Question Tag: Statement of Profit or Loss

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  • 20 Marks

FR – Nov 2015 – L2 – Q2 – Presentation of Financial Statements (IAS 1)

Prepare a statement of profit or loss and other comprehensive income for Well-Being Plc.

The following trial balance has been extracted from the books of Well-Being Plc as at March 31, 2014:

N’000 N’000
Land at cost 360
Building at cost 750
Equipment at cost 588
Vehicles at cost 852
Goodwill 900
Accumulated depreciation:
– Buildings 270
– Equipment 228
– Vehicles 396
Inventory at April 1, 2013 321
Trade receivables and payables 549 351
Allowance for receivables 24
Bank balances 171
Current taxation 18
Ordinary shares of N1 each 600
Retained earnings at April 1, 2013 1,509
Revenue 4,296
Purchases 1,464
Directors’ fees 450
Wages and salaries 828
General distribution costs 303
General administrative expenses 558
Dividend paid 60
Rent received 90
Disposal of vehicle 30
Total 7,983 7,983

Additional information:

  1. The company’s non-depreciable land was valued at ₦900,000 on March 31, 2014, and this valuation is to be incorporated into the accounts.
  2. Depreciation policy:
    • Building: 4% p.a. (straight line)
    • Equipment: 40% p.a. (reducing balance)
    • Vehicles: 25% p.a. (straight line) In all cases, a full year’s depreciation is charged in the year of disposal.
  3. On February 1, 2014, a vehicle used entirely for administrative purposes was sold for ₦30,000 (cost ₦132,000). No other entries were made.
  4. Depreciation is apportioned as follows:
    • Buildings: 50% distribution, 50% administrative
    • Equipment: 25% distribution, 75% administrative
    • Vehicles: 70% distribution, 30% administrative
  5. Inventory at March 31, 2014, is valued at ₦357,000.
  6. Trade receivables include a debt of ₦24,000 to be written off. The allowance for receivables is to be adjusted to 4% of receivables after the write-off.
  7. Current tax for the year ended March 31, 2013, was over-estimated by ₦18,000. Current tax for 2014 is estimated at ₦90,000.
  8. One-quarter of wages and salaries was paid to distribution staff and the remaining three-quarters to administrative staff.
  9. General administrative expenses include bank overdraft interest of ₦27,000.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended March 31, 2014.

 

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  • 15 Marks

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

This question asks for the preparation of Mr. Pamona’s Statement of Profit or Loss and Statement of Financial Position following a theft in his shop.

Mr. Pamona owns a corner shop in Lagos. On 30 December 2012, vandals looted his shop, stole all his inventories and cash of ₦75,000. Mr. Pamona was fully insured against theft and he has asked you to prepare his accounts to enable him estimate his insurance claim. Your investigation revealed the following:

i. Net assets on 1 January 2012:

  • Furniture and fittings:
    Cost: ₦900,000
    Accumulated depreciation: ₦(400,000)
    Carrying value: ₦500,000
  • Inventories: ₦2,700,000
  • Trade receivables: ₦430,000
  • Prepayments (rates): ₦30,000
  • Cash in bank: ₦2,140,000
  • Cash float in till: ₦30,000
  • Trade payables: ₦1,650,000
  • Accrued electricity: ₦40,000

ii. Bank statements for nine months from 1 January 2012 show the following:
Receipts:

  • Cash and cheques lodged: ₦20,060,000
  • Investment income: ₦182,000
    Total: ₦20,242,000

Payments:

  • Trade payables: ₦17,850,000
  • Rent (1 January – 31 December): ₦1,200,000
  • Electricity: ₦155,000
  • Insurance – theft: ₦45,000
  • Insurance – life: ₦107,000
  • Telephone: ₦83,000
    Total: ₦19,440,000

iii. The following were paid in cash from the till:

  • Trade payables: ₦2,400,000
  • Drawings (per month): ₦295,000

iv. Mr. Pamona’s gross profit margin on sales has averaged 20% in recent years.

v. The furniture and fittings are now estimated to be worth only ₦200,000.

vi. A cheque for ₦52,000 in respect of the telephone bill for the quarter ended 30 September 2012 was not shown in the bank statements until 3 October 2012.

vii. Rates for the period 1 April to 1 October, 2012, amounting to ₦75,000 were still outstanding.

viii. Trade receivables and payables were ₦270,000 and ₦1,900,000 respectively on 30 September 2012.

