Tag (SQ): Statement of Financial Position

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  • 20 Marks

FA – L1 – Q78 – Preparation of Partnership accounts

Prepare capital accounts and statement of financial position for M, N, O partnership after O's retirement and T's admission, adjusting for goodwill and revaluations.

M, N, and O are partners sharing profit in the ratio of their capitals. Their statement of financial position at June 30, 20X9 was as follows:

Statement of financial position as at June 30, 20X9

Assets GH₵
Land and building 450,000
Motor cars 350,000
Equipment 95,000
Inventories 500,000
Receivables 400,000
Less: Allowance (60,000)
340,000
Investments 300,000
Cash in hand 65,000
Cash at bank 450,000
Total Assets 2,550,000

Capital and Liabilities GH₵
Capital:
M 640,000
N 320,000
O 480,000
1,440,000
Payables and accrued expenses 485,000
Loan from N 625,000
Total Capital and Liabilities 2,550,000

On July 1, 20X9, O retired. His share of the net assets of the partnership was ascertained after taking into account the following adjustments:
(i) The allowance against receivables was to be adjusted to 10% of the book value of the receivables.
(ii) Inventories were to be written down by 5%.
(iii) The investments were revalued to their market value which was GH₵ 435,000.
(iv) Investments with a market value of GH₵ 160,000 were taken over by O.
(v) A motor car having a book value of GH₵ 150,000 was taken over by O for GH₵ 200,000.
(vi) O’s share of goodwill was agreed at GH₵ 216,000.

T was admitted as a partner on the same day that O retired and on the basis of the adjusted statement of financial position. He was given one-fourth share in the profits and he bought a proportionate share of capital and goodwill by paying cash into the business. The basis of valuation of goodwill for the purpose of admission of T as a partner was the same as at the time of O’s retirement.

M and N have decided that the cash paid in by T in respect of goodwill will be taken out of the business by them in their profit-sharing ratio.

Required:
Prepare capital accounts of the partners in columnar form and the statement of financial position of the firm as at July 1, 20X9 after the admission of T, assuming that goodwill is not retained in the books of account.

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  • 20 Marks

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.

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.

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  • 20 Marks

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.

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.

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  • 20 Marks

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.

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.

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  • 20 Marks

FA – L1 – Q72 – Preparing financial statements of a sole trader

Prepare Zanko Ventures' statement of profit or loss for 20X9 using trial balance and adjustments.

(a) Distinguish between capital expenditure and revenue expenditure.
(b) (i) The following trial balance was extracted from the books of Zanko Ventures, a second-hand bags dealer as at 31st December, 20X9.

Description DR (GH₵) CR (GH₵)
Inventory 120,000
Vehicle (Cost) 150,000
Trade receivables 25,000
Accumulated depreciation: Vehicle 30,000
Accumulated depreciation: Furniture & fittings 10,120
Trade payables 100,000
Drawings 120,000
General expenses 65,000
Allowance for receivables 2,500
Rate & rent 14,000
Insurance 5,000
Irrecoverable debt 7,000
Discount received 25,150
Discount allowed 15,160
Bank balance 165,240
Wages & salaries 250,000
Sundry expenses 6,150
Vehicle running expenses 15,650
Furniture & fittings 50,600
Repairs to the shop 6,500
Purchases 650,120
Sales 1,079,130
Capital 473,520
Total 1,720,420 1,720,420

The following additional information is provided:
(i) Allowance for receivables is to be reduced by 10%.
(ii) Rate and rent has been paid in advance by two (2) months. Note that Zanko Ventures pays GH₵1,000 each month.
(iii) Inventory as at 31st December, 20X9 is GH₵80,150.
(iv) A bill of GH₵6,150 for vehicle running was outstanding as at 31st December, 20X9.
(v) The enterprise provides depreciation as follows:

  • Vehicle: 20% per annum on straight-line basis.
  • Furniture and fittings: 20% per annum on straight-line basis.

You are required to:
(i) Prepare the statement of profit or loss for the year ending 31st December 20X9.

(ii) Prepare the statement of financial position as at 31st December 20X9.

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  • 15 Marks

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.

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.

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  • 15 Marks

FA – L1 – Q69 – Preparing financial statements of a sole trader

Prepare Sarah's statement of profit or loss for 20X8 and financial position as at 31 Dec 20X8 using given balances and adjustments.

The following information relates to the business of Sarah for the year ended December 20X8.

GH$ GH$
Capital account, 1 January 20X8 13,640
Freehold properties at cost 7,500
Furniture and fittings at cost 2,000
Motor cars at cost 6,300
Accumulated depreciation to 1 January
Freehold properties 450
Furniture and fittings 800
Motor cars 2,370
Inventory 1 January 6,740
Purchases 54,520
Sales 79,060
Salaries 8,760
Rates 1,170
Office expenses 3,950
Motor expenses 3,790
Drawings 4,800
Allowance for receivables 1 January 600
Loan 4,000
Trade receivables 9,240
Trade payables 10,040
Bank balance 2,190
110,960 110,960

You are also supplied with the following information:
(1) Inventory at 31 December 20X8 was GH$7,330.
(2) Rates paid in advance at 31 December 20X8 amounted to GH$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:

  • Freehold properties: 1%
  • Furniture and fittings: 10%
  • Motor cars: 20%
    (5) Interest on the loan at 5% per annum is to be provided.

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position at that date.

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  • 15 Marks

FA – L1 – Q68 – Preparing financial statements of a sole trader

Prepare Michael Tan's statement of profit or loss for 20X9 and financial position as at 31 May 20X9 using trial balance and adjustments.

The following trial balance was extracted from the main ledger of Michael Tan, a sole trader, as at 31 May 20X9 – the end of his financial year.

Michael Tan: Trial balance as at 31 May 20X9

DR GH$(000) CR GH$(000)
Land and buildings at cost 120,000
Equipment at cost 80,000
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 36,000
On equipment 38,000
Purchases 250,000
Sales 402,200
Inventory as at 1 June 20X8 50,000
Discounts received 4,800
Returns outwards 15,000
Wages and salaries 79,800
Irrecoverable debts 2,100
Loan interest 2,100
Other operating expenses 17,700
Trade payables 36,000
Trade receivables 38,000
Cash in hand 300
Bank 1,300
Drawings 24,000
Allowance for receivables 500
7% long-term loan 30,000
Capital as at 1 June 20X8 121,300
665,300 683,800

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH$42,000,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Land and buildings: 1.5% using the straight-line method;
  • Equipment: 25% on the carrying amount at the year-end (i.e., cost less accumulated depreciation at 1 June 20X8).
    (c) There are accrued wages and salaries of GH$800,000.
    (d) Other operating expenses include some prepaid expenses of GH$300,000.
    (e) The allowance for receivables should be adjusted to 2% of trade receivables as at 31 May 20X9.

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

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  • 15 Marks

FA – L1 – Q67 – Preparing financial statements of a sole trader

Prepare DOVE's statement of profit or loss for 20X9 and statement of financial position as at 31 Dec 20X9 using given ledger balances and adjustments.

The following balances were extracted from the main ledger of DOVE on 31 December 20X9.

Description GH$(000)
Capital 10,059
Inventory at 1 January 20X9 2,720
Cash in hand 55
Bank overdraft 2,522
Sundry receivables 7,009
Sundry payables 6,735
Motor vans (Cost GH$2,000) 1,500
Drawings in cash 2,459
Fixtures and fittings (Cost GH$4,000) 3,800
Purchases 33,436
Allowance for receivables 162
Sales 50,261
Purchases returns 120
Carriage inwards 546
Rent 626
Salaries and wages 5,226
Motor vehicle expenses 920
Interest on bank overdraft and bank charges 56
Carriage outwards 785
Returns inwards 240
Freehold land 10,300
Irrecoverable debts 240

You are given the following information:
(1) The inventory at 31 December 20X9 was GH$4,270,000.
(2) Wages and salaries payable at 31 December 20X9 were GH$426,000.
(3) Rent paid in advance at 31 December 20X9 amounted to GH$100,000.
(4) The allowance for receivables is to be increased to GH$260,000.
(5) Depreciation is to be charged as follows: motor vans at 25% per year on cost, fixtures and fittings 5% per year on cost.
(6) During 20X9, the owner of DOVE withdrew goods valued at GH$180,000 for his own use. No entry has been made in the accounts for the withdrawal of these goods.
(7) One quarter of the motor vehicle expenses is the cost of the owner’s private motoring, as distinct from expenses for business purposes.

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

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  • 12 Marks

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.

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.

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