Tag (SQ): Profit or Loss

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FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

Question

Portico Ltd acquired 30% of the equity shares in Armand Ltd (which satisfies the definition of associate) during Year 1 at a cost of GH₵350,000 when the fair value of the net assets of Armand Ltd was GH₵250,000. Since that time, the investment in Armand Ltd has been impaired by GH₵4,000.
On 31 December Year 5, the net assets of Armand Ltd were GH₵400,000. Since the date of acquisition, there have been no changes in the share capital of Armand Ltd or in any reserves other than retained earnings.
In the year to 31 December Year 5, the profits of Armand Ltd after tax were GH₵50,000.

Required
Show how the holding in Armand Ltd would be reflected in the Year 5 consolidated statement of financial position and consolidated statement of profit or loss.

Answer

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Tags: Associates, Consolidated Financial Statements, Equity Accounting, Financial Position, Impairment, Investment in Associate, Profit or Loss, Unrealised Profit
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)

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.

Answer

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Tags: Consolidation, Dividends, Financial Statements, Goodwill, Impairment, Intra-group Transactions, Non-controlling Interest, Profit or Loss, Retained Earnings, Statement of Financial Position
Level: Level 2

Topic: Dividends

FR – L2 – Q91 – Consolidated Financial Statements

Prepare Falcon Ltd's consolidated profit or loss, financial position, and retained profit movement for 20X4.

Question

FALCON LTD

Statement of changes in equity for the year ended 30 June 20X4 (extract)

	Falcon Ltd GH¢000	Crane Ltd GH¢000
Retained earnings brought forward	8,000	10,500
Profit for the financial year	12,000	8,000
Retained earnings carried forward	20,000	18,500

Required

Prepare Falcon Ltd’s consolidated statement of profit or loss, consolidated statement of financial position and a working showing the movement on consolidated retained profit for Falcon Ltd for the year ended 30 June 20X4.

Answer

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Tags: Consolidation, Financial Statements, IFRS 10, Non-controlling Interest, Profit or Loss, Retained Earnings, Statement of Financial Position
Level: Level 2

Topic: Consolidated Financial Statements

FR – L2 – Q89 – Business Combinations

Prepare consolidated statement of profit or loss and retained profit movement for Melody Ltd for year ended 31 Dec 20X4, including negative goodwill and intra-group adjustments.

Question

Melody Ltd
Statement of profit or loss for the year ended 31 December 20X4.

	Melody Ltd GH¢’000	Harmony Ltd GH¢’000
Revenue	304,900	195,300
Cost of sales	(144,200)	(98,550)
Gross profit	160,700	96,750
Operating costs	(76,450)	(52,100)
Operating profit	84,250	44,650
Investment income	10,500	2,600
Profit before tax	94,750	47,250
Income tax expense	(42,900)	(16,500)
Profit for the year	51,850	30,750

Statement of changes in equity (extracts) for the year ended 31 December 20X4

	Melody Ltd GH¢’000	Harmony Ltd GH¢’000
Retained earnings brought forward	80,200	31,000
Profit for the year	51,850	30,750
Proposed ordinary dividend	(20,000)
	112,050	61,750

The following information is also available.
(1) Melody Ltd acquired 75% of the share capital of Harmony Ltd on 31 August 20X4.
(2) Negative goodwill of GH¢3.8 million arose on the acquisition.
(3) Profits of both companies are deemed to accrue evenly over the year except for the investment income of Harmony Ltd all of which was received in November 20X4.
(4) Melody Ltd has bought goods from Harmony Ltd throughout the year at GH¢2 million per month. At the year-end Melody Ltd does not hold any inventory purchased from Harmony Ltd.

Required
Prepare the consolidated statement of profit or loss and a working showing the movement on consolidated retained profit for the year ended 31 December 20X4.

Answer

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Tags: Consolidation, Intra-group Transactions, Negative Goodwill, Non-controlling Interest, Profit or Loss, Retained Earnings
Level: Level 2

Topic: Business Combinations (IFRS 3)

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.

Answer

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Tags: Consolidation, Dividends, Intercompany Transactions, Inventory, Non-controlling Interest, Profit or Loss, Retained Earnings, Unrealised Profit
Level: Level 2

Topic: Business Combinations (IFRS 3)

FR – L2 – Q71 – Presentation of Financial Statements

Prepare Zestful Ltd's statement of profit or loss and financial position for 20X9, incorporating inventory adjustments, depreciation, tax, and joint operation.

Question

The following trial balance relates to Zestful Ltd as at 31st December 20X9.

