Shares – Page 2 – NBC Institute

CR – Nov 2023 – L3 – SB – Q4 – Financial Instruments (IFRS 9)

Discuss IFRS 9 derecognition rules, trade receivables factoring, and FVTOCI investment strategy for Pelumi Limited.

Question

a. Derecognition of financial instruments is the removal of a previously recognised financial asset or liability from an entity’s statement of financial position.

Required:
Discuss the rules of IFRS 9 – Financial Instruments relating to the derecognition of a financial asset. (10 Marks)

b. Royal Business Limited (RBL) held a portfolio of trade receivables with a carrying amount of N40 million as of May 31, 2022. At that date, the entity entered into a factoring agreement with Hexlinks Bank Limited (HBL), whereby it transfers the receivables in exchange for N36 million in cash. Royal Business Limited has agreed to reimburse the factor (HBL) for any shortfall between the amount collected and N36 million. Once the receivables have been collected, any amount above N36 million, less interest on this amount, will be repaid to Royal Business Limited. Royal Business Limited has derecognised the receivables and charged N4 million as a loss to profit or loss.

Required:
Explain how the rules of derecognition of the financial assets will affect the portfolio of trade receivables in Royal Business Limited’s financial statements. (3 Marks)

c. During the year 2021, Pelumi Limited invested in 800,000 shares in an NGX quoted company. The shares were purchased at N4.54 per share. The broker collected a commission of 1% on the transaction. Pelumi Limited elected to measure their shares at fair value through other comprehensive income (FVTOCI). The quoted share price as of December 31, 2021, was N4.22 to N4.26. Pelumi Limited decided to adopt a ‘sale and buy back’ strategy for the shares to realise a tax loss and therefore sold the shares at the market price on December 31, 2021, and bought the same quantity back the following day. The market price did not change on January 1, 2022. The broker collected a 1% commission on both transactions.

Required:
Explain the IFRS 9 accounting treatment of the above shares in the financial statement of Pelumi Limited for the year ended December 31, 2021.
Note: Show relevant calculations. (7 Marks)

Answer

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Tags: Derecognition, Factoring Agreement, Fair Value, Financial instruments, FVTOCI, IFRS 9, Investment strategy, Shares, Tax Loss, Trade receivables
Level: Level 3

Topic: Financial Instruments (IAS 32, IFRS 9)
Series: NOV 2023

BL – Nov 2012 – L1 – SA – Q16 – Company Law

Identify the legal term for the transfer of shares after a shareholder’s death.

Question

When a shareholder dies, what is the legal term by which his shares are vested in another person?

Answer

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Tags: Shares, Transmission of Shares
Level: Level 1

Topic: Company Law
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

Question

The offer of shares of a company to a group of selected persons is called?

Answer

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Tags: Equity, Private placement, Shares
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2012

FA – Nov 2012 – L1 – SA – Q12 – Financial Statements Preparation

Identifying what is not found in the statement of changes in equity.

Question

Which of the following is NOT found in the Statement of Changes in Equity of a company?

A. Dividend paid to equity shareholders
B. Proceeds from an issue of ordinary shares
C. Proposed dividend
D. Profit for the year
E. Share premium on fresh issue of shares

Answer

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Tags: Dividend, Equity, Shares
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2012

BMF – Nov 2014 – L1 – SA – Q7 – Basics of Business Finance and Financial Markets

Identifies the component not part of the financial structure of a firm.

Question

The financial structure of a firm is made up of the following components EXCEPT:

A. Ordinary shares
B. Preference shares
C. Debentures
D. Undistributed profits
E. Dividends

Answer

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Tags: Debentures, Financial structure, Shares, Undistributed Profits
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BL – May 2014 – L1 – SA – Q12 – Agency Law

Identifying the main types of securities issued by public limited companies.

Question

Company securities which public limited companies issue to raise capital for their operations are mainly shares and ____________.

Answer

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Tags: Public Companies, Securities, Shares
Level: Level 1

Topic: Agency Law
Series: MAY 2014

BL – Nov 2013 – L1 – SA – Q11 – Company Law

Examines restrictions on the transfer of share interests in a company.

Question

The right to transfer an interest in the share of a company can be limited by the

A. Memorandum of Association
B. Articles of Association
C. Policy Manual of the company
D. Company’s directors
E. Secretary of the company

Answer

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Tags: Articles of Association, Company Law, Multiple Choice, Shares
Level: Level 1

Topic: Company Law
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q22 – Elements of Financial Statements

Understanding the term for the face value of shares.

Question

The “face value” of the shares in limited companies is known as ____________.

Answer

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Tags: Company Capital, Face Value, Shares
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2013

SCS – March 2023 – L3 – Q6 – International financial management

Explains the financial reporting implications of debt exchange and compares investing in bonds versus shares

Question

LCH has invested GH¢1,000,000 in a 5-year Government of Ghana Bond with a coupon rate of 20%. As a result of the Government of Ghana DDE programme, LCH has no option but to exchange the old bond with the new bond.

