Limited Liability Company

BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

Question

Your mother trades in locally made fruit juice in a container at the front of the house at Adiembra-Zongo. The booming business is putting pressure on her working capital. But she plans to open two new retail branches and a semi-wholesale by the end of the year using sale proceeds of her private car which will not be enough. A bank manager working on her personal loan application advised her to convert the sole proprietorship into a private limited liability company, but your mother thinks that will reduce her power and influence. She adores the business name registration certificate with her name boldly engraved ‘HAJIA AMINA SIEDU ENTERPRISE’.

(a) Which of the options will you recommend?

(b). Discuss why you would support your mother’s position or that of the bank manager.

Answer

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Tags: Advantages, Disadvantages, Limited Liability Company, Sole proprietorship
Level: Level 1

Topic: Alternative forms and constitutions of business organisations

FA – L1 – Q76 – Preparation of limited liability company financial statements

Prepare Etabila Travel Limited's statement of profit or loss for 20X9 and statement of financial position as at 31 December 20X9 per IAS 1.

Question

The trial balance of Etabila Travel Limited as at 31 December 20X9 is as follows:

	DR (GH¢000)	CR (GH¢000)
Ordinary share capital (GH¢1 shares)		600
Cash at bank	23
Tax (over-provision in 20X8)		25
10% loan notes (repayable in 2020)		300
General administrative expenses	300
Administrative salaries	46
General distribution expenses	160
Distribution salaries	24
Directors’ remuneration	35
Loan notes interest paid	10
Development costs (incurred during 20X9)	30
Dividend paid	15
Dividends received		30
Investments	45
Land and buildings – at cost	2,600
– accumulated depreciation at 1 January 20X9		200
Plant and machinery – at cost	320
– accumulated depreciation at 1 January 20X9		75
Retained earnings at 1 January 20X9		64
Purchases and sales	1,250	2,250
Profit on disposal of factory		60
Trade receivables and trade payables	100	220
Inventory at 1 January 20X9	60
Irrecoverable debts	5
Total	4,824	4,824

Additional Information:
(1) Closing inventory is valued at the lower of cost or net realisable value. At 31 December 20X9 it amounted to GH¢55,000.
(2) Non-current assets are depreciated on a straight-line basis assuming no residual value. The following depreciation rates are to be applied:

Buildings: 5%
Plant and machinery: 20%
The depreciation charge for the year is to be apportioned as follows:

	Distribution costs	Administrative expenses
Buildings	70%	30%
Plant and machinery	75%	25%

The cost of the land was GH¢3,200,000. There were no purchases or sales of non-current assets during the year.
(3) Development costs are an intangible asset and are to be amortised (depreciated) over a three-year period. The amortisation (depreciation) charge is to be allocated to cost of sales.
(4) The profit (after tax) on disposal of the factory is considered to be a material amount for which separate disclosure is required.
(5) Tax on the profits for the year is estimated at GH¢95,000.
(6) Directors’ remuneration is to be analysed between distribution costs and administrative expenses as follows:

Distribution: GH¢15,000
Administration: GH¢20,000

Required:
Prepare the company’s statement of profit or loss for the year ended 31 December 20X9 and statement of financial position as at 31 December 20X9.

Answer

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Tags: Amortisation, Depreciation, Financial Statements, IAS 1, Limited Liability Company, Non-current Assets, Profit or Loss, Statement of Financial Position, Taxation, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements

FA – L1 – Q75 – Preparation of limited liability company financial statements

Prepare Amswaim Beauty Products Limited's statement of profit or loss for the year ended 30 June 20X9 per IAS 1, with expense allocation by function.

Question

The following draft statement of profit or loss has been prepared for Amswaim Beauty Products Limited for the year ended 30 June 20X9.

	GH¢000		GH¢000
Opening inventory	78	Sales	2,282
Purchases	1,055	Sales returns	(66)
Purchase returns	(25)
Gross profit c/d	1,170	Closing inventory	62
	2,278		2,278
Wages and salaries	160	Gross profit b/d	1,170
Office expenses	236	Dividends received	20
Depreciation:
Plant and machinery	84
Delivery vans	48
Office furniture	17
Directors’ salaries	163
Selling expenses	95
Rent of plant and machinery	21
Factory expenses	109
Legal expenses	25
Interest charges	70
Net profit c/d	162
	1,190		1,190
Taxation on profits
Net profit after tax	116	Net profit b/d	162
		Tax over-provided in the previous year	8
	170		170

Additional Information:
(1) Directors’ salaries are classified as administrative expenses.
(2) Other wages and salaries are apportioned 70% to distribution costs and 30% to administrative expenses.
(3) Amswaim Beauty Products Limited analyses expenses by function.

