Financial Accounting & Reporting 1 Page 1 of 7

Certificate in Accounting and Finance Stage Examination

ARTT Business School 19 February 2024

Fellow RAET of the ICAP 3 hours – 100 marks
Prepared by Ahmed Raza Mir, FCA Additional reading time – 15 minutes

Financial Accounting and Reporting 1

Instructions to examinees:
(i) Answer all Eleven questions.
(ii) Answer in black pen only.

Q1. On January 1, 2021, PERU Limited (PL) acquired a plant with a useful life of seven years, which was
immediately put into operation. On December 31, 2022, an impairment review was conducted which resulted
in the recognition of an impairment loss of Rs 60,000, leading to a revised carrying amount of the asset of Rs
290,000.

Given recent developments and the elimination of factors that caused impairment loss, PL carried out a
reassessment on December 31, 2023, to potentially reverse the impairment loss. The reassessment took into
account the following financial projections and adjustments:

1. Expected cash flows from sales in next year (2024)

Rupees
Sales for the year 265,000
Sales from last year stock (25,000)
Cash collection from next year sales 240,000
Account Receivables for last year realized 16,000
Net Cash to be collected next year 256,000

2. Cash out flows for the next year would be:

Cost of Goods Sold 144,000
Cost of stock sold pertaining to last year (16,250)
Payment for next year stock sold 127,750
Payment for current year's trade payable 6,750
Total Payments to be made next year 134,500
3. Operating and other payments for next year would be Rs 32,000 that includes interest payment of Rs
12,000 but does not include income tax payments of Rs 16,500.
4. All relevant cash flows for next year would increase by 4% per anum.
5. If an overhauling cost of Rs 250,000 is incurred in the year 2025, the growth rate in cash flows would
increase to 10%, and the residual value would rise to Rs 80,000 (up from Rs 35,000 without
overhauling).
6. Post tax discount rate is 6.3% whereas tax rate applicable is 30%.
7. Fair value and costs to sell are indeterminable at this stage due to significant modifications made in-
house to the plant.
Required
1. Calculate the amount of reversal of impairment (if any)
2. Prepare all journal entries for the year ended 31 December 2023 (09)
Q2. Dallas Limited (DL) reported a net profit after tax of Rs 4.65 million for the financial year ended June 30,
2023. The company's share capital at the end of the year included 2.304 million ordinary shares. Throughout
the year, DL undertook the following transactions in ordinary shares:

1. On November 1, 2022, DL issued rights shares amounting to 20% of the pre-existing shares. The share
price immediately before the rights issue was Rs 16.095 per share and adjusted to Rs 14.5 per share
immediately after the rights issue.
 Financial Accounting & Reporting 1 Page 2 of 7
2. A subsequent issuance of 20% rights shares occurred on February 1, 2023, at a price of Rs 15.3 per share,
which represented a discount of 15% on the share price prevailing on that date.

Additionally, the company has potential ordinary shares in issue as follows:

1. 200,000 options available at an exercise price of Rs 10 per share, which is 40% below the share price at
the end of the year.
2. 100,000 8% convertible bonds with a face value of Rs 100 each, convertible into two ordinary shares
anytime after eight years.
3. 50,000 5% convertible preference shares, valued at Rs 100 each, with each preference share convertible
into ordinary shares at Rs 25 per preference share /ordinary share.

The applicable tax rate for Dallas Limited is 30%.

Required:
You are required to calculate both the Basic and Diluted Earnings Per Share (EPS) for Dallas Limited for the
fiscal year ending June 30, 2023. (08)

Q3. Orlando Limited (OL) has provided extracts from its Statement of Comprehensive Income for the fiscal year
ended December 31, 2023, as follows:
Sales 650,000
Cost of Goods Sold (360,000)
Gross Profit 290,000
Operating Expenses (109,000)
PBIT 181,000
Interest Expense (23,000)
PBT 158,000
Tax @ 30% (47,400)
Profit after tax 110,600
During the fiscal year, several transactions and adjustments were noted that have not been fully accounted for
in the presented financial statements:
1. A revalued plant was impaired at the year-end with an impairment loss of Rs 16,000. This entire
amount was charged to the Cost of Goods Sold, while a revaluation surplus of Rs 13,500 still appears
against the asset in the Financial Statetements
2. The closing stock includes damaged units costing Rs 25,000 with a Net Realizable Value (NRV) of Rs
14,800. It is noted that such damaged units are a common feature of the business.
3. Sample stock valued at Rs 8,000 is included in the closing stock.
4. A suspense account with a credit balance of Rs 6,000 was identified as unrecorded purchase returns.

