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  • 30 Marks

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

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

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

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

Additional Information:

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

Required:

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

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  • 40 Marks

FR – May 2021 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare financial statements from a trial balance, including adjustments for provisions, tax, asset disposals, depreciation, and development costs.

The following is the trial balance of Almajiri Nigeria Limited as at September 30, 2018:

Account Debit (₦’m) Credit (₦’m)
Revenue 60,000
Cost of sales 40,800
Distribution costs 2,900
Administrative expenses 4,440
Interest on bank borrowings 40
Research and development costs 1,720
Leasehold property (at valuation Oct 1, 2017) 10,000
Plant and equipment (at cost) 15,320
Plant and equipment (accum. depr. at Oct 1, 2017) 4,920
Capitalised development expenditure (Oct 1, 2017) 4,000
Development expenditure (accum. amortiz. at Oct 1, 2017) 1,200
Closing inventory (30 Sept 2018) 4,000
Trade receivables 8,620
Bank 260
Trade payables & provisions 4,760
Preference dividend paid 160
Dividend paid on ordinary shares 1,200
Ordinary shares at 25k each 10,000
8% Redeemable preference shares at N1 each (year 2020) 4,000
Retained earnings brought forward 4,900
Deferred tax 1,160
Leasehold property revaluation reserve 2,000
Total 93,200 93,200

Additional information:
(i)
One of the reputable customers of Almajiri Nigeria Limited sued the company for
N
400 million for breach of contract over a cancelled order. Almajiri Nigeria
Limited obtained a legal opinion that there is 20% chance that Almajiri will lose the
case.
Accordingly, it has provided for N
80 million (N
400 million x 20%) included in
administrative expenses in respect of the claim. The unrecoverable legal cost of
defending the action was estimated at N20 million and these have not been
provided for as the legal action will not go to court until next year.
(ii)
The directors of the Company have estimated the provision for income tax for the
year ended September 30, 2018 at N2,280 million. The required deferred tax
provision at September 30, is N
1,200 million.
(iii) The redeemable preference shares were issued on April 1, 2018 at par. They are
redeemable at a large premium which gives them an effective finance cost of 12%
per annum.
(iv) The leasehold property had a remaining life of 20 years at October 1, 2017. The
company‟s policy is to revalue its property at each year end and as at September
30, 2018 it was revalued at N
8,600 million.
(v) On October 1, 2017 an item of plant and equipment was disposed of for N500
million cash. The proceeds have been treated as revenue by the company. The
plant is still included in the company‟s trial balance figure at the cost of N
million and accumulated depreciation of N
1,600
800 million (to date of disposal). All
plants and equipment are depreciated at 20% per annum using reducing balance
method. Depreciation and amortisation of all non-current assets are charged to
cost of sales.
(vi) In addition to capitalised development expenditure of N
4,000 million further
research and development cost were incurred on a new project which commenced
on October 1, 2017. The research stage of the new project lasted until December
31, 2017 and incurred N
280 million costs, from that date the project incurred
development cost of N160 million per month. On April 1, 2018 the directors
became confident that the project would be successful and yield a profit well in
excess of its costs. The project is still in development as at September 30, 2018.

Capitalised development expenditure is amortised at 20% per annum using straight
line method. All expensed research and development expenditure is charged to
cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended
September 30, 2018.

b. Statement of changes in equity for the year ended September 30, 2018.

c. Statement of movement in property, plant and equipment to be included in
published financial statements.

d. Statement of financial position as at September 30, 2018.

 

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  • 30 Marks

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

The Trial Balance of Excellent Plc. as at 30 June 2014 is as follows:

 

The following notes are relevant:
i. Inventories as at 30/6/2013:

The net realisable values of these commodities per unit are as follows:

ii. Inventories on 30 June 2014 amounted to N9,000,000

iii. Prepaid salaries and wages were N10,000,000

iv. Included in the plant and machinery maintenance cost was depreciation of
N14,800,000.

v. The allowances for receivables are no longer required. The outstanding 10%
loan notes interest was paid on 30 June 2014 and this has not been accounted
for. The fair value of goods is N40,000,000 at the end of the year.

vi. The value in use of delivery van for the year 30 June 2014 is N31,000,000. The
prevailing market interest rate is 21% per annum and the Discounting Factor for
this year is 0.8264.

vii. The fair value of delivery van at an arm’s length transaction as at 30 June 2014
was N28,000,000 and the cost to sell was N2,000,000. All non-current assets
were depreciated at 10% per annum on reducing balance basis.

viii. Current tax provision for the year is N165,000,000.

