Financial Position

FR – L2 – Q57 – Financial Instruments

Calculate face value and proceeds of debentures issued by Unity Cooperative Ltd.

Question

UNION COOPERATIVE LTD

On 1 July 20X4, Union Cooperative Ltd., issued 20,000 8% debentures at GH¢97.50. The security is redeemable in five years’ time. The interest on the debentures is payable bi-annually on 30 June and 31 December.

On 31 December 20X4, the company’s year-end date, the debentures were quoted on the Ghanaian Stock Exchange for GH¢96.00. The company accountant has suggested each of the following as possible valuation basis for reporting the debentures liability on the statement of financial position as at 31 December 20X4: (i) Face value of the debentures. (ii) Face value of the debenture plus interest payment for five years. (iii) Market value on the statement of financial position as at the year end.

Required

(a) Determine the face value of the debentures and the proceeds accruing to the company.

(b) Determine the amount and explain the nature of the differences between the face value and the market value of the debentures on 1 July, 20X4.

(d) Determine the nominal interest payable on the debentures for the year ended 31 December 20X4.

(e) State arguments for or against each of the suggested alternatives for reporting the debentures liability on the statement of financial position as at 31 December 20X4.

Answer

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Tags: Debentures, Face Value, Financial Position, Market value, Valuation
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

Question

On 30 June 20X3 Francisca Ltd had a credit balance on its deferred tax account of GH¢1,340,600 all in respect of the difference between depreciation and capital allowances.

During the year ended 30 June 20X4 the following transactions took place.

(1) GH¢45 million was charged against profit in respect of depreciation. The tax computation showed capital allowances of GH¢50 million.

(2) Interest receivable of GH¢50,000 was reflected in profit for the period. However, only GH¢45,000 of interest was actually received during the year. Interest is not taxed until it is received.

(3) Interest payable of GH¢32,000 was treated as an expense for the period. However, only GH¢28,000 of interest was actually paid during the year. Interest is not an allowable expense for tax purposes until it is paid.

(4) During the year Francisca Ltd incurred development costs of GH¢500,600, which it has capitalised. Development costs are an allowable expense for tax purposes in the period in which they are paid.

(5) Land and buildings with a carrying amount of GH¢4,900,500 were revalued to GH¢6 million.

The tax rate is 30%. Francisca Ltd has a right of offset between its deferred tax liabilities and its deferred tax assets.

Required

Calculate the deferred tax liability on 30 June 20X4. Show where the increase or decrease in the liability in the year would be charged or credited.

Answer

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Tags: Deferred Tax, Development Costs, Financial Position, IAS 12, Interest Payable, Interest Receivable, Revaluation, Tax Computation, Temporary Differences
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

PSAF – L2 – Q13.5 – Financial Statements Analysis

Prepare and analyze a common size statement of financial position for the Consolidated Fund of Ashanti for 2021 and 2022.

Question

Consolidated Fund of Ashanti
Statement of financial position as at 31 December

	2021 GH¢’	2020 GH¢’
ASSETS
Non-current asset
Property, plant and equipment
Financial assets
Total non-current assets
Current asset
Inventory
Cash and cash equivalents
Current liabilities
Payables
Deposits and trust monies
Total current liabilities
NET ASSETS
FINANCED BY:
Accumulated fund
Non-current liabilities
Domestic debt
External debt

Required:
(a) Prepare a common size statement of financial position for the Consolidated Fund of Ashanti for 2021 and 2022. (10 marks)
(b) Write a report analyzing the common size statement of financial position, discussing the financial position of the Consolidated Fund for 2021 and 2022.

Answer

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Tags: Asset Analysis, Common Size Statement, Comparative Analysis, Consolidated Fund, Financial Position, Liability Analysis, Public Sector
Level: Level 2

Topic: Preparation and Presentation of Financial Statements for Central Government

PSAF – L2 – Q12.3 – International public sector accounting standards

Prepare consolidated financial statements and notes for National Health Services and its hospitals for 2023 per IPSAS.