Required
Redraft the statement of comprehensive income for the year ended 31 December 2023 (06)

Q4. Shahzad Limited (SL) received a government grant amounting to Rs 75,000, provided as a cash incentive to
cover 60% of the purchase cost of a plant acquired on January 1, 2021. Additionally, the company spent Rs
15,000 on installation expenses for this asset, which became operational on April 1, 2021. The estimated
useful life of the asset was estimated to be five years. Initially, the asset was recognized at its nominal amount
(i.e. net of the government grant), as per applicable accounting standards.

However, after an audit revealed some non-compliance issues, the government required the company to
return 70% of the grant received initially. This repayment was made on December 31, 2022.

Following the grant repayment, SL performed an impairment assessment of the asset. The review indicated
that the recoverable value of the asset had decreased to Rs 105,000.

Required
Journal entries for the year ended 31 December 2022 (04)
 Financial Accounting & Reporting 1 Page 3 of 7
Q5. Sudais Limited (SL) Acquired a plant costing Rs 660,000 on 1 January 2016. 50% of the consideration was
paid on acquisition date while remaining 50% was paid on 1 January 2017.SL’s incremental borrowing rate is
10%. The asset was subject to installation and overhauling (adding and in house development of certain
parts). The following events took place from 01 January 2016 to 31 December 2016:

Date Event
Obtained a specific loan of Rs 150,000 and paid 40,000 on
1 Jan 16 account of installation process
1 Mar 16 Rs 140,000 incurred on installation and overhauling process
20% Right shares at Rs 13 per share. Share Capital before
1 Apr 16 right issue was Rs 500,000
1 Jun 16 Rs 150,000 incurred on overhauling an installation process
1 Jul 16 Government grant received worth Rs 100,000 for the plant
1 Oct 16 Rs 130,000 incurred on overhauling an installation process

1. Specific loan carried a markup of 10% whereas investment income rate available with the same bank
was 6%. Overdraft facility is used whenever it is required at a markup rate of 16%.
2. Installation and overhauling process completed on 31 October 2016 and the asset was available for
use immediately.
3. The asset is carried at nominal amount that is net of government grant.
4. Interest accrued on specific loan is not settled till the year end. The net interest will be paid on 1st
January 2017
5. The specific loan will be repeated in 4 equal instalments starting from 31st December 2017
Required
Calculate the value of plant at 31 December 2016. (07)

Q6. (a) Briefly describe the measurement basis of Liabilities given in the conceptual framework (03)

(b) Adeel Limited (AL) owns a machine which it purchased two years ago for Rs. 200,000. The accumulated
depreciation on the machine to date is Rs. 80,000 based on 5 years life using straight line method.
 The machine can be sold in the market for Rs 100,000 but there would be dismantling costs of
Rs.10,000.
 The cash flows from the existing machine are estimated to be Rs. 50,000 for the next two years
followed by Rs. 40,000 in the last year. Relevant discount rate is 10%.
 To replace the machine with a new version would cost Rs. 220,000
Required:
Measure the machine using different measurement bases for AL using the above information. (03)

Q7. (a) Ghulam Limited has long-term assets worth Rs 600,000. The company has requested a loan facility from
a bank which has requested the company to improve its debt to equity ratio. The company is considering
revaluing the long term assets to Rs 750,000. The loan amount will be used to purchase inventory.

