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  • 14 Marks

CR – May 2021 – L3 – Q3a – Presentation of Financial Statements (IAS 1)

Analyze Somolu Limited's financial performance and recommend whether Agege Plc should invest; discuss reporting quality improvements.

The Chief Executive Officer (CEO) of Agege Plc. has forwarded the draft financial statements of Somolu Limited through an e-mail to you as the company’s financial consultants.

In the e-mail, the CEO informed you that Agege Plc. is planning to acquire Somolu Limited. Somolu Limited is a private limited company that has recently applied for additional funds which was rejected from its current bankers on the basis that the company has insufficient assets to offer as security.

The draft financial statements of Somolu Limited as at December 31, 2019, are as follows:

Somolu Limited
Statement of profit or loss and other comprehensive income for the year ended December 31, 2019

Somolu Limited
Statement of financial position as at December 31, 2019

Required:

a. Carry out a critical analysis of the financial performance and position of Somolu
Limited together with recommendations as to whether Agege Limited should
consider the investment in Somolu Limited. (14 Marks)

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  • 15 Marks

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

One essential feature of analytical procedures in auditing is ‘comparison’. The auditor will calculate key relationships between figures (non-financial figures as well as financial figures) and then make comparisons.

You are required to:

  1. (a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
  2. (b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
  3. (c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

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  • 30 Marks

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.

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

Additional information:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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:

  1. Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
  2. Statement of changes in equity for the same period. (4 Marks)
  3. 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)

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  • 1 Marks

QTB – Nov 2015 – L1 – SA – Q17 – Mathematics

This question calculates Mabel's share from the proceeds of real estate divided among three sisters.

Three sisters: Mary, Mabel, and Vera shared the sum of N900,000 as proceeds from their father’s real estate in the ratio 7:8:9 respectively. How much did Mabel get?

A. N262,500.00
B. N300,000.00
C. N337,500.00
D. N352,173.91
E. N373,043.47

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  • 1 Marks

FA – May 2014 – L1 – SA – Q15 – Partnership Account

Calculates a partner's share of profit based on given ratios.

A, B, and C are in partnership sharing profits in the ratio of 5:4:2, respectively. In the year ended 31 March 2013, C’s share of profit was N180,000. What is A’s share of profit for the year?
A. N360,000
B. N400,000
C. N450,000
D. N550,000
E. N600,000

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FR – May 2020 – L2 – Q4a – Financial Ratios Calculation

Calculate the financial ratios of Adenta Ltd for the year ended 31 December 2018 based on its financial statements.

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  • 40 Marks

FR – Mar/Jul 2020 – L2 – Q1 – Financial Statement Analysis of Dangoyaro Plc

Preparation and analysis of financial statements, cash flow, and equity statements of Dangoyaro Plc for the year ended September 30, 2019, using IAS standards.

Dangoyaro Plc is a manufacturing company, and the summarized financial statements for the year ended September 30, 2019, and the comparative figures for 2018 are as follows:

Statement of Financial Position as at September 30

Equity and liabilities
Equity

The following information was obtained from the chairman’s statement in the annual report presented at the Annual General Meeting (AGM) held on December 22, 2019, and in the notes to the financial statements.

(i) Market condition during the year ended September 30, 2019, proved very challenging due largely to difficulties in the global economy as a result of the recession, which led to a decline in the share price and property values.

(ii) Dangoyaro Plc has not been immune from these effects and our properties have suffered impairment losses of ₦125 million in the year. The excess of these losses over previous surpluses has led to a charge to cost of sales of ₦37.5 million in addition to the normal depreciation charge.

(iii) There is no addition to or disposal of non-current assets during the year.

(iv) In response to the downturn, the company has made a number of employees redundant, incurring severance costs of ₦32.5 million (included in cost of sales), undertaken cost savings in advertising and other administrative expenses.

(v) The difficulty in the credit market has meant that the finance cost of our fixed interest bank loan has increased from ₦12.5 million to ₦15 million. In order to improve cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.

(vi) Despite the above events and the associated costs, the board of directors of Dangoyaro Plc believes the company’s performance has been quite resilient in these difficult times.

You are required to prepare:

a. An adjusted statement of profit or loss for the year ended September 30, 2019 (without taking into consideration information in the chairman’s statement and notes to the financial statements). (5 Marks)

b. Statement of changes in equity for the year ended September 30, 2019. (8 Marks)

c. Statement of cash flows for the year ended September 30, 2019, using the indirect method in accordance with provisions of IAS 7. (12 Marks)

d. Analyse and discuss the financial performance and position of Dangoyaro Plc as shown by the above financial statements as at September 30, 2019, using the following financial ratios:

i. Gross profit margin
ii. Net profit margin
iii. Return on capital employed (CE = ordinary shares plus reserves)
iv. Asset turnover
v. Current ratio
vi. Quick ratio
vii. Gearing ratio
viii. Receivables period
ix. Inventory period
x. Payables period

(15 Marks)
(Total 40 Marks)

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  • 5 Marks

QT – Nov 2017 – L1 – Q1c – Basic Mathematics

Calculate the utility bill for each tenant based on the ratio of their consumption.

