PLANNING AND ANALYSIS

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

Question

As the Credit Officer for TCB Bank, Alpha Technology Solutions Limited has submitted its financial statements as part of the process to secure a loan of GHS 5million. You are required to:
i. Compute the following ratios for 2021 and 2020.
• Gross Profit Margin
• Return on Capital Employed
• Acid Test Ratio
• Payable period
• Debt to equity

ii. Write a report to the Head of Credit analyzing the performance of the company for the 2020 and 2021. Your report should explain the ratios and analyze them in relation to the previous year.

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
NON-CURRENT ASSETS
Property, Plant and Equipment	438,631	428,210
Fixed Deposit	–	400,000
Total Non-Current Assets	438,631	828,210
CURRENT ASSETS
Inventories	2,284,401	2,409,650
Accounts Receivable	2,712,529	1,368,010
Cash on Hand and Bank	642,951	2,177,519
Total Current Assets	5,639,881	5,955,179
TOTAL ASSETS	6,078,512	6,783,389

	2021 (GHS)	2020 (GHS)
LIABILITIES AND SHAREHOLDERS’ EQUITY
NON-CURRENT LIABILITIES
Loans	115,484	115,484
Deferred Tax	18,127	22,110
Total Non-Current Liabilities	133,611	137,594
CURRENT LIABILITIES
Accounts Payable	1,843,574	2,869,489
Current Tax	30,512	129,464
Total Current Liabilities	1,874,086	2,998,953
Total Liabilities	2,007,697	3,136,547
SHAREHOLDERS’ EQUITY
Stated Capital	1,240,000	1,240,000
Retained Earnings	2,830,815	2,406,842
Total Shareholders’ Equity	4,070,815	3,646,842
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	6,078,512	6,783,389

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
Revenue	11,180,208	12,957,649
Direct Cost	(7,446,676)	(9,703,650)
Gross Profit	3,733,532	3,253,999
Other Income	–	23,436
Administrative Expenses	(3,168,234)	(2,483,480)
Operating Profit	565,298	793,955
Income Tax Expense	(141,325)	(198,489)
Profit/(Loss) After Taxation	423,973	595,466

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Banking Sector, Credit Officer, Debt to Equity, Financial Analysis, Gross Profit Margin, Payable Period, Report Writing, ROCE
Level: Level 3

Topic: FINANCIAL REPORTING, PLANNING AND ANALYSIS
Series: APR 2023

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

Question

A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit	Credit
GH¢’000	GH¢’000
Sales
Inventory	3,150
Cost of sales	35,500
Selling & distribution expenses	5,600
Administration expenses	8,540
Loan Note interest paid	110
Bank interest	85
Investment income
Leasehold building at valuation – 1 Oct 2021	14,000
Plant and equipment – cost/depreciation	13,750
Computer equipment – cost/depreciation	7,200
Motor vehicles – cost/depreciation	1,500
Trade receivables	17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335	107,335

The following additional information is made available:
i. The company paid ordinary dividends of GH¢2.2 per share on 31 January 2022 and GH¢2.6 per share on 30 June 2022. The dividend payments are included in administrative expenses in the trial balance.
ii. Provision is to be made for a full year’s interest on the Loan notes.
iii. non-current assets:
• Depreciation of Property, plant and equipment is to be provided on the following bases:

Plant and equipment – 10% on cost
Computer equipment – 25% on cost
Motor vehicles – 20% on reducing balance.
• No depreciation has yet been charged on any non-current asset for the year ended 30 September 2022.
• ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, the relevant value to be incorporated into the financial statements is GH¢14,100,000.
• The building’s remaining life at the beginning of the current year (1 October 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

You are required to:
Prepare the following financial statements of ANG Ltd. for publication in accordance with International Financial Reporting Standards (IFRS):
a. Statement of profit or loss and other comprehensive income for the year ended 30 September 2022 and.
b. Statement of financial position as of 30 September 2022.
c. Show clearly all relevant workings.

