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- 20 Marks
FR – L2 – Q92 – Consolidated Financial Statements
Prepare consolidated financial statements for Henks Plc, including profit or loss, changes in equity, and financial position for 20X4.
Question
HENKS PLC
Statements of financial position as at 31 December 20X4
| Henks Plc GH₵000 | Streen Ltd GH₵000 | Scote Ltd GH₵000 | |
|---|---|---|---|
| Non-current assets | |||
| Property, plant and equipment | 32,000 | 25,000 | 20,000 |
| Investments | 33,500 | – | – |
| 65,500 | 25,000 | 20,000 | |
| Current assets | |||
| Cash at bank and in hand | 9,500 | 2,000 | 4,000 |
| Trade receivables | 20,000 | 8,000 | 17,000 |
| Inventory | 30,000 | 18,000 | 18,000 |
| 59,500 | 28,000 | 39,000 | |
| 125,000 | 53,000 | 59,000 | |
| Share capital | 46,500 | 10,000 | 15,000 |
| Retained earnings | 55,000 | 37,000 | 27,000 |
| 101,500 | 47,000 | 42,000 | |
| Current liabilities | 23,500 | 6,000 | 17,000 |
| 125,000 | 53,000 | 59,000 |
Statement of profit or loss for the year ended 31 December 20X4
| Henks Plc GH₵000 | Streen Ltd GH₵000 | Scote Ltd GH₵000 | |
|---|---|---|---|
| Revenue | 125,000 | 117,000 | 82,000 |
| Cost of sales | (65,000) | (64,000) | (42,000) |
| Gross profit | 60,000 | 53,000 | 40,000 |
| Distribution and administrative costs | (35,000) | (22,000) | (23,000) |
| Profit before taxation | 25,000 | 31,000 | 17,000 |
| Income tax expense | (10,000) | (9,000) | (5,000) |
| Profit after tax | 15,000 | 22,000 | 12,000 |
Statement of changes in equity (extract) for the year ending 31 December 20X4
| Henks Plc GH₵000 | Streen Ltd GH₵000 | Scote Ltd GH₵000 | |
|---|---|---|---|
| Retained earnings brought forward | 40,000 | 15,000 | 15,000 |
| Retained profit for the financial year | 15,000 | 22,000 | 12,000 |
| Dividends | – | – | – |
| Retained earnings carried forward | 55,000 | 37,000 | 27,000 |
You are given the following additional information.
(1) Henks Plc owns 80% of Streen Ltd’s shares. These were purchased in 20X1 for GH₵20.5 million cash, when the balance on Streen Ltd’s retained earnings stood at GH₵7 million.
(2) Five years ago, Henks Plc purchased 60% of the shares of Scote Ltd by the issue of shares with a market value of GH₵13 million. At that date, the retained earnings of Scote Ltd stood at GH₵3 million and the fair value of the net assets of Scote Ltd was GH₵24 million. It was agreed that any undervaluation of the net assets should be attributed to land. This land was still held at 31 December 20X4.
(3) Included in the inventory of Scote Ltd and Streen Ltd at 31 December 20X4 are goods purchased from Henks Plc for GH₵5.2 million and GH₵3.9 million, respectively. Henks Plc aims to earn a profit of 30% on cost. Total sales from Henks Plc to Scote Ltd and to Streen Ltd were GH₵8 million and GH₵6 million, respectively.
(4) Henks Plc and Streen Ltd each proposed a dividend before the year end of GH₵2 million and GH₵2.5 million, respectively. No accounting entries have yet been made for these.
(5) Henks Plc has conducted annual impairment tests on goodwill in accordance with IFRS 3 and IAS 36. The estimated recoverable amount of goodwill at 31 December 20X1 was GH₵5 million and at 31 December 20X4 was GH₵4.5 million.
Required
Prepare the consolidated statement of profit or loss and consolidated statement of changes in equity for the year ended 31 December 20X4 and the consolidated statement of financial position at that date.
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- 10 Marks
FR – L2 – Q88 – Business Combinations
Prepare Haven Ltd's consolidated statement of profit or loss and retained earnings movement for 20X4, adjusting for intercompany sales and dividends.
