Question Tag: Inventory

Search 500 + past questions and counting.

FA – Nov 2024 – L1 – Q4- Preparation of Financial Statements for a Sole Trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for a sole trader from given financial data and adjustments.

Question

The following list of assets, liabilities, and equity as at 30 June 2023 was extracted from the books of Akuorkor, a sole trader:

Trial Balance as at 30 June 2023

Item	GH¢
Plant and equipment – cost	100,000
Accumulated depreciation – Plant & Equipment	36,000
Office fixtures – cost	25,000
Accumulated depreciation – Office Fixtures	2,500
Inventory	15,250
Trade receivables and prepayments	17,500
Trade payables and accrued expenses	8,800
Bank overdraft	4,425
Loan (10% interest per annum)	47,500
Capital	58,525

Summary of Receipts and Payments for the Year Ended 30 June 2024

Receipts	GH¢
Capital introduced	11,000
Cash from customers	213,750
Total Receipts	224,750

Payments	GH¢
Cash drawings (Note 5)	11,225
Loan repayments (Note 7)	10,000
Payment to suppliers	87,800
Rent	11,000
Wages	45,000
Office expenses	6,250
Total Payments	171,275

Additional Information:

Closing inventory on 30 June 2024 was GH¢13,925.
Depreciation policies:
- Plant & Equipment: 20% per annum reducing balance.
- Office Equipment: 10% per annum on cost.
- Fixtures & Fittings: Straight-line method over 4 years with a full year’s charge in the year of acquisition.
GH¢2,500 worth of fixtures & fittings was introduced into the business.
Prepayments and accrued expenses as at 30 June 2023:
- Rent paid in advance: GH¢1,250
- Accrued wages: GH¢2,150
Cash drawings included:
- Wages: GH¢3,375
- Payments to suppliers: GH¢2,100
- Advertising leaflets: GH¢1,300 (Half not yet distributed).
Bank balance per statement: GH¢53,350 after adjusting for unpresented cheques.
Loan repayments include GH¢4,750 in interest payments.
Assets and liabilities as at 30 June 2024:
- Rent paid in advance: GH¢1,350
- Accrued wages: GH¢2,625
- Amounts due to suppliers: GH¢6,100
- Amounts due from customers: GH¢11,150
Major customer went into liquidation owing GH¢8,000; only 20% recoverable.

Required:

Prepare:
i) Statement of Profit or Loss for Akuorkor for the year ended 30 June 2024.
ii) Statement of Financial Position as at 30 June 2024.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accruals and Prepayments, Depreciation, Inventory, Loan Interest, Sole Trader, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: Nov 2024

ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

Question

Working Capital Calculation
A company has annual sales revenues of GH¢45 million and the following working capital periods:

Working Capital Item	Period (months)
Inventory conversion period	2.5
Accounts receivable collection period	2.0
Accounts payable payment period	1.5

Production costs are 70% of sales revenue.

Required:
Calculate the total amount held in working capital excluding cash and cash equivalents.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounts Payable, Accounts Receivable, Budgeting, Costing, Inventory
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour
Series: Nov 2024

AAA – May 2016 – L3 – Q1 – Risk Management in Audits

Assess key business risks and outline audit work to address risks in a retail and distribution company scenario.

Question

Your firm was recently appointed the statutory auditors of Foodys, a limited liability company in Nigeria, for the year ended December 31, 2015. The previous auditors, from whom your firm has received professional clearance, did not wish to be re-appointed as auditors.

The principal activities of the company are the distribution and retail of fine Spanish food products. All products are imported from suppliers based in Spain and delivered to Foodys’s central warehouse in the southwest of Nigeria. The company has its own retail outlets but also supplies national supermarket chains and small independent retailers in Nigeria. Sales through Foodys’s retail outlets are on a cash basis, and sales to supermarkets and independent retailers are on credit basis.

The company maintains computerised records for inventories held at the distribution centre and retail outlets. The inventory records are supported by continuous counting procedures, and as a result, the company does not undertake a physical count at the year end.

Foodys’s retail outlets are equipped with computerised tills. As each sale is recorded, the computer updates the quantity sold and the inventory balance. The manager at each outlet is responsible for banking the takings on a daily basis.

During the year, the company engaged consultants to design and implement the company’s new website with online ordering facilities. Under the terms of the contract, the website was scheduled to be operational by the end of September 2015 in order to take advantage of the high seasonal demand at this time of the year. Due to technical problems, the website was not launched until the end of November 2015. The consultants have been paid in full for their work. However, the company has commenced legal proceedings for breach of contract.

