Question Tag: Profit or Loss

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FA – Nov 2024 – L1 – Q1 – Partnership Financial Statements

Prepare the profit or loss and appropriation account and financial position statement for a partnership at retirement and admission of partners.

Question

Atsu, Baba, and Chawe are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢18,000 each. Current accounts are not maintained. On 30 June 2024, Atsu retired.

Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.

The previous partnership trial balance as of 30 June 2024 was as follows:

Description	GH¢	GH¢
Capital accounts – Atsu		12,519
Capital accounts – Baba		65,844
Capital accounts – Chawe		33,618
Trade receivables	138,615
Inventories at 1 July 2023	6,000
Operating expenses	419,166
Investment	300
Bank overdraft		33,510
Trade payables		52,218
Revenue		565,296
Total	663,543	663,543

Additional Information:

Inventory remains at GH¢6,000.
Full provision is required for an irrecoverable debt of GH¢3,450.
Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
Dua introduced cash of GH¢22,500 to the partnership.

Required:
i) Prepare the statement of profit or loss and appropriation account of the previous partnership for the year ended 30 June 2024 and a statement of financial position at that date. (9 marks)
ii) Prepare the statement of financial position for the current partnership as of 1 July 2024. (6 marks)

Answer

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Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: Nov 2024

CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

Question

Dangogo Plc. has adopted IFRS in the preparation and presentation of its financial statements in line with Financial Reporting Council of Nigeria requirements. During deliberations on their financial statements for the year ended 31 March, 2019 the directors of Dangogo Plc. found the distinction between profit or loss and other comprehensive income confusing. This is the case with many other preparers or users of financial statements in Nigeria who seem to be unclear about the relationship between profit or loss and other comprehensive income (OCI). They blame the conceptual framework for Financial Reporting and IAS 1 regarding the confusing nature of re classification. The emergence of integrated reporting holds promises for better reporting, but preparers are equally uncertain about whether the International Integrated Reporting Councils (IIRC) or Integrated Reporting (IR) Framework constitutes suitable criteria for report preparation.

a. Discuss the nature of a re-classification adjustment and the arguments for and against allowing re-classification of items to profit or loss. (6 Marks)

bi. Discuss the objectives of integrated reporting and key components (content elements) of integrated reports. (6 Marks)

ii. Comment on any concerns which could limit the Framework’s suitability for assessing the performance and prospects of an entity. (3 Marks)

Answer

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Tags: Conceptual Framework, Financial Statements, Integrated Reporting, OCI, Profit or Loss, Reclassification
Level: Level 3

Topic: Presentation of Financial Statements (IAS 1)

CR – Nov 2020 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated profit or loss, financial position, cash flow benefits explanation, and share disposal accounting for a group structure.

Question

Statements of financial position as at December 31, 2019

Statement of profit or loss for the year ended December 31, 2019

Statement of changes in equity (extract) for the year ended December 31,
2019

Additional Information:

Haba owns 80% of Suka‘s shares, purchased in 2016 for N20.5 million cash, when Suka’s retained earnings balance was N7 million.
In 2014, Haba purchased 60% of Zara‘s shares by issuing shares with a nominal value of ₦6.5 million at a premium of N6.5 million. At acquisition, Zara‘s retained earnings were N3 million, and the fair value of net assets was N24 million. Any undervaluation was attributed to land still held as of December 31, 2019.
Inventory at December 31, 2019, includes goods Zara and Suka purchased from Haba valued at ₦5.2 million and N3.9 million, respectively. Haba aims for a 30% profit margin on cost. Total sales from Haba to Zara and Suka were N8 million and N6 million, respectively.
Haba and Suka each proposed dividends before year-end of N2 million and N2.5 million, respectively. These have not been accounted for yet.
Haba conducted annual impairment tests on goodwill per IFRS 3 and IAS 36. The estimated recoverable amount of goodwill was N5 million in 2016 and N4.5 million in 2019.