A compound house at Ashaiman has a simple meter. There are 5 units’ chamber and hall within the compound. The total electricity bill submitted by ECG for the month of September 2017 was GH¢2,700. The outstanding bill on the month of August 2017 was GH¢1,000.

Required:
Calculate the bill for each tenant for the month of September 2017 if the tenants had agreed to share the bill in the ratio 2:3:4:5:6.

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  • 20 Marks

FA – Nov 2015 – L1 – Q3 -Interpretation of financial statements (Financial Ratios) | IAS 7: Statement of cash flows

Define key terms related to cash flow and calculate liquidity ratios using given financial data.

(a) Explain what is meant by the following terms as per IAS 7:
i. Statement of Cash flow (3 marks)
ii. Cash (1 mark)
iii. Cash equivalents (1½ marks)
iv. Operating activities (1½ marks)
v. Investing activities (1½ marks)
vi. Financing activities (1½ marks)

(b)
(i) Yaa Baby Company Ltd. has the following items in its Statement of Financial Position as at 31st December, 2014:

Item GH¢
Inventories 130,000
Trade Receivables 60,500
Cash in hand 3,453
Trade Payables 96,750

The company belongs to a Trade Association that has recently published industry averages for key financial ratios based upon a survey of its members. The industry averages for current and quick ratios applicable to the business of Yaa Baby Co. Ltd are:

  • Current ratio = 1.55: 1
  • Quick ratio = 0.95: 1

Required:
Calculate Current and Quick ratios of Yaa Baby Co. Ltd. and briefly comment on the result with reference to the industry averages. (5 marks)

(ii) Financial Ratios can be grouped under three (3) broad categories i.e. Profitability, Liquidity/Working capital, and Debt and Gearing/Leverage ratios. List all the ratios under Liquidity or Working capital ratios. (5 marks)

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  • 14 Marks

CR – May 2021 – L3 – Q3a – Presentation of Financial Statements (IAS 1)

Analyze Somolu Limited's financial performance and recommend whether Agege Plc should invest; discuss reporting quality improvements.

The Chief Executive Officer (CEO) of Agege Plc. has forwarded the draft financial statements of Somolu Limited through an e-mail to you as the company’s financial consultants.

In the e-mail, the CEO informed you that Agege Plc. is planning to acquire Somolu Limited. Somolu Limited is a private limited company that has recently applied for additional funds which was rejected from its current bankers on the basis that the company has insufficient assets to offer as security.

The draft financial statements of Somolu Limited as at December 31, 2019, are as follows:

Somolu Limited
Statement of profit or loss and other comprehensive income for the year ended December 31, 2019

Somolu Limited
Statement of financial position as at December 31, 2019

Required:

a. Carry out a critical analysis of the financial performance and position of Somolu
Limited together with recommendations as to whether Agege Limited should
consider the investment in Somolu Limited. (14 Marks)

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  • 15 Marks

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

One essential feature of analytical procedures in auditing is ‘comparison’. The auditor will calculate key relationships between figures (non-financial figures as well as financial figures) and then make comparisons.

You are required to:

  1. (a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
  2. (b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
  3. (c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

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  • 30 Marks

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.

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

Additional information:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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:

  1. Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
  2. Statement of changes in equity for the same period. (4 Marks)
  3. 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)

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  • 1 Marks

QTB – Nov 2015 – L1 – SA – Q17 – Mathematics

This question calculates Mabel's share from the proceeds of real estate divided among three sisters.

Three sisters: Mary, Mabel, and Vera shared the sum of N900,000 as proceeds from their father’s real estate in the ratio 7:8:9 respectively. How much did Mabel get?

A. N262,500.00
B. N300,000.00
C. N337,500.00
D. N352,173.91
E. N373,043.47

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  • 1 Marks

FA – May 2014 – L1 – SA – Q15 – Partnership Account

Calculates a partner's share of profit based on given ratios.

A, B, and C are in partnership sharing profits in the ratio of 5:4:2, respectively. In the year ended 31 March 2013, C’s share of profit was N180,000. What is A’s share of profit for the year?
A. N360,000
B. N400,000
C. N450,000
D. N550,000
E. N600,000

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FR – May 2020 – L2 – Q4a – Financial Ratios Calculation

Calculate the financial ratios of Adenta Ltd for the year ended 31 December 2018 based on its financial statements.