This step will increase the profitability from an average annual profit of Rs 120,000 to 140,000
Required
1. Elaborate whether the above measures will improve Debt to equity ratio before obtaining loans
2. Calculate return on fixed assets before and after the step and comment on the impact of this event
over profitability of company (04)

(b) KHSB a trader is concerned over its increasing working capital investments. Following data is extracted
from the financial statements for the year ended 31 Decmber 2023:
31 Dec 2023 31 Dec 2022
Cost of Goods Sold 450,000
Sales 585,000
Debtors 97,500 81,250
Creditors 37,500 31,250
Stock in trade 56,250 46,875
 Financial Accounting & Reporting 1 Page 4 of 7
Industry in which KHSB operates the average turnover days are as under:

Debtors’ turnover days 45

Creditors turnover days 32
Stock turnover days 30
Required
Calculate the working capital cycle for the KHSB and specify 1 measure each for every element on how to (04)
reduce the working capital cycle

Q8. 1. Which of the following cannot be a qualifying asset:

a) A piece of Property, Plant and Equipment
b) A Software
c) Inventory
d) Inventory that does not need substantial time. (01)

2. Following is the details of overdraft facilities used by the company last year:

Bank Limit Avg Usage Interest

A 6,500 3,250 455
B 7,800 3,120 499.2
C 9,800 7,840 1,019.20
Calculate weighted average capitalization rate: (1.5)
a. 13.10% b. 13.89% c. 18.39% d. 16%

3. Which of the following is not a current asset:

a) Inventory of raw material
b) Property purchased for resale in the ordinary course of business
c) Plant with total useful life of 9 years left with 1 year of remaining life
d) Current portion of a long term loan (01)

4. Zunair Limited invested a Machine valuing Rs 400,000, stock Rs 250,000 and cash Rs 150,000 on 1 Jan
2022. At the year the total capital is reported to be Rs 960,000. Inflation rate that prevailed during the
year was 10% for machine, 8% for stock and 11% in general. Profit as per physical capital maintenance
principles would be:
a) Rs 83,500
b) Rs 160,000
c) Rs (72,000)
d) Rs 72,000 (1.5)

Q9. Doomstone Limited (DL) is the process of proeparing its financial statements for the year ended 31
December 2023. Balances of different components of equity at 31 December 2022:

(Rupees)
Share Capital 756,000
Share Premium 1,025,000
Retained Earnings 2,450,000
Revaluation Surplus 120,900
General Reserves 119,000
Details of transactions between 1 Jan 2022 to 31 December 2023:
1. Final Dividend announced in March and paid in April every year:

Year Bonus Cash Dividend Status

2021 10% 10% Paid / settled
2022 15% 15% Paid / settled
2023 10% 20% Announced
 Financial Accounting & Reporting 1 Page 5 of 7
2. Interim dividend announced and paid in the month of August every year

Year Bonus Cash Dividend Status

2022 20% 10% Paid / settled
2023 10% 15% Paid / settled

3. 30% Right Shares were issued in 2023 when market price was Rs 40 and shares were issued at a
discount of 20%.
4. During 2022 an impairment review of land was commissioned and an impairment of Rs 200,000 was
found. However the impairment loss was disregarded inadvertently.
5. Profit for the years:

2021 2022 2023

Profit after tax (Rs) 650,000 780,000 950,000
Revaluation Surplus (Rs) 50,000 - -

6. On 27 June 2023 the company acquired a small machined costing Rs 200,000 against issuance of
shares. Market price of shares at the time of issuance was Rs 31.25 per share. Shares were issued at a
discount of 20%.
7. 10% of the profit is transferred every year to general reserves

Required
prepare a statement of changes in equity for the year ended 31st December 2023 including comparative
figures. (15)

Q10 Baber Azam Sports Club is an NPO established under Companies Act 2017. The organization prepares
financial statements as per the accounting standard promulgated for NPOs by ICAP. Following are the
Income and Expenditure Account and Statement of Changes in net assets for the year ended 31 December
2022:

Extracts of Income and Expenditure Account for the year ended 31 December 2022

Incomes (Rupees)
Contribution for endowment fund 450,000
Contribution for construction fund 100,000
Subscription received 105,000
Event based net income 25,600
Contribution for general fund 325,000
Total Investment Income 50,800