Description	GH₵’000	GH₵’000
Revenue		213,800
Cost of sales	143,800
Operating expenses	22,400
Trade receivables	13,500
Bank		900
Closing inventories – 31st December 20X9 (note (i))	10,500
Interest expenses (note (iii))	5,000
Rental income from investment property		1,200
Plant and equipment – cost (note (ii))	36,000
Land and building – at valuation (note (ii))	63,000
Accumulated depreciation		16,800
Investment property – valuation 1st January 20X9 (note (ii))	16,000
Trade payables		11,800
Joint arrangement (note (v))	8,000
Deferred tax (note (iv))		5,200
Ordinary shares of 25p each		20,000
10% Redeemable preference shares of GH₵1 each		10,000
Retained earnings – 1st January 20X9		17,500
Revaluation surplus (note (ii))		21,000
Total	318,000	318,000

The following additional information is relevant:
(i) An inventory count on 31st December 20X9 listed goods with a cost of GH₵10.5 million. This includes some damaged goods that had cost GH₵800,000. These would require remedial work costing GH₵450,000 before they could actually be sold for an estimated GH₵950,000.
(ii) Non-current assets:

Plant: All plant, including that of the joint operation (note v), is depreciated at 12.5% on reducing balance basis.
Land and building: The land and building were revalued at GH₵15 million and GH₵48 million respectively on 1st January 20X9 creating a GH₵21 million revaluation surplus. At this date the building had a remaining life of 15 years. Depreciation policy is on a straight-line basis. Zestful Ltd does not make a transfer to realized profits in respect of excess depreciation. Depreciation on both the building and the plant should be charged to the cost of sales.
Investment property: On 31st December 20X9 a qualified surveyor valued the investment property at GH₵13.5 million. Zestful Ltd uses the fair value model in IAS 40 Investment Property to measure its investment property.
(iii) Interest expenses include interest on loan notes and an ordinary dividend of 4p per share that was paid in June 20X9.
(iv) The directors have estimated the provision for income tax for the year ended 31st December 20X9 at GH₵8 million. The deferred tax provision ended 31st December 20X9 is to be adjusted (through the profit or loss) to reflect the tax base of the company’s net assets is GH₵12 million less than their carrying amounts. The rate of tax is 30%.
(v) On 1 January 20X9 Zestful Ltd entered into a joint arrangement with other entities. Each venturer contributes their own assets and is responsible for their own expenses including depreciation assets of the joint arrangement. Zestful Ltd is entitled to 40% of the joint venture’s total turnover. The joint arrangement is not a separate entity and is regarded as a joint operation.
Details of Zestful Ltd joint venture transactions are:

Description	GH₵’000
Plant and equipment at cost	12,000
Share of joint venture turnover (40% of total turnover)	8,000
Related joint venture cost of sales excluding depreciation	(5,000)
Trade receivables	1,500
Trade payables	(2,500)

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X9 and a statement of financial position as at that date.

Answer

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Tags: Deferred Tax, Depreciation, Fair Value, Financial Statements, Inventory Valuation, Investment property, Joint Operations, Profit or Loss, Statement of Financial Position
Level: Level 2

Topic: Fair Value Measurement (IFRS 13)

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.

Question

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.

Answer

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Tags: Financial Position, Financial Statements, Healthcare, Income Tax, Inventory, Profit or Loss, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)

Title: FR – L2 – Q48 – Taxation

Calculate Peak Ltd's corporate income tax liability for 20X4 based on profit, depreciation, and tax allowances.

Question

Peak Ltd was incorporated on 1 January 20X4. In the year ended 31 December 20X4 the company made a profit before taxation of GH¢121,000.
During the period Peak Ltd made the following capital additions:

GH¢
Plant	48,000
Motor vehicles	12,000

During the period:

GH¢
Accounting depreciation	11,000
Tax depreciation	15,000

Tax is chargeable at a rate of 30%.

Required:
(a) Calculate the corporate income tax liability for the year ended 31st December 20X4.

(b) Calculate the deferred tax balance that is required in the statement of financial position as at 31st December 20X4.

(c) Prepare a note showing the movement on the deferred tax account and thus calculate the deferred tax charge for the year ended 31st December 20X4.

(d) Prepare the statement of profit or loss note which shows the compilation of the tax expense for the year ended 31st December 20X4.

Answer

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Tags: axation, Current Tax, Deferred Tax, Profit or Loss, Tax Expense
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

Question

Peak Limited conducts its activities from two properties, a main office in the centre and a property in the rural area where staff training is conducted. Both properties were acquired on 1 April 20X1 and had estimated lives of 25 years with no residual value. The company has a policy of carrying its land and buildings at current values. However, until recently property prices had changed for some years. On 1 October 20X3 the properties were revalued by a firm of surveyors. Details of this and the original costs are:

Land	Main office	Training premises
Cost 1 April 20X1	500	300
Valuation 1 October 20X3	700	350
Buildings	Main office	Training premises
Cost 1 April 20X1	1,200	900
Valuation 1 October 20X3	1,350	600

Required
Show the effect of the above transactions on the statement of profit or loss and statement of financial position of Peak Limited for the year ended 31 March 20X4.

