Program (SQ): PROFESSIONAL PROGRAM

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  • 50 Marks

SCS – L3 – Q35 – Strategy, stakeholders and mission

State corporate objectives for Apex Shipping Ltd based on its organizational aims.

(a)With reference to the organizational aims set out above, state what Apex Shipping Ltd.’s corporate objectives should address.       (b) It has been argued that an organization which operates in a turbulent environment should include flexibility as an objective in order that it can be responsive to changing environmental conditions.

Explain how Apex Shipping Ltd could achieve flexibility in its operations and discuss potential areas of stakeholder conflict which may occur in satisfying its organizational objectives.                                                                                                                                           (c) Discuss the change in turnover and profit of the shipping divisions within Apex Shipping Ltd in the last financial year, and state, with reasons, whether you consider the chairman’s statement reflects the divisional results achieved.

(d) With reference to Porter’s five competitive forces model, assess the nature of the cruise and ferry shipping market in which Apex Shipping Ltd is engaged, and discuss what opportunities and threats exist in respect of its market share.

(e)Discuss how monitoring through an audit system can be implemented to ensure that Apex Shipping Ltd.’s environmental policy is being achieved.

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  • 20 Marks

FR – L2 – Q73 – Statement of Cash Flows

Prepare a cash flow statement for Fellon Plc for 20X4 using IAS 7, based on provided financial data and additional information.

Fellon Plc has prepared the following rough draft accounts for the year ended 31 December 20X4.

Statement of profit or loss

GH₵’000
Revenue 11,563
Cost of sales (5,502)
Gross profit 6,061
Distribution costs (402)
Administration expenses (882)
Interest payable (152)
Operating profit before tax 4,625
Taxation (35%) including deferred tax (1,531)
Profit after tax 3,094
Dividends (700)
Retained profit 2,394

Statements of financial position

31 December 20X4 GH₵’000 31 December 20X3 GH₵’000
Non-current assets
Property, plant and equipment 10,380 9,108
Current assets
Inventories 2,208 1,314
Trade receivables 1,986 1,392
Investments 1,992 2,190
Cash at bank and in hand – 576
6,186 5,472
Total assets 16,566 14,580
Equity and liabilities
Equity
Share capital 4,392 3,600
Retained earnings 6,714 4,320
11,106 7,920
Non-current liabilities
Long-term loans 1,240 1,800
Deferred repairs provision 702 516
1,942 2,316
Current liabilities
Trade payables 2,038 1,714
Bank overdraft 222 –
Taxation 1,258 2,630
3,518 4,344
Total equity and liabilities 16,566 14,580

The following data is relevant.
(1) The 10% long-term loan was redeemed at par.
(2) Plant and equipment with a written down value of GH₵276,000 was sold for GH₵168,000. New plant was purchased for GH₵2,500,000.
(3) Buildings costing GH₵1,300,000 were acquired during the year.
(4) The investments are highly liquid securities held for the short term.

Required
Prepare the cash flow statement and supporting notes in accordance with IAS 7 for Fellon Plc for 20X4.

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  • 20 Marks

FR – L2 – Q72 – Statement of Cash Flows

Prepare a cash flow statement for Model Ltd for 20X4 per IAS 7, using trial balance and additional information.

MODEL LTD
The following trial balance relates to Model Ltd as at 31 December 20X4.

