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PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation

Prepare the Statement of Financial Performance for Paja Teaching Hospital following IPSAS guidelines.

Question

Below is a Trial Balance of Paja Teaching Hospital (PTH) under the Ministry of Health for the year ended 31 December 2023.

Debit (GH¢000)	Credit (GH¢000)
Cash and Bank – GoG	3,400
Cash and Bank – IGF	72,200
Cash and Bank – Donor Funds	210,400
Undeposited Cash – IGF	4,000
Petty Cash	100
Investments	2,000
Debtors	661,400
Other Receivables	17,700
Withholding Tax
Trust Funds
Trade Payables
GoG Subsidy – Employee Compensation
GoG Subsidy – Goods & Services
Development Partners Programmes Receipt
Other Non-Operating Income
Medicines & Pharmaceuticals	433,900
Surgical	50,800
Medical	111,400
Investigation	140,900
OPD	238,400
Obstetrics and Gynaecology	135,300
Dental	8,300
Pediatrics	40,300
Ear, Nose & Throat	5,300
Eye Care	7,300
Mortuary	30,000
Ambulance Fees	300
Ophthalmology	3,000
Physiotherapy	3,300
Examination Fees	200
Dialysis	400
Feeding	30,400
Employee Compensation – GoG	3,912,500
Goods & Services – GoG	20,800
Employee Compensation – IGF	148,000
Goods & Services – IGF	978,500
Capital Expenditure – IGF	27,500
Goods & Services – Partners Fund	472,400
Accumulated Fund
Total	6,530,900

Additional Information:

The hospital previously used modified accrual accounting but switched to IPSAS accrual basis in 2023.
The hospital revalued legacy assets as follows:
- Motor Vehicles: GH¢50,250,000
- Buildings: GH¢120,540,000
- Medical Equipment & Other Equipment: GH¢31,500,000
- Land: GH¢15,000,000
Gavi supported the hospital with GH¢200,000,000 in 2023, but 20% was allocated for Q1 of 2024. The Global Fund committed GH¢250,000,000, but only GH¢200,000,000 was received.
NHIA rejected 10% of the hospital’s total claims of GH¢100,300,000.
Parliament approved a write-off of GH¢20,225,000 for unpaid hospital services.
The capital expenditure consists of:
- Medical Equipment: GH¢19,236,000
- Furniture & Fittings: GH¢8,264,000
Depreciation Policy (Straight-Line Basis):
- Building: 5%
- Motor Vehicle: 20%
- Medical Equipment: 10%
- Furniture & Fitting: 25%
Year-end inventory values:

Inventory Type	Cost (GH¢000)	Replacement Cost (GH¢000)	Net Realisable Value (GH¢000)
Medicines (for resale)	146,800	176,100	132,100
Medical Consumables (For use on clients)	29,400	33,800	30,800
Office Consumables	19,600	29,400	18,600

Required:

In compliance with IPSAS, the PFM Act, and the Government of Ghana Chart of Accounts, prepare:
a) A Statement of Financial Performance for Paja Teaching Hospital for the year ended 31 December 2023.

Answer

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Tags: Accrual Accounting, Expenditure, Financial Statements, IPSAS, Public Sector Accounting, Revenue, Statement of Financial Performance, Trial Balance
Level: Level 2

Topic: Preparation and presentation of financial statements for central government
Series: Nov 2024

ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

Question

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

Answer

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Tags: Companies Income Tax, Profit, Revenue, Small Business, Tax computation
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

CR – May 2017 – L3 – Q7a – Revenue Recognition (IFRS 15)

Itemize and discuss the five-step model for revenue recognition under IFRS 15.

Question

Megida hopes to obtain contracts from both the private and public sectors following the new government economic initiatives. The company’s revenue had always been accounted for in line with IAS 18, as the company had adopted IFRS. Some directors of Megida understand that with the introduction of IFRS 15: Revenue from Contracts, the way revenue from contracts is recognized may change. In particular, one of them who attended an IFRS training organized by the Institute of Chartered Accountants of Nigeria (ICAN) heard about IFRS 15 and its five-step model for revenue recognition but did not understand.