Despite failing to meet its sales targets in respect of online sales, the management accounts for the 11 months to November 30, 2015, indicate an increase in sales revenue of 12% compared with the same period in 2014. Inventory and receivables balances are significantly higher than the previous year as a result of the increased level of activity.

Management is planning to expand the retail activities of the business by opening additional retail outlets. It is hoping to fund the expansion with a bank loan and has approached the company’s bankers to provide the funding. The bankers require the audited financial statements before making a decision. Management is keen to have the funding in place to progress with the expansion and would like to have the audit completed by February 28, 2016.

Required:

(a) Identify the key business risks from the circumstances described above.
(b) List the factors which have led you to identify that risk.
(c) Outline the audit work you would perform to address the risk.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Work, Business Risks, Financial Statement Audit, Inventory, Legal Proceedings, Receivables
Level: Level 3

Topic: Risk Management in Audits

CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)

Classify cryptocurrency holdings in financial statements, addressing IAS 32, IAS 38, and IAS 2.

Question

You have been asked to make a presentation to your team on cryptocurrencies. A snapshot of your draft presentation includes the following:

“Cryptocurrency is a new phenomenon in the financial market. A cryptocurrency is a digital or virtual currency designed to serve as a medium of exchange. Cryptocurrencies are created through cryptography, often with a maximum possible number of ‘coins’ that can exist through solutions to a complex algorithm with their value supported only by the laws of supply and demand. Cryptocurrencies are currently not regulated by government or other similar entity.

The following are some of the types of cryptocurrency in the market:

Bitcoin: The first-ever cryptocurrency that started the market awareness and “boom.”
Ethereum: A programmable currency that lets developers build different distributed apps and technologies that wouldn’t work with Bitcoin.
Ripple: Unlike most cryptocurrencies, it doesn’t use a blockchain to reach a network-wide consensus for transactions. An iterative consensus process is implemented, which makes it faster than Bitcoin but also makes it vulnerable to hacker attacks.

There are many merchants – both online and offline – that accept Bitcoin as a form of payment, while Ethereum and Ripple are not yet widely accepted.

Required:

Following your presentation, you are asked how a holding of cryptocurrency should be classified in the financial statements of your clients. (15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cryptocurrency, Digital Currency, Financial instruments, Intangible Assets, Inventory
Level: Level 3

Topic: Financial Instruments (IAS 32, IFRS 9)

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

Question

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

(a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
(b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
(c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
(d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Finished Goods, Inventory, Physical Count, Work in Progress
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2017

AA – Nov 2015 – L2 – Q3b – Internal Control Systems

Describing internal control procedures an auditor would expect for inventory management.

Question

Describe TWO internal control procedures an auditor would expect the company to put in place in respect of inventories.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Internal Control, Inventory, Risk Management
Level: Level 2

Topic: Internal Control Systems
Series: NOV 2015

TAX – Nov 2020 – L1 – SA – Q1 – Introduction to Taxation

Objective questions testing basic financial accounting principles.

Question

Which of the following items is NOT found on the debit column of a trial balance?
A. Capital
B. Motor vehicle
C. Rent and rates
D. Salaries and wages
E. Postage and stationary

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Conventions, Control Account, Financial Statements, Income Statement, Inventory, Partnership, Source Document, Trial Balance
Level: Level 1

Topic: Introduction to Taxation
Series: NOV 2020

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

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

Question

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

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

Additional information:

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

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

Answer

Find Related Questions by Tags, levels, etc.

Tags: Administrative Expenses, Depreciation, Inventory, Statement of Profit or Loss
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2015

FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Hapu Plc and Sege Plc for the year ended December 31, 2014.

Question

Statement of financial position as at December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Assets
Non-current assets:
Property, plant, and equipment	32,000	25,000
Investments	33,500	–
Total non-current assets	65,500	25,000
Current assets
Cash at bank and in hand	9,500	2,000
Trade receivables	20,000	8,000
Inventory	30,000	18,000
Total current assets	125,000	53,000
Equity and liabilities
Share capital	40,000	10,000
Share premium	6,500	–
Retained earnings	55,000	37,000
Total equity	101,500	47,000
Current liabilities	23,500	6,000
Total equity and liabilities	125,000	53,000