Required:
a) Explain FIVE (5) financial reporting implications of the debt exchange on the financial statements of LCH as at 31 December 2022.
(10 marks)

b) Discuss FOUR (4) advantages and TWO (2) main disadvantages of investing in bonds rather than shares.
(10 marks)

Answer

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Tags: Bonds, Debt Exchange, Financial Reporting, Investment, Shares
Level: Level 3

Topic: International financial management
Series: MAR 2023

BL – May 2022 – L1 – SA – Q11 – Company Law

Determine when a person to whom shares are transmitted is entitled to dividends.

Question

A person to whom shares have been transmitted is entitled to dividends on the shares only after
A. Registration as a member of the company
B. Death of the original shareholder
C. Proving of deceased shareholder’s Will
D. Applying for the dividends
E. Notifying the company of deceased’s death

Answer

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Tags: Corporate Law, Dividends, Shares
Level: Level 1

Topic: Company Law
Series: MAY 2022

FA – May 2022 – L1 – SA – Q8 – Elements of Financial Statements

Calculate the balance in the share premium account after issuing shares at a premium.

Question

Owen PLC issued 140,000 shares of ₦20 each at a price of ₦120 per share, and the issue cost was ₦2,000,000. What is the balance in the share premium account at the end of this transaction?

A. ₦12,000,000
B. ₦12,800,000
C. ₦14,000,000
D. ₦16,000,000
E. ₦16,800,000

Answer

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Tags: Equity, Share Premium, Shares
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2022

PT – Aug 2022 – L2 – Q5c – Taxation of Capital Gains

Compute the capital gains tax on shares sold by Fortune in 2020.

Question

Fortune acquired shares in Obolo Company Ltd, a manufacturing company situated in Nsawam, and the following transactions took place:
i) He acquired 100,000 ordinary shares for GH¢115,600 on 14 March, 2020. He also acquired another 220,000 shares on 26 November, 2020 at a price of GH¢1.2 per share.
ii) On 24 December, 2020, he sold 235,000 shares for GH¢305,500 which attracted a sales commission of 1.5% of the sales value to the brokerage firm.
Required:
Compute the capital gains tax.

Answer

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Tags: Brokerage Fees, Capital Gains, Investment, Shares, Taxable Gains
Level: Level 2

Topic: Taxation of Capital Gains
Series: AUG 2022

PT – Mar 2024 – L2 – Q5b -Taxation of Capital Gains

Compute the tax payable by Atta Panin on the sale of shares.

Question

The following information relates to Atta Panin:

Required:
Compute the tax payable. (5 marks)

Answer

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Tags: Capital Gains, Investment income, Shares, Tax computation
Level: Level 2

Topic: Taxation of Capital Gains
Series: MAR 2024

TF – May 2018 – L3 – Q3a – Business income – Corporate income tax

Calculate the capital gain tax from the sale of shares in Annam Company Ltd.

Question

Akua is a shareholder of Annam Company Limited, a company not listed on the Ghana Stock Exchange (GSE) Market. Akua has the following transactions in Annam Company Limited:
i) On 01/07/2008, Akua purchased 200,000 ordinary shares for GH¢184,000. She purchased another 120,000 shares on 01/10/2008 at a price of GH¢1.00 per share. Akua again purchased 95,000 shares on 16/06/2009 at a price of GH¢1.15 per share.
ii) On 20/07/2009, Akua received bonus shares of 1 for every 10 shares currently held by her.
iii) On 01/01/2017, Akua accepted a right offer of 1 for 5 shares held as at 31/12/2015 at a price of GH¢0.90 per share.
iv) On 15/11/2017, Akua sold 340,000 shares for GH¢408,000, paying a commission of 2.5% of the sale value to the brokerage firm that facilitated the sale. The proceeds received from the sale were GH¢0.10 per share lower than a similar share on the Ghana Stock Exchange Market.

Required:
Calculate the capital gain tax if any.
(9 marks)

Answer

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Tags: Capital Gain, Shares, Tax Calculation
Level: Level 3

Topic: Tax Calculation
Series: MAY 2018

AT – Nov 2015 – L3 – Q1c – Business income – Corporate income tax

Treatment of shares issued to employees by the parent company for tax purposes.

Question

Staff of ABC Bank Ghana Limited have been issued shares by ABC Bank Limited – United Kingdom (the Parent company). The shares have been vested and are available to be sold immediately by the beneficiary staff.

Requirement:
With the support of the provisions of the relevant tax laws, how will the above be treated for tax purposes, if any?

Answer

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Tags: Corporate Income Tax, Employment Income, Shares, Taxation of benefits
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – Nov 2015 – L3 – Q1b – Business income – Corporate income tax

Circumstances under which shares are not considered chargeable assets for capital gains tax purposes.

Question

Shares of a resident company are classified as chargeable assets under capital gains tax. Under what circumstances will shares not be described as chargeable assets under capital gains tax provision?

