Financial Statement

FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

Question

The following is a summary of the cash book of Babagana Limited for the month of March 2019.

N’000
Receipts	Payments
22,035	11,930
Balance b/f 18,415	Balance c/d 8,310
30,345	30,345

All receipts are banked and payments made by cheque. On investigation, you discovered that:

Bank charges of N2,040,000 entered on the bank statement had not been entered in the cash book.
Cheques drawn amounting to N4,005,000 had not been presented to the bank for payment.
Cheques received amounting to N11,430,000 had been entered in the cash book and paid into the bank, but had not been credited by the bank until April 2019.
A cheque for N330,000 had been wrongly entered as a receipt in the cash book.
A cheque drawn had been overstated by N375,000.
A cheque of N1,200,000 received had been returned by the bank. No adjustment had been made in the cash book.
All dividends receivable are credited directly to the bank account. During March 2019, amounts totaling N930,000 were credited by the bank and no entries were made in the cash book.
A cheque drawn for N90,000 had been incorrectly entered in the cash book as N990,000.
The bank statement as at 31 March 2019 showed an overdraft of N17,430,000.

Required:

i. The adjustments required in the cash book (5 Marks)
ii. Starting with balance as per bank statement, prepare a bank reconciliation statement as at March 31, 2019. (5 Marks)

Answer

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Tags: Construction, Contract Account, Financial Statement
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2021

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

Question

Akwatia Gold Mines was established ten years ago. For the year ended 31 December 2020, the following income statement was prepared and submitted to the Ghana Revenue Authority as part of its financial statement.

Akwatia Gold Mines
Income Statement for the Year Ended 31/12/2020

The capital allowance agreed for the period was GH¢24,320,500.

Required:
a) Compute the chargeable income of the company and the tax payable. (15 marks)

b) Advise Akwatia Gold Mines on how to identify opportunities within the tax laws to optimise tax payable for the year ended 31 December 2020. (5 marks)

Answer

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Tags: Business income, chargeable income, Corporate Tax, Financial Statement, Minerals and mining, Tax computation, tax optimization
Level: Level 3

Topic: Business income - Corporate income tax, Minerals and mining
Series: NOV 2021

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

Question

A motor car manufacturer has been specializing in the production and sale of Bedford model cars. The model is somewhat outmoded, and the current sales forecast indicates that the current (2018) sales level of 150,000 will be the same as in 2019 but will decline to 130,000 cars in 2020 and 110,000 cars in 2021. The company supplies according to orders received, and no stocks are held. Carbon monoxide emission regulations will prevent the model from being manufactured and sold after December 2021.

The company’s current estimates of the selling price and costs in 2019 are as follows:

Per car (GH¢)	Amount (GH¢)
Selling Price	11,200
Production costs:
– Material and Labour (vary with production volume)	3,600
– Assembly	4,000
– Delivery	2,500

75% and 40% of the assembly and delivery costs respectively are fixed, and the remainder vary with production volume.
In addition, the company estimates that it will incur the following non-production costs:
- Marketing costs of GH¢60 million would be amortized on a straight-line basis over three years.
- The Administration costs of GH¢10 million are fixed per annum.
- The selling price, variable costs per car, and total fixed costs are expected to remain constant throughout the period from 2019 to 2021.

The company’s Managing Director is unhappy with the current annual profit forecasts for 2019–2021 based on the information above and believes that the company has the potential to increase the profit to a desired level of GH¢245 million in each of the years 2019 to 2021. The Managing Director has undertaken a strategic review and developed the following strategies to eliminate the gap:

Strategy 1: A marketing proposal will enable the company to enter a new overseas market with the result that the total (including the overseas market) sales level will be stabilized at 160,000 cars per annum from 2019 to 2021. The market entry costs will be GH¢30 million for each of the three years.

Strategy 2: A re-design of the car will enhance its sales appeal and will permit the company to increase its selling price to GH¢12,000. The re-design costs are GH¢30 million and are to be amortized over three years on a straight-line basis.

Strategy 3: A radical cost reduction program will improve efficiency and lower all variable costs by 20%. This will add GH¢70 million to the annual fixed overheads each year from 2019 to 2021.

Required:

a) Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for each of the years 2019 to 2021 and briefly comment on the figures. (Ignore the time value of money)

b) Calculate the profit gap for 2019, 2020, and 2021.

c) Estimate the profit in 2019 if:

i) Strategy 1 was implemented;
ii) Strategy 2 was implemented;
iii) Strategy 3 was implemented.

d) Evaluate which strategy to implement

Answer

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Tags: Budgetary Control, Financial Statement, Forecasting, Marginal Costing, Profit Analysis
Level: Level 2

Topic: Budgetary control
Series: NOV 2020

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Question

Revenue		GH₵	GH₵
GOG Subvention		152,000
Internally Generated Fund (IGF)	1	187,000
Donations	4	45,000	384,000

Expenditure

Description		GH₵	GH₵
Compensation	2	68,000
Use of Goods & Services	3 & 5	35,000
Consumption of Fixed Asset		13,000	(116,000)
Surplus			268,000

Additional Information:

The entity received an IGF of GH¢ 13,000 in advance for the year 2023. This transaction is not included in the IGF amount stated in the financial statement.
Included in Compensation is an amount of GH¢ 17,000 accrued as at the end of 31 December 2022.
Excluded from the Use of Goods & Services is an amount of GH¢ 1,000 paid in advance for the year 2023.
Included in Donations is Motor Vehicle received from a donor partner amounting to GH¢ 12,000.
Included in the Use of Goods and Services is Furniture acquired on 31 December 2022 at the cost of GH¢ 2,000.
The Statement of Financial Performance is prepared under Accrual Accounting Basis.