Required:
Itemize and briefly discuss the FIVE-step model approach to revenue recognition under IFRS 15. (9 Marks)

Answer

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Tags: Contracts, Five-Step Model, IFRS 15, Revenue, Revenue Recognition
Level: Level 3

Topic: Revenue Recognition (IFRS 15)

CR – May 2017 – L3 – Q4 – Revenue Recognition (IFRS 15)

Advise on the correct accounting treatment for transactions involving contracts, licences, and purchase of components.

Question

Dango Plc is a conglomerate company operating in Nigeria with diverse interests across Africa. It prepares its financial statements in accordance with International Financial Reporting Standards with a year-end of September 30. The following transactions relate to Dango Plc.

(a) In February 2016, Dango Plc won a significant new contract to supply large quantities of rice to the government of Guyama, a small West African country, for the next two years. Under the terms of the arrangement, payment is made in cash on delivery once goods have been cleared by customs. The rice will be delivered in batches four (4) times every year, on April 1, July 1, October 1, and January 1. The batches for April 1, 2016, and July 1, 2016, amounting to N250 million and N380 million respectively, were delivered and paid. Dango incurred significant costs on customs duties for the first batch of delivery. The October 1 batch, valued at N520 million, was shipped prior to the year-end but delivered and paid for on October 1, 2016.

(b) On October 1, 2010, a 12-year licence was awarded to Dango Plc by the Federal Government to be the sole manufacturer of a chemical used in the Nigerian pharmaceutical industry. The licence was recognised on that date at its fair value of N196 million. The award of the licence motivated Dango Plc in 2011 to purchase a division of another Nigerian competitor company making similar products. Goodwill of N240 million was recognised on the purchase of the division. Dango Plc merged the activities of the newly acquired division with its own to create a specialist chemical sub-division, which it now classifies as a separate cash-generating unit. By 2016, the revenue of this cash-generating unit now amounts to 5% of the Group’s revenue.

(c) Dango Plc buys raw materials from overseas suppliers. It has recently taken delivery of 1,000 units of component X, used in the production of chemicals. The quoted price of component X was N1,200 per unit, but Dango Plc has negotiated a trade discount of 5% due to the size of the order. The supplier offers an early settlement discount of 2% for payment within 30 days, and Dango Plc intends to achieve this. Import duties of N60 per unit must be paid before the goods are released through customs. Once the goods are released, Dango Plc must pay a delivery cost of N5,000 to have the components taken to its warehouse.

Required:
Write a report to the directors advising them on the correct accounting treatment of the above transactions in the financial statements for the year ended September 30, 2016, in accordance with the provisions of the relevant standards.

Note: You may consider the relevance of the following standards to the transactions: IAS 20, IAS 2, IAS 38, IFRS 3, and IFRS 15.

Answer

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Tags: Accounting Standards, Customs Duties, Discounts, Goodwill, Licenses, Revenue
Level: Level 3

Topic: Revenue Recognition (IFRS 15)

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

AT – Nov 2017 – L3 – Q6 – Tax Administration and Dispute Resolution

Company on the total tax liabilities

Question

Pategi and Abu are brothers based in Hackettstown, New Jersey, USA. In 2009, they, along with ten other African-Americans, incorporated a telecommunications company named Pategi Telecommunications Limited. The company, headquartered in the USA, has a representative office in Share, Kwara State, Nigeria. In the year ended December 31, 2014, the following transactions were extracted from the company’s records:

Number of Minutes of Telecommunication Transactions:
- U.S. to other parts of the World: 1,705,000 minutes
- U.S. to Nigeria: 374,000 minutes
- Nigeria to U.S.: 426,250 minutes
- Nigeria to Canada: 550,000 minutes
- U.S. to Canada through Nigeria: 794,750 minutes
  Total Minutes: 3,850,000 minutes
Worldwide Expenses Incurred (Naira):
- Refurbishment: N7,150,000
- Rent: N1,100,000
- Depreciation: N25,991,563
- Salaries and Wages: N4,065,188
- Other Disallowable Expenses: N9,658,000
- Administrative Expenses: N4,820,750
  Total Expenses: N52,785,501
Telecommunication Charges:
- Average charge rate per minute: $0.50
- Applicable exchange rate: N198 to $1.00