Question

GHANA HEALTH SERVICE

Statements of Financial Performance for the year ended 31st December 2023

	GHS	Kolebu	Saint H
	GHC’000	GHC’000	GHC’000
Revenue
Tax revenue	100,000
GoG receipt		2,000
Non-exchange revenue	100,000	2,000	3,000
Internally generated revenue	5,000	400	200
Exchange revenue	5,000	400	200
Total revenue	105,000	2,400	3,200
Expenses
Compensation for employees	40,000	600	500
Depreciation & amortisation	500	300	200
Goods and services	25,000	600	400
Finance costs	1,600	500	100
Total expenses	67,100	2,000	1,200
Surplus for the period	37,900	400	2,000

Statements of Financial Position for the year ended 31 December 2023

	GHS	Kolebu	Saint H
	GHC’000	GHC’000	GHC’000
Assets:
Cash & cash equivalent	25,000	800	500
Receivable: GHS		900
Receivable: Others	62,000	700	400
Inventories	12,000	300	200
Current assets	99,000	2,700	1,100
Property, plant & equipment	140,000	40,000	67,100
Investment- Saint H	60,000
Non-current assets	200,000	40,000	67,100
Total Asset	299,000	42,700	68,200
Liabilities
Payable: Kolebu	900
Payable others	60,000	8,000	3,000
Current borrowings	90,000	2,000
Current liabilities	150,900	10,000	3,000
Borrowing	45,000	10,000	5,000
Non-current liabilities	45,000	10,000	5,000
Total liabilities	195,900	20,000	8,000
Net asset (liabilities)	103,100	22,700	60,200

Net Asset/Equity:

	GHS	Kolebu	Saint H
	GHC’000	GHC’000	GHC’000
Contribution from owners			60,000
Accumulated Surplus (deficit)	103,100	22,700	200
Total Asset/Equity	103,100	22,700	60,200

Additional information
(i) The Ghana Health Services (GHS) is a government agency responsible for overseeing the health sector. The Kwadwo Teaching Hospital is funded through government appropriations and internally generated funds approved by Parliament. The GHS appoints most of the hospital’s board members on behalf of the government. All employees at Kwadwo receive their salaries from the Consolidated Fund.
(ii) On July 1, 2023, the GHS established the Blessed Hospital to provide high-quality healthcare services in the country. The GHS has fully funded the hospital’s operations through equity and debt guarantees and has also appointed the hospital’s governing board.
(iii) The appropriations to Kwadwo cover employee compensation and goods and services expenses at a ratio of 60% to 40%, respectively.
(iv) At the end of the reporting period, the GHS owed Kwadwo GHC900,000 for services rendered to its staff. The GHS has committed to paying this amount by the end of the second quarter of the following year.
(v) The separate financial statements of the GHS, Kwadwo, and Blessed Hospital are prepared using the same accounting policies.

Required:
Prepare in accordance with the relevant IPSASs:
(a) A consolidated statement of financial performance for the year ended 31 December 2023.
(b) A consolidated statement of financial position as at 31 December 2023.
(c) Note to the accounts.

Answer

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Tags: Consolidation, Control, Financial Performance, Financial Position, Financial Statements, Ghana Health Service, IPSAS 35, Public Sector
Level: Level 2

Topic: International Public Sector Accounting Standards

PSAF – L2 – Q8.2 – International Public Sector Accounting Standards

Show the accounting treatment of bilateral grant revenue for the Federal Government of Nigeria as at 31st December 2023.

Question

Bilateral grants were received from a number of friendly governments in 2023 amounting to NGN125 million. The Federal Government of Nigeria is unlikely to comply with some of the conditions for the bilateral grants from one country amounting to NGN15 million included in bilateral grants received. The Federal Government of Nigeria has already complied with grant conditions in respect of a grant from a Global Development Agency amounting to NGN22 million which is yet to be received. The probability of receipt of this grant in a month’s time from December 2023 is very probable.

Required:

Show the accounting treatment for the grant revenue in the books of the government as at 31st December 2023.

Answer

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Tags: Bilateral Grants, Deferred Grant, Financial Position, Grant Revenue, IPSAS 23, Non-Exchange Transactions, Revenue Receivable
Level: Level 2

Topic: International Public Sector Accounting Standards

FA – L1 – Q77 – Preparation of Partnership accounts

Prepare partnership accounts for X and Y Dental Practice admitting a new partner, including goodwill valuation and capital adjustments.

Question

X and Y are partners in a dental practice who share profits and losses in the ratio of 3:2. Their statement of financial position as on June 30, 20X9 is as follows:

Assets	GH¢
Non-current assets	2,625,000
Investments	437,500
Long term receivables	875,000
Current assets	1,750,000
Total Assets	5,687,500

Capital and liabilities	GH¢
Capital account:
X	1,050,000
Y	700,000
Total Capital	1,750,000
Long term loans	1,750,000
Current liabilities	2,187,500
Total Capital and Liabilities	5,687,500

They agree to admit Z as a new partner with effect from July 1, 20X9 on the following terms and conditions:

(i) The goodwill of the firm is to be valued at 2 years’ purchase of the average profits of the firm for the last three years GH¢ (This means that the average annual profit over the last three years is to be multiplied by 2). The profits over the last three years are as follows:

Year ended June 30, 20X7: GH¢675,000
Year ended June 30, 20X8: GH¢(700,000)
Year ended June 30, 20X9: GH¢1,000,000

(ii) Goodwill will not appear in the books of the firm.

(iii) Z will bring in cash amounting to GH¢1,460,000 which includes his share of goodwill in the firm.

(iv) Assets of the firm were agreed to be revalued as follows:

Non-current assets (net of depreciation): GH₵3,100,000
Long term receivables: GH₵875,000
Current assets: GH₵1,575,000

Investments will be taken over equally by Smith and Jones at their fair market value of GH₵400,000.

(v) The new profit sharing ratio is to be 7:5:8.

Required:
(a) Prepare the following ledger accounts:

Revaluation account
Partners’ capital accounts

(b) Prepare the opening statement of financial position of the new firm as on July 1, 20X9.

Answer

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Tags: Capital accounts, Financial Position, Goodwill valuation, Partnership accounts, Profit-sharing ratio, Revaluation
Level: Level 1

Topic: Preparation of Partnership accounts

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

Question

t 31 December 20X9 Bles had the following items of inventory:

Product	Quantity	Total cost GH₵	Realisable value GH₵	Estimated cost of realisation GH₵
ABC	20	80	200	20
DEF	10	150	120	10
GHI	6	6	7	2
JKL	12	36	12	1

Required
What amount of inventory should be presented in the statement of financial position of Bles at 31 December 20X9.

Answer

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Tags: Cost, Financial Position, Inventory, Net Realisable Value, Valuation
Level: Level 1

Topic: Inventory

MA – L2 – Q16 – Budgetary control

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

Question

Kofi Limited retails fertilizer to farmers in Ghana. The company has approached its Bankers to provide funding for next year’s operations and a three-month master budget has been requested for review by the bankers.
You have been approached by the management as a consultant to prepare the 1st quarter budget for the banker’s consideration for its next year’s operations.
End of Accounting year December 20X9

	GH¢
Debtors	23,000
Bank balance	55,000
Non-current asset at cost	698,000
Provision for depreciation balance	98,000
Creditors Balance	48,000
Operating expenses for the month December	60,000
Sales for the month of December 20X9	400,000
December Ending inventory	20,000
Retained earnings	120,000

The following additional information was also provided to assist your work:
(i) Depreciation is provided at the rate of 5% on cost of non-current assets.
(ii) Closing inventory is expected to increase by GH¢2,000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be GH¢26,000.
(iii) The company makes a profit of 25% on its sales.
(iv) Operating expenses are expected to increase by 10% from that of December, and this is projected to increase at the same growth rate to March.
(v) Sales are projected to grow by 15% from December until March.
(vi) The Debtors figure is desired to be proportional to the sales values.
(vii) Creditors value for the three months are expected to be as follows: January – GH¢50,000; February – GH¢46,000; and in March – GH¢52,000.

You are required as a consultant for Kofi Company Limited to prepare for their Bankers:
(a) The budgeted statement of profit or loss for the three months.

(b) The budgeted statement of financial position for the three months.

Answer

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Tags: Budgeting, Cash Balance, Creditors, Debtors, Depreciation, Financial Planning, Financial Position, Inventory, Non-current Assets, Retained Earnings
Level: Level 2

Topic: Budgetary Control, Cash budgets and master budgets

FA – L1 – Q20 – Non-current assets and depreciation

Record Sophia’s machine transactions for 20X6-20X8 and show financial position extracts.

Question

Since she commenced business on 1 January 20X6, Sophia has purchased for cash the following three machines.

Machine	Date of purchase	Cost (GH₵)	Rate of depreciation
Machine 1	20 January 20X6	4,200	25%
Machine 2	17 April 20X7	5,000	30%
Machine 3	11 July 20X8	3,500	35%

Sophia’s policy is to charge a full year’s depreciation in the year of purchase irrespective of the date of purchase. The reducing balance method is used to calculate depreciation. Accounts are prepared to 31 December each year.

