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Fahnbulleh LTD (Fahnbulleh) is a well-known company manufacturing thrill rides. During the current economic climate, Fahnbulleh has experienced some difficulties and has had to close down its Merry Go Round division.
The company’s trial balance as at 31 October 2023 is as follows:
| Account Description | Dr (GH¢’000) | Cr (GH¢’000) |
|---|---|---|
| Revenue | 1,296,000 | |
| Cost of Sales | 546,480 | |
| Distribution Costs | 127,080 | |
| Administrative Expenses | 142,560 | |
| Investment Income | 28,080 | |
| Investment Property | 270,000 | |
| Interest Paid | 17,280 | |
| Income Tax | 10,800 | |
| Property, Plant & Equipment (PPE) – Carrying Value at 1 Nov 2022 | 1,620,000 | |
| Inventories (31 October 2023) | 108,000 | |
| Trade Receivables | 135,000 | |
| Bank | 64,800 | |
| Payables | 43,200 | |
| Deferred Tax (1 Nov 2022) | 75,600 | |
| 8% Loan Note | 432,000 | |
| Ordinary Share Capital (GH¢1 per share) | 540,000 | |
| Retained Earnings (1 Nov 2022) | 605,520 | |
| Totals | 3,031,200 | 3,031,200 |
Revenue Adjustments:
Property, Plant & Equipment (PPE):
Closure of the Merry Go Round Division (Discontinued Operations):
| Item | GH¢’000 |
|---|---|
| Revenue | 58,800 |
| Cost of Sales | 38,700 |
| Distribution Costs | 12,240 |
| Administrative Expenses | 11,880 |
Investment Property Revaluation (IAS 40):
Income Tax and Deferred Tax (IAS 12):
Damaged Inventory (IAS 2):
Required:
Prepare and present the Statement of Comprehensive Income for the year ended 31 October 2023 and the Statement of Financial Position as at 31 October 2023 for Fahnbulleh LTD.
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The following list of assets, liabilities, and equity as at 30 June 2023 was extracted from the books of Akuorkor, a sole trader:
| 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 |
| 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 |
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.
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Yusuf Olatunji & Co., (Chartered Accountants) have been auditors to XBC Bank Limited. There has been some regulatory and compliance issues for which the bank was sanctioned and paid penalties to both the Central Bank of Nigeria and the Financial Reporting Council of Nigeria. At the board of directors meeting to consider the last annual report audited by the firm, some of the problems caused by the auditors were raised. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm. To achieve their objective, a bigger firm that has international affiliation was considered to take a leading position in a joint audit arrangement and to ensure appropriate compliance.
Your firm has been approached for the appointment. A meeting was scheduled between your firm, Yusuf Olatunji & Co., and the executive management of the bank. In preparation for the meeting, you are informed that you will address the meeting on the advantages and disadvantages of joint audit, being an area some members of the management team have expressed concerns.
After the meeting, your firm was subsequently appointed, and the necessary formalities were properly followed. Your partner has directed that you liaise with Yusuf Olatunji & Co. to obtain the necessary materials for the preparation of the audit and that you review your firm’s audit manual with respect to the concerns of management on joint audit.
Your assessment of the documents obtained from the other auditor revealed the following, amongst others:
Required:
a. Evaluate the advantages and disadvantages of joint audit. (8 Marks)
b. Prepare an agenda for the scheduled meeting between the two audit firms. (4 Marks)
c. Develop the appropriate audit approach to address each of the issues identified from the review of the documents obtained from Yusuf Olatunji & Co. (8 Marks)
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IAS 1- Presentation of Financial Statements provides a list of line items that, as a minimum, must be shown on the face of the statement of financial position.
Required:
i. Give FIVE examples of minimum line items to be shown on the face of the statement of financial position. (5 Marks)
ii. State FIVE items that should be accounted for in the statement of changes in equity. (5 Marks)
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Despite the global recession, demand for the company’s products has recently increased and is expected to grow over the next two years.
As part of a recent strategic review, the directors made the following projections for the years ending March 31, 2018, and March 31, 2019:
Financial Statement Extracts (March 31, 2017):
Assume today is April 1, 2017.
a. Prepare a Forecast Financial Statement (Income Statement, Statement of Financial Position, and Cash Flow Statement) for each of the years ending March 31, 2018, and March 31, 2019.
(24 Marks)
Note: All calculations should be rounded up to the nearest N’000.
b. Beyond March 31, 2019, the directors are considering the disposal of a smaller subsidiary due to poor performance. The Finance Director suggests avoiding liquidation to minimize industrial relations issues.
Required: Discuss three non-liquidation methods to divest the subsidiary.
