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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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Kofi Badu, a sole trader, extracted the following Trial Balance from the business books as of 30 April 2019:
The following information is also relevant:
i) The closing inventory as at 30 April 2019 was valued at GH¢8,010.
ii) As at 30 April 2019, accrued rent income for the year amounted to GH¢420; heat and light accrued was GH¢260; whilst salaries of GH¢720 was paid in advance.
iii) During the year, Kofi Badu had withdrawn goods costing GH¢720 for his personal use. This had not been recorded in the accounts.
iv) New equipment costing GH¢2,650 was purchased during the year but had been mistakenly included in purchases. This is yet to be corrected.
v) A cheque for GH¢440 received from a customer in full settlement of a debt of GH¢450 has not yet been entered in the accounts.
vi) Allowance for doubtful debt is to be maintained at 2% of receivables.
vii) Depreciation is to be provided for as follows:
Required:
a) Prepare a statement of profit or loss for Kofi Badu for the year ended 30 April 2019.
(12 marks)
b) Prepare a statement of financial position for Kofi Badu as at 30 April 2019.
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On 30 June 2019, the accounting records of Kofi, a sole trader, were partly destroyed by fire. The following list of assets, liabilities, and equity as at 30 June 2018 is available:
| Assets, Liabilities, and Equity | Amount (GH¢) |
|---|---|
| Plant and equipment – cost | 200,000 |
| – Accumulated depreciation | 72,000 |
| Office fixtures– cost | 50,000 |
| – Accumulated depreciation | 5,000 |
| Inventory | 30,500 |
| Trade receivables and prepayments – Note (iv) | 35,000 |
| Trade payables and accrued expenses – Note (iv) | 17,600 |
| Bank overdraft | 8,850 |
| Loan (10% interest per annum) | 95,000 |
| Capital | 117,050 |
The following summary of receipts and payments for the year to 30 June 2019 has been extracted from the bank statements:
| Receipts | Amount (GH¢) |
|---|---|
| Capital introduced | 22,000 |
| From credit customers | 427,500 |
| Payments | Amount (GH¢) |
|---|---|
| Cash drawings – Note (v) | 22,450 |
| Loan repayments – Note (vii) | 20,000 |
| To credit suppliers | 175,600 |
| Rent | 22,000 |
| Wages | 90,000 |
| Office expenses | 12,500 |
In preparing the statement of profit or loss and statement of financial position at 30 June 2019, the following further information is relevant:
Notes
i) Inventory at 30 June 2019 was GH¢27,850.
ii) Depreciation is to be provided as follows:
Required:
Prepare Kofi’s statement of profit or loss for the year ended 30 June 2019 and a statement of financial position as at that date. Ignore taxation. (20 marks)
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The following balances were extracted from the books of Tudu Ltd on 31 December 2018.
Additional information:
Required:
a) Prepare the Statement of Profit or Loss for Tudu Ltd for the year ended 31 December 2018. (10 marks)
b) Prepare the Statement of Financial Position for Tudu Ltd as at 31 December 2018. (10 marks)
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The trial balance below was extracted from the ledger of Nhyiraba Ltd as at 31 December 2018.
The following additional information is provided:
i) Allowance is to be made for depreciation on the non-current assets on a straight-line method at the following rates:
ii) The value of land included in Land and Building is GH¢20,000,000.
iii) The following payments were made in advance:
iv) One year interest is due on the loan notes.
v) Provision for doubtful debt is to be adjusted so that it is 3% of trade receivables.
vi) Allowance is to be made for audit fees of GH¢3,600,000.
vii) Directors’ fees of GH¢4,500,000 were due at the year-end.
viii) The cost of closing inventories at 31/12/2018 was GH¢43,740,000. However, due to a market recession, the net realizable value of the goods is GH¢37,430,000.
ix) The directors have recommended a transfer of GH¢20,000,000 to the general reserve.
x) The year’s preference dividend is to be provided for.
xi) Current year income tax charged was GH¢9,630,000.
xii) Authorised share capital comprises:
Required:
a) Prepare Nhyiraba Ltd’s Statement of Profit or Loss for the year end 31 December 2018. (10 marks)
b) Prepare Nhyiraba Ltd’s Statement of Financial Position as at 31 December 2018. (10 marks)
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Question:
Bob and Sons prepares its financial statements to 31 December every year. At 31 December 2017, the company’s trial balance was as follows:
The following additional information is relevant:
i) Depreciation is to be provided as follows:
Required:
Prepare the Statement of Comprehensive Income for Bob and Sons for the year ended 31 December 2017 and the Statement of Financial Position as at 31 December 2017 in compliance with the provisions of International Financial Reporting Standards (IFRS). (20 marks)
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Sawaba Limited is a company involved in the construction and fitting of kitchens and wardrobes. The following trial balance was extracted from its books as at 31 October 2017:
The following information, based on your investigations, has also come to your attention:
i) Inventory as at 31 October 2017 was GH¢387,100.
ii) Depreciation is to be charged as follows:
Required:
Prepare a Statement of Profit or Loss Account and Statement of Financial Position for Sawaba Limited for the financial year-ending 31 October 2017. (20 marks)
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STL has been in business for a number of years. In the past year, she has been busy training for the Olympics and has not kept proper records for her business. She has given you some information.