Statement of profit or loss for the year ended December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Revenue	125,000	117,000
Cost of sales	(65,000)	(64,000)
Gross profit	60,000	53,000
Distribution costs	(21,000)	(14,000)
Administrative expenses	(14,000)	(8,000)
Profit before taxation	25,000	31,000
Income tax expense	(10,000)	(9,000)
Profit for the year	15,000	22,000

Statement of changes in equity (extract) for the year ended December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Retained earnings brought forward	40,000	15,000
Retained profit for the year	15,000	22,000
Retained earnings carried forward	55,000	37,000

Additional Information:

Hapu Plc owns 80% of Sege’s shares, purchased in 2011 for ₦20.5 million when Sege’s retained earnings stood at ₦7 million.
Included in Sege’s inventory as of December 31, 2014, were goods purchased from Hapu for ₦3.9 million, with a 30% profit margin on cost. Total sales from Hapu to Sege amounted to ₦6 million.
Hapu Plc and Sege Plc proposed dividends of ₦2 million and ₦2.5 million respectively, not yet accounted for.
Goodwill impairment tests indicate no impairment in accordance with IFRS 3 and IAS 36.

Required:
Prepare the consolidated statement of profit or loss and the consolidated statement of financial position for Hapu Plc and Sege Plc as at December 31, 2014.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidated Statement, Goodwill, Group Accounts, Inventory, Non-Controlling Interest
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: NOV 2015

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

Question

c. State the main factors that IAS 8 requires management of a company to consider in selecting and applying accounting policies in the absence of any IFRS and identify the alternative accounting policies on the following items in the financial statements:

i. Inventories
ii. Depreciation

(12 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Policies, Depreciation, IAS 8, IFRS, Inventory
Level: Level 2

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2019

AA – April 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains the determination of net realisable value and outlines audit procedures for verifying inventory valuation.

Question

b) The management of Zenda Plc have told you that inventory is correctly valued at the lower of cost and net realisable value. As the Auditor of Zenda Plc, you have already satisfied yourself that cost is correctly determined.

Required:
i) Explain how to determine net realisable value. (2 marks)
ii) Explain FOUR (4) audit procedures that you will perform to ensure that net realisable value of the inventory is at or above cost. (8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Inventory, Net Realisable Value, Substantive Testing
Level: Level 2

Topic: Audit and Assurance Evidence
Series: APR 2022

FR – May 2018 – L2 – Q5a – Preparation of Financial Statements

Prepare statements of profit or loss and financial position for Head Office, Branch, and the combined entity using trial balances provided.

Question

The following trial balances for the year ended 31 December 2017 were obtained from the Head Office and Branch of Compassionate Grounds Ltd.

Additional information: i) The branch deposited GH¢800,000 on behalf of the head office in the bank on 31 December 2017. No record of this transaction had been made in head office books. ii) All goods sold by the branch are supplied from the head office at cost plus 25%. At 31 December 2017, goods to the value of GH¢10 million were in transit to the branch. iii) Inventories at 31 December 2017, excluding goods in transit were as follows:

Branch at markup: GH¢8,000
Head Office at cost: GH¢14,500

Required:
Prepare for the head office, branch, and combined entity of Compassionate Grounds Limited:

Statement of profit or loss for the year ended 31 December 2017
Statement of financial position as at 31 December 2017

Answer

Find Related Questions by Tags, levels, etc.

Tags: Branch Accounting, Consolidation, Financial Reporting, Head Office, Intercompany transactions, Inventory, Unrealized profit
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAY 2018

FR – Aug 2022 – L2 – Q3 – Preparation of Financial Statements

Prepare the Statement of Profit or Loss and Financial Position for Morontuo Plc for the year ended 31 December 2021, along with all relevant workings.

Question

Morontuo Plc deals in electrical and other household appliances. It has a fleet of vehicles used in the distribution of these goods. The company is preparing its financial statements for the year ended 31 December 2021. Below is the trial balance for the period:

Additional Information:

i) The company repairs goods returned by customers for minor or major defects. It estimates that 25% of goods sold would have minor defects and 15% would have major defects. Estimated repairs cost for minor and major defects is GH¢8 million and GH¢2 million respectively. This effect has not been incorporated in the trial balance.

ii) Morontuo rents some of its vehicles and routinely sells them after some time. Vehicles X and Y (GH¢3.5 million and GH¢2 million respectively) used for rental services were acquired on 1 January 2021. Vehicle Y was sold on 1 December 2021 for GH¢1.88 million, which remains unpaid. The effects of the decision to sell the vehicles have not been incorporated.

iii) Suspense account represents interest and principal payments on a loan from Alpha Bank contracted on 1 July 2021. The loan is repayable in monthly instalments of GH¢1 million over 3 years, with 24% annual interest.

iv) Inventory includes slow-moving finished goods costing GH¢15 million. These were sold at 98% of their carrying amounts in January 2022.

v) Current tax for the year is estimated at GH¢15.8 million.