B
I. What is the objective of general-purpose financial reporting?
II. The IASB’s Conceptual Framework for Financial Reporting states that “If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent.” Explain the terms Relevance and Faithfully Representation.

C
The accounting treatment of intangible assets is prescribed by IAS 38 Intangible Assets. You are required to:
i. Define intangible asset under IAS 38 Intangible Assets.
ii. Explain the recognition criteria for intangible assets.
iii. State 5 disclosure requirements of Intangible Assets under IAS 38.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Comprehensive Income, Conceptual Framework, Depreciation, Disclosure, Faithful Representation, Financial Position, FRS, IAS 38, Intangible Assets, Profit or Loss, Recognition, Relevance, Revaluation Surplus
Level: Level 3

Topic: PLANNING AND ANALYSIS
Series: APR 2023

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

Question

ii. Write a report to the Head of Credit analyzing the performance of the company for the 2020 and 2021. Your report should explain the ratios and analyze them in relation to the previous year.

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
NON-CURRENT ASSETS
Property, Plant and Equipment	438,631	428,210
Fixed Deposit	–	400,000
Total Non-Current Assets	438,631	828,210
CURRENT ASSETS
Inventories	2,284,401	2,409,650
Accounts Receivable	2,712,529	1,368,010
Cash on Hand and Bank	642,951	2,177,519
Total Current Assets	5,639,881	5,955,179
TOTAL ASSETS	6,078,512	6,783,389

	2021 (GHS)	2020 (GHS)
LIABILITIES AND SHAREHOLDERS’ EQUITY
NON-CURRENT LIABILITIES
Loans	115,484	115,484
Deferred Tax	18,127	22,110
Total Non-Current Liabilities	133,611	137,594
CURRENT LIABILITIES
Accounts Payable	1,843,574	2,869,489
Current Tax	30,512	129,464
Total Current Liabilities	1,874,086	2,998,953
Total Liabilities	2,007,697	3,136,547
SHAREHOLDERS’ EQUITY
Stated Capital	1,240,000	1,240,000
Retained Earnings	2,830,815	2,406,842
Total Shareholders’ Equity	4,070,815	3,646,842
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	6,078,512	6,783,389

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
Revenue	11,180,208	12,957,649
Direct Cost	(7,446,676)	(9,703,650)
Gross Profit	3,733,532	3,253,999
Other Income	–	23,436
Administrative Expenses	(3,168,234)	(2,483,480)
Operating Profit	565,298	793,955
Income Tax Expense	(141,325)	(198,489)
Profit/(Loss) After Taxation	423,973	595,466

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Banking Sector, Credit Officer, Debt to Equity, Financial Analysis, Gross Profit Margin, Payable Period, Report Writing, ROCE
Level: Level 3

Topic: FINANCIAL REPORTING, PLANNING AND ANALYSIS
Series: APR 2023

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

Question

A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit	Credit
GH¢’000	GH¢’000
Sales
Inventory	3,150
Cost of sales	35,500
Selling & distribution expenses	5,600
Administration expenses	8,540
Loan Note interest paid	110
Bank interest	85
Investment income
Leasehold building at valuation – 1 Oct 2021	14,000
Plant and equipment – cost/depreciation	13,750
Computer equipment – cost/depreciation	7,200
Motor vehicles – cost/depreciation	1,500
Trade receivables	17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335	107,335

Plant and equipment – 10% on cost
Computer equipment – 25% on cost
Motor vehicles – 20% on reducing balance.
• No depreciation has yet been charged on any non-current asset for the year ended 30 September 2022.
• ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, the relevant value to be incorporated into the financial statements is GH¢14,100,000.
• The building’s remaining life at the beginning of the current year (1 October 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Comprehensive Income, Conceptual Framework, Depreciation, Disclosure, Faithful Representation, Financial Position, FRS, IAS 38, Intangible Assets, Profit or Loss, Recognition, Relevance, Revaluation Surplus
Level: Level 3

Topic: PLANNING AND ANALYSIS
Series: APR 2023

Topic: PLANNING AND ANALYSIS

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FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

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FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

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