Expenditures (Rupees)
Transfer of contribution to Gen Fund 325,000
Internal transfer to research fund 30,000
Salary Expense 15,600
Other Expenses 105,000

Statement of Changes in Net Assets for the year ended 31 December 2022:

General Research Fund for Endowment

Fund Fund Construction Fund

Opening Balance 650,000 125,000 200,000 350,000

Surplus 580,800
Contribution to general fund 325,000
Transfer to Research Fund 30,000
Closing Balance 1,555,800 155,000 200,000 350,000
Other information:
1. The endowment fund established by the organization is for "Old house" developed for old people.
Contributions are not allowed to be spent. Expenses to the extent of investment incomes are allowed.
Investment income from funds invested from endowment fund is Rs 15,000 whereas expenses incurred
 Financial Accounting & Reporting 1 Page 6 of 7
from the fund is Rs 11,560. These expenses are included in the "Other Expenses" in income and
expenditure.
2. Fund for construction of new Laboratory is contributed by a company from time to time. The library was
completed at a total cost of Rs 600,000 on 1 July 2022. Life of the Setup is 20 years. No depreciation was
charged for the year.
3. Investment Income earned on the surplus cash pertaining to Fund for construction was Rs 8,000.
4. The company has also established an internal research fund. Company transfers certain amount every
year to that fund. Investment income on such fund earned during the year was Rs 6,500. Fund Specific
expenses charged to Income and expenditure are Rs 8,800 (included in Other Expenses)
5. At the start of the year the subscription was net receivable Rs 25,000 and at the year-end it was net
closing Advance Rs 7,600. Receivables written of during the period Rs 5,000.
6. Internal auditor of the organization thinks that there are a lot of mistakes in both the
7. statements.

Required
1. You are required to prepare revised:
 Income and expenditure account for the year ended 31 December 2022
 Statement of changes in net assets for the year ended 31 December 2022 (14)
2. Calculate the closing balance of Fund for construction on 31 December 2022

Q11 Sultan Limited is engaged in the production of toys for kids. Beside using property as office building, the
company also invests in properties for long term capital appreciation. Following is the summary of Long
term assets at 1 Jan 2021:

Assets Cost Accumulated Net Book

Depreciation Value
Manufacturing Plant 1,600,000 (640,000) 960,000
Property A 1,700,000 (425,000) 1,275,000
Heavy Machinery 600,000 Not Applicable 600,000

Transactions that took place in 2021 and 2022 were:

1. Manufacturing Plant
 A manufacturing plant which was purchased on 1 May 2018 for Rs 120,000 was disposed of on 31
July 2021 at a gain of Rs 20,000.
 A small plant was traded in on 1 March 2022 for Rs 50,000 in a deal to purchase a new plant costing
Rs 125,000. Remaining amount was paid in cash. The surrendered plant has a book value of Rs
45,615 and was purchased on 1 Jan 2017.
 Depreciation is charged at 20% per annum on written down value.

2. Property A
 This building was in use as head office of the company for quite some time. The company has
decided to move out of the property and rent it out instead. The company moved its head office in
property C on 1 June 2022. Depreciation on Property A is charged at 5% of cost.

 Fair Value at the date of moving out was Rs 1.25 million and at the end of the year 2022 it was Rs
1.42 million.

3. Heavy Machinery
This machinery is being carried under revaluation model. Revaluation is performed at the end of every
year. Fair Values at the end of:

Year Amount (Rs)

31 Dec 2020 600,000
31 Dec 2021 490,000
31 Dec 2022 540,000

Useful life of the machinery was 8 years at the beginning of 2021. Depreciation is charged on straight line
Basis.
4. Property C Financial Accounting & Reporting 1 Page 7 of 7
Property C has been an investment property till it was reoccupied as head office. The property was
acquired in 2021 for rental income for Rs 950,000. Its fair values on different dates are as under:

Date Amount (Rs)

31 Dec 21 1,050,000
1 June 22 1,300,000
31 Dec 22 1,345,000

Remaining useful life on 1 July 2022 was 6.5 years. Depreciation is charged on straight line basis.

