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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

FA – L1 – Q73 – Preparation of limited liability company financial statements

Prepare Kamisa Health Limited's statement of profit or loss and financial position for 31 March 20X9 per IAS 1, using trial balance and additional info.

Question

The following trial balance has been extracted from the books of account of Kamisa Health Limited, a limited liability company, at 31 March 20X9.

Description	ZMW ‘000 (DR)	ZMW ‘000 (CR)
Administrative expenses	210
Share capital (ordinary shares of ZMW 1 fully paid)		600
Trade receivables	470
Bank overdraft		80
Income tax (overprovision in 20X8)		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 20X9)		220
Accumulated profit (at 1 April 20X8)		240
Purchases	960
Inventories (at 1 April 20X8)	140
Trade payables		260
Revenue		1,950
Dividend paid	120
Total	3,630	3,630

Additional Information
(1) Inventories at 31 March 20X9 were valued at ZMW 150,000.
(2) The following items are already included in the balances listed in the above trial balance.
(3) The income tax expense based on the profit on ordinary activities is estimated to be ZMW 54,000.
(4) The retirement benefit liability is to be increased by ZMW 16,000. The increase should be charged to administrative expenses. No retirement benefits are expected to be paid for the foreseeable future.

Required:
Prepare the company’s statement of profit or loss for the year to 31 March 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: Financial Statements, IAS 1, Inventory, Limited Company, Profit or Loss, Retirement Benefits, Statement of Financial Position, Taxation, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements

FA – L1 – Q70 – Preparing financial statements of a sole trader

Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

Question

The following trial balance has been extracted from the ledger of Henry, a sole trader, as at 31 May 20X9, the end of his most recent financial year.

Henry: Trial balance as at 31 May 20X9

	DR GH₵(000)	CR GH₵(000)
Land and buildings at cost	90,000
Equipment at cost	57,500
Accumulated depreciation (as at 1 June 20X8)
On land and buildings		12,500
On equipment		32,500
Inventory as at 1 June 20X8	27,400
Sales		405,000
Purchases	259,600
Discounts received		4,420
Wages and salaries	52,360
Irrecoverable debts	1,720
Loan interest	1,560
Other operating expenses	38,800
Trade receivables	46,200
Trade payables		33,600
Allowance for receivables		280
Cash in hand	151
Bank overdraft		14,500
Carriage out	8,680
Drawings	28,930
10% loan		15,600
Capital as at 1 June 20X8		94,501
Total	612,901	612,901

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH₵25,900,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

Property – 1% using the straight-line method;
Equipment – 15% using the straight-line method.
(c) There are accrued wages and salaries of GH₵140,000.
(d) Other operating expenses include some prepaid expenses of GH₵500,000 and some accrued expenses of GH₵200,000.
(e) The allowance for receivables should be adjusted to 5% of trade receivables as at 31 May 20X9.
(f) The amount for purchases includes goods valued at GH₵1,040,000 which were withdrawn by Henry for his own personal use.

Required
Prepare Henry’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

Answer

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Tags: Accruals, Depreciation, Drawings, Financial Statements, Inventory, Prepayments, Profit or Loss, Receivables, Sole Trader, Statement of Financial Position
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q42 – Accruals and prepayments

Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

Question

A hotel makes up its accounts to 30 April annually. The proprietor, Mrs Amponsah, informs you that she has paid the following amounts during the year to 30 April 20X9:

Item	GH₵(000)
Wholesaler	3,945
Butcher	4,261
Building supplies (repairs)	814
Electricity	935
Gas	566
Wages	1,150

She also informs you that she has received GH₵37,550,000 in cash from guests, of which GH₵4,300,000 relates to deposits paid in advance for holidays to be taken after 1 May 20X9.
You discover on further investigation that invoices for April 20X9 from the butcher and wholesaler, amounting to GH₵431,000 and GH₵292,000, were received on 15 May. The electricity bill for the quarter ended 31 May 20X9 totals GH₵220,000, and the chambermaids are paid a week in arrears at GH₵42,000 per week. Gas cylinders are purchased in advance at GH₵17,000 each, and two remain unused at 30 April.

Required
(a) Calculate the amounts to be included in the statement of profit or loss for each of the above items for the year ended 30 April 20X9.

(b) Calculate the relevant statement of financial position amounts at 30 April 20X9.