Requirements:

a. Prepare the consolidated statement of profit or loss for the year ended December 31, 2019.
(10 Marks)

b. Prepare the consolidated statement of financial position as at December 31, 2019.
(10 Marks)

c. Explain the benefits to external users of including a statement of group cash flows in the annual report.
(10 Marks)

d. At December 31, 2019, Hard plc owned 90% of Spark Limited’s shares. The net assets of Spark in Hard Group’s consolidated financial statements amounted to N800 million, with no asset revaluation.

On January 1, 2020, Hard sold 80% of its Spark equity for N960 million cash, and the fair value of Hard’s remaining Spark shares is N100 million.

Required: Explain how the Spark share disposal should be accounted for in Hard Group’s consolidated financial statements.
(10 Marks)

Answer

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Tags: Cash Flow, Consolidation, Financial Position, Group Statements, Profit or Loss, Share Disposa
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Question

Wizkid Bottling Company Plc specializes in the production of alcoholic wine known as Blue Bull and a soft drink called “Wiz-Cola,” operating two divisions: Blue Bull and Wiz-Cola. Due to high labor costs and raw material shortages for wine production, the Blue Bull division has incurred significant operating losses. Management decided to close down the Blue Bull division and drew up a plan to discontinue its operations.

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

	2019		2018
	Blue Bull	Wiz-Cola	Blue Bull	Wiz-Cola
Revenue	235,000	1,570,000	250,000	1,250,000
Cost of sales	175,000	505,000	200,000	450,000
Admin. expenses	35,000	311,000	25,000	255,000
Distribution costs	20,000	186,500	10,000	157,500
Other operating	15,000	124,500	10,000	102,500
expenditure
Taxation expense	(3,000)	130,500	1,500	85,000

Additional Information:

Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

i. Draft the statement of profit or loss for Wizkid Bottling Company Plc for the years ended March 31, 2019, and 2018, in compliance with IFRS 5, showing continuing and discontinuing operations.
(10 Marks)

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Answer

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Tags: Additional Disclosures, Discontinued Operations, IFRS 5, Profit or Loss
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: MAY 2021

FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

Question

Olu Nigeria PLC has a subsidiary, Oba Limited, which it acquired on January 1, 2022. The financial statements of the companies are detailed below:

Statements of Profit or Loss for the year ended September 30, 2022

Additional Information:

Olu PLC acquired its 70% interest in Oba Limited through a share exchange of three shares in Olu PLC for every five shares in Oba Limited. At the acquisition date, the shares of Olu PLC were sold at ₦8.10 each on the Nigerian Exchange (NGX). The parent company has not recorded this share issue in its books.
At the acquisition date, the fair value of Oba Limited’s assets equaled their carrying amounts except for an item of plant, which had a fair value of N30,000,000 above its carrying amount. This fair value increase has not been adjusted in Oba Limited’s books. The plant’s remaining life at acquisition was five years.
During the year, Oba Limited transferred goods worth N40,000,000 to Olu PLC. These goods were invoiced at cost plus 25%, and only a quarter of them were sold by Olu PLC at year-end.
Included in the other income was N6,550,000 received from Oba Limited as interest paid on a loan granted by Olu PLC. The loan was fully repaid before September 30, 2022.
An impairment test revealed a goodwill impairment of N28,000,000 at the acquisition date.
It is the group’s policy to value non-controlling interests at fair value. The prevailing market price per ordinary share of Oba Limited at January 1, 2022, was ₦5.05.
The gain on the revaluation of property arose from an independent valuation of the group’s property in September 2022.
Administrative expenses of Oba Limited included N10,000,000 paid as management fees to Olu PLC, and the income has been duly recorded in Olu PLC’s books.
Income and expenses accrue evenly over the period.

Required:

a. Prepare the consolidated statement of profit or loss and other comprehensive income for Olu Group for the year ended September 30, 2022. (12 Marks)

b. Calculate the goodwill on acquisition and the non-controlling interest at the reporting date. (4 Marks)

c. IFRS 10 – Consolidated Financial Statements states that a parent must present consolidated financial statements for its investments in subsidiaries.