Required
Prepare notes for Property plant and equipment and Investment properties for the year ended 31 December (18)
2022 (including comparative figures) (18)
Solution 1

Find the cost of Asset to determine the maximum impairment reversal

possible.

Carrying amount after impairment 290,000

Impairment 60,000
Carrying amount before impairment 350,000 with 5 years remaining life
Grossed up for cost 490,000 350k / 5 x 7

With Impr Without Impair

Cost of Asset 490,000 490,000
Depreciation 2021 (70,000) (70,000)
Depreciation 2022 (70,000) (70,000)
Impairment (60,000) -
290,000 350,000
Depreciation 2023 (58,000) (70,000)
232,000 280,000

If impairment is reversed carrying amount can only reach Rs 280,000

and not beyond

Working for impairment testing / reversal

1 2 3 4
2024 2025 2026 2027
Cash from sales 240,000 249,600 259,584 269,967
Cash for stock (127,750) (132,860) (138,174) (143,701)
Operating Expenses (20,000) (20,800) (21,632) (22,497)
Residual Value 35,000
Net Cash Flows 92,250 95,940 99,778 138,769
PV at 9% 84,633 80,751 77,047 98,307

Value in use 340,738

Recoverable Amount 340,738

Carrying amount 232,000

Recovery Maximum 280,000

Journal Entries

31 December 2023
Depreciation Exp 58,000
Allowance 58,000
PPE 48,000
Reversal of Impair (P/L) 48,000
Solution 2

Date Particulars Shares Balance Time Factors Factors WANS

1 Jul 22 Balance 1,600,000 4/12 1.1100 1.0345 612,414
1 Nov 22 Right issue 320,000 1,920,000 3/12 1.0345 496,552
1 Feb 23 Right issue 384,000 2,304,000 5/12 960,000
2,068,966
Basic EPS
Earnings 4,650,000
Dividend for pref shares (250,000)
Income attributable to Ord Shares 4,400,000

Basic EPS 2.1267

First right issue

Factor

Theoratical Ex right price 14.5000

Price before right adjustment 16.0950
Factor 1.11000

2nd right issue

Factor
Shares Price Amount
Base 100 15.30 1,530.00
Rights 20 12.24 244.80
120.00 1,774.80
Theor Ex-right Price 14.790
Factor 1.03448 (Price / TERP)

Diluted EPS
Test of dilution

1. Options are always dillutive

Earnings increase -
Free Shares

Free shares
Cash from 200,000 share 2,000,000
Market price 25
Shares at full value 80,000
Free shares (200,000-80,000) 120,000
2. Convertible Bonds

Earnings increase 600,000

Tax @ 30% (180,000)
Net Savings 420,000

Shares on conversion 200,000

EPS 2.1000

3. Convertible Pref Shares

Dividend 250,000
Shares 200,000
EPS 1.25

Ranking Own EPS Ranking

Options 0.00 1
Bonds 2.10 3
Preference Shares 1.25 2

Putting securities in order of dilution

Earnings Shares EPS
Basic 4,400,000 2,068,966 2.13
Options free shares - 120,000
4,400,000 2,188,966 2.01 Dilutive
Prefer Shares 250,000 200,000
4,650,000 2,388,966 1.95 Dilutive
Convert Bonds 420,000 200,000
5,070,000 2,588,966 1.96 Anti dilutive
Solution 3
Adjustment Adjustment Adjustment Revised P/L
Sales 650,000 650,000
Cost of Goods Sold (360,000) 13,500 (10,200) 6,000 (350,700)
Gross Profit 290,000 299,300
Operating Expense (109,000) (8,000) (117,000)
PBIT 181,000 182,300
Impairment Expense (23,000) (23,000)
PBT 158,000 159,300
Tax @ 30% (47,400) (47,790)
110,600 111,510

Impairment loss charged to P/L 16,000

Impairment to be charged to OCI (13,500)
Loss that should have been charged to P/L 2,500

Closing stock reported at 25,000

Closing stock should have been reported (14,800)
Cost of goods sold to be increased to 10,200

Sample stock shoould be charged as a marketing expense so there should be no

adjustment to COGS but a marketing expense needs to be recognised
Solution 4

We are aware that the company is carrying the plant at a nominal amount (i.e. the grant is
deducted from the cost of the asset). Therefore, when the grant is returned, we should adjust the
asset value to reflect a lower grant, as if the grant had been initially provided in a reduced
amount.