GH¢’000 GH¢’000
Freehold property at cost 5,700
Plant and machinery at cost 36,000
Fixtures and fittings at cost 12,000
Inventories 14,000
Trade receivables 15,200
Long-term investments 4,600
Cash at bank 11,400
Accumulated depreciation: Plant and machinery 12,000
Accumulated depreciation: Fixtures and fittings 7,000
10% Long-term loan 1,800
Ordinary share capital 20,000
Share premium 2,500
Retained earnings 14,000
Revenue 92,000
Cost of sales 60,000
Operating expenses 7,200
Corporation tax 21,500
Trade payables 14,440
Long-term investment income 450
Government stock 3,000
169,250 169,250

The following information is relevant.
(a) There had been no disposal of freehold property in the year.
(b) A machine tool which had cost GH¢8,000,000 (in respect of which GH¢6,000,000 depreciation had been provided) was sold for GH¢3,000,000, and fixtures which had cost GH¢5,000,000 (in respect of which depreciation of GH¢2,000,000 had been provided) were sold for GH¢1,000,000. Profits and losses on those transactions had been dealt with through the statement of profit or loss.
(c) The statement of profit or loss charge in respect of tax was GH¢22,000,000.
(d) The premium paid on redemption of the long-term loan was GH¢2,000,000, which has been written off to the statement of profit or loss.
(e) The proposed dividend for 20X3 had been paid during the year.
(f) Interest received during the year was GH¢450,000. Interest charged in the statement of profit or loss for the year was GH¢6,400,000. Accrued interest of GH¢440,000 is included in payables at 31 December 20X3 (nil at 31 December 20X4).
(g) The government stock is a long-term investment.

Required
Prepare a cash flow statement for the year ended 31 December 20X4, together with notes as required by IAS 7.

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  • 20 Marks

FR – L2 – Q71 – Presentation of Financial Statements

Prepare Zestful Ltd's statement of profit or loss and financial position for 20X9, incorporating inventory adjustments, depreciation, tax, and joint operation.

The following trial balance relates to Zestful Ltd as at 31st December 20X9.

Description GH₵’000 GH₵’000
Revenue 213,800
Cost of sales 143,800
Operating expenses 22,400
Trade receivables 13,500
Bank 900
Closing inventories – 31st December 20X9 (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 20X9 (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 20X9 17,500
Revaluation surplus (note (ii)) 21,000
Total 318,000 318,000

The following additional information is relevant:
(i) An inventory count on 31st December 20X9 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.
(ii) Non-current assets:

  • Plant: All plant, including that of the joint operation (note v), is depreciated at 12.5% on reducing balance basis.
  • Land and building: The land and building were revalued at GH₵15 million and GH₵48 million respectively on 1st January 20X9 creating a GH₵21 million revaluation surplus. At this date the building had a remaining life of 15 years. Depreciation policy is on a straight-line basis. Zestful Ltd does not make a transfer to realized profits in respect of excess depreciation. Depreciation on both the building and the plant should be charged to the cost of sales.
  • Investment property: On 31st December 20X9 a qualified surveyor valued the investment property at GH₵13.5 million. Zestful Ltd uses the fair value model in IAS 40 Investment Property to measure its investment property.
    (iii) Interest expenses include interest on loan notes and an ordinary dividend of 4p per share that was paid in June 20X9.
    (iv) The directors have estimated the provision for income tax for the year ended 31st December 20X9 at GH₵8 million. The deferred tax provision ended 31st December 20X9 is to be adjusted (through the profit or loss) to reflect the tax base of the company’s net assets is GH₵12 million less than their carrying amounts. The rate of tax is 30%.
    (v) On 1 January 20X9 Zestful Ltd entered into a joint arrangement with other entities. Each venturer contributes their own assets and is responsible for their own expenses including depreciation assets of the joint arrangement. Zestful 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 Zestful Ltd joint venture transactions are:

Description GH₵’000
Plant and equipment at cost 12,000
Share of joint venture turnover (40% of total turnover) 8,000
Related joint venture cost of sales excluding depreciation (5,000)
Trade receivables 1,500
Trade payables (2,500)

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X9 and a statement of financial position as at that date.

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  • 20 Marks

SCS – L3 – Q34 – Internal analysis

Explain benchmarking and its advantages for Zamu Fashions in Zamora.