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  • 40 Marks

FR – Mar/Jul 2020 – L2 – Q1 – Financial Statement Analysis of Dangoyaro Plc

Preparation and analysis of financial statements, cash flow, and equity statements of Dangoyaro Plc for the year ended September 30, 2019, using IAS standards.

Dangoyaro Plc is a manufacturing company, and the summarized financial statements for the year ended September 30, 2019, and the comparative figures for 2018 are as follows:

Statement of Financial Position as at September 30

Equity and liabilities
Equity

The following information was obtained from the chairman’s statement in the annual report presented at the Annual General Meeting (AGM) held on December 22, 2019, and in the notes to the financial statements.

(i) Market condition during the year ended September 30, 2019, proved very challenging due largely to difficulties in the global economy as a result of the recession, which led to a decline in the share price and property values.

(ii) Dangoyaro Plc has not been immune from these effects and our properties have suffered impairment losses of ₦125 million in the year. The excess of these losses over previous surpluses has led to a charge to cost of sales of ₦37.5 million in addition to the normal depreciation charge.

(iii) There is no addition to or disposal of non-current assets during the year.

(iv) In response to the downturn, the company has made a number of employees redundant, incurring severance costs of ₦32.5 million (included in cost of sales), undertaken cost savings in advertising and other administrative expenses.

(v) The difficulty in the credit market has meant that the finance cost of our fixed interest bank loan has increased from ₦12.5 million to ₦15 million. In order to improve cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.

(vi) Despite the above events and the associated costs, the board of directors of Dangoyaro Plc believes the company’s performance has been quite resilient in these difficult times.

You are required to prepare:

a. An adjusted statement of profit or loss for the year ended September 30, 2019 (without taking into consideration information in the chairman’s statement and notes to the financial statements). (5 Marks)

b. Statement of changes in equity for the year ended September 30, 2019. (8 Marks)

c. Statement of cash flows for the year ended September 30, 2019, using the indirect method in accordance with provisions of IAS 7. (12 Marks)

d. Analyse and discuss the financial performance and position of Dangoyaro Plc as shown by the above financial statements as at September 30, 2019, using the following financial ratios:

i. Gross profit margin
ii. Net profit margin
iii. Return on capital employed (CE = ordinary shares plus reserves)
iv. Asset turnover
v. Current ratio
vi. Quick ratio
vii. Gearing ratio
viii. Receivables period
ix. Inventory period
x. Payables period

(15 Marks)
(Total 40 Marks)

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  • 5 Marks

QT – Nov 2017 – L1 – Q1c – Basic Mathematics

Calculate the utility bill for each tenant based on the ratio of their consumption.

A compound house at Ashaiman has a simple meter. There are 5 units’ chamber and hall within the compound. The total electricity bill submitted by ECG for the month of September 2017 was GH¢2,700. The outstanding bill on the month of August 2017 was GH¢1,000.

Required:
Calculate the bill for each tenant for the month of September 2017 if the tenants had agreed to share the bill in the ratio 2:3:4:5:6.

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  • 20 Marks

FA – Nov 2015 – L1 – Q3 -Interpretation of financial statements (Financial Ratios) | IAS 7: Statement of cash flows

Define key terms related to cash flow and calculate liquidity ratios using given financial data.

(a) Explain what is meant by the following terms as per IAS 7:
i. Statement of Cash flow (3 marks)
ii. Cash (1 mark)
iii. Cash equivalents (1½ marks)
iv. Operating activities (1½ marks)
v. Investing activities (1½ marks)
vi. Financing activities (1½ marks)

(b)
(i) Yaa Baby Company Ltd. has the following items in its Statement of Financial Position as at 31st December, 2014:

Item GH¢
Inventories 130,000
Trade Receivables 60,500
Cash in hand 3,453
Trade Payables 96,750

The company belongs to a Trade Association that has recently published industry averages for key financial ratios based upon a survey of its members. The industry averages for current and quick ratios applicable to the business of Yaa Baby Co. Ltd are:

  • Current ratio = 1.55: 1
  • Quick ratio = 0.95: 1

Required:
Calculate Current and Quick ratios of Yaa Baby Co. Ltd. and briefly comment on the result with reference to the industry averages. (5 marks)

(ii) Financial Ratios can be grouped under three (3) broad categories i.e. Profitability, Liquidity/Working capital, and Debt and Gearing/Leverage ratios. List all the ratios under Liquidity or Working capital ratios. (5 marks)

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