings – 31/12/14		23,625
Motor vehicles at cost	112,500
Accumulated depreciation – motor vehicles 31/12/14		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
Total	4,183,500	4,183,500

Additional Information:

A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
Inventories at December 31, 2015 were:
- Raw materials: N168,900
- Finished goods: N413,025
- Work-in-progress: N56,700
Legal and professional expenses include solicitor’s fees of N7,500 for the purchase of new freehold land.
Provision is to be made for a full year’s interest on the loan notes.
The leasehold land and buildings have an unexpired life of 40 years as of December 31, 2014.
Depreciation for the year is charged as follows:
- Plant and equipment at 8% on cost (production)
- Furniture and fittings at 10% on cost (administration)
- Motor vehicles at 20% on carrying amount (25% to administration and 75% to selling/distribution).
Income tax for the year is estimated at N68,900.
A dividend of N2.25 per ordinary share is recommended by the directors. No dividend was paid in the prior year.

Required:

Answer

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Tags: Financial Position, IAS Compliance, Profit or Loss Statement, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: MAY 2016

AA – May 2017 – L2 – SA – Q1 – Audit Evidence

Analysis and identification of unusual features in Abricon Nigeria Ltd.'s profit and loss for audit purposes.

Question

The following is the statement of Profit or Loss and other comprehensive income of ABRICON NIGERIA LIMITED for the year ended December 31, 2016.

ABRICON NIGERIA LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016

Requirements:

(a) Perform analytical tests on the figures given. (16 Marks)

(b) Identify unusual features. (8 Marks)

(c) Provide possible explanations why some apparently unusual items were not selected in (b) above. (6 Marks)

Answer

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Tags: Analytical procedures, Financial Ratios, Income Statement Analysis, Profit or Loss Statement
Level: Level 2

Topic: Audit evidence
Series: MAY 2017

FR – May 2024 – L2 – SA – Q1 – Statement of Cash Flows (IAS 7)

Preparation of financial statements for Adama PLC, including profit or loss, changes in equity, and memo on EPS and ROCE.

Question

a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:

Additional information:

The value of the freehold land and buildings includes a land element of N266,800,000, and the estimated remaining life of the buildings at July 1, 2021, was 25 years. Depreciation on buildings is charged 65% to cost of sales and 35% to administrative expenses.
The revenue includes N69,250,000 for an item of office equipment disposed of on November 30, 2021. The equipment had a carrying value of N46,060,000 at the date of sale. The equipment cost N75,000,000 when acquired three years ago.
Included in the cost of sales is N82,600,000 incurred in the manufacture of new office equipment, which was put to use by Adama PLC on February 1, 2022.
All office equipment is depreciated at 15% per annum using the reducing balance method, charged to cost of sales. Depreciation on all motor vehicles is at 20% per annum on a straight-line basis and charged to distribution costs. Depreciation is charged in full in the year of acquisition and no charge in the year of disposal.
Following the conclusion of winding-up proceedings for one of Adama PLC’s customers, it was resolved to write off the sum of N26,450,000 due from the customer and to make an allowance for doubtful receivables of 2½% on the continuing trade receivables.
The financial assets are equity instruments held at fair value through profit or loss, and they suffered an impairment loss of N12,700,000 at the year-end.
The 3% redeemable loan notes were issued on October 1, 2021, under terms that provided for a large premium on redemption in 2025. These terms were interpreted by the finance director to mean an effective interest rate of 6½% per annum.
The income tax expense for the year ended June 30, 2022, is estimated at N143,552,000, while the deferred tax payable for the same period is N12,520,000. There was an over-provision of N25,664,000 in respect of income tax for the previous trading year.
The suspense account balance represents the corresponding credit entry for shares issued at a premium of 15 kobo per share, arising from the issue of 400,000 ordinary shares made during the year.
The directors recommended a 20 kobo final dividend per ordinary share for the year and a transfer of N38,900,000 to the general reserve.

Required: Prepare for Adama PLC the following financial statements:

Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
Statement of changes in equity for the same period. (4 Marks)
Statement of financial position as of June 30, 2022. (10 Marks)

Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)

Answer

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Tags: Comprehensive Income, Earnings Per Share, Financial Analysis, Financial Position, Profit or Loss Statement, Ratios, Return on Capital Employed
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2023

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

Preparation of a statement of profit or loss for Emeka's business.

Question

Emeka produces and distributes “Zobo” and has provided you with the following information for the year ended 31 December 2012:

Office rent and rates: N681,000
Inventories at 1 January 2012:
- Raw materials: N6,375,000
- Work-in-progress: N3,750,000
- Finished goods: N4,500,000
Manufacturing wages: N14,100,000
Revenue: N42,000,000
Carriage on raw materials: N210,000
General expenses: N3,375,000
Carriage on sales: N375,000
Discount allowed: N300,000
Discount received: N420,000
Depreciation of factory machinery: N675,000
Purchase of raw materials: N22,500,000
Factory overhead expenses: N6,000,000
Selling and distribution cost: N6,750,000
Office salaries: N3,975,000
Royalty: N1,500,000

Additional information:

Inventories at 31 December 2012:
- Raw materials: N4,875,000
- Work-in-progress: N5,235,000
- Finished goods: N6,000,000

You are required to:
Prepare the statement of profit or loss for the year ended 31 December 2012.

