- 30 Marks
Question
GBENGANIG Plc. Trial balance as at December 31, 2015 is shown below:
| Account | Debit (N) | Credit (N) |
|---|---|---|
| Revenue | 2,290,125 | |
| Administrative expenses | 237,150 | |
| Selling and distribution expenses | 175,200 | |
| Legal and professional expenses | 81,150 | |
| Allowance for receivables – 31/12/15 | 8,625 | |
| Inventories – finished goods – 31/12/14 | 276,750 | |
| Work-in-progress – 31/12/14 | 49,125 | |
| Inventories – raw materials at cost-31/12/14 | 162,600 | |
| Purchases – raw materials | 1,125,900 | |
| Carriage inwards – raw materials | 15,750 | |
| Manufacturing wages | 375,000 | |
| Manufacturing overheads | 187,500 | |
| Authorized and issued 900,000 ordinary shares of N0.50 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-31/12/14 | 425,250 | |
| Patents and trademarks | 323,250 | |
| Freehold property at cost | 375,000 | |
| Leasehold property at cost | 112,500 | |
| Amortization of leasehold property – 31/12/14 | 22,500 | |
| Plant and equipment at cost | 225,000 | |
| Accumulated depreciation – plant and equipment – 31/12/14 | 102,750 | |
| Furniture and fittings at cost | 75,000 | |
| Accumulated depreciation – furniture and fittings – 31/12/14 | 23,625 | |
| Motor vehicles at cost | 112,500 | |
| Accumulated depreciation – motor vehicles 31/12/14 | 37,500 | |
| 10% loan notes | 150,000 | |
| Trade payables | 146,250 | |
| Trade receivables | 266,445 | |
| Bank overdraft | 76,875 | |
| Cash | 7,680 | |
| Total | 4,183,500 | 4,183,500 |
Additional Information:
- A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
- Inventories at December 31, 2015 were:
- Raw materials: N168,900
- Finished goods: N413,025
- Work-in-progress: N56,700
- Legal and professional expenses include solicitor’s fees of N7,500 for the purchase of new freehold land.
- Provision is to be made for a full year’s interest on the loan notes.
- The leasehold land and buildings have an unexpired life of 40 years as of December 31, 2014.
- Depreciation for the year is charged as follows:
- Plant and equipment at 8% on cost (production)
- Furniture and fittings at 10% on cost (administration)
- Motor vehicles at 20% on carrying amount (25% to administration and 75% to selling/distribution).
- Income tax for the year is estimated at N68,900.
- A dividend of N2.25 per ordinary share is recommended by the directors. No dividend was paid in the prior year.
Required:
a. Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2015.
b. Prepare a statement of financial position as at December 31, 2015, in accordance with International Financial Reporting Standards.
Answer
Gbenga Nig. Plc. Statement of Profit or Loss and Other Comprehensive Income for the Year Ended December 31, 2015
| Item | Note | Amount (N) |
|---|---|---|
| Revenue | 2,290,125 | |
| Cost of Sales | 1 | (1,572,000) |
| Gross Profit | 718,125 | |
| Less Expenses: | ||
| Administrative expenses | 2 | 324,300 |
| Selling and distribution expenses | 3 | 186,450 |
| Finance cost | 4 | 27,600 |
| Total Expenses | (538,350) | |
| Profit before taxation | 179,775 | |
| Income tax expense | (68,900) | |
| Profit for the year | 110,875 | |
| Other comprehensive income | ||
| Items that cannot be reclassified to profit or loss: | ||
| Gain on revaluation of freehold property | 20,000 | |
| Total comprehensive income | 130,875 | |
| EPS | N0.12 (12 kobo) |
Gbenga Nig. Plc. Statement of Financial Position as at December 31, 2015
| Item | Note | Amount (N) |
|---|---|---|
| Assets | ||
| Non-Current Assets: | ||
| Property, Plant, and Equipment | 5 | 698,375 |
| Patents and trademarks | 323,250 | |
| Total Non-Current Assets | 1,021,625 | |
| Current Assets: | ||
| Inventories | 6 | 638,625 |
| Trade receivables (N266,445 – 8,625) | 257,820 | |
| Cash and cash equivalents | 7,680 | |
| Total Current Assets | 904,125 | |
| Total Assets | 1,925,750 | |
| Equity and Liabilities | ||
| Equity: | ||
| Authorized and issued 900,000 ordinary shares of 50k each | 450,000 | |
| Share premium | 150,000 | |
| Revaluation surplus (N65,000 + 20,000) | 85,000 | |
| General Reserve | 85,000 | |
| Retained earnings (N425,250 + 130,875) | 536,125 | |
| Total Equity | 1,306,125 | |
| Non-Current Liabilities: | ||
| 10% loan notes | 150,000 | |
| 8.4% cumulative preference shares of N1 each | 150,000 | |
| Current Liabilities: | ||
| Trade payables | 146,250 | |
| Income tax expense | 68,900 | |
| Bank overdraft | 76,875 | |
| Interest on loan | 15,000 | |
| Preference shares dividend | 12,600 | |
| Total Current Liabilities | 319,625 | |
| Total Equity and Liabilities | 1,925,750 |
Notes/Workings:
- Cost of Sales:
- Calculated cost elements related to raw materials, manufacturing wages, overheads, and inventory adjustments based on the trial balance.
- Administrative Expenses:
- Includes legal and professional expenses minus any fees related to the acquisition of freehold property.
- Selling and Distribution Expenses:
- Allocated based on the specifics of transport and carriage as given in the data.
- Finance Cost:
- Full year’s interest calculated on the 10% loan notes.
- Depreciation and Carrying Amounts:
- Property, Plant, and Equipment Schedule – includes freehold property, plant, and equipment, furniture and fittings, and motor vehicles.
- Inventories:
- Closing inventory based on specific values for raw materials, work-in-progress, and finished goods.
- Earnings Per Share (EPS):
- Calculated as N110,875 / 900,000 shares = 0.12 or 12 kobo.
- Dividend:
- An ordinary dividend of N2.25 per share is proposed.
- Tags: Financial Position, IAS Compliance, Profit or Loss Statement, Trial Balance
- Level: Level 2
- Topic: Presentation of Financial Statements (IAS 1)
- Series: MAY 2016
- Uploader: Kwame Aikins