Required:
State FOUR exceptions to this pronouncement. (4 Marks)

Answer

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Tags: consolidated financial statements, Elimination of Intragroup Transactions, Fair Value, Goodwill, IFRS 10, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2023

FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

Question

The Chief Accountant of Uchena Nigeria plc has just forwarded the trial balance of the company to you for review before the preparation of draft financial statements for the year ended December 31, 2018.

The trial balance is as follows:

Description	Debit (N’m)	Credit (N’m)
Ordinary share capital		43,200
Revenue		125,280
Staff cost	18,720
Leasehold building	21,600
Patent rights	4,320
Work-in-progress (Jan 1, 2018)	9,000
Accum. Depreciation on building (Jan 1, 2018)		4,320
Inventories of finished goods (Jan 1, 2018)	11,160
Consultancy fee	3,168
Directors’ salaries	25,920
Computer at cost (Hardware)	3,600
Accum. Depreciation on computer (Jan 1, 2018)		1,440
Retained earnings (Jan 1, 2018)		8,712
Dividend paid	9,000
Cash and bank	31,680
Trade receivables	30,240
Trade payables		6,624
Sundry expenses	21,168
Totals	189,576	189,576

Additional information:

On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
The patent rights relate to a computer software with a 3-year life span.
An allowance for bad debts of 5% is to be created.
Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
Prepare a statement of financial position as at December 31, 2018. (6 Marks)

Answer

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Tags: Financial Statements, IAS 1, Profit or Loss, Revaluation, Statement of Changes in Equity, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2019

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Question

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item	N’000	N’000
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables		8,625
Inventories – finished goods – 31/12/18	276,750
Work-in-progress – 31/12/18	49,125
Inventories – raw materials at cost – 31/12/18	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings – 31/12/18		425,250
Patents and trademarks	323,250
Motor vehicle at cost	112,500
Freehold property at cost	375,000
Leasehold property at cost	112,500
Plant and equipment at cost	225,000
Furniture and fittings at cost	75,000
Amortisation of leasehold property – 31/12/18		22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment		102,750
– Furniture and fittings		23,625
– Motor vehicles		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
	4,183,500	4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

Raw materials: N168,900
Finished goods: N413,025
Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

Plant and equipment 8% on cost – charged to production
Furniture and fittings 10% on cost – charged to administration
Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

Answer

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Tags: Depreciation, Expenses, IAS 1, OCI, Profit or Loss, Revenue
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2020

FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

This question involves calculating the profit or loss on the disposal of a non-current asset.

Question

A non-current asset with an original cost of N500,000 and accumulated depreciation of N400,000 was disposed of for N80,000. Calculate the profit or loss on disposal.

Answer

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Tags: Asset Disposal, Profit or Loss
Level: Level 1

Topic: Depreciation Methods and Accounting for Disposals
Series: MAY 2013

FA – May 2014 – L1 – SB – Q6 – Accounting Concepts

Preparation of departmental profit or loss statement and head office statement of financial position.

Question

The following trial balance for the year ended 30 June 2013 was extracted from the books of Dapo Trading Enterprises which operates from the head office and two departments:

Additional Information:
(i) Write off bad debts of N120,000 and increase the provision for doubtful receivables to 5% of the outstanding receivables.
(ii) Depreciate furniture and fittings at 10% per annum.
(iii) Accrue N40,000 for sundry expenses owed at 30 June 2013.
(iv) The values of inventories on hand on 30 June 2013 were: Department X – N2,960,000, Department Y – N1,700,000.
(v) Catalogue in hand was valued at N60,000.
(vi) Inter-departmental transfers were made at cost.
(vii) All expenses are to be allocated between Department X and Y in the proportion of two-thirds and one-third, respectively, except for carriage inwards which is to be apportioned on the basis of purchases.
(viii) Dividend received is to be treated as Head Office income.

