ANWSER
Question 1:
Answer:
a) Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2018:
– Revenue: N100,582,000
– Cost of Sales: N46,500,000 (Purchases) – N8,000,000 (Opening Inventory) + N19,000,000 (Closing Inventory, adjusted for NRV) = N57,500,000
– Gross Profit: N100,582,000 – N57,500,000 = N43,082,000
– Operating Expenses:
– Administrative Expenses: N21,000,000
– Selling and Distribution Costs: N36,560,000
– Depreciation (Building: N5,625,000; Delivery Van: N1,536,000) = N7,161,000
– Research and Development Cost (Expensed): N3,200,000 (March-October 2018)
– Operating Profit: N43,082,000 – (N21,000,000 + N36,560,000 + N7,161,000 + N3,200,000) = N24,839,000
– Finance Costs: Interest Paid N830,000 + Effective Interest on Debenture N913,000 = N1,743,000
– Profit Before Tax: N24,839,000 – N1,743,000 = N23,096,000
– Income Tax Expense: 30% of PBT = N6,928,800
– Other Comprehensive Income: Revaluation Surplus (Building N4,000,000 + Delivery Van N1,480,000 + Investment Property N1,500,000) = N6,980,000
b) Statement of Financial Position as at December 31, 2018:
– Non-Current Assets:
– Land and Building: N35,000,000 (Revalued) – N5,625,000 (Depreciation) = N29,375,000
– Delivery Van: N5,800,000 (Revalued) – N1,536,000 (Depreciation) = N4,264,000
– Investment Property: N11,500,000 (Fair Value)
– Current Assets:
– Inventory: N19,000,000 (Adjusted for NRV)
– Trade Receivables: N5,000,000
– Bank: N975,000
– Equity:
– Share Capital: N50,000,000
– Share Premium: N5,000,000
– Retained Earnings: N2,968,000 + N16,167,200 (Profit After Tax) = N19,135,200
– Revaluation Surplus: N6,980,000
– Liabilities:
– Trade Payables: N4,000,000
– Convertible Debenture: N8,300,000 + N913,000 (Interest Accrued) = N9,213,000
– Current Tax Payable: N6,928,800
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Question 2:
Answer:
Statement of Changes in Equity for GENGEN Limited for the year ended December 31, 2018:
– Opening Balances:
– Share Capital: N800,000,000
– Share Premium: N255,450,000
– Retained Earnings: N50,000,000
– Revaluation Surplus: N200,000,000
– Transactions:
– Right Issue: 1 for 3 (266,666,667 shares at 50k) → Share Capital + N133,333,333; Share Premium + N133,333,333
– Bonus Issue: 1 for 4 (266,666,667 shares) → Share Capital + N66,666,667; Retained Earnings – N66,666,667
– Dividends Paid: Interim (5k + 25k per share) → Retained Earnings – N240,000,000
– Revaluation Surplus: N18,540,000 (Upward Revaluation)
– Profit for the Year: N105,300,000 → Retained Earnings + N105,300,000
– Closing Balances:
– Share Capital: N1,000,000,000
– Share Premium: N388,783,333
– Retained Earnings: N51,633,333
– Revaluation Surplus: N218,540,000
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Question 3:
Answer:
a) Royalty Receivable Account (Landlord’s Book):
– Debit:
– 2015: N112,000 (140 × N800)
– 2016: N124,000 (155 × N800)
– 2017: N116,000 (145 × N800)
– 2018: N144,000 (180 × N800)
– Credit:
– Minimum Rent: N120,000 (2015-2017), N1,000,000 (2018)
– Short workings recouped: N8,000 (2016), N4,000 (2017)
b) Tenant’s Account (Landlord’s Book):
– Debit: Payments made by tenant (minimum rent or actual royalty).
– Credit: Royalty owed (actual sales).
c) Short Workings Account:
– Debit: Excess of minimum rent over royalty (e.g., 2015: N8,000).
– Credit: Recouped in subsequent years (e.g., 2016: N8,000).
