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  • 20 Marks

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

  A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit Credit
GH¢’000 GH¢’000
Sales
Inventory 3,150
Cost of sales 35,500
Selling & distribution expenses 5,600
Administration expenses 8,540
Loan Note interest paid 110
Bank interest 85
Investment income
Leasehold building at valuation – 1 Oct 2021 14,000
Plant and equipment – cost/depreciation 13,750
Computer equipment – cost/depreciation 7,200
Motor vehicles – cost/depreciation 1,500
Trade receivables 17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335 107,335

The following additional information is made available:
i. The company paid ordinary dividends of GH¢2.2 per share on 31 January 2022 and GH¢2.6 per share on 30 June 2022. The dividend payments are included in administrative expenses in the trial balance.
ii. Provision is to be made for a full year’s interest on the Loan notes.
iii. 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 2022.
    • ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, 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 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
    iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

You are required to:
Prepare the following financial statements of ANG 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 2022 and.
b. Statement of financial position as of 30 September 2022.
c. Show clearly all relevant workings.

 B
I. What is the objective of general-purpose financial reporting?
II. The IASB’s Conceptual Framework for Financial Reporting states that “If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent.” Explain the terms Relevance and Faithfully Representation.

 C
The accounting treatment of intangible assets is prescribed by IAS 38 Intangible Assets. You are required to:
i. Define intangible asset under IAS 38 Intangible Assets.
ii. Explain the recognition criteria for intangible assets.
iii. State 5 disclosure requirements of Intangible Assets under IAS 38.

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  • 30 Marks

FR – May 2024 – L2 – SA – Q1 – Statement of Cash Flows (IAS 7)

Preparation of financial statements for Adama PLC, including profit or loss, changes in equity, and memo on EPS and ROCE.

a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:

Additional information:

  1. The value of the freehold land and buildings includes a land element of N266,800,000, and the estimated remaining life of the buildings at July 1, 2021, was 25 years. Depreciation on buildings is charged 65% to cost of sales and 35% to administrative expenses.
  2. The revenue includes N69,250,000 for an item of office equipment disposed of on November 30, 2021. The equipment had a carrying value of N46,060,000 at the date of sale. The equipment cost N75,000,000 when acquired three years ago.
  3. Included in the cost of sales is N82,600,000 incurred in the manufacture of new office equipment, which was put to use by Adama PLC on February 1, 2022.
  4. All office equipment is depreciated at 15% per annum using the reducing balance method, charged to cost of sales. Depreciation on all motor vehicles is at 20% per annum on a straight-line basis and charged to distribution costs. Depreciation is charged in full in the year of acquisition and no charge in the year of disposal.
  5. Following the conclusion of winding-up proceedings for one of Adama PLC’s customers, it was resolved to write off the sum of N26,450,000 due from the customer and to make an allowance for doubtful receivables of 2½% on the continuing trade receivables.
  6. The financial assets are equity instruments held at fair value through profit or loss, and they suffered an impairment loss of N12,700,000 at the year-end.
  7. The 3% redeemable loan notes were issued on October 1, 2021, under terms that provided for a large premium on redemption in 2025. These terms were interpreted by the finance director to mean an effective interest rate of 6½% per annum.
  8. The income tax expense for the year ended June 30, 2022, is estimated at N143,552,000, while the deferred tax payable for the same period is N12,520,000. There was an over-provision of N25,664,000 in respect of income tax for the previous trading year.
  9. The suspense account balance represents the corresponding credit entry for shares issued at a premium of 15 kobo per share, arising from the issue of 400,000 ordinary shares made during the year.
  10. The directors recommended a 20 kobo final dividend per ordinary share for the year and a transfer of N38,900,000 to the general reserve.

Required: Prepare for Adama PLC the following financial statements:

  1. Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
  2. Statement of changes in equity for the same period. (4 Marks)
  3. Statement of financial position as of June 30, 2022. (10 Marks)

b. Some new trainee accountants in your organization discussed Earnings Per Share (EPS) and Return on Capital Employed (ROCE) as the best ratios for analyzing an entity’s financial performance. The finance director has requested a memo explaining these ratios and highlighting their limitations.

Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)

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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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  • 30 Marks

FR – May 2022 – L2 – SA – Q1 – Preparation of Financial Statements

Prepare a statement of profit or loss, comprehensive income, changes in equity, and financial position for Endtime PLC.

Endtime PLC is a company based in Benin with the following trial balance for the year ended December 31, 2020:

Additional Information:
(i) Finance costs include full year dividends on preference shares and ordinary share dividends of 2½ kobo paid at the end of the year. Allowances for 4 doubtful debts are no longer necessary as customers paid as at when due from time to time in the past 2 years.

(ii) Severely damaged inventories, which cost N790,000,000 were included in the inventories in the trial balance. This will need to be repaired at a cost of N440,000,000 before a knowledgeable buyer will be interested to pay N940,000,000 at arm’s length transaction.

(iii) As at December 31, 2020, a valuer based in Victoria Island in Lagos was contacted by the company to review its land and buildings. The land and buildings was revalued upward by N13,000,000,000 and a certificate was issued to this effect. The board of directors approved the valuation but it has
not yet been accounted for in the trial balance. The valuer advised that the remaining useful life of the asset is reasonably and reliably estimated to be 20 years. Depreciation is on straight-line basis.

(iv) Depreciation on plant and equipment is charged at 15% on reducing balance basis. The multi-users S&P and Sage was bought on September 30, 2020. The amortisation is at the rate of 12.5% annually. The amortisation is evenly distributed over the year. Besides, software installation, customisation and
handling cost of N800,000,000, training costs of N900,000,000, consultancy fee of N600,000,000 and other general overheads of N850,000,000 on the new software were included in administrative expenses. All depreciations are treated as administrative costs.

(v) On December 30, 2020, a chartered surveyor valued investment property at N14,000,000,000 and the company uses fair value model in IAS 40 – Investment Property.

(vi) Current income tax has been estimated for the year ended December 31, 2020 at N9,000,000,000 and deferred tax provision as at December 31, 2020 is to be adjusted in the income statement to reflect the tax base of the company’s net assets of N12,000,000,000 less than the carrying amounts. The current
company income tax rate is 30%.

vii) The plant held for sale is valued in the trial balance at its carrying amount. A broker is readily available to buy the plant for N6,000,000,000 at a fee of 6% of sales proceed. The sale would take place in January, 2021. Any necessary adjustment is to be treated as cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended December 31, 2020. (13 Marks)
b. Statement of changes in equity for the year ended December 31, 2020. (4 Marks)
c. Statement of financial position as at December 31, 2020. (13 Marks)

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  • 14 Marks

FA – May 2022 – L1 – SB – Q1b – Financial Statements Preparation

Prepare the statement of profit or loss and financial position for Wazobia PLC using the provided trial balance and adjustments.

The following trial balance has been extracted from the books of Wazobia PLC as at December 31, 2020:

Description Dr (₦’000) Cr (₦’000)
Accruals 4,002
Administrative expenses 65,990
24% bank loan repayable 2023 50,000
Cash at bank 4,207
Distribution costs 84,235
Interest 6,000
Inventories at January 1, 2020 73,735
Property, plant and equipment (PPE) at cost 603,950
Accumulated depreciation on PPE 238,932
Purchases 279,168
Retained earnings 207,410
Revenue 531,611
Share capital 100,000
Share premium 46,875
Trade payables 23,253
Trade receivables 84,798
Total 1,202,083 1,202,083

Additional information:
(i) The share capital of the company consists of ordinary shares with a nominal value of ₦1 each.
(ii) The revenue figure in the trial balance includes sales of ₦29,502,000 made on credit on January 1, 2021.
(iii) The inventories at the close of business on December 31, 2020, cost ₦78,815,000. Included in the figure were inventories that cost ₦4,500,000 but could only be sold for ₦1,688,000.
(iv) Electricity bills of ₦1,472,000 relating to December 2020 were not included in the trial balance as the invoice was received after the year-end.
(v) Interest on the bank loan for the last six months of the year was not included in the trial balance.
(vi) The company income tax charge for the year was calculated as ₦12,702,000.