You are required to prepare:
a. Departmental Statement of profit or loss showing Department X, Department Y, and Head Office separately for the year ended 30 June 2013.
b. The Head Office Statement of Financial Position as at that date.

Answer

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Tags: Departmental Accounts, Profit or Loss, Statement of Financial Position
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2014

CR – Nov 2020 – L3 – Q1i – Consolidated Profit or Loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for a parent, foreign subsidiary, and associate, accounting for goodwill impairment, disposal, and foreign currency translation.

Question

Bolga Ltd is a limited liability company in Ghana, which has investments in a number of other companies. The draft statements of profit or loss for Bolga Ltd and its other investments for the year ended April 30, 2020, are given below:

	Bolga Ltd	Navrongo Ltd	Serrekunda Ltd
Revenue	GH¢286,000	GH¢136,000	GMD840,000
Cost of sales	(GH¢122,000)	(GH¢84,000)	(GMD504,000)
Gross profit	GH¢164,000	GH¢52,000	GMD336,000
Distribution costs	(GH¢20,000)	(GH¢12,000)	(GMD56,000)
Administrative expenses	(GH¢46,000)	(GH¢20,000)	(GMD116,000)
Operating profit	GH¢98,000	GH¢20,000	GMD164,000
Investment income	GH¢2,000	GH¢4,000	–
Finance costs	(GH¢4,000)	(GH¢8,000)	(GMD12,000)
Profit before tax	GH¢96,000	GH¢16,000	GMD152,000
Income tax expenses	(GH¢22,000)	(GH¢4,000)	(GMD36,000)
Profit for the period	GH¢74,000	GH¢12,000	GMD116,000

Additional relevant information:
i) Bolga Ltd purchased 80% of Navrongo Ltd’s three million GH¢5 ordinary shares for GH¢12 million two years ago. At the acquisition date, the carrying value of Navrongo’s net assets was GH¢10 million, and this was deemed to be the same as their fair value. The non-controlling interest was measured using the proportion of net assets method. Goodwill on acquisition of Navrongo is not impaired. On 31 October 2019, Bolga Ltd sold one million, four hundred and forty thousand of its shares in Navrongo Ltd for GH¢13 million. The fair value of the interest retained was GH¢19 million. The retained earnings of Navrongo Ltd was GH¢5 million as at April 30, 2019. The only entry posted in Bolga Ltd’s individual financial statements was the GH¢13 million cash received. This was debited to the bank account and the credit posted to the suspense account.

ii) On 1 May 2019, Bolga Ltd acquired 60% of Serrekunda Ltd’s one million GMD1 ordinary shares for GMD284 million. Serrekunda is a Gambian-based company with Gambian Dalasi (GMD) as its currency. The non-controlling interest at acquisition was valued at GMD116 million using the fair value method. At 1 May 2019, the carrying amount of Serrekunda Ltd’s net assets was GMD240 million but the fair value was GMD280 million. The excess in the fair value was due to a brand with a remaining useful economic life of 5 years at the date of acquisition.

On 30 April 2020, it was determined that goodwill arising on the purchase of Serrekunda Ltd was impaired by GMD16 million. Goodwill impairments are charged as administrative expenses.

iii) On 28 February 2020, Navrongo Ltd paid a dividend of GH¢2 million to its ordinary shareholders.

iv) On 1 June 2019, Bolga Ltd started construction of a new building project and financed this out of its general borrowings. The construction was completed on 30 April 2020 at a total cost of GH¢20 million, excluding interest on borrowings. Bolga Ltd has had the following loans outstanding for the whole financial year:

10% bank loan: GH¢28,000
8% loan notes: GH¢12,000

All the interest for the year has been expensed to the statement of profit or loss. None of the loan notes are held by any other companies within Bolga Ltd.

v) On 1 November 2019, Bolga Ltd granted 20,000 share options to each of its 100 managers. These options will vest on 31 October 2021 if the managers are still employed. However, five managers had left the company by 30 April 2020, and it is expected that another five will leave by 31 October 2021. The fair value of the share options was GH¢3.10 on 1 November 2019, and GH¢10 on 30 April 2020. There have not been any accounting entries posted in relation to this scheme.

vi) The following exchange rates are relevant:

GMD: GH¢1
- May 1 2019: 10.0
- April 30 2020: 8.0
- Average for the year ended 30 April 2020: 9.2

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 April 2020.