Answer

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Tags: Depreciation, Financial Statements, IAS 16, Impairment, Non-current Assets, Profit or Loss, Property Valuation, Revaluation, Revaluation Reserve
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

Question

The following is relevant to three tangible non-current assets held by Chantelle (Ghana) Ltd.

Machine 1 was purchased on 1 January Year 1 for GH¢420,000. It had an estimated residual value of GH¢50,000 and a useful life of ten years and was being depreciated on a straight-line basis. On 1 January Year 6 Chantelle (Ghana) Ltd revalued this machine to GH¢275,000 and reassessed its total useful life as fifteen years. On 1 January Year 7 an impairment review showed machine 1’s recoverable amount to be GH¢100,000 and its remaining useful life to be five years.

Machine 2 was purchased on 1 January Year 1 for GH¢500,000. It had an estimated residual value of GH¢60,000 and a useful life of ten years and was being depreciated on a straight-line basis. On 1 January Year 7 this machine was classified as held for sale, at which time its fair value was estimated at GH¢200,000 and costs to sell at GH¢5,000. On 31 March Year 7 the machine was sold for GH¢210,000.

Machine 3 was purchased on 1 January Year 1 for GH¢600,000. In Year 1 depreciation of GH¢30,000 was charged. On 1 January Year 2 this machine was revalued to GH¢800,000 and its remaining useful life assessed as eight years. On 1 January Year 7 this machine was classified as held for sale, at which time, its fair value was estimated at GH¢550,000 and costs to sell at GH¢5,000. On 31 March Year 7 the machine was sold for GH¢550,000.

Tax is at the rate of 30%.

Required
For each machine show the effect of the above on profit or loss, other comprehensive income and revaluation reserve of Chantelle (Ghana) Ltd in Year 7. You should also show the brought forward balance on the revaluation reserve (at 1 January Year 7) in respect of machines 1 and 3.

Answer

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Tags: Depreciation, Held for Sale, IAS 36, IFRS 5, Impairment, Non-current Assets, Other Comprehensive Income, Profit or Loss, Revaluation, Revaluation Reserve
Level: Level 2

Topic: Impairment of Assets

Tag (SQ): Profit or Loss

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FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

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.

FR – L2 – Q91 – Consolidated Financial Statements

Prepare Falcon Ltd's consolidated profit or loss, financial position, and retained profit movement for 20X4.

FR – L2 – Q89 – Business Combinations

Prepare consolidated statement of profit or loss and retained profit movement for Melody Ltd for year ended 31 Dec 20X4, including negative goodwill and intra-group adjustments.

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.

FR – L2 – Q71 – Presentation of Financial Statements

Prepare Zestful Ltd's statement of profit or loss and financial position for 20X9, incorporating inventory adjustments, depreciation, tax, and joint operation.

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.

Title: FR – L2 – Q48 – Taxation

Calculate Peak Ltd's corporate income tax liability for 20X4 based on profit, depreciation, and tax allowances.

FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

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FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

You're reporting an error for "FR – L2 – Q94 – Associates and Joint Ventures"

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.

You're reporting an error for "FR – L2 – Q92 – Consolidated Financial Statements"

FR – L2 – Q91 – Consolidated Financial Statements

Prepare Falcon Ltd's consolidated profit or loss, financial position, and retained profit movement for 20X4.

You're reporting an error for "FR – L2 – Q91 – Consolidated Financial Statements"

FR – L2 – Q89 – Business Combinations

Prepare consolidated statement of profit or loss and retained profit movement for Melody Ltd for year ended 31 Dec 20X4, including negative goodwill and intra-group adjustments.

You're reporting an error for "FR – L2 – Q89 – Business Combinations"

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.

You're reporting an error for "FR – L2 – Q88 – Business Combinations"

FR – L2 – Q71 – Presentation of Financial Statements

Prepare Zestful Ltd's statement of profit or loss and financial position for 20X9, incorporating inventory adjustments, depreciation, tax, and joint operation.

You're reporting an error for "FR – L2 – Q71 – Presentation of Financial Statements"

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.

You're reporting an error for "FR – L2 – Q66 – Presentation of Financial Statements"

Title: FR – L2 – Q48 – Taxation

Calculate Peak Ltd's corporate income tax liability for 20X4 based on profit, depreciation, and tax allowances.

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FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

You're reporting an error for "FR – L2 – Q35 – Financial Reporting Standards and Their Applications"

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

You're reporting an error for "FR – L2 – Q34 – Impairment of Assets"

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