(6 Marks)
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The following information has been extracted from the books of Egbin Electricity Board, a public sector-owned electricity generating company, for the year ended December 31, 2014:
| Item | N’000 |
|---|---|
| Accumulated Depreciation, January 1, 2014 | 45,224 |
| Sale of Electricity | 114,392 |
| Purchase of Electricity | 95,784 |
| Meter reading, billing, and collection | 1,624 |
| Non-Current Assets Expenditure | 84,102 |
| Debtors for electricity consumption | 12,006 |
| Training and welfare | 692 |
| Stock and work-in-progress | 1,234 |
| Rents, Rates, and Insurance | 2,126 |
| Electricity Estimated unread consumption | 7,222 |
| Administration and General Expenses | 1,476 |
| Electricity Council Grant | 21,556 |
| Preparation of Electricity Council’s Expenses | 362 |
| Bank Balance and Cash | 1,284 |
| Depreciation for the year | 3,634 |
| Hire purchase and deferred payment | 2,672 |
| Interest and Financing Expenses | 2,434 |
| Creditors and accrued liabilities | 13,926 |
| Profit on contracting and sale of appliance poles | 534 |
| Reserves | 23,116 |
| Rental of Meters Application | 556 |
| Distribution cost | 4,476 |
| Customer Service | 1,810 |
Required:
Prepare in vertical form the Statement of Financial Performance and Statement of Financial Position for Egbin Electricity Board for the year ended December 31, 2014.
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a. The Conceptual Framework for Financial Reporting sets out the concepts that underlie the preparation and presentation of financial statements and considers the various users of these financial statements.
Required:
Identify and discuss the information needs of the different users of financial statements. (10 Marks)
b. The Companies and Allied Matters Act (CAMA) 2020 is the primary source of company law that establishes the requirements for financial reporting by all companies in Nigeria.
Required:
Briefly explain FIVE issues that must be contained in a directors’ report in accordance with CAMA 2020. (5 Marks)
c. Babanriga Nigeria Limited acquired a factory machine for N10 million on January 1, 2019. The machine had an estimated life and residual value of 10 years and N2 million, respectively, and is depreciated on a straight-line basis. In lieu of depreciation, the tax authority allows a tax expense of 40% of the cost of this type of machine to be claimed against income tax in the year of purchase, with 25% per annum of its tax base subsequently on a reducing balance basis. The prevailing company income tax rate is 30%.
Required:
Calculate the deferred tax charge or credit which will be recorded in Babanriga Nigeria Limited’s Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2021, and the deferred tax balance in the Statement of Financial Position at that date. (5 Marks)
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Endtime PLC is a company based in Benin with the following trial balance for the year ended December 31, 2020:
Additional Information:
(i) Finance costs include full year dividends on preference shares and ordinary share dividends of 2½ kobo paid at the end of the year. Allowances for 4 doubtful debts are no longer necessary as customers paid as at when due from time to time in the past 2 years.
(ii) Severely damaged inventories, which cost N790,000,000 were included in the inventories in the trial balance. This will need to be repaired at a cost of N440,000,000 before a knowledgeable buyer will be interested to pay N940,000,000 at arm’s length transaction.
(iii) As at December 31, 2020, a valuer based in Victoria Island in Lagos was contacted by the company to review its land and buildings. The land and buildings was revalued upward by N13,000,000,000 and a certificate was issued to this effect. The board of directors approved the valuation but it has
not yet been accounted for in the trial balance. The valuer advised that the remaining useful life of the asset is reasonably and reliably estimated to be 20 years. Depreciation is on straight-line basis.
(iv) Depreciation on plant and equipment is charged at 15% on reducing balance basis. The multi-users S&P and Sage was bought on September 30, 2020. The amortisation is at the rate of 12.5% annually. The amortisation is evenly distributed over the year. Besides, software installation, customisation and
handling cost of N800,000,000, training costs of N900,000,000, consultancy fee of N600,000,000 and other general overheads of N850,000,000 on the new software were included in administrative expenses. All depreciations are treated as administrative costs.
(v) On December 30, 2020, a chartered surveyor valued investment property at N14,000,000,000 and the company uses fair value model in IAS 40 – Investment Property.
(vi) Current income tax has been estimated for the year ended December 31, 2020 at N9,000,000,000 and deferred tax provision as at December 31, 2020 is to be adjusted in the income statement to reflect the tax base of the company’s net assets of N12,000,000,000 less than the carrying amounts. The current
company income tax rate is 30%.
vii) The plant held for sale is valued in the trial balance at its carrying amount. A broker is readily available to buy the plant for N6,000,000,000 at a fee of 6% of sales proceed. The sale would take place in January, 2021. Any necessary adjustment is to be treated as cost of sales.
You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended December 31, 2020. (13 Marks)
b. Statement of changes in equity for the year ended December 31, 2020. (4 Marks)
c. Statement of financial position as at December 31, 2020. (13 Marks)
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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:
Required:
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b. Emeka has been in business as a Japan spare part dealer. The last statement of financial position of his business as at September 30, 2019, is given below:
| N’000 | N’000 | |
|---|---|---|
| Equity | ||
| Capital | 1,000 | |
| Retained earnings | 130 | |
| 1,130 | ||
| Drawings | (60) | |
| 1,070 | ||
| Non-current assets: | ||
| PPE | 1,100 | |
| Current assets: | ||
| Inventories | 190 | |
| Trade payables | 40 | |
| Bank | 45 | |
| 1,375 | 1,375 |
On October 1, 2019, he agreed with Bode to join him, and the new business will trade under the name and style EmBo Ventures.