Answer

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Tags: Associate, Consolidation, Disposal, Fair Value, Foreign subsidiary, Goodwill, Profit or Loss
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: NOV 2020

FA – Nov 2024 – L1 – Q1 – Partnership Financial Statements

Prepare the profit or loss and appropriation account and financial position statement for a partnership at retirement and admission of partners.

Question

Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.

The previous partnership trial balance as of 30 June 2024 was as follows:

Description	GH¢	GH¢
Capital accounts – Atsu		12,519
Capital accounts – Baba		65,844
Capital accounts – Chawe		33,618
Trade receivables	138,615
Inventories at 1 July 2023	6,000
Operating expenses	419,166
Investment	300
Bank overdraft		33,510
Trade payables		52,218
Revenue		565,296
Total	663,543	663,543

Additional Information:

Inventory remains at GH¢6,000.
Full provision is required for an irrecoverable debt of GH¢3,450.
Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
Dua introduced cash of GH¢22,500 to the partnership.

Answer

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Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: Nov 2024

CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

Question

a. Discuss the nature of a re-classification adjustment and the arguments for and against allowing re-classification of items to profit or loss. (6 Marks)

bi. Discuss the objectives of integrated reporting and key components (content elements) of integrated reports. (6 Marks)

ii. Comment on any concerns which could limit the Framework’s suitability for assessing the performance and prospects of an entity. (3 Marks)

Answer

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Tags: Conceptual Framework, Financial Statements, Integrated Reporting, OCI, Profit or Loss, Reclassification
Level: Level 3

Topic: Presentation of Financial Statements (IAS 1)

CR – Nov 2020 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated profit or loss, financial position, cash flow benefits explanation, and share disposal accounting for a group structure.

Question

Statements of financial position as at December 31, 2019

Statement of profit or loss for the year ended December 31, 2019

Statement of changes in equity (extract) for the year ended December 31,
2019

Additional Information:

Haba owns 80% of Suka‘s shares, purchased in 2016 for N20.5 million cash, when Suka’s retained earnings balance was N7 million.
In 2014, Haba purchased 60% of Zara‘s shares by issuing shares with a nominal value of ₦6.5 million at a premium of N6.5 million. At acquisition, Zara‘s retained earnings were N3 million, and the fair value of net assets was N24 million. Any undervaluation was attributed to land still held as of December 31, 2019.
Inventory at December 31, 2019, includes goods Zara and Suka purchased from Haba valued at ₦5.2 million and N3.9 million, respectively. Haba aims for a 30% profit margin on cost. Total sales from Haba to Zara and Suka were N8 million and N6 million, respectively.
Haba and Suka each proposed dividends before year-end of N2 million and N2.5 million, respectively. These have not been accounted for yet.
Haba conducted annual impairment tests on goodwill per IFRS 3 and IAS 36. The estimated recoverable amount of goodwill was N5 million in 2016 and N4.5 million in 2019.

Requirements:

a. Prepare the consolidated statement of profit or loss for the year ended December 31, 2019.
(10 Marks)

b. Prepare the consolidated statement of financial position as at December 31, 2019.
(10 Marks)

c. Explain the benefits to external users of including a statement of group cash flows in the annual report.
(10 Marks)

On January 1, 2020, Hard sold 80% of its Spark equity for N960 million cash, and the fair value of Hard’s remaining Spark shares is N100 million.