Question
Haven Ltd
The following are the statement of profit or loss for the year ended 31 December 20X4 of Haven Ltd and its subsidiary Seren Ltd.
| Haven Ltd GH¢’000 | Seren Ltd GH¢’000 | |
|---|---|---|
| Revenue | 1,120 | 390 |
| Cost of sales | (610) | (220) |
| Gross profit | 510 | 170 |
| Distribution costs | (50) | (40) |
| Administration costs | (55) | (45) |
| Operating profit | 405 | 85 |
| Investment income | 20 | 4 |
| Finance costs | (18) | (4) |
| Profit before tax | 407 | 85 |
| Income tax expense | (140) | (25) |
| Profit for the year | 267 | 60 |
| Retained profit brought forward | 100 | 45 |
| Profit for year | 267 | 60 |
| Dividends paid and proposed | (50) | (20) |
| Retained profit carried forward | 317 | 85 |
The following information is relevant.
(1) Haven Ltd acquired 75% of Seren Ltd six years ago when Seren Ltd’s retained earnings were GH¢9,000.
(2) Haven Ltd made sales to Seren Ltd totalling GH¢100,000 in the year. At the year end the statement of financial position of Seren Ltd included inventory purchased from Haven Ltd. Haven Ltd had taken a profit of GH¢3,000 on this inventory.
(3) Haven Ltd’s investment income includes GH¢15,000 being its share of Seren Ltd’s dividends.
Required
Prepare a consolidated statement of profit or loss and a working showing the movement on consolidated retained profit for the year ended 31 December 20X4.
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- 12 Marks
FR – L2 – Q81 – Business Combinations
Prepare PrimeCare Ltd's consolidated statement of financial position as at 31 December 20X4, including Frost Ltd, with adjustments for dividends and cash in transit.
Question
PRIME CARE LTD
The following are the draft statements of financial position of PrimeCare Ltd and its subsidiary Frost Ltd as at 31 December 20X4.
| PrimeCare Ltd | GH¢000 | Frost Ltd | GH¢000 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 100,000 | 68,000 | |
| Investments | 68,000 | ||
| Current assets | |||
| Cash | 11,000 | 2,000 | |
| Trade receivables | 72,600 | 19,100 | |
| Frost Ltd current account | 3,200 | ||
| Inventory | 17,000 | 11,000 | |
| 271,800 | 100,100 | ||
| Equity and liabilities | |||
| Shareholders’ equity | |||
| Share capital | 120,000 | 60,000 | |
| Retained earnings | 91,900 | 16,000 | |
| Capital reserve | 23,000 | 7,000 | |
| Current liabilities | |||
| PrimeCare Ltd current account | 3,200 | ||
| Trade payables | 33,900 | 12,900 | |
| Proposed dividend | 3,000 | 1,000 | |
| 271,800 | 100,100 |
Notes
(1) Frost Ltd has 50,000 shares in issue. PrimeCare Ltd acquired 45,000 of these on 1 January 20X1 for a cost of GH¢65,000,000 when the balances on Frost Ltd’s reserves were:
- Capital reserve: 20,000
- Retained earnings: 10,000
(2) PrimeCare Ltd declared a dividend of GH¢3,000,000 before the year end and Frost Ltd declared one of GH¢2,000,000. These transactions have been approved by the shareholders but have not been accounted for.
(3) The current account difference is due to cash in transit.
Required
Prepare the consolidated statement of financial position as at 31 December 20X4 of PrimeCare Ltd.
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- 20 Marks
FR – L2 – Q73 – Statement of Cash Flows
Prepare a cash flow statement for Fellon Plc for 20X4 using IAS 7, based on provided financial data and additional information.
Question
Fellon Plc has prepared the following rough draft accounts for the year ended 31 December 20X4.
Statement of profit or loss
| GH₵’000 | |
|---|---|
| Revenue | 11,563 |
| Cost of sales | (5,502) |
| Gross profit | 6,061 |
| Distribution costs | (402) |
| Administration expenses | (882) |
| Interest payable | (152) |
| Operating profit before tax | 4,625 |
| Taxation (35%) including deferred tax | (1,531) |
| Profit after tax | 3,094 |
| Dividends | (700) |
| Retained profit | 2,394 |
Statements of financial position
| 31 December 20X4 GH₵’000 | 31 December 20X3 GH₵’000 | |
|---|---|---|
| Non-current assets | ||
| Property, plant and equipment | 10,380 | 9,108 |
| Current assets | ||
| Inventories | 2,208 | 1,314 |
| Trade receivables | 1,986 | 1,392 |
| Investments | 1,992 | 2,190 |
| Cash at bank and in hand | – | 576 |
| 6,186 | 5,472 | |
| Total assets | 16,566 | 14,580 |
| Equity and liabilities | ||
| Equity | ||
| Share capital | 4,392 | 3,600 |
| Retained earnings | 6,714 | 4,320 |
| 11,106 | 7,920 | |
| Non-current liabilities | ||
| Long-term loans | 1,240 | 1,800 |
| Deferred repairs provision | 702 | 516 |
| 1,942 | 2,316 | |
| Current liabilities | ||
| Trade payables | 2,038 | 1,714 |
| Bank overdraft | 222 | – |
| Taxation | 1,258 | 2,630 |
| 3,518 | 4,344 | |
| Total equity and liabilities | 16,566 | 14,580 |
The following data is relevant.