Answer

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Tags: Capital gains tax, Chargeable assets, Corporate Income, Exemptions, Shares
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

BCL – Nov 2020 – L1 – Q2b – Types of Capital and the Financing of Companies

Identify two prohibited transactions in shares under Section 56(1) of the Companies Act, 1963 ACT 179.

Question

State TWO (2) prohibited transactions in shares under section 56(1) of the Companies Act, 1963 ACT 179 where a company limited by shares is prohibited from transacting in its shares.

(4 marks)

Answer

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Tags: Companies Act, Company Law, Prohibited Transactions, Shares
Level: Level 1

Topic: Types of capital and the financing of companies
Series: NOV 2020

BCL – Mar 2024 – L1 – Q5a – Types of Capital and the Financing of Companies

Identify and explain prohibited transactions in shares under the Companies Act, 2019 (Act 992).

Question

State TWO (2) prohibited transactions in shares under section 58(1) of the Companies Act, 2019, Act 992 where a company limited by shares is prohibited from transacting in its shares.

(4 marks)

Answer

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Tags: Companies Act, Company Law, Prohibited Transactions, Shares
Level: Level 1

Topic: Types of capital and the financing of companies
Series: MAR 2024

BCL – Nov 2015 – L1 – Q5 – Types of Capital and the Financing of Companies

Discuss prohibited transactions in respect of shares and the reasons for these prohibitions.

Question

The Directors of a company are prohibited from making certain transactions in respect of shares. Mention the prohibited transactions and discuss fully the reasons for the prohibitions. (20 marks)

Answer

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Tags: Company Law, Corporate finance, Prohibited Transactions, Shares
Level: Level 1

Topic: Types of capital and the financing of companies
Series: NOV 2015

BCL – Nov 2023 – L1 – Q5a – Types of Capital and the Financing of Companies

Explain the content and effect of a share certificate.

Question

a) The Managing Director of your organisation has just received a share certificate from an agent of Ecobank Transactional and considers the document as incomplete.

Required: Explain to your Managing Director the content and the effect of a share certificate. (8 marks)

Answer

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Tags: Company Law, Corporate Documentation, Share Certificate, Shares
Level: Level 1

Topic: Types of capital and the financing of companies
Series: NOV 2023

Question Tag: Shares

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CR – Nov 2023 – L3 – SB – Q4 – Financial Instruments (IFRS 9)

Discuss IFRS 9 derecognition rules, trade receivables factoring, and FVTOCI investment strategy for Pelumi Limited.

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BL – Nov 2012 – L1 – SA – Q16 – Company Law

Identify the legal term for the transfer of shares after a shareholder’s death.

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FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

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FA – Nov 2012 – L1 – SA – Q12 – Financial Statements Preparation

Identifying what is not found in the statement of changes in equity.

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BMF – Nov 2014 – L1 – SA – Q7 – Basics of Business Finance and Financial Markets

Identifies the component not part of the financial structure of a firm.

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BL – May 2014 – L1 – SA – Q12 – Agency Law

Identifying the main types of securities issued by public limited companies.

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BL – Nov 2013 – L1 – SA – Q11 – Company Law

Examines restrictions on the transfer of share interests in a company.

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FA – Nov 2013 – L1 – SA – Q22 – Elements of Financial Statements

Understanding the term for the face value of shares.

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SCS – March 2023 – L3 – Q6 – International financial management

Explains the financial reporting implications of debt exchange and compares investing in bonds versus shares

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BL – May 2022 – L1 – SA – Q11 – Company Law

Determine when a person to whom shares are transmitted is entitled to dividends.

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FA – May 2022 – L1 – SA – Q8 – Elements of Financial Statements

Calculate the balance in the share premium account after issuing shares at a premium.

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PT – Aug 2022 – L2 – Q5c – Taxation of Capital Gains

Compute the capital gains tax on shares sold by Fortune in 2020.

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PT – Mar 2024 – L2 – Q5b -Taxation of Capital Gains

Compute the tax payable by Atta Panin on the sale of shares.

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TF – May 2018 – L3 – Q3a – Business income – Corporate income tax

Calculate the capital gain tax from the sale of shares in Annam Company Ltd.

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AT – Nov 2015 – L3 – Q1c – Business income – Corporate income tax

Treatment of shares issued to employees by the parent company for tax purposes.

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AT – Nov 2015 – L3 – Q1b – Business income – Corporate income tax

Circumstances under which shares are not considered chargeable assets for capital gains tax purposes.

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BCL – Nov 2020 – L1 – Q2b – Types of Capital and the Financing of Companies

Identify two prohibited transactions in shares under Section 56(1) of the Companies Act, 1963 ACT 179.

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BCL – Mar 2024 – L1 – Q5a – Types of Capital and the Financing of Companies

Identify and explain prohibited transactions in shares under the Companies Act, 2019 (Act 992).

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BCL – Nov 2015 – L1 – Q5 – Types of Capital and the Financing of Companies

Discuss prohibited transactions in respect of shares and the reasons for these prohibitions.

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BCL – Nov 2023 – L1 – Q5a – Types of Capital and the Financing of Companies

Explain the content and effect of a share certificate.

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