You are required to prepare Mr. Pamona’s:
a. Statement of Profit or Loss for the nine-month period ended 30 September 2012. (10 Marks)
b. Statement of Financial Position as at that date. (5 Marks)

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  • 7 Marks

FR – May 2020 – L2 – Q3a – Preparation of Statement of Profit or Loss

Prepare the statement of profit or loss for Badu Trading Ltd for the year ended 31 May 2020.

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  • 4 Marks

FA – Nov 2015 – L1 – SB – Q6b – Bases of Accounting: Accrual vs. Cash

Calculate rent recognized for profit or loss and financial position as of March 31, 2014.

Oluyemi Ventures prepares its financial statements to March 31 each year. The business pays rent quarterly in advance on January 1, April 1, July 1, and October 1 each year. The annual rent is N600,000. On June 30, 2013, the rent was increased to N900,000 per annum.

Required:
i. Calculate the amount of rent that will be recognized in the Statement of Profit or Loss for the year ended March 31, 2014. (3 Marks)
ii. Calculate the amount to be recognized in the Statement of Financial Position as at March 31, 2014. (1 Mark)

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  • 20 Marks

FA – Nov 2015 – L1 – SB – Q1 – Financial Statements Preparation

Prepare financial statements for a company, including income and balance sheet, with adjustments for accruals and depreciation.

The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:

Item N’000
Share capital, authorised and issued 200,000
Cash at bank and in hand 500
Inventory at December 31, 2014 61,200
Trade receivables 18,005
Trade payables 15,009
Gross profit at December 31, 2014 128,942
Retained earnings 25,000
Salaries & Wages 28,430
Prepayments 600
Bad debts 500
Accrued expenses 526
Director’s account (credit) 2,500
Finance cost on loan note 600
Sundry expenses 4,100
Rates & insurance 1,520
6% Loan notes 20,000
Lighting & cooling 1,310
Postage, telephone and telegrams 800
Motor vehicle (cost N25 million) 15,000
Office fittings and equipment 42,350
Profit at January 1, 2014 22,300
Land and buildings at cost 239,362

The following additional information is relevant:

  1. Office fittings and equipment are to be depreciated at 15% of cost, and Motor vehicles at 20% of cost.
  2. Provisions are to be made for:
    • Directors’ Fees N6,000,000
    • Audit Fees N2,500,000
  3. The amount of insurance includes a premium of N600,000 paid in September 2014 to cover the company against fire for the period September 1, 2014, to August 31, 2015.
  4. A bill for N548,000 in respect of electricity consumed up to December 31, 2014, has not been posted to the ledger.

Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)

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  • 20 Marks

FR – Nov 2019 – L2 – Q3 – Preparation of Financial Statements

Preparation of statement of profit or loss and statement of financial position for Biggs Ltd as at 31 December 2018.

Biggs Ltd has a financial year ending 31 December. Its trial balance extracted as at 31 December 2018 is as follows:


Additional Information:
i) The carrying value of inventories at cost at 31 December 2018 was GH¢39.5 million.
The estimated useful life (at the date of purchase) of the PPE components is:

  • Land: infinite life
  • Buildings: 50 years
  • Plant and equipment: 5 years

On 30 June 2018, the directors decided to sell the property because more suitable leasehold property had become available at a very competitive cost. They advertised the property for sale at that date at what was considered to be a realistic asking price of GH¢68 million. They estimated that costs of GH¢3 million would be necessary in order to sell the property. On 1 December 2018, they reduced the asking price to GH¢64.5 million and sold the property at this price shortly after the year-end. Costs to sell totaled GH¢2.5 million.

Required:
Prepare for Biggs Ltd:
a) The Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018. (10 marks)
b) The Statement of Financial Position as at 31 December 2018. (10 marks)

ii) On 1 January 2018, Biggs Ltd sold some of its plant and equipment to a finance company. Biggs Ltd credited the sales proceeds of GH¢25.6 million to revenue. The plant and equipment were purchased by Biggs Ltd on 1 January 2017 at a total cost of GH¢32 million and were being depreciated over five years. The cost and accumulated depreciation of the disposed asset are still included in the PPE cost and accumulated depreciation accounts.