Required
(a) Prepare the machinery account and accumulated depreciation account showing the charge to the depreciation account for each year.
(b) Show the relevant statement of financial position extracts for each year.

Answer

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Tags: Accumulated Depreciation, Depreciation, Financial Position, Machinery Account, Non-current Assets, Reducing Balance Method
Level: Level 1

Topic: Non-current assets and depreciation

FA – L1 – Q19 – Non-current assets and depreciation

Record Martin’s machine transactions for 20X8-20X9 and show financial position extracts.

Question

Martin bought a machine for GH₵10,000 on 1 January 20X8. He estimates a useful life of 8 years and a residual value of GH₵800. Depreciation is to be calculated on a straight-line basis.

Required:
(a) Write up for 20X8 and 20X9 the
(i) Machinery account (3 marks)
(ii) Accumulated depreciation account (3 marks)
(iii) Depreciation expense account (2 marks).
(b) Show how the machine would be presented in the statement of financial positions as at 31 December 20X8 and 31 December 20X9. (2 marks)

Answer

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Tags: Accumulated Depreciation, Depreciation, Financial Position, Machinery Account, Non-current Assets, Straight-line Method
Level: Level 1

Topic: Non-current assets and depreciation

Tag (SQ): Financial Position

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FR – L2 – Q57 – Financial Instruments

Calculate face value and proceeds of debentures issued by Unity Cooperative Ltd.

FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

PSAF – L2 – Q13.5 – Financial Statements Analysis

Prepare and analyze a common size statement of financial position for the Consolidated Fund of Ashanti for 2021 and 2022.

PSAF – L2 – Q12.3 – International public sector accounting standards

Prepare consolidated financial statements and notes for National Health Services and its hospitals for 2023 per IPSAS.

PSAF – L2 – Q8.2 – International Public Sector Accounting Standards

Show the accounting treatment of bilateral grant revenue for the Federal Government of Nigeria as at 31st December 2023.

FA – L1 – Q77 – Preparation of Partnership accounts

Prepare partnership accounts for X and Y Dental Practice admitting a new partner, including goodwill valuation and capital adjustments.

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

MA – L2 – Q16 – Budgetary control

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

FA – L1 – Q20 – Non-current assets and depreciation

Record Sophia’s machine transactions for 20X6-20X8 and show financial position extracts.

FA – L1 – Q19 – Non-current assets and depreciation

Record Martin’s machine transactions for 20X8-20X9 and show financial position extracts.

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FR – L2 – Q57 – Financial Instruments

Calculate face value and proceeds of debentures issued by Unity Cooperative Ltd.

You're reporting an error for "FR – L2 – Q57 – Financial Instruments"

FR – L2 – Q52 – Financial Reporting Standards and Their Applications

Calculate deferred tax liability for Francisca Ltd for 20X4, considering depreciation, interest, development costs, and revaluation, and show where changes are charged/credited.

You're reporting an error for "FR – L2 – Q52 – Financial Reporting Standards and Their Applications"

PSAF – L2 – Q13.5 – Financial Statements Analysis

Prepare and analyze a common size statement of financial position for the Consolidated Fund of Ashanti for 2021 and 2022.

You're reporting an error for "PSAF – L2 – Q13.5 – Financial Statements Analysis"

PSAF – L2 – Q12.3 – International public sector accounting standards

Prepare consolidated financial statements and notes for National Health Services and its hospitals for 2023 per IPSAS.

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PSAF – L2 – Q8.2 – International Public Sector Accounting Standards

Show the accounting treatment of bilateral grant revenue for the Federal Government of Nigeria as at 31st December 2023.

You're reporting an error for "PSAF – L2 – Q8.2 – International Public Sector Accounting Standards"

FA – L1 – Q77 – Preparation of Partnership accounts

Prepare partnership accounts for X and Y Dental Practice admitting a new partner, including goodwill valuation and capital adjustments.

You're reporting an error for "FA – L1 – Q77 – Preparation of Partnership accounts"

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

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MA – L2 – Q16 – Budgetary control

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

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FA – L1 – Q20 – Non-current assets and depreciation

Record Sophia’s machine transactions for 20X6-20X8 and show financial position extracts.

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FA – L1 – Q19 – Non-current assets and depreciation

Record Martin’s machine transactions for 20X8-20X9 and show financial position extracts.

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