Required:

Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 and the Statement of Financial Position as at that date in accordance with IFRS. Include all relevant workings.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Financial Position, Inventory, Loan Repayment, Profit or Loss Statement, Tax
Level: Level 2

Topic: Preparation of Financial Statements
Series: AUG 2022

CR – Mar 2023 – L3 – Q3b – IAS 12

Recommend the correct financial reporting treatment for foreign-currency denominated inventory and related deferred tax.

Question

Sadio Plc imports wheat from Ukraine for wholesale distribution. On 31 October 2022, Sadio purchased goods for €7.2 million cash at an exchange rate of GH¢1 = €0.12. At 31 October 2022, the net realisable value (NRV) of the inventory was estimated at €7.0 million, and the exchange rate at this date was GH¢1 = €0.14. Sadio’s directors recorded the inventory at its purchase cost in the financial statements for the year ended 31 October 2022.

Sadio only receives tax relief for any inventory loss when the related item is sold. The company’s tax rate at 31 October 2022 was 20%, but a revised rate of 25% was introduced on 18 November 2022. Assume that Sadio has sufficient taxable future profit.

Required:
Recommend the correct financial reporting treatment of the above in Sadio’s financial statements for the year ended 31 October 2022.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Foreign Currency, Inventory, Tax, Translation
Level: Level 3

Topic: IAS 12: Income taxes
Series: MAR 2023

PSAF – Nov 2016 – L2 – Q3e – Preparation and presentation of financial statements for central government.

Identify eight key financial disclosures required when accounting for government stores

Question

In accounting for Government Stores, the head of department shall report annually on the value of stocks held by his department.

Required:

Identify EIGHT financial information that must be disclosed by a head of government department when accounting for government stores.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting, Disclosure, Financial Reporting, Government Stores, Inventory
Level: Level 2

Topic: Preparation and presentation of financial statements for central governmen
Series: NOV 2016

PSAF – Nov 2019 – L2 – Q1b – International public sector accounting standards

Formulate accounting policies for land, building, and inventory for public sector entities.

Question

Formulate accounting policies on the following items relating to the financial statement of public sector entities:

i) Land and Building
ii) Inventories

(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Policies, Inventory, IPSAS, Land and Building, Public Sector
Level: Level 2

Topic: International public sector accounting standards
Series: NOV 2019

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

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

Question

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

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

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

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Depreciation, Inventory, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Bad and doubtful debt, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2021

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

Question

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account	Debit (GH¢)	Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each		500,000
– 60,000 7% redeemable preference shares of 50p each		30,000
Equipment: cost	350,000
Equipment: accumulated depreciation		75,000
Motor vehicle: cost	160,000
Motor vehicle: accumulated depreciation		25,650
Premises	220,000
Inventory as at 1 January 2020	51,980
Bank	10,050
Sales		508,420
Purchases	225,000
Trade receivables	130,010
Trade payables		10,200
Distribution costs	80,400
Administrative expenses	45,240
Irrecoverable debts	1,250
Allowance for receivables		14,360
Rent received		8,500
Income from investments		17,040
Interim dividend on equity shares	7,420
Retained earnings		51,760
General reserve		40,420
Total	1,281,350	1,281,350

Additional information:
i) Inventories as at 31 December 2020 are valued at GH¢85,420.
ii) Insurance includes GH¢840 for one and half years ending 30 June 2021. Insurance is included in administrative expenses.
iii) Rent received includes an amount of GH¢2,400 paid in advance as at 31 December 2020.
iv) Distribution costs of GH¢750 were prepaid, and administrative expenses of GH¢800 were owing as at 31 December 2020.
v) The total trade receivables balance of GH¢130,010 includes a balance of GH¢1,010 which has been outstanding for ten months. Poloo Ltd has decided to write off this balance.
vi) Poloo Ltd’s policy is to allow for receivables on the basis of the length of time the debt has been outstanding. The aged analysis of trade receivables at 31 December 2020 and the required allowance are shown below:

Age of Debt	Balance (GH¢)	Allowance Required
0 – 30 days	80,000	Nil
31 – 60 days	40,000	20% of balances
Over 60 days	10,010	85% of balances

vii) On 15 January 2020, Poloo Ltd purchased premises at a cost of GH¢105,000. This cost included GH¢3,500 relating to legal costs. The legal costs of GH¢3,500 had been included in administrative expenses and not in the cost of premises. Premises are not depreciated.
viii) On 1 April 2020, Poloo Ltd purchased equipment that cost GH¢50,000. This transaction was entered in the accounts on 1 April 2020.
ix) Depreciation is to be provided as follows:

Equipment: 20% per annum on cost
Motor vehicles: 20% per annum reducing balance basis
x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Required:
Prepare, for Poloo Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS):
a) Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)
b) Statement of Financial Position as at 31 December 2020.
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Depreciation, Income Statement, Inventory, Statement of Financial Position
Level: Level 1

Topic: Inventory, Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: MAY 2021

FA – Nov 2019 – L1 – Q1 – The IASB’s Conceptual Framework

Explain the fundamental qualitative characteristics of financial information and post transactions into various ledger accounts.

Question

a) The IASB Conceptual Framework describes the fundamental qualitative characteristics of useful financial information.

Required:
State and explain the TWO (2) fundamental qualitative characteristics. (10 marks)

b) Kofi Mensah started a furniture business on January 1, 2018, and undertook the following transactions during the year:

On 1/1/18, he paid GH¢150,000 into the business.
On 4/1/18, he borrowed GH¢150,000 from Ama.
He paid GH¢200,000 on 6/1/18 for one room to be used as a small shop for his furniture business.
Kofi Mensah bought furniture costing GH¢80,000 on 8/1/18, which he plans to sell.
On 10/1/18, he bought furniture for resale from Kwame for GH¢150,000 agreeing to pay for them within 15 days.
Kofi Mensah sold furniture which had cost GH¢60,000 for GH¢90,000 on 12/1/18.
Furniture worth GH¢110,000 was sold for GH¢180,000 to AA Ltd on credit on 20/1/18.
On 24/1/18 Kwame was paid GH¢90,000.
On 28/1/18 AA Ltd paid GH¢80,000 of the amount he owed.

Note: All monies paid and received were through the bank account.

Required:
Post the above transactions to the following ledgers in the books of Kofi Mensah:
i) Bank account (3 marks)
ii) Inventory account (2 marks)
iii) Capital account (1 mark)
iv) Kwame account (2 marks)
v) AA Ltd account (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounts Receivable, Capital, Inventory, Ledger Accounts, Qualitative Characteristics
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2019

FA – May 2017 – L1 – Q1 – Inventory | Preparation of Partnership accounts | The IASB’s Conceptual Framework

Dissolution of partnership and preparation of realization, cash, and capital accounts; explanation of inventories and elements of financial statements.

Question

a) B & C Brothers are partners sharing profits and losses equally between themselves for many years. However, they have now decided to dissolve their partnership as at 31 December 2016. Below is their Statement of financial position as at 31 December, 2016:

Statement of Financial Position as at 31 December, 2016

	GH¢000	GH¢000
Non-Current Assets:
Land and Buildings	3,200
Furniture and Fittings	3,400	6,600
Current Assets:
Trade receivables	11,200
Cash and Bank balances	7,200	18,400
Total Assets		25,000
Capital accounts:
B	8,000
C	6,000	14,000
Trade payables		11,000
Total Capital and Liabilities		25,000

Additional information: At dissolution, the trade receivables realized was GH¢10,800,000, the land and buildings GH¢1,600,000 and the furniture and fittings GH¢3,800,000. The expenses incurred on dissolution were GH¢400,000 and discounts amounted to GH¢800,000 were received from suppliers.

Required: i) Prepare Realisation Account (5 marks)

ii) Prepare Cash Account (3 marks)

iii) Prepare Partners’ Capital Account (2 marks)

b) The objective of IAS 2 Inventories is to prescribe the accounting treatment for inventories and provide guidance for measuring and valuation of inventories. It determines the cost of inventories and subsequent recognition as an expense, including any write-down to net realizable value.

Required: i) Explain Inventories. (3 marks)

ii) Explain how inventories are measured and valued in the financial statements in accordance with IAS 2. (3 marks)

c) In order to enhance the quality of information in financial statements, business transactions are grouped into different classes or categories on the basis of their economic characteristics. The broad classes or categories are called elements of financial statements.