(1) The 10% long-term loan was redeemed at par.
(2) Plant and equipment with a written down value of GH₵276,000 was sold for GH₵168,000. New plant was purchased for GH₵2,500,000.
(3) Buildings costing GH₵1,300,000 were acquired during the year.
(4) The investments are highly liquid securities held for the short term.
Required
Prepare the cash flow statement and supporting notes in accordance with IAS 7 for Fellon Plc for 20X4.
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- 20 Marks
FM – L2 – Q120 – Corporate Restructuring
Discuss advantages of management buy-outs and features of share repurchases and splits, including their effects on share price vs. dividends.
Question
(a) Briefly discuss the potential advantages of management buy-outs.
(b) Discuss the main features of the following and explain why companies might use them:
(i) corporate share repurchases (buy-backs); and
(ii) share (stock) splits;
Include in your discussion comment on the possible effects on share price of share repurchases and share (stock) splits in comparison to the payment of dividends.
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- 20 Marks
FA – L1 – Q102 – Statement of cash flows
Prepare a statement of cash flows for ZA Ltd for the year ended 31 May 20X9 using the indirect method per IAS 7.
Question
The statements of financial position for the last two years for ZA Ltd are shown below. ZA Ltd implemented an expansion programme during the year ended 31st May 20X9.
| 20X8 | 20X9 | |||
|---|---|---|---|---|
| GH¢ | GH¢ | GH¢ | GH¢ | |
| Non-current assets (net) | 380,000 | 530,000 | ||
| Current assets | ||||
| Inventory | 80,000 | 108,000 | ||
| Receivables | 32,000 | 37,000 | ||
| Bank | 13,000 | – | ||
| Cash | 1,000 | 3,000 | ||
| Total assets | 506,000 | 678,000 | ||
| Current liabilities | ||||
| Payables | 26,000 | 30,000 | ||
| Corporation Tax | 22,000 | 28,000 | ||
| Overdraft | – | 5,000 | ||
| Dividends | – | 21,000 | ||
| Accruals | – | 4,000 | ||
| Total liabilities | 68,000 | 88,000 | ||
| Capital and Reserves | ||||
| Ordinary shares | 350,000 | 490,000 | ||
| General reserve | 62,000 | 62,000 | ||
| Revaluation reserve | – | 10,000 | ||
| Retained earnings | 26,000 | 28,000 | ||
| Total capital and liabilities | 506,000 | 678,000 |
Additional information:
(i) The total depreciation provision incorporated in the statements of financial position was GH¢48,000 at 31st May 20X8 and GH¢122,000 at 31st May 20X9.
(ii) During the year ended 31st May 20X9 a non-current asset costing GH¢22,000 with a carrying amount of GH¢6,000 was sold for GH¢1,000. No other disposals took place.
(iii) The revaluation surplus represents a revaluation of premises during the year ended 31st May 20X9.
Required:
(a) Prepare a statement of cash flows for ZA Ltd for the year ended 31st May 20X9 in accordance with IAS 7. (Use the indirect method).
(b) State the effects of the expansion policy on ZA Ltd.
Answer:
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- 20 Marks
FA – L1 – Q100 – Statement of cash flows
Prepare a statement of cash flows for SpicyFlare Limited for the year ended 31 December 20X9 using provided financial data.