Required:
Prepare the company’s statement of profit or loss for the year to 30 June 20X9 in accordance with IAS 1 Presentation of Financial Statements.

Answer

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Tags: Expense Allocation, Financial Statements, Gross Profit, IAS 1, Limited Liability Company, Profit or Loss
Level: Level 1

Topic: Preparation of limited liability company financial statements

FA – L1 – Q74 – Preparation of limited liability company financial statements

Prepare Pakasa Bepo Industries Ltd's statement of profit or loss and financial position for 20X9 per IAS 1, using trial balance and additional info.

Question

The list of balances of Pakasa Bepo Industries Limited shows the following balances at 31 December 20X9.

Dr	GH¢000	Cr	GH¢000
Inventory (goods for resale) at 1 January 20X9	330	Share capital (600,000 shares)	300
Revenue		1,000
Purchases	484
Purchases returns		60
Sales returns	28
Carriage outwards	28
Warehouse wages	80
Sales representatives salaries	60
Administrative wages	40
Warehouse plant and equipment – cost	126
Accumulated depreciation – 1 January 20X9		50
Delivery vehicle hire	20
Goodwill	100
Distribution expenses	10
Administrative expenses	30
Directors’ salaries (charge to administrative expenses)	30
Rental income		16
Trade receivables	60
Cash at bank	60
Trade payables		60
Total	1,542	Total	1,542

Additional Information
(1) Inventory (goods for resale) at 31 December 20X9 amounted to GH¢100,000.
(2) Annual depreciation on warehouse plant and equipment of GH¢32,000 should be provided.
(3) Income tax for 20X9 should be taken as GH¢50,000.
(4) Goodwill is to be written down to GH¢90,000.

Required:
Prepare the company’s statement of profit or loss for the year to 31 December 20X9 and a statement of financial position at that date in accordance with IAS 1 Presentation of Financial Statements.

Answer

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Tags: Depreciation, Financial Statements, Goodwill, IAS 1, Income Tax, Inventory, Limited Liability Company, Profit or Loss, Statement of Financial Position
Level: Level 1

Topic: Preparation of limited liability company financial statements

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BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

FA – L1 – Q76 – Preparation of limited liability company financial statements

Prepare Etabila Travel Limited's statement of profit or loss for 20X9 and statement of financial position as at 31 December 20X9 per IAS 1.

FA – L1 – Q75 – Preparation of limited liability company financial statements

Prepare Amswaim Beauty Products Limited's statement of profit or loss for the year ended 30 June 20X9 per IAS 1, with expense allocation by function.

FA – L1 – Q74 – Preparation of limited liability company financial statements

Prepare Pakasa Bepo Industries Ltd's statement of profit or loss and financial position for 20X9 per IAS 1, using trial balance and additional info.

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BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

You're reporting an error for "BCL – L1 – Q61 – Alternative forms and constitutions of business organisations"

FA – L1 – Q76 – Preparation of limited liability company financial statements

Prepare Etabila Travel Limited's statement of profit or loss for 20X9 and statement of financial position as at 31 December 20X9 per IAS 1.

You're reporting an error for "FA – L1 – Q76 – Preparation of limited liability company financial statements"

FA – L1 – Q75 – Preparation of limited liability company financial statements

Prepare Amswaim Beauty Products Limited's statement of profit or loss for the year ended 30 June 20X9 per IAS 1, with expense allocation by function.

You're reporting an error for "FA – L1 – Q75 – Preparation of limited liability company financial statements"

FA – L1 – Q74 – Preparation of limited liability company financial statements

Prepare Pakasa Bepo Industries Ltd's statement of profit or loss and financial position for 20X9 per IAS 1, using trial balance and additional info.

You're reporting an error for "FA – L1 – Q74 – Preparation of limited liability company financial statements"

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