Required: Explain any TWO elements of financial statements in line with the IASB Conceptual Framework for Financial Reporting and identify their criteria for recognition. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Dissolution, Financial Reporting, Inventory, Partnership, Realisation Account
Level: Level 1

Topic: Inventory, Preparation of Partnership accounts, The IASB’s Conceptual Framework
Series: MAY 2017

Question Tag: Inventory

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

FA – Nov 2024 – L1 – Q4- Preparation of Financial Statements for a Sole Trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for a sole trader from given financial data and adjustments.

Trial Balance as at 30 June 2023

Summary of Receipts and Payments for the Year Ended 30 June 2024

Additional Information:

Required:

You're reporting an error for "FA – Nov 2024 – L1 – Q4- Preparation of Financial Statements for a Sole Trader"

ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

You're reporting an error for "ICMA – Nov 2024 – L1 – Q2b – Working Capital"

AAA – May 2016 – L3 – Q1 – Risk Management in Audits

Assess key business risks and outline audit work to address risks in a retail and distribution company scenario.

Required:

You're reporting an error for "AAA – May 2016 – L3 – Q1 – Risk Management in Audits"

CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)

Classify cryptocurrency holdings in financial statements, addressing IAS 32, IAS 38, and IAS 2.

You're reporting an error for "CR – Nov 2018 – L3 – SC – Q6 – Financial Instruments (IAS 32)"

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

You're reporting an error for "AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)"

AA – Nov 2015 – L2 – Q3b – Internal Control Systems

Describing internal control procedures an auditor would expect for inventory management.

You're reporting an error for "AA – Nov 2015 – L2 – Q3b – Internal Control Systems"

TAX – Nov 2020 – L1 – SA – Q1 – Introduction to Taxation

Objective questions testing basic financial accounting principles.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q1 – Introduction to Taxation"

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

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

You're reporting an error for "FR – Nov 2015 – L2 – Q2 – Presentation of Financial Statements (IAS 1)"

FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Hapu Plc and Sege Plc for the year ended December 31, 2014.

You're reporting an error for "FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)"

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

You're reporting an error for "FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

AA – April 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains the determination of net realisable value and outlines audit procedures for verifying inventory valuation.

You're reporting an error for "AA – April 2022 – L2 – Q3b – Audit and Assurance Evidence"

FR – May 2018 – L2 – Q5a – Preparation of Financial Statements

Prepare statements of profit or loss and financial position for Head Office, Branch, and the combined entity using trial balances provided.

You're reporting an error for "FR – May 2018 – L2 – Q5a – Preparation of Financial Statements"

FR – Aug 2022 – L2 – Q3 – Preparation of Financial Statements

Prepare the Statement of Profit or Loss and Financial Position for Morontuo Plc for the year ended 31 December 2021, along with all relevant workings.

You're reporting an error for "FR – Aug 2022 – L2 – Q3 – Preparation of Financial Statements"

CR – Mar 2023 – L3 – Q3b – IAS 12

Recommend the correct financial reporting treatment for foreign-currency denominated inventory and related deferred tax.

You're reporting an error for "CR – Mar 2023 – L3 – Q3b – IAS 12"

PSAF – Nov 2016 – L2 – Q3e – Preparation and presentation of financial statements for central government.

Identify eight key financial disclosures required when accounting for government stores

You're reporting an error for "PSAF – Nov 2016 – L2 – Q3e – Preparation and presentation of financial statements for central government."

PSAF – Nov 2019 – L2 – Q1b – International public sector accounting standards

Formulate accounting policies for land, building, and inventory for public sector entities.

You're reporting an error for "PSAF – Nov 2019 – L2 – Q1b – International public sector accounting standards"

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

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

You're reporting an error for "FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

You're reporting an error for "FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements"

FA – Nov 2019 – L1 – Q1 – The IASB’s Conceptual Framework

Explain the fundamental qualitative characteristics of financial information and post transactions into various ledger accounts.

You're reporting an error for "FA – Nov 2019 – L1 – Q1 – The IASB’s Conceptual Framework"

FA – May 2017 – L1 – Q1 – Inventory | Preparation of Partnership accounts | The IASB’s Conceptual Framework

Dissolution of partnership and preparation of realization, cash, and capital accounts; explanation of inventories and elements of financial statements.

You're reporting an error for "FA – May 2017 – L1 – Q1 – Inventory | Preparation of Partnership accounts | The IASB’s Conceptual Framework"

Our offerings

Contact Info

Customer

Get In Touch

admin