Required:
Advise the company on the total tax liabilities for the relevant year of assessment. (Total 15 Marks)

Answer

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Tags: Cross-Border Transactions, Exchange Rate, International Taxation, Revenue, Tax Assessment, Tax computation, Tax liabilities, Telecommunications
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2017

PSAF – May 2023 – L2 – SA – Q1 – Public Sector Financial Statements

Prepare statements for government performance and financial position, including adjustments and depreciation calculations.

Question

a. The following information relates to the accounts of Dovet State Government for the year ended December 31, 2022:

Description	DR (N’M)	CR (N’M)
Land and buildings (cost)	387,500
Long-term investments	187,500
Equipment and furniture	67,500
Accumulated depreciation:
– Land and building		40,000
– Motor vehicles		30,000
– Equipment and furniture		21,250
Motor vehicles (cost)	145,000
Federation account allocation		287,500
VAT allocation		87,500
Grants from Federal Government		33,750
Internally generated fund		97,500
Grant from donor agency		25,000
Personnel emolument	125,000
Maintenance of premises	5,000
Consolidated Revenue Fund charges	32,500
Overhead expenses	25,000
Miscellaneous expenditure/income	37,500	61,250
Loan notes		250,000
Current assets/liabilities	38,750	36,250
Consolidated Revenue Fund (CRF)		81,250
Total	1,051,250	1,051,250

Additional Information:

Loan interest outstanding at the end of the year was N12.5 billion.
Depreciation on tangible assets is charged at the following rates on cost:
- Building is 5% (cost of land is N250 billion)
- Motor vehicles is 20%
- Equipment and furniture is 15%
A building costing N12.5 billion with accumulated depreciation of N5 billion was sold for N11.25 billion. This transaction has not been adjusted in the accounts.
Interest on receivable amounted to N10 billion.

Required:

Prepare the Statement of Financial Performance for the year ended December 31, 2022.
Prepare the Statement of Financial Position as at December 31, 2022.

b. Financial statements provide information that meets a number of qualitative characteristics in financial reporting.

Required:
Discuss FOUR characteristics of financial reporting.

Answer

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Tags: Consolidated Revenue, Depreciation, Expenditure, Government Financial Statements, Public Sector Accounting, Revenue
Level: Level 2

Topic: Public Sector Financial Statements
Series: MAY 2023

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Question

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item	N’000	N’000
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables		8,625
Inventories – finished goods – 31/12/18	276,750
Work-in-progress – 31/12/18	49,125
Inventories – raw materials at cost – 31/12/18	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorised and issued 900,000 ordinary shares of 50 kobo 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 – 31/12/18		425,250
Patents and trademarks	323,250
Motor vehicle at cost	112,500
Freehold property at cost	375,000
Leasehold property at cost	112,500
Plant and equipment at cost	225,000
Furniture and fittings at cost	75,000
Amortisation of leasehold property – 31/12/18		22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment		102,750
– Furniture and fittings		23,625
– Motor vehicles		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
	4,183,500	4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

Raw materials: N168,900
Finished goods: N413,025
Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

Plant and equipment 8% on cost – charged to production
Furniture and fittings 10% on cost – charged to administration
Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

Answer

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Tags: Depreciation, Expenses, IAS 1, OCI, Profit or Loss, Revenue
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2020

FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

Question

The accounting concept which states that sales revenue should be recognized when goods and services have been received is known as?

Answer

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Tags: Accounting Concepts, Revenue, Sales
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q32 – Financial Statements Preparation

Calculate turnover based on the cost of goods sold and profit margin.

Question

If the cost of goods sold is N315,060 and the profit margin is 25%, what is the turnover?

Answer

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Tags: Cost of Goods Sold, Profit margin, Revenue, Turnover
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2012

PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation