Statement of Financial Position – Page 2

FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

Question

BNN Co is considering acquiring an interest in its competitor JB Co Ltd. The managing director of BNN Co has obtained the three most recent statements of financial position of JB Co Ltd as shown below.

JB Co Ltd – Statement of Financial Position at 31st December

	20X7 GH$’000	20X8 GH$’000	20X9 GH$’000
Non-current assets
Land and buildings	11,460	12,121	11,081
Plant and equipment	8,896	9,020	9,130
	20,356	21,141	20,211
Current assets
Inventories	1,775	2,663	3,995
Trade receivables	1,440	2,260	3,164
Cash	50	53	55
	3,265	4,976	7,214
Total assets	23,621	26,117	27,425
Equity
Share capital	8,000	8,000	8,000
Retained earnings	6,434	7,313	7,584
	14,434	15,313	15,584
Non-current liabilities
12% debentures 20X9–20Y2	5,000	5,000	5,000
Current liabilities
Trade payable	390	388	446
Bank	1,300	2,300	3,400
Income taxes payable	897	1,420	1,195
Dividend payable	1,600	1,696	1,800
	4,187	5,804	6,841
Total equity and liabilities	23,621	26,117	27,425

Required:
Prepare a report for the managing director of BNN Co. commenting on the financial position of JB Co Ltd. and highlight any areas that require further investigation (using gearing and liquidity ratios only).

Answer

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Tags: Comparative Analysis, Corporate Acquisition, Current Ratio, Debt Ratio, Financial analysis, Financial Position, Gearing Ratios, Liquidity Ratios, Quick Ratio, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements

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 – 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 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

Question

NOVA BEKASI LIMITED
The list of balances of Nova Bekasi Limited shows the following balances at 31 December 20X5.

	Dr GH₵’000	Cr GH₵’000
Share capital (600,000 shares)		320
General reserve		20
Accumulated profit 1 January 20X5		50
Inventory (goods for resale) at 1 January 20X5	60
Revenue		1,000
Purchases	540
Purchases returns		26
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 20X5		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	330
Cash at bank	60
Trade payables		60
	1,542	1,542

Additional information
(1) Inventory (goods for resale) at 31 December 20X5 amounted to GH₵100,000.
(2) Annual depreciation on warehouse plant and equipment of GH₵32,000 should be provided.
(3) Income tax for 20X5 should be taken as GH₵50,000.
(4) The recoverable amount of goodwill was only GH₵90,000.

Required
Prepare the company’s statement of profit or loss for the year to 31 December 20X5 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 Reporting, Financial Statements, Goodwill Impairment, IAS 1, Income Tax, Inventory Valuation, Statement of Financial Position, Statement of profit or loss, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements, Presentation of Financial Statements (IAS 1)

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

Question

The trial balance of Wenchi Exports Limited at 31 December 20X4 is as follows.

	GH₵ in million
	Dr	Cr
Patent rights	60
Work-in-progress, 1 January 20X4	125
Buildings at cost	300
Ordinary share capital		600
Revenue		1,740
Staff costs	260
Accumulated depreciation on buildings, 1 January 20X4		60
Inventories of finished games, 1 January 20X4	155
Consultancy fees	44
Directors’ salaries	360
Computers at cost	50
Accumulated depreciation on computers, 1 January 20X4		20
Dividends paid	125
Cash	440
Receivables	420
Trade payables		294
Sundry expenses	94
Accumulated profits, 1 January 20X4		279
	2,633	2,633

The following information is also relevant.
(1) Closing inventories of finished games are valued at GH₵180 million. Work in progress has increased to GH₵140 million.
(2) The patent rights relate to a computer program with a three-year lifespan.
(3) On 1 January 20X4 buildings were revalued to GH₵360 million. This has not yet been reflected in the accounts. Computers are depreciated over five years. Buildings are now to be depreciated over 30 years.
(4) An allowance for bad debts (irrecoverable debts) of 5% is to be created.
(5) There is an estimated bill for current tax of GH₵120 million which has not yet been recognised.

Required
Prepare a statement of profit or loss (analysing expenses by nature) for the year ended 31 December 20X4 and a statement of financial position as at that date.

Answer

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Tags: Amortisation, Bad Debts, Depreciation, Inventory Valuation, Revaluation, Statement of Financial Position, Statement of profit or loss, Tax Provision, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

Question

LORRY LIMITED
The trial balance of Lorry Limited at 31 December 20X4 is as follows.

	GH₵ in million
Administration	86
	5
	918
	189
	175
	2,830
	20
	400
	18
	1,562
	3,304
	6,313

The following information is also relevant.
(1) Inventories on 31 December 20X4 amounted to GH₵127 million.
(2) Current tax of GH₵75 million is to be provided.
(3) The loan is repayable by equal annual instalments over three years.

Required
Prepare a statement of profit or loss (analysing expenses by function) for the year ended 31 December 20X4 and a statement of financial position as at that date.

Answer

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Tags: Financial Statements, Income Tax, Inventory, Loan repayment, Statement of Financial Position, Statement of profit or loss, Trial Balance
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

Question

On 1 January 20X4, Finley Ltd entered into an agreement to lease a boat. The initial measurement of the lease liability was GH¢36,000 and the term of the lease was four years. Annual lease payments of GH¢10,000 are payable in advance. The interest rate implicit in the lease is 7.5%.

Required
Show how this lease would be presented in the statement of profit or loss of Finley Ltd for the year ended 31 December 20X4 and the statement of financial position as at that date. Detailed disclosure notes are not required.

Answer

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Tags: Depreciation, Finance Costs, Financial Statements, IFRS 16, Interest rate, Lease Accounting, Statement of Financial Position, Statement of profit or loss
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

Question

“A statement of financial position is a snapshot of a business at a point in time. It shows the assets that an entity owns and the liabilities that it owes. This is all that is required to convey a business’s performance, position and adaptability.

As income generated and expenses incurred by a business are already reflected within the assets and liabilities shown in the statement of financial position, a statement of profit or loss is a superfluous statement.”

Required

Briefly appraise the validity of the above statement, defining the words underlined.

Answer

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Tags: Assets, Conceptual Framework, Expenses, Financial Statements, Income, Liabilities, Statement of Financial Position, Statement of profit or loss
Level: Level 2

Topic: Conceptual Framework for Financial Reporting

PSAF – L2 – Q10.2 – International public sector accounting standards

Prepare financial statement extracts for a new technology acquisition by the Office of Business Registry for 2023 and 2024, considering delayed deployment.

Question

The Office of Business Registry has successfully acquired a new technology that will transform the landscape of business registration in the Republic of Zamara and make the Republic of Zamara a preferred destination for business.

The cost of the technology is GHc375 million. Professional advisers charged GHc5 million for providing advice in the acquisition of the technology which was estimated to have a useful life of 20 years effective from 1 January 2023.

Delay for the construction of the supporting infrastructure meant that the new technology could not be deployed until 1 January 2024.

Required:

Show extracts of the financial statements of the Office of Business Registry for the years ending 31st December 2023 and 2024.

Answer

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Tags: Amortization, Capitalization, Depreciation, Financial Statements, Intangible assets, IPSAS, Non-current Assets, Public Sector Accounting, Statement of Financial Position, Technology acquisition
Level: Level 2

Topic: International Public Sector Accounting Standards

Tag (SQ): Statement of Financial Position

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FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

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 – 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 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

PSAF – L2 – Q10.2 – International public sector accounting standards

Prepare financial statement extracts for a new technology acquisition by the Office of Business Registry for 2023 and 2024, considering delayed deployment.

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FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

You're reporting an error for "FR – L2 – Q100 – Presentation of Financial Statements"

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 – 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 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

You're reporting an error for "FR – L2 – Q69 – Presentation of Financial Statements"

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

You're reporting an error for "FR – L2 – Q67 – Presentation of Financial Statements"

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

You're reporting an error for "FR – L2 – Q65 – Presentation of Financial Statements"

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

You're reporting an error for "FR – L2 – Q40 – Financial Reporting Standards and Their Applications"

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

You're reporting an error for "FR – L2 – Q3 – Conceptual Framework for Financial Reporting"

PSAF – L2 – Q10.2 – International public sector accounting standards

Prepare financial statement extracts for a new technology acquisition by the Office of Business Registry for 2023 and 2024, considering delayed deployment.

You're reporting an error for "PSAF – L2 – Q10.2 – International public sector accounting standards"

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