Required:
(i) Prepare the statement of profit or loss and other comprehensive income of Wazobia PLC for the year ended December 31, 2020. (6 Marks)
(ii) Prepare the statement of financial position at December 31, 2020. (8 Marks)

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  • 6 Marks

FA – May 2022 – L1 – SB – Q1a – Financial Statements Preparation

Identify and list the components of financial statements according to IAS 1.

In accordance with IAS 1 – Presentation of Financial Statements, state the components of financial statements.

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  • 1 Marks

FA – May 2021 – L1 – SA – Q17 – Financial Statements Preparation

Identify an item not disclosed in the statement of comprehensive income using nature of expenses method.

When the statement of comprehensive income is prepared using nature of expenses method, the following information is disclosed, EXCEPT:

A. Gross profit
B. Changes in inventories of finished goods
C. Employee benefit expenses
D. Depreciation and amortisation expenses
E. Raw materials and consumables used

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  • 20 Marks

CR – Nov 2016 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended June 30, 2016.

Below are the separate financial statements of Broad Ltd and two investee companies which also operate in the same industry as the investor entity.

Statements of profit or loss and other comprehensive income for the year ended 30 June 2016


The following information is relevant:

  1. On 1 March 2016, Broad Ltd acquired 80% of the equity share capital of Narrow Ltd. The consideration consisted of two elements: a share exchange of three shares in Broad Ltd for every five acquired shares in Narrow Ltd and the issue of a GH¢100 6% loan note for every 500 shares acquired in Narrow Ltd. The share issue has not yet been recorded by Broad Ltd, but the issue of the loan notes has been recorded. At the date of acquisition, shares in Broad Ltd had a market value of GH¢5 each, and the shares of Narrow Ltd had a stock market price of GH¢3.50 each.Broad Ltd had earlier acquired 2.4 million shares in Shadow Ltd on the stock market at a price of GH¢1.50 per share on 1 January 2016.
  2. At the date of acquisition, the fair values of Narrow Ltd.’s assets were equal to their carrying amounts with the exception of its property, which had a fair value of GH¢1.2 million below its carrying amount. This would lead to a reduction of the depreciation charge (in cost of sales) of GH¢50,000 in the post-acquisition period. Narrow Ltd has not incorporated this value change into its separate financial statements.
  3. Broad’s group policy is to revalue all properties to current value at each year-end. On 30 June 2016, the value of Narrow’s property was unchanged from its value at acquisition, but the land element of Broad Ltd.’s property had increased in value by GH¢500,000 as shown in other comprehensive income.
  4. Sales from Narrow Ltd to Broad Ltd throughout the year ended 30 June 2016 were GH¢12 million. Narrow made a mark-up on cost of 25% on these sales. Broad Ltd had GH¢2 million (at cost to Broad Ltd) of inventory that had been supplied in the post-acquisition period by Narrow Ltd as at 30 June 2016.
  5. In June 2016, Broad Ltd sold goods to Shadow Ltd for GH¢2,000,000, thus achieving a profit mark-up of 25%. The entire consignment remained unsold and was included in the inventory of Shadow Ltd as at 30 June 2016.
  6. Broad’s investments include some available-for-sale investments that have increased in value by GH¢300,000 during the year. The other equity reserve relates to these investments and is based on their value as at 30 June 2015. There were no acquisitions or disposals of any of these investments during the year ended 30 June 2016.
  7. Broad’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Narrow’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.
  8. It was determined at the year-end that 10% of the goodwill relating to the acquisition of Narrow was impaired.