iii) On 1 January 2018, Biggs Ltd issued 200 million preference shares at 32.50 pesewas each. Costs of issue were GH¢1 million so the net proceeds of the issue were GH¢64 million. The preference shareholders will receive an annual dividend on 31 December each year of GH¢3.9 million. The shares will be redeemed at par on 31 December 2022. The effective annual finance cost attached to these shares is approximately 6.4%. The first annual dividend was paid on 31 December 2018 and is included in dividends paid.

iv) The estimated income tax on the profits for the year to 31 December 2018 is GH¢4.5 million. During the year GH¢4.2 million was paid in full and final settlement of income tax on the profits for the year ended 31 December 2017. The statement of financial position at 31 December 2017 had included GH¢4.4 million in respect of this liability. At 31 December 2018, the carrying amounts of the net assets of Biggs Ltd exceeded their tax base by GH¢35.8 million. Assume an income tax rate of 25%.

v) The details of property, plant, and equipment are as follows:

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  • 20 Marks

FR – July 2023 – L2 – Q3 – Preparation of Financial Statements for Beposo Ltd

Preparation of financial statements (profit or loss, changes in equity, and financial position) for Beposo Ltd for the year ended 31 December 2021.

Beposo Ltd is an agro-processing company, whose head office is in the Greater Accra region of Ghana. The trial balance of the company for the year ended 31 December 2021 is as follows:

Additional Information:

i) Included in the revenue figure is sales made on special arrangement, payable by customers in two years’ time at an amount of GH¢16.8 million. The cash price of the sales at the date of the sales (i.e. 1 January 2021) is estimated at GH¢15 million, and the effective interest rate of the arrangement has been computed as 5.83% per annum.

ii) Non-current assets consist of the following classes of assets:

The company revalues its buildings periodically to ensure that the carrying value reflects their fair market value. On 31 December 2020, the buildings were revalued at GH¢198 million, of which GH¢80 million was attributed to land. The revaluation surplus shown in the trial balance represents the increase in value recorded during this revaluation. All buildings were completed and ready for use on 1 January 2011. The company’s buildings serve as administrative offices and production centers, and they have an estimated useful life of 50 years.

In 2021, the company relocated from one of its administrative offices and sold the building on 1 April 2021 for GH¢27.6 million. The revalued amount and revaluation surplus for this building as of 31 December 2020 were GH¢25 million (with GH¢5 million for the land) and GH¢8 million, respectively. On 31 December 2021, the remaining land and buildings were revalued at GH¢169.35 million, with GH¢85 million attributed to the land. The company’s policy is to recognize revaluation surplus only upon derecognition of the non-current asset.

The sale of the building and the 2021 revaluation of the remaining buildings have not yet been recorded in the company’s books. The payment for the sale of the building was received in the first week of January 2022. There were no other changes to the value of property, plant, and equipment during the year ended 31 December 2021.

Depreciation for 2021 has not been accounted for in the trial balance. The company charges depreciation to cost of sales. Motor vehicles, machinery, and equipment are depreciated over five years.

In lieu of a cash dividend, the company issued bonus shares on 1 January 2021 at a ratio of one new share for every ten existing shares, priced at GH¢1 per share. The issuance was subject to an 8% withholding tax, which has already been paid by the company and is included in administrative expenses. The bonus shares, which are in respect of the year ended 31 December 2020, have not yet been recorded.

After 31 December 2021, the Board of Directors proposed a dividend of GH¢0.80 per share in respect of the year ended 31 December 2021. The dividend has not yet been approved by shareholders.

The provision for tax in the trial balance reflects the under or over provision of tax for the year ended 31 December 2020, based on the difference between the tax estimated for the year and the actual liability determined after a tax audit. The current tax liability for 2021 is estimated at GH¢16.7 million. Taxable temporary differences as at 31 December 2021, arising from discrepancies between the carrying amounts of assets and liabilities and their tax bases, amount to GH¢60 million. The applicable corporation tax rate is 25%.