Terms of the new business:
Required:
Prepare for EmBo Ventures: i. Revaluation account (5 Marks)
ii. Partners’ capital accounts (5 Marks)
iii. Statement of financial position as at October 1, 2019 (5 Marks)
(Total: 15 Marks)
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Which of the following is NOT a component of financial statements under IAS 1?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of equity
D. Statement of changes in equity
E. Statement of cash flows
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The trial balance for United Nigeria Plc as at December 31, 2020 is given below:
Additional information:
You are required to prepare the following:
a. (i) Statement of Comprehensive Income for United Nigeria Plc for the year ended December 31, 2020. (10 Marks)
(ii) Statement of Changes in Equity for the year ended December 31, 2020. (5 Marks)
(iii) Statement of Financial Position as at December 31, 2020. (10 Marks)
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The balances extracted from the accounting records of Disney Social Club in respect of its subscriptions are as follows:
How would the figure in brackets at 31 December 2011 be classified in the Statement of Financial Position?
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Mr. Pamona owns a corner shop in Lagos. On 30 December 2012, vandals looted his shop, stole all his inventories and cash of ₦75,000. Mr. Pamona was fully insured against theft and he has asked you to prepare his accounts to enable him estimate his insurance claim. Your investigation revealed the following:
i. Net assets on 1 January 2012:
ii. Bank statements for nine months from 1 January 2012 show the following:
Receipts:
Payments:
iii. The following were paid in cash from the till:
iv. Mr. Pamona’s gross profit margin on sales has averaged 20% in recent years.
v. The furniture and fittings are now estimated to be worth only ₦200,000.
vi. A cheque for ₦52,000 in respect of the telephone bill for the quarter ended 30 September 2012 was not shown in the bank statements until 3 October 2012.
vii. Rates for the period 1 April to 1 October, 2012, amounting to ₦75,000 were still outstanding.
viii. Trade receivables and payables were ₦270,000 and ₦1,900,000 respectively on 30 September 2012.
You are required to prepare Mr. Pamona’s:
a. Statement of Profit or Loss for the nine-month period ended 30 September 2012. (10 Marks)
b. Statement of Financial Position as at that date. (5 Marks)
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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.
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The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:
| Item | N’000 |
|---|---|
| Share capital, authorised and issued | 200,000 |
| Cash at bank and in hand | 500 |
| Inventory at December 31, 2014 | 61,200 |
| Trade receivables | 18,005 |
| Trade payables | 15,009 |
| Gross profit at December 31, 2014 | 128,942 |
| Retained earnings | 25,000 |
| Salaries & Wages | 28,430 |
| Prepayments | 600 |
| Bad debts | 500 |
| Accrued expenses | 526 |
| Director’s account (credit) | 2,500 |
| Finance cost on loan note | 600 |
| Sundry expenses | 4,100 |
| Rates & insurance | 1,520 |
| 6% Loan notes | 20,000 |
| Lighting & cooling | 1,310 |
| Postage, telephone and telegrams | 800 |
| Motor vehicle (cost N25 million) | 15,000 |
| Office fittings and equipment | 42,350 |
| Profit at January 1, 2014 | 22,300 |
| Land and buildings at cost | 239,362 |
The following additional information is relevant:
Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)
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You are provided with the following statement of financial position for Ajakaye Limited and Ajalorun Limited.
| Statement of Financial Position as at 31 March 2019 | Ajakaye Ltd (₦’000) | Ajalorun Ltd (₦’000) |
|---|---|---|
| Non-current assets | ||
| Property, Plant & Equipment | 367,500 | 84,000 |
| Investment | 140,000 | – |
| Total non-current assets | 507,500 | 84,000 |
| Current assets | ||
| Inventory at cost | 154,000 | 49,000 |
| Trade receivables | 101,500 | 73,500 |
| Bank balance | 70,000 | – |
| Total current assets | 325,500 | 122,500 |
| Total assets | 833,000 | 206,500 |
| Equity and liabilities | ||
| Ordinary shares at ₦1 each | 490,000 | 119,000 |
| Retained earnings | 150,500 | 35,000 |
| Total equity | 640,500 | 154,000 |
| Current liabilities | ||
| Trade payables | 192,500 | 38,500 |
| Bank overdraft | – | 14,000 |
| Total current liabilities | 192,500 | 52,500 |
| Total equity and liabilities | 833,000 | 206,500 |
Additional Information:
Required:
Prepare the consolidated statement of financial position of Ajakaye Group Ltd as at 31 March 2019.
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