Required:

a) Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended 30 June 2016. (10 marks)

b) Prepare the consolidated statement of financial position for Broad Ltd. Group as at 30 June 2016. (10 marks)

 

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  • 20 Marks

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

  A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit Credit
GH¢’000 GH¢’000
Sales
Inventory 3,150
Cost of sales 35,500
Selling & distribution expenses 5,600
Administration expenses 8,540
Loan Note interest paid 110
Bank interest 85
Investment income
Leasehold building at valuation – 1 Oct 2021 14,000
Plant and equipment – cost/depreciation 13,750
Computer equipment – cost/depreciation 7,200
Motor vehicles – cost/depreciation 1,500
Trade receivables 17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335 107,335

The following additional information is made available:
i. The company paid ordinary dividends of GH¢2.2 per share on 31 January 2022 and GH¢2.6 per share on 30 June 2022. The dividend payments are included in administrative expenses in the trial balance.
ii. Provision is to be made for a full year’s interest on the Loan notes.
iii. 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 2022.
    • ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, 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 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
    iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

You are required to:
Prepare the following financial statements of ANG 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 2022 and.
b. Statement of financial position as of 30 September 2022.
c. Show clearly all relevant workings.

 B
I. What is the objective of general-purpose financial reporting?
II. The IASB’s Conceptual Framework for Financial Reporting states that “If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent.” Explain the terms Relevance and Faithfully Representation.

 C
The accounting treatment of intangible assets is prescribed by IAS 38 Intangible Assets. You are required to:
i. Define intangible asset under IAS 38 Intangible Assets.
ii. Explain the recognition criteria for intangible assets.
iii. State 5 disclosure requirements of Intangible Assets under IAS 38.

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  • 30 Marks

FR – May 2024 – L2 – SA – Q1 – Statement of Cash Flows (IAS 7)

Preparation of financial statements for Adama PLC, including profit or loss, changes in equity, and memo on EPS and ROCE.

a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:

Additional information:

  1. The value of the freehold land and buildings includes a land element of N266,800,000, and the estimated remaining life of the buildings at July 1, 2021, was 25 years. Depreciation on buildings is charged 65% to cost of sales and 35% to administrative expenses.
  2. The revenue includes N69,250,000 for an item of office equipment disposed of on November 30, 2021. The equipment had a carrying value of N46,060,000 at the date of sale. The equipment cost N75,000,000 when acquired three years ago.
  3. Included in the cost of sales is N82,600,000 incurred in the manufacture of new office equipment, which was put to use by Adama PLC on February 1, 2022.
  4. All office equipment is depreciated at 15% per annum using the reducing balance method, charged to cost of sales. Depreciation on all motor vehicles is at 20% per annum on a straight-line basis and charged to distribution costs. Depreciation is charged in full in the year of acquisition and no charge in the year of disposal.
  5. Following the conclusion of winding-up proceedings for one of Adama PLC’s customers, it was resolved to write off the sum of N26,450,000 due from the customer and to make an allowance for doubtful receivables of 2½% on the continuing trade receivables.
  6. The financial assets are equity instruments held at fair value through profit or loss, and they suffered an impairment loss of N12,700,000 at the year-end.
  7. The 3% redeemable loan notes were issued on October 1, 2021, under terms that provided for a large premium on redemption in 2025. These terms were interpreted by the finance director to mean an effective interest rate of 6½% per annum.
  8. The income tax expense for the year ended June 30, 2022, is estimated at N143,552,000, while the deferred tax payable for the same period is N12,520,000. There was an over-provision of N25,664,000 in respect of income tax for the previous trading year.
  9. The suspense account balance represents the corresponding credit entry for shares issued at a premium of 15 kobo per share, arising from the issue of 400,000 ordinary shares made during the year.
  10. The directors recommended a 20 kobo final dividend per ordinary share for the year and a transfer of N38,900,000 to the general reserve.

Required: Prepare for Adama PLC the following financial statements:

  1. Statement of profit or loss and other comprehensive income for the year ended June 30, 2022. (10 Marks)
  2. Statement of changes in equity for the same period. (4 Marks)
  3. Statement of financial position as of June 30, 2022. (10 Marks)

b. Some new trainee accountants in your organization discussed Earnings Per Share (EPS) and Return on Capital Employed (ROCE) as the best ratios for analyzing an entity’s financial performance. The finance director has requested a memo explaining these ratios and highlighting their limitations.

Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)

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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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  • 30 Marks

FR – May 2022 – L2 – SA – Q1 – Preparation of Financial Statements

Prepare a statement of profit or loss, comprehensive income, changes in equity, and financial position for Endtime PLC.

Endtime PLC is a company based in Benin with the following trial balance for the year ended December 31, 2020:

Additional Information:
(i) Finance costs include full year dividends on preference shares and ordinary share dividends of 2½ kobo paid at the end of the year. Allowances for 4 doubtful debts are no longer necessary as customers paid as at when due from time to time in the past 2 years.

(ii) Severely damaged inventories, which cost N790,000,000 were included in the inventories in the trial balance. This will need to be repaired at a cost of N440,000,000 before a knowledgeable buyer will be interested to pay N940,000,000 at arm’s length transaction.

(iii) As at December 31, 2020, a valuer based in Victoria Island in Lagos was contacted by the company to review its land and buildings. The land and buildings was revalued upward by N13,000,000,000 and a certificate was issued to this effect. The board of directors approved the valuation but it has
not yet been accounted for in the trial balance. The valuer advised that the remaining useful life of the asset is reasonably and reliably estimated to be 20 years. Depreciation is on straight-line basis.

(iv) Depreciation on plant and equipment is charged at 15% on reducing balance basis. The multi-users S&P and Sage was bought on September 30, 2020. The amortisation is at the rate of 12.5% annually. The amortisation is evenly distributed over the year. Besides, software installation, customisation and
handling cost of N800,000,000, training costs of N900,000,000, consultancy fee of N600,000,000 and other general overheads of N850,000,000 on the new software were included in administrative expenses. All depreciations are treated as administrative costs.

(v) On December 30, 2020, a chartered surveyor valued investment property at N14,000,000,000 and the company uses fair value model in IAS 40 – Investment Property.

(vi) Current income tax has been estimated for the year ended December 31, 2020 at N9,000,000,000 and deferred tax provision as at December 31, 2020 is to be adjusted in the income statement to reflect the tax base of the company’s net assets of N12,000,000,000 less than the carrying amounts. The current
company income tax rate is 30%.

vii) The plant held for sale is valued in the trial balance at its carrying amount. A broker is readily available to buy the plant for N6,000,000,000 at a fee of 6% of sales proceed. The sale would take place in January, 2021. Any necessary adjustment is to be treated as cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended December 31, 2020. (13 Marks)
b. Statement of changes in equity for the year ended December 31, 2020. (4 Marks)
c. Statement of financial position as at December 31, 2020. (13 Marks)

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  • 14 Marks

FA – May 2022 – L1 – SB – Q1b – Financial Statements Preparation

Prepare the statement of profit or loss and financial position for Wazobia PLC using the provided trial balance and adjustments.

The following trial balance has been extracted from the books of Wazobia PLC as at December 31, 2020:

Description Dr (₦’000) Cr (₦’000)
Accruals 4,002
Administrative expenses 65,990
24% bank loan repayable 2023 50,000
Cash at bank 4,207
Distribution costs 84,235
Interest 6,000
Inventories at January 1, 2020 73,735
Property, plant and equipment (PPE) at cost 603,950
Accumulated depreciation on PPE 238,932
Purchases 279,168
Retained earnings 207,410
Revenue 531,611
Share capital 100,000
Share premium 46,875
Trade payables 23,253
Trade receivables 84,798
Total 1,202,083 1,202,083

Additional information:
(i) The share capital of the company consists of ordinary shares with a nominal value of ₦1 each.
(ii) The revenue figure in the trial balance includes sales of ₦29,502,000 made on credit on January 1, 2021.
(iii) The inventories at the close of business on December 31, 2020, cost ₦78,815,000. Included in the figure were inventories that cost ₦4,500,000 but could only be sold for ₦1,688,000.
(iv) Electricity bills of ₦1,472,000 relating to December 2020 were not included in the trial balance as the invoice was received after the year-end.
(v) Interest on the bank loan for the last six months of the year was not included in the trial balance.
(vi) The company income tax charge for the year was calculated as ₦12,702,000.