Required:

Prepare the following financial statements for Beposo Ltd for the year ended 31 December 2021:
i) Statement of profit or loss and other comprehensive income
ii) Statement of changes in equity
iii) Statement of financial position as at that date.
(Total: 20 marks)

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  • 20 Marks

FA – May 2015 – L1 – Q3a – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Prepare Receivables, Payables control accounts, Opening Capital, Statement of Profit or Loss, and Statement of Financial Position using given data from single entry

Mr. Ken Stevenson keeps single entry books of account. He had the following balances on 1 January, 2013:

N
Inventory
Payables
Prepaid insurance
Bank overdraft
Furniture
Motor vehicles
Receivables
Borrowings

The following information is extracted from his cash book in respect of the year ended 31 December 2013:

DR N CR N
Revenue 279,500
Receipt from trade receivables 536,400
815,900 815,900

He had the following balances on 31 December 2013:

N
Motor vehicles
Inventory
Furniture
Receivables
Payables
Borrowings

Additional information:
(i) Interest on Borrowings to be accrued for at 5% per annum.
(ii) Bad debts of N12,600 are to be written off while 5% allowance is to be made on the net receivables at 31 December, 2013.
(iii) Depreciation is to be charged on the non-current assets at the rate of 10% per annum.

You are required to prepare:

a. Receivables control account (2 Marks)
b. Payables control account (2 Marks)
c. The opening capital (2 Marks)
d. Statement of Profit or Loss for the year ended 31 December 2013 (8 Marks)
e. Statement of Financial Position as at 31 December 2013 (6 Marks)

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  • 1 Marks

FA – May 2024 – L1 – SA – Q10 – Financial Statements Preparation

Describes the link between the statement of financial position and the statement of profit or loss.

Which of the following correctly explains the links between the statement of financial position and the statement of profit or loss?

A. The statement of profit or loss shows the financial position of a business at a given point in time, while the statement of financial position shows the profit or loss for a period of time.
B. The statement of financial position affects the statement of profit or loss, by adding to the owner’s capital.
C. The statement of profit or loss affects the statement of financial position, by either adding to or reducing the owner’s capital.
D. The statement of profit or loss affects the statement of financial position, by adding to and reducing the owner’s capital.
E. The statement of financial position affects the statement of profit or loss, by reducing the owner’s capital.

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  • 20 Marks

FA – Mar/July 2020 – L1 – SB – Q1a – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Preparing the statement of profit or loss and financial position based on extracted balances.

The following balances were extracted from the books of Walling Enterprises as at October 31, 2019:

Item N’000
Capital at November 1, 2018 90,428
Purchases 776,400
Revenue 1,045,800
Salaries and wages 66,880
Rent and rates 28,004
Receivables 144,600
Bad debts 3,768
Drawings 19,004
Allowances for receivables 7,404
Bank 5,632
Payables 68,616
Cash 668
Inventories at November 1, 2018 164,218
Motorcycle at cost 14,400
Accumulated depreciation on motorcycle 4,200
Bank interest received 1,756
Commission received 5,370

Additional Information:

(i) Inventory at October 31, 2019 was valued at N198,712,000
(ii) Rent prepaid at October 31, 2019 amounted to N3,200,000
(iii) Depreciation is to be provided on the motorcycle at the rate of 20% on cost per annum
(iv) Accrued salary at October 31, 2019 amounted to N6,024,000
(v) Commission received in advance is N800,000
(vi) Additional amount of irrecoverable debts of N2,840,000 is to be written off
(vii) Bank interest of N100,000 has fallen due but is yet to be received
(viii) Allowances for receivables are to be adjusted to 5% of accounts receivables
(ix) Goods taken by the owner for own use and cheque withdrawals amounting to N1,600,000 and N2,400,000 respectively are yet to be recorded.

Required:

Using the extended trial balance, prepare:
a. Statement of profit or loss of Walling Enterprises for the year ended October 31, 2019.
b. Statement of financial position of Walling Enterprises as at October 31, 2019.

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  • 20 Marks

FR – Nov 2021 – L2 – Q3 – Preparation of Financial Statements

This question focuses on the preparation of a Statement of Profit or Loss and Other Comprehensive Income and a Statement of Financial Position for Neeta Ltd, incorporating revaluations, deferred tax, and lease accounting.