Required: Explain how the Spark share disposal should be accounted for in Hard Group’s consolidated financial statements.
(10 Marks)

Answer

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Tags: Cash Flow, Consolidation, Financial Position, Group Statements, Profit or Loss, Share Disposa
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Question

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

	2019		2018
	Blue Bull	Wiz-Cola	Blue Bull	Wiz-Cola
Revenue	235,000	1,570,000	250,000	1,250,000
Cost of sales	175,000	505,000	200,000	450,000
Admin. expenses	35,000	311,000	25,000	255,000
Distribution costs	20,000	186,500	10,000	157,500
Other operating	15,000	124,500	10,000	102,500
expenditure
Taxation expense	(3,000)	130,500	1,500	85,000

Additional Information:

Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Answer

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Tags: Additional Disclosures, Discontinued Operations, IFRS 5, Profit or Loss
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: MAY 2021

FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

Question

Olu Nigeria PLC has a subsidiary, Oba Limited, which it acquired on January 1, 2022. The financial statements of the companies are detailed below:

Statements of Profit or Loss for the year ended September 30, 2022

Additional Information:

Olu PLC acquired its 70% interest in Oba Limited through a share exchange of three shares in Olu PLC for every five shares in Oba Limited. At the acquisition date, the shares of Olu PLC were sold at ₦8.10 each on the Nigerian Exchange (NGX). The parent company has not recorded this share issue in its books.
At the acquisition date, the fair value of Oba Limited’s assets equaled their carrying amounts except for an item of plant, which had a fair value of N30,000,000 above its carrying amount. This fair value increase has not been adjusted in Oba Limited’s books. The plant’s remaining life at acquisition was five years.
During the year, Oba Limited transferred goods worth N40,000,000 to Olu PLC. These goods were invoiced at cost plus 25%, and only a quarter of them were sold by Olu PLC at year-end.
Included in the other income was N6,550,000 received from Oba Limited as interest paid on a loan granted by Olu PLC. The loan was fully repaid before September 30, 2022.
An impairment test revealed a goodwill impairment of N28,000,000 at the acquisition date.
It is the group’s policy to value non-controlling interests at fair value. The prevailing market price per ordinary share of Oba Limited at January 1, 2022, was ₦5.05.
The gain on the revaluation of property arose from an independent valuation of the group’s property in September 2022.
Administrative expenses of Oba Limited included N10,000,000 paid as management fees to Olu PLC, and the income has been duly recorded in Olu PLC’s books.
Income and expenses accrue evenly over the period.

Required:

a. Prepare the consolidated statement of profit or loss and other comprehensive income for Olu Group for the year ended September 30, 2022. (12 Marks)

b. Calculate the goodwill on acquisition and the non-controlling interest at the reporting date. (4 Marks)

c. IFRS 10 – Consolidated Financial Statements states that a parent must present consolidated financial statements for its investments in subsidiaries.

Required:
State FOUR exceptions to this pronouncement. (4 Marks)

Answer

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Tags: consolidated financial statements, Elimination of Intragroup Transactions, Fair Value, Goodwill, IFRS 10, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2023

FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

Question

The trial balance is as follows:

Description	Debit (N’m)	Credit (N’m)
Ordinary share capital		43,200
Revenue		125,280
Staff cost	18,720
Leasehold building	21,600
Patent rights	4,320
Work-in-progress (Jan 1, 2018)	9,000
Accum. Depreciation on building (Jan 1, 2018)		4,320
Inventories of finished goods (Jan 1, 2018)	11,160
Consultancy fee	3,168
Directors’ salaries	25,920
Computer at cost (Hardware)	3,600
Accum. Depreciation on computer (Jan 1, 2018)		1,440
Retained earnings (Jan 1, 2018)		8,712
Dividend paid	9,000
Cash and bank	31,680
Trade receivables	30,240
Trade payables		6,624
Sundry expenses	21,168
Totals	189,576	189,576

Additional information:

On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
The patent rights relate to a computer software with a 3-year life span.
An allowance for bad debts of 5% is to be created.
Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
Prepare a statement of financial position as at December 31, 2018. (6 Marks)