Required:

a. Identify any FOUR of the cost items that are EXCLUDED in the valuation of inventories under IAS 2. (4 Marks)

b. Calculate the following:

  • (i) Value of opening inventories to be included in the Statement of Profit or Loss and Other Comprehensive Income. (2 Marks)
  • (ii) The present value in the use of delivery van (1 Mark)
  • (iii) The fair value and recoverable amount of delivery van (2 Marks)
  • (iv) The carrying amount and impairment if any on delivery van (2 Marks)

c. Prepare the Statement of Profit or Loss and Other Comprehensive Income (OCI) and Statement of Changes in Equity for the year ended 30 June 2014. (11 Marks)

d. Prepare the Statement of Financial Position as at 30 June 2014. (8 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q17 – Control Accounts

Identifying an advantage not associated with control accounts.

The advantages of Control Accounts do NOT include:

A. Locating errors
B. Facilitating the extraction of trial balance
C. Detecting fraud
D. Checking on the accuracy of ledger entries
E. Discouraging adherence to double entry principle

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  • 1 Marks

FA – May 2012 – L1 – SA – Q3 – Trial Balance

Identifying how a trial balance helps disclose errors.

In which of the following circumstances will the preparation of a Trial Balance assist in disclosing an error?

A. Failure to post an entry journal
B. Posting rent expenses to motor running account
C. Failure to post part of a journal entry
D. Posting the debit of a journal entry as a credit and vice versa
E. Failure to record an entry in the journal

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  • 1 Marks

FA – May 2012 – L1 – SA – Q2 – Double-Entry Accounting Principles

Identifying the shortcoming of single entry book-keeping.

Which of the following is NOT a shortcoming of single entry book-keeping?

A. A trial balance is not available
B. Profits are overstated
C. There are no subsidiary books
D. There are no control accounts
E. There are no ledger accounts.

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  • 1 Marks

FA – Nov 2011 – L1 – SA – Q8 – Trial Balance

This question asks about what a collection of ledger balances is used for.

A collection of ledger balances is used in preparing?

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  • 1 Marks

FA – Nov 2011 – L1 – SA – Q16 – Trial Balance

This question identifies which type of error affects the trial balance.

Which of the following errors would affect a Trial Balance?
A. Error of commission
B. Error of original entry
C. Casting error
D. Error of omission
E. Error of principle

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  • 30 Marks

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

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

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

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

Additional Information:

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

Required:

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

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  • 40 Marks

FR – May 2021 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare financial statements from a trial balance, including adjustments for provisions, tax, asset disposals, depreciation, and development costs.

The following is the trial balance of Almajiri Nigeria Limited as at September 30, 2018:

Account Debit (₦’m) Credit (₦’m)
Revenue 60,000
Cost of sales 40,800
Distribution costs 2,900
Administrative expenses 4,440
Interest on bank borrowings 40
Research and development costs 1,720
Leasehold property (at valuation Oct 1, 2017) 10,000
Plant and equipment (at cost) 15,320
Plant and equipment (accum. depr. at Oct 1, 2017) 4,920
Capitalised development expenditure (Oct 1, 2017) 4,000
Development expenditure (accum. amortiz. at Oct 1, 2017) 1,200
Closing inventory (30 Sept 2018) 4,000
Trade receivables 8,620
Bank 260
Trade payables & provisions 4,760
Preference dividend paid 160
Dividend paid on ordinary shares 1,200
Ordinary shares at 25k each 10,000
8% Redeemable preference shares at N1 each (year 2020) 4,000
Retained earnings brought forward 4,900
Deferred tax 1,160
Leasehold property revaluation reserve 2,000
Total 93,200 93,200

Additional information:
(i)
One of the reputable customers of Almajiri Nigeria Limited sued the company for
N
400 million for breach of contract over a cancelled order. Almajiri Nigeria
Limited obtained a legal opinion that there is 20% chance that Almajiri will lose the
case.
Accordingly, it has provided for N
80 million (N
400 million x 20%) included in
administrative expenses in respect of the claim. The unrecoverable legal cost of
defending the action was estimated at N20 million and these have not been
provided for as the legal action will not go to court until next year.
(ii)
The directors of the Company have estimated the provision for income tax for the
year ended September 30, 2018 at N2,280 million. The required deferred tax
provision at September 30, is N
1,200 million.
(iii) The redeemable preference shares were issued on April 1, 2018 at par. They are
redeemable at a large premium which gives them an effective finance cost of 12%
per annum.
(iv) The leasehold property had a remaining life of 20 years at October 1, 2017. The
company‟s policy is to revalue its property at each year end and as at September
30, 2018 it was revalued at N
8,600 million.
(v) On October 1, 2017 an item of plant and equipment was disposed of for N500
million cash. The proceeds have been treated as revenue by the company. The
plant is still included in the company‟s trial balance figure at the cost of N
million and accumulated depreciation of N
1,600
800 million (to date of disposal). All
plants and equipment are depreciated at 20% per annum using reducing balance
method. Depreciation and amortisation of all non-current assets are charged to
cost of sales.
(vi) In addition to capitalised development expenditure of N
4,000 million further
research and development cost were incurred on a new project which commenced
on October 1, 2017. The research stage of the new project lasted until December
31, 2017 and incurred N
280 million costs, from that date the project incurred
development cost of N160 million per month. On April 1, 2018 the directors
became confident that the project would be successful and yield a profit well in
excess of its costs. The project is still in development as at September 30, 2018.