Neeta Ltd is a manufacturing company located in the Western Region. The trial balance of Neeta Ltd as at 31 March 2020 is as follows:

Trial Balance GH¢’000 GH¢’000
Revenue (Note i) 164,000
Production costs 90,000
Distribution costs 8,000
Administrative expenses 26,000
Inventory at 31 March 2019 19,710
Interest paid on interest-bearing borrowings 3,000
Income tax (Note iii) 100
Dividends paid on equity shares 5,000
Property, Plant and Equipment (PPE) (Note iv) 77,000
Provision for depreciation on PPE at 31 March 2019 22,610
Trade receivables 53,000
Cash and cash equivalents 33,000
Trade payables 12,000
Long term interest-bearing borrowings 50,000
Lease rentals (Note v) 20,000
Deferred tax (Note iii) 7,000
Share capital 50,000
Retained earnings at 31 March 2019 29,000
Totals 334,710 334,710

Additional information:

i) On 1 April 2019, Neeta Ltd sold goods to a customer for a price of GH¢12.1 million. The terms of the sale allowed the customer extended credit, and the price was payable by the customer in cash on 31 March 2021. Neeta Ltd included the GH¢12.1 million in revenue for the current year and the corresponding entry in trade receivables. A discount rate that is appropriate for the risks in this transaction is 10%.

ii) The carrying value of inventory at 31 March 2020 was GH¢25 million.

iii) The estimated income tax on the profits for the year to 31 March 2020 is GH¢1.5 million. During the year, GH¢1.3 million was paid in full as the final settlement of income tax on the profits for the year ended 31 March 2019. The statement of financial position as at 31 March 2019 had included GH¢1.4 million in respect of this liability.

As at 31 March 2020, the carrying amounts of the net assets of Neeta Ltd exceeded their tax base by GH¢28 million. This information is before taking account of the Property revaluation (see Note iv below). The rate of income tax is 30%.

iv) Details of Property, Plant and Equipment are as follows:

Component of PPE Cost (GH¢’000) Accumulated depreciation at 31 March 2019 (GH¢’000) Carrying Amount at 31 March 2019 (GH¢’000)
Land 22,000 0 22,000
Buildings 28,000 5,600 22,400
Plant and Equipment 27,000 17,010 9,990
Total 77,000 22,610 54,390

The estimated useful economic life (at the date of purchase) of PPE components are:

  • Land: Infinite life
  • Building: 50 years
  • Plant and Equipment: 4 years

On 1 April 2019, the property’s open market value was GH¢60 million, including GH¢32 million relating to the building. The directors wish to reflect this revaluation in the financial statements, but no entries regarding the revaluation have been made. The directors do not want to make an annual transfer of excess depreciation to retained earnings. The original estimate of the useful economic life of the building is still considered valid. No assets were fully depreciated at 31 March 2020. All the depreciation is to be charged to the cost of sales.

v) On 1 April 2019, Neeta Ltd leased a large group of machines used in the production process. The lease was for 4 years, and the annual rental (payable in advance) was GH¢20 million. The lessee has not elected to apply the recognition exemption under IFRS 16 leases. The interest rate implicit in the lease can be taken as 9% per year.

Required:

a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for Neeta Ltd for the year ended 31 March 2020.
(10 marks)

b) Prepare the Statement of Financial Position for Neeta Ltd as at 31 March 2020.
(10 marks)

(Total: 20 marks)

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  • 20 Marks

FR – May 2016 – L2 – Q1 – Preparation of Financial Statements

Prepare the statement of profit or loss and statement of financial position for Zealow Ltd as at 31st December 2015, incorporating relevant adjustments.

The following trial balance relates to Zealow Ltd as at 31st December 2015:

GH¢000 GH¢000
Turnover 213,800
Cost of sales 143,800
Operating expenses 22,400
Trade receivables 13,500
Bank 900
Closing inventories – 31st December 2015 (note i) 10,500
Interest expenses (note iii) 5,000
Rental income from investment property 1,200
Plant and equipment-cost (note ii) 36,000
Land and building- at valuation (note ii) 63,000
Accumulated depreciation 16,800
Investment property-valuation 1st January 2015 (note ii) 16,000
Trade payables 11,800
Joint arrangement (note v) 8,000
Deferred tax (note iv) 5,200
Ordinary shares of 25p each 20,000
10% Redeemable preference shares of GH¢1 each 10,000
Retained earnings – 1st January 2015 17,500
Revaluation surplus (note ii) 21,000

Total: GH¢318,000 | GH¢318,000

The following additional information is relevant:

  1. An inventory count on 31st December 2015 listed goods with a cost of GH¢10.5 million. This includes some damaged goods that had cost GH¢800,000. These would require remedial work costing GH¢450,000 before they could actually be sold for an estimated GH¢950,000.
  2. Non-current assets:
    • Plant: All plant, including that of the joint operation (note v), is depreciated at 12.5% on a reducing balance basis.
    • Land and Building: The land and building were revalued at GH¢15 million and GH¢48 million respectively on 1st January 2015, creating a GH¢21 million revaluation surplus. At this date, the building had a remaining life of 15 years. Depreciation is on a straight-line basis. Zealow Ltd does not make a transfer to realized profits in respect of excess depreciation.
    • Investment property: On 31st December 2015, a qualified surveyor valued the investment property at GH¢13.5 million. Zealow Ltd uses the fair value model in IAS 40 Investment property to value its investment property.
  3. Interest expenses include overdraft charges, the full year’s preference dividend, and an ordinary dividend of 4p per share that was paid in June 2015.
  4. The directors have estimated the provision for income tax for the year ended 31st December 2015 at GH¢8 million. The deferred tax provision at 31st December 2015 is to be adjusted (through the profit or loss statement) to reflect that the tax base of the company’s net assets is GH¢12 million less than their carrying amounts. The rate of tax is 30%.
  5. On 1st January 2015, Zealow Ltd entered into a joint arrangement with two other entities. Each venturer contributes their own assets and is responsible for their own expenses, including depreciation on assets of the joint arrangement. Zealow Ltd is entitled to 40% of the joint venture’s total turnover. The joint arrangement is not a separate entity and is regarded as a joint operation.
    Details of Zealow Ltd joint venture transactions are:

    GH¢000
    Plant and equipment at cost
    Share of joint venture turnover (40% of total turnover)
    Related joint venture cost of sales excluding depreciation
    Trade receivables
    Trade payables
    Total

Required:

  1. (a) Prepare the statement of profit or loss for Zealow Ltd for the year ended 31st December 2015. (10 marks)
  2. (b) Prepare the statement of financial position for Zealow Ltd as at 31st December 2015. (10 marks)

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  • 20 Marks

FR – Nov 2016 – L2 – Q3 – Preparation of Financial Statements

Prepare the financial statements of Kwadaso Ltd, including profit or loss, changes in equity, and financial position for the year ended 30 September 2015.

The following is the trial balance of Kwadaso Ltd, a trading company, as at 30 September 2015:

Additional Information:

  1. On 31 March 2015, the company made a bonus issue from retained earnings of one new share for every four shares in issue at GH¢10.00 each. This transaction is yet to be recorded in the books. The company paid ordinary dividends of GH¢2.2 per share on 31 January 2015 and GH¢2.6 per share on 30 June 2015. The dividend payments are included in administrative expenses in the trial balance.
  2. Provision is to be made for a full year’s interest on the Loan notes.
  3. The finance charge relating to the preference shares is equal to the dividend payable.
  4. Non-current assets:
    • Depreciation of Property, Plant, and Equipment is to be provided on the following bases:
      • Plant and equipment – 10% on cost
      • Computer equipment – 25% on cost
      • Motor vehicles – 20% on reducing balance
    • No depreciation has yet been charged on any non-current asset for the year ended 30 September 2015.
    • Kwadaso revalues its buildings at the end of each accounting year. At 30 September 2015, the relevant value to be incorporated into the financial statements is GH¢14,100,000. The building’s remaining life at the beginning of the current year (1 October 2014) was 25 years. Kwadaso does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
  5. The available-for-sale investments held at 30 September 2015 had a fair value of GH¢8,400,000. There were no acquisitions or disposals of these investments during the year.
  6. In February 2015, Kwadaso’s internal audit unit discovered a fraud committed by the company’s credit manager who did not return from a foreign business trip. The outcome of the fraud is that GH¢500,000 of the company’s trade receivables have been stolen by the credit manager and are not recoverable. Of this amount, GH¢200,000 relates to the year ended 30 September 2014 and the remainder to the current year. Kwadaso is not insured against this fraud.
  7. Corporate income tax payable estimated on the profit for the year is GH¢3,500,000. An amount of GH¢1,200,000 is to be transferred to the deferred taxation account.

Required:
Prepare the following financial statements of Kwadaso Ltd for publication in accordance with International Financial Reporting Standards (IFRS):

a) Statement of profit or loss and other comprehensive income for the year ended 30 September 2015.

b) Statement of changes in equity for the year ended 30 September 2015.

c) Statement of financial position as at 30 September 2015.

d) Show clearly all relevant workings.