The balances as at 1 May 2016 are as follows:
The balance on the bank statement at 30 April 2017 was GH¢1,144. There were no timing differences.
You are given the following additional information:
i) Closing inventory is valued at GH¢1,324.
ii) STL took goods which had a cost of GH¢96 and would have been sold for GH¢124 for her own personal use.
iii) A telephone bill was received on 7 July 2017 for GH¢75, this related to the quarter ended 30 June 2017.
iv) Rent includes GH¢1,000 paid on 1 January 2017 for the year to 31 December 2017.
v) STL takes GH¢60 every week out of the takings before banking them. She also spends GH¢20 every week on petrol for the company van.
vi) Depreciation is to be charged at 15% reducing balance.
vii) Closing trade receivables and payables were GH¢2,072 and GH¢967 respectively. However, one customer, Caroline, has vanished and her debt of GH¢575 is not likely to be paid.
viii) STL always keeps a cash float of GH¢50.
ix) STL makes sales to cash and credit customers. Customers taking credit always pay by cheque or bank transfer.
Required:
a) Prepare the statement of profit or loss for STL for the year ended 30 April 2017. (12 marks)
b) Prepare the statement of financial position for STL as at 30 April 2017. (8 marks)
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The ABSU Social Club prepares its accounts annually on 31st December. The Receipts and Payments Account for the year ended 31st December 2014 was prepared by the Treasurer as follows:
Receipts and Payments Account for the year ended 31st December 2014
Additional information:
i) The equipment sold during the year was valued in the books at GH¢600 on 1st January 2014. The Club’s policy is to provide a full year’s depreciation in the year of purchase but none in the year of sale.
ii) The savings account (short term) pays a fixed rate of interest of 5% per annum. An additional amount of GH¢400 was paid into the account on 1st July 2014. There were no withdrawals made during the year. Interest due on 31st December 2014 has not been received.
iii) The remaining assets and liabilities of the Club at the beginning and end of the year were:
| Description | 1st January 2014 | 31st December 2014 |
|---|---|---|
| Clubhouse | GH¢230,000 | GH¢230,000 |
| Equipment | GH¢26,000 | GH¢25,200 |
| Savings account (short term) | GH¢2,000 | GH¢2,400 |
| Insurance prepaid | GH¢100 | GH¢80 |
| Bar staff wages owing | GH¢180 | GH¢160 |
| Subscriptions due and unpaid | GH¢800 | GH¢300 |
| Subscriptions paid in advance | GH¢700 | GH¢1,000 |
| Bar payables | GH¢2,400 | GH¢1,400 |
| Bar inventory | GH¢7,500 | GH¢8,700 |
iv) All subscriptions due for the year 2013, but unpaid on 31st December 2014 are considered to be irrecoverable debts.
v) Bar staff wages are the only expense to be charged to the Bar Trading Account.
Required:
a) Prepare the Bar Trading Account for the year ended 31st December 2014. (5 marks)
b) Prepare the Income and Expenditure Account for the year ended 31st December 2014. (8 marks)
c) Prepare the Statement of Financial Position as at 31st December 2014. (7 marks)
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Agyakoo is a vehicle spare parts dealer in Aboisokai. He deposits his cash takings into his bank account after retaining GH¢2,000 per week for personal use and paying wages and other expenses. For the accounting period ending 31st December 2014, the following expenses were noted:
| Description | GH¢ |
|---|---|
| Staff wages | 1,440 |
| Cleaning | 1,200 |
| Sundry | 5,000 |
| Telephone | 600 |
| Rent | 10,000 |
| Electricity | 500 |
| Accountancy fees | 750 |
The following are his bank transactions:
| Description | GH¢ |
|---|---|
| Income Tax | 3,000 |
| Telephone | 600 |
| Bank Lodgments: | |
| Cash Sales | 30,100 |
| Bulk Sales (Cheques) | 95,000 |
| Treasury bill Interest | 5,000 |
| Payments to Suppliers | 110,000 |
| Rent | 10,000 |
| Electricity | 500 |
| Balance as at 1st January 2014 | 6,000 |
Additional Information:
| 01/01/2014 | 31/12/2014 | |
|---|---|---|
| Furniture & Fittings | 1,200 | 1,100 |
| Stocks in Trade | 10,500 | 7,650 |
| Payables – Goods Purchased | 1,670 | 2,750 |
| Payables – Rent | 5,000 | 6,000 |
| Payables – Electricity | 500 | 650 |
| Payables – Telephone | 150 | 200 |
| Accountancy Fee | – | 750 |
| Treasury Bills | 10,000 | 10,000 |
| Receivables – Bulk Sales | 8,000 | 15,000 |
You are required to:
i. Prepare an Income Statement for the year ending 31st December 2014. (10 marks)
ii. Prepare a Statement of Affairs as at 1st January 2014. (2 marks)
iii. Prepare a Statement of Financial Position as at 31st December 2014. (8 marks)
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