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  • 20 Marks

FR – L2 – Q66 – Presentation of Financial Statements

Prepare profit or loss and financial position statements for Kumasi Healthcare Limited using trial balance and additional info.

The following trial balance has been extracted from the books of Kumasi Healthcare Limited, at 31 March 20X5.

GH₵ 000 GH₵ 000
Administrative expenses 210
Share capital (ordinary shares of GH₵ 1 fully paid) 600
Trade receivables 470
Bank overdraft 80
Income tax (overprovision in 20X4) 25
Retirement benefit liability 180
Distribution costs 420
Non-current asset investments 560
Investment income 75
Plant and equipment
At cost 750
Accumulated depreciation (at 31 March 20X5) 220
Accumulated profit (at 1 April 20X4) 240
Purchases 960
Inventories (at 1 April 20X4) 140
Trade payables 280
Revenue 1,950
Interim dividend paid 20
3,630 3,630

Additional information
(1) Inventories at 31 March 20X5 were valued at GH₵ 150,000.
(2) The following items are already included in the balances listed in the above trial balance.

Distribution costs GH₵ 000 Administrative costs GH₵ 000
Depreciation (for year to 31 March 20X5) 27 20

(3) A final dividend of GH₵ 120,000 was proposed but not yet paid.
(4) The retirement benefit liability increased by GH₵ 16,000 during the year which has not been included in the trial balance.
(5) Income tax for the year is estimated at GH₵ 29,000.

Required
Prepare a statement of profit or loss (analysing expenses by function) for the year ended 31 March 20X5 and a statement of financial position at 31 March 20X5.

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  • 20 Marks

FR – L2 – Q64 – Revenue from Contracts with Customers

Recalculate AX Ltd's profit for the year ended 31 March 20X9, adjusting for sale or return, depreciation, fraud, and tax.

AX LTD
Below is the summarised draft statement of financial position of AX Ltd, a company listed on the West Africa Stock Exchange, as at 31 March, 20X9:

Non-current assets
Property at valuation (land GH₵20,000; buildings GH₵165,000) (note ii) 185,000
Plant (note ii) 180,500
Financial assets at fair value through profit or loss at 1 April 20X8 (note iii) 12,500
378,000
Current assets
Inventory 84,000
Trade receivables (note iv) 52,200
Bank 3,800
140,000
Total assets 518,000

Equity and Liabilities
Equity
Stated capital 290,000
Capital surplus 12,300
Income surplus
– At 1 April 20X8 96,700
– For the year ended 31 March 20X9 12,300
109,000
411,300
Non-current liabilities
Deferred tax – at 1 April 20X8 (note v) 19,200
Current liabilities 81,800
101,000
Total equity and liabilities 518,000

The following information is relevant:
(i) AX Ltd’s statement of profit or loss includes GH₵8million of revenue for credit sales made on a “sale or return” basis. At 31 March 20X9, customers who had not paid for the goods, had the right to return GH₵2.6million of them. AX Ltd applied a mark-up on cost of 30% on all these sales. In the past, AX Ltd’s customers have sometimes returned goods under this type of agreement.
(ii) The non-current assets have not been depreciated for the year ended 31 March 20X9. AX Ltd has a policy of revaluing its land and buildings at the end of each accounting year. The values in the above statement of financial position as at 1 April 20X8 when the building had a remaining life of 15 years. A qualified surveyor has valued the land and buildings at 31 March 20X9 at GH₵180million. Plant is depreciated at 20% on the reducing balance basis.
(iii) The financial assets at fair value through profit or loss are held in a fund whose value changes directly in proportion to a specified market index. At 1 April 20X8 the relevant index was 1,200 and at 31 March 20X9 it was 1,296.
(iv) In late March 20X9 the directors of AX Ltd discovered a material fraud perpetrated by the company’s credit controller that had been continuing for some time. Investigations revealed that a total of GH₵4 million of the trade receivables as shown in the statement of financial position at 31 March 20X9 had in fact been paid and the money had been stolen by the credit controller. An analysis revealed that GH₵1.5 million had been stolen in the year to 31 March 20X8 with the rest being stolen in the current year. AX Ltd is not insured for this loss and it cannot be recovered from the credit controller, nor is it deductible for tax purpose.
(v) During the year, the company’s taxable temporary differences increased by GH₵10 million of which GH₵6 million related to the revaluation of the property. The deferred tax relating to the remainder of the increase in the income tax rate is 20%.
(vi) The above figures do not include the estimated provision for income tax on the profit for the year ended 31 March 20X9. After allowing for any adjustments required in terms (i) to (iv), the directors have estimated the provision of GH₵11.4 million (this is in addition to the deferred tax effects of item (v).
(vii) During the year, dividends of GH₵15.5 million were paid. These have been correctly accounted for in the above statement of financial position.

Required:
Taking into account any adjustments required by items (i) to (vii) above:
(a) Prepare a statement showing the recalculation of AX Ltd’s profit for the year ended 31 March 20X9; and

(b) Redraft the statement of financial position of AX Ltd as at 31 March 20X9.

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  • 15 Marks

FR – L2 – Q57 – Financial Instruments

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

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.

(c) Distinguish between nominal and effective rate of interest.

(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.

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  • 15 Marks

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.

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.

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  • 20 Marks

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.

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.

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  • 20 Marks

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.

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.

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  • 10 Marks

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.

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.

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  • 20 Marks

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.

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.

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  • 4 Marks

FA – L1 – Q44 – Inventory Valuation

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

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.

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  • 15 Marks

MA – L2 – Q16 – Budgetary control

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

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.

(c) The cash budget for the three months.

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