(Note: Accounting policy notes are not required)

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  • 15 Marks

CR – May 2018 – L3 – Q1a – Consolidated Financial Statements

Prepare consolidated financial statements for Sawaba Group, including a foreign subsidiary, for the year ended 31 December 2017.

Sawaba Ltd (Sawaba) is a listed entity incorporated in Ghana with the object of producing and selling Designed clothing. The functional and presentation currency of Sawaba is the Ghana cedi (GH¢). In its quest to extend its market outside Ghana, the directors of the company decided to acquire a subsidiary in Nigeria. The corporate name of the investee entity is Enugu Plc (Enugu).

In pursuit to its agenda, Sawaba acquired 4,044,000 of the shares in Enugu for GH¢1,680,000 on 31 December 2014 when Enugu’s retained earnings stood at ₦5,752,000. Enugu operates as an autonomous subsidiary. Its functional currency is the Nigerian Naira (₦). The fair value of the identifiable net assets of Enugu were equivalent to their book values at the acquisition date.

The draft financial statements of Sawaba and its subsidiary, Enugu for 2017 financial year are set out below.

Statements of Profit or Loss and Comprehensive Income for the year ended 31 December 2017

i) Exchange rates moved as follows:
31 December 2014 ₦4.40 = GH¢1.00
31 December 2015 ₦4.16 = GH¢1.00
31 December 2016 ₦4.00 = GH¢1.00
15 May 2017 ₦3.90 = GH¢1.00
31 December 2017 ₦3.60 = GH¢1.00
Average for 2017 ₦3.75 = GH¢1.00

ii) Enugu paid an interim dividend of ₦7,488,000 on 15 May 2017. Sawaba also paid an interim dividend of GH¢1,400,000 on 30 September 2017. No other dividends were paid or declared in 2017.

iii) Assessment of consolidation goodwill for impairment indicated nil impairment in the consolidated financial statements by 31 December 2017. No goodwill impairment had been recognised in the previous years.

iv) Group policy is to measure non-controlling interests at fair value at the acquisition date. The fair value of the non-controlling interests in Enugu was measured at GH¢540,000 on 31 December 2014.

Required:
Prepare the consolidated statements of profit or loss and other comprehensive income, an extract from the statement of changes in equity for income surplus for the year ended 31 December 2017 and the consolidated statement of financial position at 31 December 2017 for Sawaba Group.

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  • 20 Marks

CR – Nov 2019 – L3 – Q5 – Analysis and Interpretation of Financial Statements

Analyze the financial performance of Pep Ltd over the past three years and recommend areas for further investigation.

You are the Financial Controller of Oxtom Ltd. Pep Ltd is a competitor in the same industry and has been operating for 20 years. Summaries of Pep Ltd’s Statements of Profit or Loss and Financial Position for the previous three years are given below:

Pep Ltd – Summarised Statement of Profit or Loss for the year ended 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Revenue 840 981 913
Cost of sales (554) (645) (590)
Gross profit 286 336 323
Selling, distribution, and admin expenses (186) (214) (219)
Profit before interest and taxes 100 122 104
Finance cost (6) (15) (19)
Profit before taxation 94 107 85
Taxation (45) (52) (45)
Profit after taxation 49 55 40
Dividends 24 24 24

Pep Ltd – Summarised Statement of Financial Position as at 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Assets
Non-current assets
Intangible assets 36 40 48
Tangible assets (net) 176 206 216
Total non-current assets 212 246 264
Current assets
Inventories 237 303 294
Receivables 105 141 160
Bank 52 58 52
Total current assets 394 502 506
Total assets 606 748 770
Equity and Liabilities 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Equity
Stated capital 100 100 100
Retained earnings 299 330 346
Total equity 399 430 446
Non-current liabilities
Long-term loans 74 138 138
Current liabilities
Trade payables 53 75 75
Other payables 80 105 111
Total equity and liabilities 606 748 770

Required:
a) Write a report to the Chief Executive Officer of Oxtom Ltd analyzing the performance of Pep Ltd, showing any calculations in an appendix to the report. (14 marks)
b) Summarize THREE (3) areas which require further investigation, including reference to other pieces of information that would complement your analysis of Pep Ltd’s performance. (6 marks)

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  • 20 Marks

FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, doubtful debts, and prepayments.