Required:
i) Redraft the financial statement under Cash Accounting Basis for the year ended 31 December 2022, showing the necessary adjustments. (7 marks)
ii) Justify THREE (3) reasons management would want to prepare the financial statement under Cash Accounting Basis. (3 marks)

Answer

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Tags: Adjustments, Cash Basis, Financial Statement
Level: Level 2

Topic: General purpose financial reporting framework
Series: NOV 2023

FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

Question

The following is a summary of the cash book of Babagana Limited for the month of March 2019.

N’000
Receipts	Payments
22,035	11,930
Balance b/f 18,415	Balance c/d 8,310
30,345	30,345

All receipts are banked and payments made by cheque. On investigation, you discovered that:

Bank charges of N2,040,000 entered on the bank statement had not been entered in the cash book.
Cheques drawn amounting to N4,005,000 had not been presented to the bank for payment.
Cheques received amounting to N11,430,000 had been entered in the cash book and paid into the bank, but had not been credited by the bank until April 2019.
A cheque for N330,000 had been wrongly entered as a receipt in the cash book.
A cheque drawn had been overstated by N375,000.
A cheque of N1,200,000 received had been returned by the bank. No adjustment had been made in the cash book.
All dividends receivable are credited directly to the bank account. During March 2019, amounts totaling N930,000 were credited by the bank and no entries were made in the cash book.
A cheque drawn for N90,000 had been incorrectly entered in the cash book as N990,000.
The bank statement as at 31 March 2019 showed an overdraft of N17,430,000.

Required:

i. The adjustments required in the cash book (5 Marks)
ii. Starting with balance as per bank statement, prepare a bank reconciliation statement as at March 31, 2019. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Construction, Contract Account, Financial Statement
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2021

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

Question

Akwatia Gold Mines
Income Statement for the Year Ended 31/12/2020

The capital allowance agreed for the period was GH¢24,320,500.

Required:
a) Compute the chargeable income of the company and the tax payable. (15 marks)

b) Advise Akwatia Gold Mines on how to identify opportunities within the tax laws to optimise tax payable for the year ended 31 December 2020. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business income, chargeable income, Corporate Tax, Financial Statement, Minerals and mining, Tax computation, tax optimization
Level: Level 3

Topic: Business income - Corporate income tax, Minerals and mining
Series: NOV 2021

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

Question

The company’s current estimates of the selling price and costs in 2019 are as follows:

Per car (GH¢)	Amount (GH¢)
Selling Price	11,200
Production costs:
– Material and Labour (vary with production volume)	3,600
– Assembly	4,000
– Delivery	2,500

75% and 40% of the assembly and delivery costs respectively are fixed, and the remainder vary with production volume.
In addition, the company estimates that it will incur the following non-production costs:
- Marketing costs of GH¢60 million would be amortized on a straight-line basis over three years.
- The Administration costs of GH¢10 million are fixed per annum.
- The selling price, variable costs per car, and total fixed costs are expected to remain constant throughout the period from 2019 to 2021.

Strategy 3: A radical cost reduction program will improve efficiency and lower all variable costs by 20%. This will add GH¢70 million to the annual fixed overheads each year from 2019 to 2021.

Required:

b) Calculate the profit gap for 2019, 2020, and 2021.

c) Estimate the profit in 2019 if:

i) Strategy 1 was implemented;
ii) Strategy 2 was implemented;
iii) Strategy 3 was implemented.

d) Evaluate which strategy to implement

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgetary Control, Financial Statement, Forecasting, Marginal Costing, Profit Analysis
Level: Level 2

Topic: Budgetary control
Series: NOV 2020

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Question

Revenue		GH₵	GH₵
GOG Subvention		152,000
Internally Generated Fund (IGF)	1	187,000
Donations	4	45,000	384,000

Expenditure

Description		GH₵	GH₵
Compensation	2	68,000
Use of Goods & Services	3 & 5	35,000
Consumption of Fixed Asset		13,000	(116,000)
Surplus			268,000

Additional Information:

The entity received an IGF of GH¢ 13,000 in advance for the year 2023. This transaction is not included in the IGF amount stated in the financial statement.
Included in Compensation is an amount of GH¢ 17,000 accrued as at the end of 31 December 2022.
Excluded from the Use of Goods & Services is an amount of GH¢ 1,000 paid in advance for the year 2023.
Included in Donations is Motor Vehicle received from a donor partner amounting to GH¢ 12,000.
Included in the Use of Goods and Services is Furniture acquired on 31 December 2022 at the cost of GH¢ 2,000.
The Statement of Financial Performance is prepared under Accrual Accounting Basis.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjustments, Cash Basis, Financial Statement
Level: Level 2

Topic: General purpose financial reporting framework
Series: NOV 2023

Question Tag: Financial Statement

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FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Expenditure

FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Expenditure

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FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

You're reporting an error for "FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation"

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

You're reporting an error for "AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining"

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

You're reporting an error for "MA – Nov 2020 – L2 – Q1 – Budgetary Control"

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Expenditure

You're reporting an error for "PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework"

FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

You're reporting an error for "FA – May 2021 – L1 – SB – Q2a – Bank Reconciliation"

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

You're reporting an error for "AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining"

MA – Nov 2020 – L2 – Q1 – Budgetary Control

Prepare a financial analysis statement showing the current annual forecast of costs, revenues, and profits for the years 2019-2021 for a motor car manufacturer.

You're reporting an error for "MA – Nov 2020 – L2 – Q1 – Budgetary Control"

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Expenditure

You're reporting an error for "PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework"

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