(a) In the business world, companies use benchmarking as a point of reference. Benchmarking occurs across all types of companies and industries. Many companies have positions or offices that are in charge of benchmarking.
Required:
(i) Explain the term benchmarking.
(ii) Explain FOUR advantages companies gain from benchmarking.

(b) Zamu Fashions is a Zamoran private company owned mainly by the Zamu family. Most of its clothing and accessories are produced and marketed by the company (some are manufactured by outside contractors). For other products, notably fragrances, cosmetics, and eyewear, Zamu Fashions licenses its brand names to other companies. The Board of Directors of Zamu Fashions is considering expanding into new foreign markets with athletic clothing, hotels, and bridal shops.

Required:

Advise Zamu Fashions on the most suitable foreign market entry strategy for each of the new line of business.

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  • 20 Marks

FR – L2 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

NOVA BEKASI LIMITED
The list of balances of Nova Bekasi Limited shows the following balances at 31 December 20X5.

Dr GH₵’000 Cr GH₵’000
Share capital (600,000 shares) 320
General reserve 20
Accumulated profit 1 January 20X5 50
Inventory (goods for resale) at 1 January 20X5 60
Revenue 1,000
Purchases 540
Purchases returns 26
Sales returns 28
Carriage outwards 28
Warehouse wages 80
Sales representatives salaries 60
Administrative wages 40
Warehouse plant and equipment – cost 126
Accumulated depreciation – 1 January 20X5 50
Delivery vehicle hire 20
Goodwill 100
Distribution expenses 10
Administrative expenses 30
Directors’ salaries (charge to administrative expenses) 30
Rental income 16
Trade receivables 330
Cash at bank 60
Trade payables 60
1,542 1,542

Additional information
(1) Inventory (goods for resale) at 31 December 20X5 amounted to GH₵100,000.
(2) Annual depreciation on warehouse plant and equipment of GH₵32,000 should be provided.
(3) Income tax for 20X5 should be taken as GH₵50,000.
(4) The recoverable amount of goodwill was only GH₵90,000.

Required
Prepare the company’s statement of profit or loss for the year to 31 December 20X5 and a statement of financial position at that date in accordance with IAS 1 Presentation of Financial Statements.

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  • 20 Marks

FR – L2 – Q68 – Events After the Reporting Period

Explain adjusting and non-adjusting events with three examples each per IAS 10.

(a) Explain the terms “adjusting events” and “non-adjusting events” and give three examples of each

(b) Yamfo Retail Limited, a chain of departmental stores has distributed its operations into four Divisions i.e. Food, Furniture, Clothing and Household Appliances. The following information has been extracted from the records:
(i) The company allows the dissatisfied customers to return the goods within 30 days. It is estimated that 5% of the sales made in June 20X4 will be refunded in July 20X4.
(ii) On June 2, 20X4, three employees were seriously injured as a result of a fire at the company’s warehouse. They have lodged claims seeking damages of GH¢2.0 million from the company. The company’s lawyers have advised that it is probable that the court may award compensation of GH¢400,000.
(iii) Under a new legislation, the company is required to fit smoke detectors at all the stores by December 31, 20X4. The company has not yet installed the smoke detectors.
(iv) On June 20, 20X4, the board of directors decided to close down the Household Appliances Division. However, the decision was made public after June 30, 20X4.
(v) The company has a large warehouse in Kumasi which was acquired under a three-year rent agreement signed on April 1, 20X3. The agreement is non-cancellable and the company cannot sub-let the warehouse. However, due to operational difficulties, the company shifted the warehouse to a new location.
(vi) A 15% cash dividend was declared on July 5, 20X4.

Required
Describe how each of the above issue should be dealt with in the financial statements for the year ended June 30, 20X4. Support your point of view in the light of relevant International Accounting Standards.

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  • 20 Marks

SCS – L3 – Q33- Financial management

Explain limitations of financial measures and describe financial and non-financial measures for Zamco Enterprises’ performance.