Required:
(i) Prepare the statement of profit or loss and other comprehensive income of Wazobia PLC for the year ended December 31, 2020. (6 Marks)
(ii) Prepare the statement of financial position at December 31, 2020. (8 Marks)

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  • 6 Marks

FA – May 2022 – L1 – SB – Q1a – Financial Statements Preparation

Identify and list the components of financial statements according to IAS 1.

In accordance with IAS 1 – Presentation of Financial Statements, state the components of financial statements.

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  • 1 Marks

FA – May 2021 – L1 – SA – Q17 – Financial Statements Preparation

Identify an item not disclosed in the statement of comprehensive income using nature of expenses method.

When the statement of comprehensive income is prepared using nature of expenses method, the following information is disclosed, EXCEPT:

A. Gross profit
B. Changes in inventories of finished goods
C. Employee benefit expenses
D. Depreciation and amortisation expenses
E. Raw materials and consumables used

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  • 20 Marks

CR – Nov 2016 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended June 30, 2016.

Below are the separate financial statements of Broad Ltd and two investee companies which also operate in the same industry as the investor entity.

Statements of profit or loss and other comprehensive income for the year ended 30 June 2016


The following information is relevant:

  1. On 1 March 2016, Broad Ltd acquired 80% of the equity share capital of Narrow Ltd. The consideration consisted of two elements: a share exchange of three shares in Broad Ltd for every five acquired shares in Narrow Ltd and the issue of a GH¢100 6% loan note for every 500 shares acquired in Narrow Ltd. The share issue has not yet been recorded by Broad Ltd, but the issue of the loan notes has been recorded. At the date of acquisition, shares in Broad Ltd had a market value of GH¢5 each, and the shares of Narrow Ltd had a stock market price of GH¢3.50 each.Broad Ltd had earlier acquired 2.4 million shares in Shadow Ltd on the stock market at a price of GH¢1.50 per share on 1 January 2016.
  2. At the date of acquisition, the fair values of Narrow Ltd.’s assets were equal to their carrying amounts with the exception of its property, which had a fair value of GH¢1.2 million below its carrying amount. This would lead to a reduction of the depreciation charge (in cost of sales) of GH¢50,000 in the post-acquisition period. Narrow Ltd has not incorporated this value change into its separate financial statements.
  3. Broad’s group policy is to revalue all properties to current value at each year-end. On 30 June 2016, the value of Narrow’s property was unchanged from its value at acquisition, but the land element of Broad Ltd.’s property had increased in value by GH¢500,000 as shown in other comprehensive income.
  4. Sales from Narrow Ltd to Broad Ltd throughout the year ended 30 June 2016 were GH¢12 million. Narrow made a mark-up on cost of 25% on these sales. Broad Ltd had GH¢2 million (at cost to Broad Ltd) of inventory that had been supplied in the post-acquisition period by Narrow Ltd as at 30 June 2016.
  5. In June 2016, Broad Ltd sold goods to Shadow Ltd for GH¢2,000,000, thus achieving a profit mark-up of 25%. The entire consignment remained unsold and was included in the inventory of Shadow Ltd as at 30 June 2016.
  6. Broad’s investments include some available-for-sale investments that have increased in value by GH¢300,000 during the year. The other equity reserve relates to these investments and is based on their value as at 30 June 2015. There were no acquisitions or disposals of any of these investments during the year ended 30 June 2016.
  7. Broad’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Narrow’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.
  8. It was determined at the year-end that 10% of the goodwill relating to the acquisition of Narrow was impaired.

Required:

a) Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended 30 June 2016. (10 marks)

b) Prepare the consolidated statement of financial position for Broad Ltd. Group as at 30 June 2016. (10 marks)

 

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