With 75,000 With 22,500

Grant Grant
Cost of the asset 125,000 125,000
Grant (75,000) (22,500)
Net CA 50,000 102,500
Installation Cost 15,000 15,000
CA at 1 April 2021 65,000 117,500
Depreciation 2021 - 9 Months (9,750) (17,625)
Depreciation 2022 - 12 Months (13,000) (23,500)
42,250 76,375
CA Should Have been CA

31 Dec 2022

Depreciation 13,000
Allowance for Depreciation 13,000

PPE 52,500
Cash 52,500

Depreciation for 1 year and 9 months

Depreciation 18,375 (52,500 / 5 x 1.75yrs)

Allowance for Depreciation 18,375

Carrying amount
CA after depreciation for the year 42,250
Capitalisation on grant return 52,500
Depreciation for 1.75 years (18,375)
CA after all adjustements 76,375
Solution 5
Consideration to paid in 12 months 324,000
PV at 8% rate 300,000

Month Exp Balance Other Sources

Jan 40,000 110,000
Feb 110,000
Mar 140,000 (30,000)
Apr - 130,000 (Remaining Bal 100,000)
May -
Jun 150,000 (50,000) (100,000 Rights + 50,000 Gen)
Jul - 100,000 (Grant 150,000 remining 100,000)
Aug -
Sep -
Oct 130,000 (30,000)

Borrowing Cost for capitalisation

Interest included in the purchase consideration
Consideration to be paid on 1 Jan 17 330,000
PV at 10% (300,000)
Interest included in consideration 30,000
10 months interest to be capitalised 25,000 30,000x10/12
Specific Loan
Loan Months Rate Interest
150,000 10 10% 12,500

Income
110,000 2 6% (1,100)
11,400
Genral Loan
30,000 2 16% 800
50,000 1 16% 667
1,467

Total Interest to be capitalised 37,867

PPE
Consideration on delivery 330,000
Deferred consideration excl interest 300,000
Interst Cap 37,867
Installation 460,000
1,127,867
Cost 1,127,867
Deferred Grant (100,000)
Net of Grant Cost 1,027,867
Depr 17,131 for 2 months
Net CA at yr end 1,010,736
Solutoin 6

a) Measurement basis for Liabilities

Historical Cost The consideration received to incur or taken the liability minus
transaction costs.

Fair Value The price that would be paid to transfer a liability in an orderly
transaction between market participants at the measurement
date

Fulfilment value The present value of the cash, or other economic resources, that
an entity expects to be obliged to transfer as it fulfils a liability.

Current Value The consideration that would be received for an equivalent

liability at the measurement date minus the transaction costs.

b) Different measurement of Asset's Value

Historical Cost
Cost 200,000
Accumulated Depreciation (80,000)
Historical CA 120,000

Fair Value
Sale price 100,000

Value in Use

Yr CF PV @ 10%
1 50,000 45,455
2 50,000 41,322
3 40,000 30,053
Value in use 116,829

Current Value
Current new Market Value 220,000
Accumulated Depreciation (88,000)
Current Cost CA 132,000
Solution 7
Part a)
This step will certainly improve the debt equity ratio since a revaluation surplus will
be generated which will increase the equity balance and the condition for obtaining
loan will be met.

Since the loan amount will be used to purchase inventory there would not be any
change in long term assets except for revaluation. We can calculate return on long
term assets before and after the revaluation and obtaining loan:

Before After
Profit 120,000 140,000
Long term assets 600,000 750,000
Ratio 20.00% 18.67%

Profitability is affected by the following factors:

1. Incremental depreciation led to reduction in profits
2. Interest on long-term loan led to a reduction in profits.
3. Sales of inventory resulted in an increase in profits.