(a) During the past year, the management of Zamco Enterprises faced many challenges, including several customer complaints, loss of some key customers and a high level of employee turnover. At a meeting of the Board of Directors, the Chief Executive Officer presented a report on the financial performance of the company during the period and, in his closing remarks, he said, “Overall, we have done very well, notwithstanding the challenges we faced.” Some members of the Board were not happy with these remarks and accused him of doing a “partial evaluation” of the company.

Required:

(i) Explain FOUR limitations of the use of financial measures for evaluating the performance of the company.

(ii) Describe THREE financial measures and THREE non-financial measures that Zamco Enterprises may use to evaluate its performance.

(b) Innovation can be a major source of competitive advantage of business firms, even though it comes with a burden of cost and uncertainty. Management would have to decide whether it would be a leader or follower in the industry regarding innovation.

Required:

State FIVE competitive advantages associated with being a first mover in product innovation in an industry.

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  • 15 Marks

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

The trial balance of Wenchi Exports Limited at 31 December 20X4 is as follows.

GH₵ in million
Dr Cr
Patent rights 60
Work-in-progress, 1 January 20X4 125
Buildings at cost 300
Ordinary share capital 600
Revenue 1,740
Staff costs 260
Accumulated depreciation on buildings, 1 January 20X4 60
Inventories of finished games, 1 January 20X4 155
Consultancy fees 44
Directors’ salaries 360
Computers at cost 50
Accumulated depreciation on computers, 1 January 20X4 20
Dividends paid 125
Cash 440
Receivables 420
Trade payables 294
Sundry expenses 94
Accumulated profits, 1 January 20X4 279
2,633 2,633

The following information is also relevant.
(1) Closing inventories of finished games are valued at GH₵180 million. Work in progress has increased to GH₵140 million.
(2) The patent rights relate to a computer program with a three-year lifespan.
(3) On 1 January 20X4 buildings were revalued to GH₵360 million. This has not yet been reflected in the accounts. Computers are depreciated over five years. Buildings are now to be depreciated over 30 years.
(4) An allowance for bad debts (irrecoverable debts) of 5% is to be created.
(5) There is an estimated bill for current tax of GH₵120 million which has not yet been recognised.

Required
Prepare a statement of profit or loss (analysing expenses by nature) for the year ended 31 December 20X4 and a statement of financial position as at that date.

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  • 20 Marks

FR – L2 – Q66 – Presentation of Financial Statements

Prepare profit or loss and financial position statements for Kumasi Healthcare Limited using trial balance and additional info.

The following trial balance has been extracted from the books of Kumasi Healthcare Limited, at 31 March 20X5.

GH₵ 000 GH₵ 000
Administrative expenses 210
Share capital (ordinary shares of GH₵ 1 fully paid) 600
Trade receivables 470
Bank overdraft 80
Income tax (overprovision in 20X4) 25
Retirement benefit liability 180
Distribution costs 420
Non-current asset investments 560
Investment income 75
Plant and equipment
At cost 750
Accumulated depreciation (at 31 March 20X5) 220
Accumulated profit (at 1 April 20X4) 240
Purchases 960
Inventories (at 1 April 20X4) 140
Trade payables 280
Revenue 1,950
Interim dividend paid 20
3,630 3,630

Additional information
(1) Inventories at 31 March 20X5 were valued at GH₵ 150,000.
(2) The following items are already included in the balances listed in the above trial balance.

Distribution costs GH₵ 000 Administrative costs GH₵ 000
Depreciation (for year to 31 March 20X5) 27 20

(3) A final dividend of GH₵ 120,000 was proposed but not yet paid.
(4) The retirement benefit liability increased by GH₵ 16,000 during the year which has not been included in the trial balance.
(5) Income tax for the year is estimated at GH₵ 29,000.

Required
Prepare a statement of profit or loss (analysing expenses by function) for the year ended 31 March 20X5 and a statement of financial position at 31 March 20X5.

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