Answer

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Tags: accrual basis, Accruals, cash basis, Expenses, Financial Statements, hotel operations, Prepayments, Profit or Loss, Revenue Recognition
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

Question

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

	Dr GH¢(000)	Cr GH¢(000)
Revenue		18,955
Purchases	12,556
Inventory 1 May 20X8	3,776
Salaries and wages	2,447
Motor expenses	664
Rent	456
Rates	120
Insurance	146
Packing expenses	276
Lighting and heating expenses	665
Sundry expenses	115
Motor vehicles	2,400
Fixtures and fittings	600
Trade receivables	4,577
Trade payables		3,045
Cash at bank	3,876
Cash in hand	120
Drawings	2,050
Capital		12,844
	34,844	34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Inventory, Ledger accounts, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

Question

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

	Dr GH₵(000)	Cr GH₵(000)
Capital		5,000
Cash	4,200
Motor van	600
Trade payable – A		200
Trade receivable – B	300
Rates prepaid	100
	5,200	5,200

Cash transactions during the period to 31 March 20X9 were

	GH₵(000)
Purchases	2,000
Revenue	3,000
Drawings	500
Motor running expenses	350
Rates	250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

Answer

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Tags: Cash Transactions, Financial Statements, Inventory, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

MA – L2 – Q15 – Budgetary Control

Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

Question

A private medical practice based near Mount Adaklu has five full-time doctors, five full-time assistants, and two administrators.
Each doctor treats 18 patients each day on average. The medical centre is open for five days each week, 46 weeks each year.
Charges for patients vary according to the age of the patient and the nature of the treatment provided.

Charges

	Adults below 65 years of age	Children and individuals aged 65 years and over
No treatment: consultation only	GH¢50	GH¢30
Minor treatment	GH¢200	GH¢120
Major treatment	GH¢600	GH¢280

The patient mix and the treatment mix are as follows:
Patients:

Adults: 45%
Children: 25%
Over 65 years old: 30%

Treatment:

No treatment: 20%
Minor treatment: 70%
Major treatment: 10%

The salary of each doctor is GH¢240,000, assistants earn GH¢100,000, and administrators earn GH¢80,000. In addition, everyone receives a 5% bonus at the end of the year.
The medical practice expects to pay GH¢414,300 for materials next year and other (fixed) costs will be GH¢733,600.
Required:
Using the information provided, present a statement of profit or loss for the medical practice for next year. (Ignore the effects of inflation.)

Answer

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Tags: Budgeting, Cost allocation, Financial Performance, Medical Services, Operational Costs, Patient Mix, Profit or Loss, Revenue Calculation, Salary Costs
Level: Level 2

Topic: Budgetary Control

FA – L1 – Q26 – Non-current assets and depreciation

Calculate the cost of machinery including delivery and modification costs, excluding warranty, for ledger entry.

Question

(1) A company purchased some heavy machinery. The invoice for the machinery showed the following items:

Description	GH¢000
Cost of machinery	46,000
Cost of delivery	900
Cost of 12-month warranty on the machinery	1,600
Total amount payable	48,500

In addition, the company incurred GH¢3.4 million in making modifications to its factory so that the heavy machinery could be installed.
What should be the cost of the machinery in the company’s machinery account in the ledger?

(2)

A business acquired new premises at a cost of GH¢400 million on 1 January 20X9. In the period to the year end of 31 March 20X9 the following further costs were incurred:

Description	GH¢000
Costs of initial adaptation of the building	12,000
Legal costs relating to the purchase	2,500
Monthly cleaning contract	3,400
Cost of air conditioning unit necessary for machinery to be used	2,800
Cost of machinery	12,300

What amount should appear as the cost of premises in the company’s statement of financial position at 31 March 20X9?

(3)

The plant and machinery account for a company for the year ended 30 June 20X9 is as follows:

20X8		GH¢	20X9		GH¢
1 July	Balance	960,000	31 March	Transfer to disposal account	80,000
31 Dec	Cash: purchase of machines	200,000	30 June	Balance	1,080,000
		1,160,000			1,160,000

The company’s policy is to charge depreciation on plant and machinery at 25% each year on the straight-line basis, with proportionate charges in the year of acquisition and the year of disposal. None of the assets held at 1 July 20X8 was more than three years old.
What is the charge for depreciation of plant and machinery for the year ended 30 June 20X9?

(4)

A motor car was purchased in May 20X6 for GH¢7.8 million. The accounting policy is depreciation at 20% straight line on the cost of the assets in use at the year end. The car was traded in for a replacement vehicle purchased in July 20X9 with the agreed part exchange value being GH¢2.4 million. The company’s year-end is 31 December.

What was the profit or loss on disposal?

Answer

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Tags: Depreciation, Disposal, Financial accounting, Motor car, Non-current Assets, Profit or Loss, Straight-line Method
Level: Level 1

Topic: Non-current assets and depreciation

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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.

FA – L1 – Q73 – Preparation of limited liability company financial statements

Prepare Kamisa Health Limited's statement of profit or loss and financial position for 31 March 20X9 per IAS 1, using trial balance and additional info.

FA – L1 – Q70 – Preparing financial statements of a sole trader

Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

FA – L1 – Q42 – Accruals and prepayments

Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

MA – L2 – Q15 – Budgetary Control

Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

FA – L1 – Q26 – Non-current assets and depreciation

Calculate the cost of machinery including delivery and modification costs, excluding warranty, for ledger entry.

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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.

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Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

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Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

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Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

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Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

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Prepare a budgeted profit or loss statement for a medical practice near Mount Adaklu based on patient mix, treatment charges, and costs.

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