Overall impact is that the amount of profits are increased whereas return as a
percentage of long term assets declined

Part b)
Working Capital Cycle

Element Opening Closing Average Base Base Value Days Industry Remarks
Debtors 81,250 97,500 89,375 Sales 585,000 55.00 45 Worst
Creditors (31,250) (37,500) (34,375) COGS 450,000 (27.50) 32 Worst
Stock 46,875 56,250 51,563 COGS 450,000 41.25 30 Worst
Length of working capital cycle 68.75

In all three turnover periods the copmany is worst than industry averages

The following measures could help decrease Debtors turnover days:

- Offering discounts to encourage early payments.
- Implementing a strict credit policy that allows credit only to trustworthy customers,
with a timeframe and a threat of surcharges for late payments.

The following measures could help decrease stock turnover days:

- Producing stock only upon customer request instead of keeping it in storage in
anticipation of sales.
- Establishing service level agreements with customers to determine when they need
stock and adjusting production accordingly.

The following measures might enhance creditors turnover:

- Delaying credit payments as much as possible within the specified time limit.
- Sourcing goods from new suppliers with less bargaining power, allowing for longer
credit terms.
Solution 8

Part 1
(d) Inventory that does not need substantial time to complete

Part 2

Bank Avg Use Interest

A 3,250 455.00
B 3,120 499.20
C 7,840 1,019.20
14,210.00 1,973.40
Weighted average rate 13.887%
Answer (b) is correct

Part 3
(c) Plant with total useful life of 9 years left with 1 year of remaining life

Part 4
Machine Stock Cash Total
Opening 400,000 250,000 150,000 800,000
Inflation 40,000 20,000 16,500 76,500
Inflation Adjusted opening balances 876,500
Closing Balance 960,000
Additional capital is income 83,500

Option (a) is correct

Solution 9

Doomstone Limited
Statement of changes in equity
For the year ended 31 December 2023

Sh Cap Sh Prem Ret Earn Rev Surp Gen Resr

Opening (W1) 500,000 905,000 2,068,500 120,900 41,000
Profit for the year (W2) Restated 700,900
Impairment loss charged (120,900)
500,000 905,000 2,769,400 - 41,000
Final Dividend 2021
Cash Dividend (10%) (50,000)
Bonus Shares (10%) 50,000 (50,000)

Shares issued for plant 80,000 120,000

Interim Dividend (2022)

Cash Dividend (15%) (94,500)
Bonus Shares (10%) 126,000 (126,000)
756,000 1,025,000 2,448,900 - 41,000
Transfer of profit (78,000) 78,000
Closing Balance 2022 - Restated 756,000 1,025,000 2,370,900 - 119,000
(Adju for impaiment 2450000-79100)

Profit for the year 950,000

756,000 1,025,000 3,320,900 - 119,000
Final Dividend 2022
Cash Dividend (15%) (113,400)
Bonus Shares (15%) 113,400 (113,400)

30% Right issue 260,820 782,460

Interim Dividend (2023)

Cash Dividend (15%) (169,533)
Bonus Shares (10%) 113,022 (113,022)
1,243,242 1,807,460 2,465,900 - 24,000
Transfer of profit (95,000) 95,000
Closing Balance 2022 - Restated 1,243,242 1,025,000 2,370,900 - 119,000

Fisrt find opening share capital all other operning figures to found at the end of first
year calculation

Opening Share capital (Working 1)

Closing balance of share capital at 31 December 2022 is Rs 669,600

Shares issued in 2022 in chronological order:

Date Particulars % or Shares

15 March Final Dividend 10%
27 June Purchase of Plant 8,000 200,000/25
31 Aug Interim Dividend 20%

Lets assume the opening shares to be X

So
Opening Shares X
Bonus Final 10% X
Pruchase of Plant 8,000
Interim Bonus 20% of (X+10%X+8000)
Closing Shares 75,600
Openig shares are 50,000 (75,600/1.2-8000)/1.1
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