The following trial balance was extracted from the books of Nsaa Zolko, a sole trader, on 31 December 2020:

Account Debit (GHȼ) Credit (GHȼ)
Land 251,200
Equipment 202,220
Accumulated depreciation on equipment 62,830
Inventory 49,620
Receivable and Payable 124,200 104,350
Value Added Tax (refund due) 10,320
Deposit on rented premises (security deposit) 17,900
Bank and Cash balances 15,640
Allowance for doubtful debt 11,250
Tax Liability 7,420
Business Rent 30,000
Sales 804,500
Purchases 390,200
Returns 8,300 7,500
Discount 4,300 6,240
Distribution and Advertising 8,900
Power 4,200
Communication 1,540
Insurance 22,500
Wages and Salaries 164,380
Employers Social Security contribution 16,560
4% Long term loan 182,500
Long term loan interest 3,520
Bad debt 2,240
Drawings 10,580
Retained Earnings 44,820
Capital 103,710
Suspense 3,200
Total 1,338,320 1,338,320

Additional Information: i) The inventory count as at 31 December 2020 showed closing inventory value at GHȼ42,390. ii) Nsaa Zolko has agreed an annual rent of GHȼ40,000 with his landlord. iii) Included in insurance above is an amount of GHȼ18,000 paid to insure the equipment. The policy year ends 28 February 2021. iv) Nsaa Zolko has specific concerns over GHȼ5,120 of receivables balance and wishes to set up a specific provision with respect to these balances. The general provision on the remaining receivable balance should be at 5%. v) Depreciation is to be charged as follows:

  • Land: No Provision
  • Equipment: 15% reducing balance method (Depreciation should be calculated to the nearest whole number). vi) The suspense account balance above relates to sales of GHȼ1,600 which was recorded as purchases in error. The receivables and payables balances are correct.

Required:
a) Prepare a Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)

b) Prepare a Statement of Financial Position as at 31 December 2020.
(10 marks)

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  • 20 Marks

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Additional Information:
i) The inventory count on 30 June 2019 showed closing inventory valued at GHȼ34,380.
ii) A review of receivables as at 30 June 2019 showed that a further GHȼ2,300 was to be written off as an irrecoverable debt. Therefore, it was decided that the closing allowance for receivables was 10% of the outstanding receivables balance as at 30 June 2019.
iii) On 30 June 2019, Sintim received a cheque of GHȼ1,680 in relation to an irrecoverable debt previously written off.
iv) A supplier of Sintim has charged an interest of GHȼ1,490 on a payable balance that has been outstanding for over 200 days.
v) GHȼ16,000 of insurance in the trial balance above relates to 1 January 2019 to 31 December 2019.
vi) Allowance to be made for depreciation is as follows:

  • Land: Not depreciated.
  • Delivery van: 10% straight line basis.
    vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

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  • 20 Marks

FA – May 2017 – L1 – Q7 – Preparations of accounts from Incomplete Records | Preparation of limited liability company financial statements

Preparation of the statement of profit or loss and statement of financial position for STL, including adjustments for drawings, depreciation, and closing inventory.

STL has been in business for a number of years. In the past year, she has been busy training for the Olympics and has not kept proper records for her business. She has given you some information.

The balances as at 1 May 2016 are as follows:

The balance on the bank statement at 30 April 2017 was GH¢1,144. There were no timing differences.

You are given the following additional information:
i) Closing inventory is valued at GH¢1,324.
ii) STL took goods which had a cost of GH¢96 and would have been sold for GH¢124 for her own personal use.
iii) A telephone bill was received on 7 July 2017 for GH¢75, this related to the quarter ended 30 June 2017.
iv) Rent includes GH¢1,000 paid on 1 January 2017 for the year to 31 December 2017.
v) STL takes GH¢60 every week out of the takings before banking them. She also spends GH¢20 every week on petrol for the company van.
vi) Depreciation is to be charged at 15% reducing balance.
vii) Closing trade receivables and payables were GH¢2,072 and GH¢967 respectively. However, one customer, Caroline, has vanished and her debt of GH¢575 is not likely to be paid.
viii) STL always keeps a cash float of GH¢50.
ix) STL makes sales to cash and credit customers. Customers taking credit always pay by cheque or bank transfer.

Required:
a) Prepare the statement of profit or loss for STL for the year ended 30 April 2017. (12 marks)
b) Prepare the statement of financial position for STL as at 30 April 2017. (8 marks)

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