Capitalised development expenditure is amortised at 20% per annum using straight
line method. All expensed research and development expenditure is charged to
cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended
September 30, 2018.

b. Statement of changes in equity for the year ended September 30, 2018.

c. Statement of movement in property, plant and equipment to be included in
published financial statements.

d. Statement of financial position as at September 30, 2018.

 

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  • 30 Marks

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

The Trial Balance of Excellent Plc. as at 30 June 2014 is as follows:

 

The following notes are relevant:
i. Inventories as at 30/6/2013:

The net realisable values of these commodities per unit are as follows:

ii. Inventories on 30 June 2014 amounted to N9,000,000

iii. Prepaid salaries and wages were N10,000,000

iv. Included in the plant and machinery maintenance cost was depreciation of
N14,800,000.

v. The allowances for receivables are no longer required. The outstanding 10%
loan notes interest was paid on 30 June 2014 and this has not been accounted
for. The fair value of goods is N40,000,000 at the end of the year.

vi. The value in use of delivery van for the year 30 June 2014 is N31,000,000. The
prevailing market interest rate is 21% per annum and the Discounting Factor for
this year is 0.8264.

vii. The fair value of delivery van at an arm’s length transaction as at 30 June 2014
was N28,000,000 and the cost to sell was N2,000,000. All non-current assets
were depreciated at 10% per annum on reducing balance basis.

viii. Current tax provision for the year is N165,000,000.

Required:

a. Identify any FOUR of the cost items that are EXCLUDED in the valuation of inventories under IAS 2. (4 Marks)

b. Calculate the following:

  • (i) Value of opening inventories to be included in the Statement of Profit or Loss and Other Comprehensive Income. (2 Marks)
  • (ii) The present value in the use of delivery van (1 Mark)
  • (iii) The fair value and recoverable amount of delivery van (2 Marks)
  • (iv) The carrying amount and impairment if any on delivery van (2 Marks)

c. Prepare the Statement of Profit or Loss and Other Comprehensive Income (OCI) and Statement of Changes in Equity for the year ended 30 June 2014. (11 Marks)

d. Prepare the Statement of Financial Position as at 30 June 2014. (8 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q17 – Control Accounts

Identifying an advantage not associated with control accounts.

The advantages of Control Accounts do NOT include:

A. Locating errors
B. Facilitating the extraction of trial balance
C. Detecting fraud
D. Checking on the accuracy of ledger entries
E. Discouraging adherence to double entry principle

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  • 1 Marks

FA – May 2012 – L1 – SA – Q3 – Trial Balance

Identifying how a trial balance helps disclose errors.

In which of the following circumstances will the preparation of a Trial Balance assist in disclosing an error?

A. Failure to post an entry journal
B. Posting rent expenses to motor running account
C. Failure to post part of a journal entry
D. Posting the debit of a journal entry as a credit and vice versa
E. Failure to record an entry in the journal

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  • 1 Marks

FA – May 2012 – L1 – SA – Q2 – Double-Entry Accounting Principles

Identifying the shortcoming of single entry book-keeping.

Which of the following is NOT a shortcoming of single entry book-keeping?

A. A trial balance is not available
B. Profits are overstated
C. There are no subsidiary books
D. There are no control accounts
E. There are no ledger accounts.

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  • 1 Marks

FA – Nov 2011 – L1 – SA – Q8 – Trial Balance

This question asks about what a collection of ledger balances is used for.

A collection of ledger balances is used in preparing?

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  • 1 Marks

FA – Nov 2011 – L1 – SA – Q16 – Trial Balance

This question identifies which type of error affects the trial balance.

Which of the following errors would affect a Trial Balance?
A. Error of commission
B. Error of original entry
C. Casting error
D. Error of omission
E. Error of principle

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