Answer

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Tags: Financial Statements, IAS 1, Profit or Loss, Revaluation, Statement of Changes in Equity, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2019

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Question

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item	N’000	N’000
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables		8,625
Inventories – finished goods – 31/12/18	276,750
Work-in-progress – 31/12/18	49,125
Inventories – raw materials at cost – 31/12/18	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings – 31/12/18		425,250
Patents and trademarks	323,250
Motor vehicle at cost	112,500
Freehold property at cost	375,000
Leasehold property at cost	112,500
Plant and equipment at cost	225,000
Furniture and fittings at cost	75,000
Amortisation of leasehold property – 31/12/18		22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment		102,750
– Furniture and fittings		23,625
– Motor vehicles		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
	4,183,500	4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

Raw materials: N168,900
Finished goods: N413,025
Work-in-progress: N56,700

Plant and equipment 8% on cost – charged to production
Furniture and fittings 10% on cost – charged to administration
Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

Answer

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Tags: Depreciation, Expenses, IAS 1, OCI, Profit or Loss, Revenue
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2020

FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

This question involves calculating the profit or loss on the disposal of a non-current asset.

Question

A non-current asset with an original cost of N500,000 and accumulated depreciation of N400,000 was disposed of for N80,000. Calculate the profit or loss on disposal.

Answer

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Tags: Asset Disposal, Profit or Loss
Level: Level 1

Topic: Depreciation Methods and Accounting for Disposals
Series: MAY 2013

FA – May 2014 – L1 – SB – Q6 – Accounting Concepts

Preparation of departmental profit or loss statement and head office statement of financial position.

Question

The following trial balance for the year ended 30 June 2013 was extracted from the books of Dapo Trading Enterprises which operates from the head office and two departments:

Answer

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Tags: Departmental Accounts, Profit or Loss, Statement of Financial Position
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2014

CR – Nov 2020 – L3 – Q1i – Consolidated Profit or Loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for a parent, foreign subsidiary, and associate, accounting for goodwill impairment, disposal, and foreign currency translation.

Question

	Bolga Ltd	Navrongo Ltd	Serrekunda Ltd
Revenue	GH¢286,000	GH¢136,000	GMD840,000
Cost of sales	(GH¢122,000)	(GH¢84,000)	(GMD504,000)
Gross profit	GH¢164,000	GH¢52,000	GMD336,000
Distribution costs	(GH¢20,000)	(GH¢12,000)	(GMD56,000)
Administrative expenses	(GH¢46,000)	(GH¢20,000)	(GMD116,000)
Operating profit	GH¢98,000	GH¢20,000	GMD164,000
Investment income	GH¢2,000	GH¢4,000	–
Finance costs	(GH¢4,000)	(GH¢8,000)	(GMD12,000)
Profit before tax	GH¢96,000	GH¢16,000	GMD152,000
Income tax expenses	(GH¢22,000)	(GH¢4,000)	(GMD36,000)
Profit for the period	GH¢74,000	GH¢12,000	GMD116,000

On 30 April 2020, it was determined that goodwill arising on the purchase of Serrekunda Ltd was impaired by GMD16 million. Goodwill impairments are charged as administrative expenses.

iii) On 28 February 2020, Navrongo Ltd paid a dividend of GH¢2 million to its ordinary shareholders.

10% bank loan: GH¢28,000
8% loan notes: GH¢12,000

All the interest for the year has been expensed to the statement of profit or loss. None of the loan notes are held by any other companies within Bolga Ltd.

vi) The following exchange rates are relevant:

GMD: GH¢1
- May 1 2019: 10.0
- April 30 2020: 8.0
- Average for the year ended 30 April 2020: 9.2

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 April 2020.

Answer

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Tags: Associate, Consolidation, Disposal, Fair Value, Foreign subsidiary, Goodwill, Profit or Loss
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: NOV 2020

Question Tag: Profit or Loss

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