Answer

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Tags: Accounting Adjustments, Closing Inventories, Financial Statements, Manufacturing Accounts, Profit or Loss Statement
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2013

FR – May 2017 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare consolidated financial statements for a parent and subsidiary, including profit or loss, statement of changes in equity, and statement of financial position.

Question

Statement of Profit or Loss for the year ended 31 December, 2016

Additional Information:
i) During the year Asonbata sold goods to Ghanbetter for GH¢100 million. These goods were sold at a margin of 20%, and one quarter remained in inventory at the year-end.

ii) During the year Ghanbetter sold goods to Asonbata for GH¢180 million. These goods were sold at a mark-up of 50%, and one half remained in inventory at the year-end.

iii) At the year-end, there were no outstanding inter-company current account balances.

v) Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose.

Required:
Prepare the Consolidated Statement of Financial Position, Statement of Changes in Equity, and Consolidated Statement of Profit or Loss for Asonbata for the year ended 31 December, 2016.

Answer

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Topic: Group Financial Statements and Consolidation
Series: MAY 2017

FR – Aug 2022 – L2 – Q3 – Preparation of Financial Statements

Prepare the Statement of Profit or Loss and Financial Position for Morontuo Plc for the year ended 31 December 2021, along with all relevant workings.

Question

Additional Information:

iv) Inventory includes slow-moving finished goods costing GH¢15 million. These were sold at 98% of their carrying amounts in January 2022.

v) Current tax for the year is estimated at GH¢15.8 million.

Required:

Answer

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Tags: Depreciation, Financial Position, Inventory, Loan Repayment, Profit or Loss Statement, Tax
Level: Level 2

Topic: Preparation of Financial Statements
Series: AUG 2022

FA – May 2020 – L1 – Q4 – Preparations of accounts from Incomplete Records | Preparation of financial statements of a sole trader

This question involves preparing a statement of profit or loss and a statement of financial position for a sole trader from incomplete records.

Question

On 30 June 2019, the accounting records of Kofi, a sole trader, were partly destroyed by fire. The following list of assets, liabilities, and equity as at 30 June 2018 is available:

Assets, Liabilities, and Equity	Amount (GH¢)
Plant and equipment – cost	200,000
– Accumulated depreciation	72,000
Office fixtures– cost	50,000
– Accumulated depreciation	5,000
Inventory	30,500
Trade receivables and prepayments – Note (iv)	35,000
Trade payables and accrued expenses – Note (iv)	17,600
Bank overdraft	8,850
Loan (10% interest per annum)	95,000
Capital	117,050

The following summary of receipts and payments for the year to 30 June 2019 has been extracted from the bank statements:

Receipts	Amount (GH¢)
Capital introduced	22,000
From credit customers	427,500

Payments	Amount (GH¢)
Cash drawings – Note (v)	22,450
Loan repayments – Note (vii)	20,000
To credit suppliers	175,600
Rent	22,000
Wages	90,000
Office expenses	12,500

In preparing the statement of profit or loss and statement of financial position at 30 June 2019, the following further information is relevant:

Notes
i) Inventory at 30 June 2019 was GH¢27,850.
ii) Depreciation is to be provided as follows:

Plant and equipment 20% per annum, reducing balance basis
Office equipment 10% per annum on cost
iii) During the year, Kofi introduced a motor vehicle valued at GH¢5,000 into the business. It is to be depreciated over 4 years on the straight-line basis with a full year’s depreciation charge in the year of acquisition.
iv) Prepayments and accrued expenses as at 30 June 2018 were:
Rent paid in advance GH¢2,500
Accrued wages GH¢4,300
v) Cash drawings during the year included GH¢6,750 for wages, GH¢4,200 for cash payments to suppliers, and GH¢2,600 for advertising leaflets (of which half are yet to be distributed). The remainder was Kofi’s personal expenditure.
vi) The bank balance per the bank statement as at 30 June 2019 after adjusting for unpresented cheques was GH¢106,700. Any difference is assumed to be cash takings (i.e., in respect of cash sales).
vii) Loan repayments include interest amounting to GH¢9,500.
viii) At 30 June 2019 the following assets and liabilities existed:
Rent paid in advance GH¢2,700
Accrued wages GH¢5,250
Amounts due to suppliers GH¢12,200
Amounts due from customers GH¢22,300
ix) On 3 July 2019, Kofi’s major customer, Yaw, went into liquidation owing GH¢16,000. A statement from the customer’s liquidator indicates that Kofi should expect to recover 20 pesewas for every GH¢1 owing.

Required:
Prepare Kofi’s statement of profit or loss for the year ended 30 June 2019 and a statement of financial position as at that date. Ignore taxation. (20 marks)

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IMAC – MAY 2020 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit or loss statements using marginal and absorption costing for Smooth Sailing Ltd.

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Topic: Marginal Costing and Absorption Costing
Series: MAY 2020

Question Tag: Profit or Loss Statement

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