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Question 4:
Answer:
a) Internally Generated Intangible Assets Prohibited by IAS 38:
1. Brands
2. Customer lists
3. Publishing titles
4. Goodwill
b) Directly Attributable Costs (IAS 16):
1. Employee benefits directly attributable to construction.
2. Site preparation costs.
3. Delivery and handling costs.
4. Installation and assembly costs.
c) Enhancing Qualitative Characteristics (IASB Framework):
1. Comparability: Consistency in policies across periods.
2. Verifiability: Independent observers can reach consensus.
3. Timeliness: Information available in time to influence decisions.
4. Understandability: Clear and concise presentation.
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Question 5:
Answer:
a) Statement of Profit or Loss and Other Comprehensive Income for Kojor Bank Plc:
– Interest Income: N875,474,000
– Interest Expense: (N200,040,000)
– Net Fee Income: N230,000 – N186,000 = N44,000
– Net Trading Income: N128,945,000
– Other Income: N3,134,688,000
– Operating Expenses: (N1,235,505,000)
– Profit Before Tax: N2,747,606,000
– Income Tax: (N21,004,000)
– Other Comprehensive Income: Revaluation Surplus N6,128,000
b) Key Input for Expected Credit Loss (IFRS 9):
Probability of Default (PD): Likelihood of a borrower failing to meet obligations, based on historical data and forward-looking estimates.
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Question 6:
Answer:
Statement of Cash Flows for Unbelievable Limited (Indirect Method):
– Operating Activities:
– Profit Before Tax: N1,950,000
– Adjustments: Depreciation N1,150,000 + Amortization N250,000 + Interest N450,000 = N1,850,000
– Changes in Working Capital: Increase in Receivables (N1,200,000) + Increase in Inventory (N900,000) – Increase in Payables N400,000 = (N700,000)
– Net Cash from Operations: N3,100,000
– Investing Activities:
– Purchase of PPE: (N6,000,000 – N4,100,000 + N1,150,000) = (N3,050,000)
– Purchase of Investments: (N2,300,000)
– Net Cash Used: (N5,350,000)
– Financing Activities:
– Proceeds from Loan Notes: N5,150,000
– Dividends Paid: (Not provided, assumed N0)
– Net Cash from Financing: N5,150,000
– Net Increase in Cash: N2,900,000
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Question 1:
Answer:
To prepare the Statement of Cash Flows using the Direct Method for the year ended 31 March 2017, we need to classify the cash flows into three activities: Operating, Investing, and Financing.
Operating Activities
Cash Receipts from Customers – Not provided explicitly
Cash Payments to Suppliers and Employees – Not provided explicitly
However, from the note:
- A fully depreciated plant & machinery with original cost ₦22,500,000 was sold for ₦7,500,000.
- This amount is included in operating expenses, so we adjust it here.
Investing Activities
Sale of machinery = ₦7,500,000 (Influx)
Financing Activities
(Not enough information provided in the image)
Note: Since the full data for a complete Statement of Cash Flows is not available (such as receipts from customers, payments, depreciation, taxes, etc.), only partial information can be provided.
Question 3:
(a) Answer:
According to IAS 36, impairment is a loss that occurs when the carrying amount of an asset exceeds its recoverable amount.
Indicators of impairment include:
- A significant decline in market value.
- Adverse changes in the technological, market, economic, or legal environment.
- Increases in market interest rates.
- Evidence of obsolescence or physical damage.
- Poor economic performance of the asset.
Examples:
- A machine becomes technologically obsolete due to a competitor’s new product.
- A reduction in expected future cash flows due to reduced demand.
(b) Answer:
Carrying Amount = ₦300,000
Future cash flows expected = ₦150,000, ₦100,000, ₦50,000 (over 3 years)
Present value of future cash flows (discounted at 10%):
PV=150,000(1.10)1+100,000(1.10)2+50,000(1.10)3=136,364+82,645+37,565=₦256,574PV = \frac{150,000}{(1.10)^1} + \frac{100,000}{(1.10)^2} + \frac{50,000}{(1.10)^3} = 136,364 + 82,645 + 37,565 = ₦256,574
Fair value less cost to sell = Offer price ₦240,000 – Shipping costs ₦5,000 = ₦235,000
Recoverable amount = higher of value in use (₦256,574) and fair value less cost to sell (₦235,000) = ₦256,574
Impairment Loss = Carrying amount – Recoverable amount
= ₦300,000 – ₦256,574 = ₦43,426
Extract from Statement of Profit or Loss:
Impairment Loss on Machine: ₦43,426
Question 4:
(a) Answer:
Non-performing loans:
- Total non-performing loan = ₦5,000,000
- Doubtful loan = ₦2,000,000 → Provision (50%) = ₦1,000,000
- Bad loan = ₦1,500,000 → Provision (100%) = ₦1,500,000
Total Provision = ₦1,000,000 + ₦1,500,000 = ₦2,500,000
(b) Answer:
Extract from Income Statement:
Provision for Loan Losses: ₦2,500,000
Provision for Loan Losses Account:
Dr. Profit or Loss a/c ₦2,500,000
Cr. Provision for Loan Losses a/c ₦2,500,000
(c) Answer:
Two performance requirements of a performing loan:
- Timely payment of both principal and interest as per agreed terms.
- No arrears for a period exceeding 90 days.