Question
SpicyFlare Limited
SpicyFlare Limited summarised final accounts are as follows:
Statements of financial position
| 31 December 20X8 | 31 December 20X8 | ||
|---|---|---|---|
| GH¢000 | GH¢000 | GH¢000 | |
| Non-current assets: | |||
| Plant and machinery at cost | 2,700 | ||
| Accumulated depreciation | (748) | ||
| Carrying amount | 1,952 | ||
| Current assets: | |||
| Inventory | 203 | ||
| Receivables | 147 | ||
| Bank | 51 | ||
| 401 | |||
| Total assets | 2,353 | ||
| Ordinary share capital (GH¢1 shares) | 740 | ||
| Share premium account | |||
| Retained earnings | 671 | ||
| 1,411 | |||
| Non-current liabilities: | |||
| Loans | |||
| Current liabilities: | |||
| Bank overdraft | |||
| Trade payables and accruals | 152 | ||
| Current taxation | 470 | ||
| Total equity and liabilities | 2,353 |
Statement of profit or loss for year ended 31 December 20X9
Profit before tax
Taxation
Profit after tax
Dividend payments during the year were GH¢230,000.
The following information is also available:
(1) The only new loan raised during the year was a five-year bank loan amounting to GH¢65,000.
(2) Interest charged during the year was GH¢156,000. Interest accrued was GH¢24,000 last year and GH¢54,000 this year.
(3) Depreciation charged during the year amounted to GH¢401,000. This does not include any profit or loss on disposal of non-current assets.
(4) During the year plant which originally cost GH¢69,000 was disposed of for GH¢41,000.
(5) During the year the company issued 200,000 new shares.
Required
Prepare a statement of cash flows.
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- 20 Marks
FA – L1 – Q99 – Statement of Cash Flows
Prepare a statement of cash flows for Nordex Limited for 20X9 using financial statements and non-current asset details.
Question
The following information has been extracted from the draft financial information of Nordex Limited.
Statement of Profit or Loss for the Year Ended 31 December 20X9
| GH¢’000 | GH¢’000 |
|---|---|
| Sales revenue | 1,350 |
| Administration costs | (346) |
| Distribution costs | (246) |
| Operating profit | 758 |
| Interest expense | (110) |
| Profit before tax | 648 |
| Taxation | (208) |
| Profit after tax | 440 |
| Dividends paid | (120) |
| Retained profit for the year | 320 |
Statements of Financial Position
| 31 December 20X9 | 31 December 20X8 | |||
|---|---|---|---|---|
| GH¢’000 | GH¢’000 | GH¢’000 | GH¢’000 | |
| Non-current assets | 1,145 | 957 | ||
| Current assets | ||||
| Inventory | 157 | 142 | ||
| Receivables | 203 | 184 | ||
| Cash and cash equivalents | 41 | 10 | ||
| 401 | 401 | 336 | 336 | |
| Total assets | 1,546 | 1,293 | ||
| Equity and liabilities | ||||
| Equity | ||||
| Share capital | 200 | 200 | ||
| Revaluation surplus | 170 | 100 | ||
| Retained earnings | 604 | 404 | ||
| 974 | 974 | 704 | 704 | |
| Non-current liabilities | ||||
| Loans | 350 | 450 | ||
| Current liabilities | ||||
| Trade payables | 43 | 43 | ||
| Taxation | 29 | 36 | ||
| Accruals | 150 | 100 | ||
| 222 | 222 | 179 | 179 | |
| Total equity and liabilities | 1,546 | 1,293 |
Note on Non-Current Assets
| Land and Buildings | Machinery | Fixtures & Fittings | Total | |
|---|---|---|---|---|
| GH¢’000 | GH¢’000 | GH¢’000 | GH¢’000 | |
| Cost or Valuation | ||||
| At 31 December 20X8 | 830 | 470 | 197 | 1,497 |
| Additions | – | 43 | 55 | 98 |
| Disposals | – | (18) | – | (18) |
| Adjustment on revaluation | 70 | – | – | 70 |
| At 31 December 20X9 | 900 | 495 | 252 | 1,647 |
| Depreciation | ||||
| At 31 December 20X8 | (90) | (270) | (180) | (540) |
| Charge for the year | (10) | (56) | (8) | (74) |
| Disposals | – | 12 | – | 12 |
| Adjustment on revaluation | 100 | – | – | 100 |
| At 31 December 20X9 | 0 | (314) | (188) | (502) |
| Carrying Amount | ||||
| At 31 December 20X8 | 740 | 200 | 17 | 957 |
| At 31 December 20X9 | 900 | 181 | 64 | 1,145 |
You have been informed that included within distribution costs is GH¢4,000 relating to the loss on a disposal of a non-current asset.
Required
Prepare a statement of cash flows for Nordex Limited for the year ended 31 December 20X9.
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