PRESENTATION OF FINANCIAL STATEMENTS –REVIEW QUESTIONS SET 1

Question 1
The following trial balance relates to A & G Co.at 31 March 2013

Tshs Tshs
Administration expenses 250,000
Distribution cost 295,000
Ordinary shares Tshs1 270,000
Share premium 80,000
Revaluation Reserve 20,000
Dividend 27,000
Cash at bank and at hand 3,000
Receivables 233,000

Interest paid 25,000

Dividend Received 15,000
Interest Received 1,000
Land and building at cost (land 380, buildings 100) 480,000
Land and building accumulated depreciation 30,000
Plant and machinery at cost 400,000
Plant and machinery accumulated depreciation 170,000
Retained earnings (at 1 April 2012) 235,000
Purchases 1,260,000
Sales 2,165,000

Inventory at 1 April 2012 140,000

Trade Payables
27,000
Bank loan 100,000

3,113,000 3,113,000

The following notes are relevant

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 (1) Inventory at 31 March 2013 was valued at a cost of Tshs 95,000. Included in this balance
were goods that have a cost of Tshs 15,000. These goods had become damaged during
the year and it is considered that following remedial work the goods could be sold for
Tshs 5,000.
(2) Depreciation for the year to 31 March 20X7 is to be charged against cost of sales as
follows:
• Buildings 5%on cost (Straight line)
• Plant and machinery 30% on carrying value (CV) ( Reducing Balance)
(3) Income tax of Tshs 165,000 is to be provided for the year to 31 March 2013.
(4) Land is to be revalued upward by Tshs 100,000.

Required

i. Prepare the statement of profit or loss and other comprehensive income for the
year to 31 March 2013.
ii. Prepare the statement of changes in equity for the year to 31 March 2013and
iii. Prepare a statement of financial position at that date in accordance with IFRS
insofar as the information permits.

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Question 2
The following trial balance relates to TBL Co. Ltd. At 31 March 2007

Tshs Tshs
“000” “000”

Revenue 520,000
Cost of sales 292,900
Distribution cost 7,600
Administration cost 19,800
Loan interest paid 4,800

Property-cost 200,000
Property-depreciation at 1 April 2006 37,500
Plant and equipment-cost 168,600
Plant and equipment – depreciation at 1 April 48,600
2006
Licence-cost 40,000
Licence-amortization at 1 April 2006 16,000
Trade receivables 43,200
Inventory – 31 March 2007 18,800
Bank 1,950
Trade payables 35,200
Ordinary shares (@ Tshs. 0.25) 70,000
Share premium 13,000
12% Loan not (issued 1 April 2006) 40,000
Taxation 2,000
Retained earnings at 1 April 2006 11,450
795,700 795,700

The following notes are relavant:

1. On 1 April 2006, TBL Co revalued its property to Tshs 240m of which Tshs 60m
relates to land. The property’s original cost on 1 April 1996 of Tshs. 200m included
Tshs. 50 million for land.
2. The building has an estimated life of 40 years when it was acquired and this has not
changed as the results of the revaluation. Depreciation is charged on a straight line
basis. The revaluation has not yet been recorded in the books. TBL Co. Ltd has a
policy of transferring an excess depreciation to retained earnings.
3. During the year TBL Co. Ltd sold a plant that costs Tshs. 20m on 1 December 2004.
the proceed of the sale were 12m and these has been credited to cost of sales. No
any other entries have been made relating to this disposal.
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4. Plant and machinery has to be depreciated at the reducing balance method at the
rate of 20% per annum, TBL charged full year’s depreciation in the year of
acquisition and none in the year of disposal.
5. The licence is being emortized on straight line basis at the rate of 20% per annum.
6. All depreciation and emortization is to be charged to cost of sales.
7. The director has estimated the provision for income tax for the year to 31 March
2007 at Tshs. 12.7m.
8. TBL Co. has not paid ordinary dividends during the year, but just before the year
end the director has proposed a dividend of Tshs. 0.20 per share.

Required:

i. Prepare statement of profit or loss and other comprehensive income for the year
ended 31 March 2007
ii. Prepare statement of change in equity for the year ended 31 march 2007
iii. Prepare statement of financial position as at 31 March 2007

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Question 3
The following trial balance relates to TBL Co. Ltd at 30 June 2007

Tshs Tshs
“000” “000”
Revenue 390,000
Cost of sales 210,600
Distribution cost 6,800
Administration cost 12,700
Loan interest paid 3,600
Property-cost 150,000
Property-depreciation at 1 July 2006 38,400
Plant and equipment-cost 176,200
Plant and equipment – depreciation at 1 July 2006 48,600
Trade receivables 31,600
Inventory – 31 March 2007 18,100
Bank 1,950
Trade payables 25,400
Ordinary shares (@ Tshs. 0.25) 50,000
Share premium 9,000
12% Loan not (issued 1 April 2006) 40,000
Taxation 1,300
Retained earnings at 1 April 2006 11,450
612,850 612,850

The following notes are relevant:

Property includes land at a cost of Tshs. 30,000. The building is being depreciated on a
straight line basis over its estimated economic useful life of 25 years.
Plant and equipment is being depreciated on a reducing balance basis at a rate of 20%
per annum
The balance on plant and equipment include a piece of specialist machinery that cost
Tshs. 70,000 on 1 July 2005. On 30 June 2007 a forklift Truck reversed into the
machinery causing severe damage.

TBL has identifies two possible options:

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 i. Sell the machine
A potential buyer has been located, who has indicated that would pay 80% of
carrying amount at 30 June 2007. However she has insisted that the machine is
repaired before she buys it. The repair work will be done by TBL Co’s employees
and will take about 120hrs of skilled labour. The labour is normally charged out
to customers at Tshs. 25.20 per hours (including profit mark up of 40% on cost).
In additional TBL Co will have to deliver the machine to the buyer at a cost of
2,100 and there will be single premium insurance cost of Tshs. 580 for the
journey.

ii. Repair of the machine and continue to use it

The financial controller has estimated that the present value of cash flows
generated from future use (including the repair cost) amount to Tshs. 31,800.
All depreciation is charged to cost of sales.
The directors have estimated the provision for income tax for the year to 30 June
2007 at Tshs. 6,500

Required:

i. Prepare statement of profit of loss and other comprehensive income for the
year ended 30 June 2007
ii. Prepare statement of change in equity for the year ended 30 June 2007
iii. Prepare statement of financial position as at 30 June 2007

Question 4

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Hewlett is a quoted company reporting under IFRS. During the year end 31 December
20X2, the company changed its accounting policy with respect to property-valuation.
There are also a number of other issues that need to be finalized before the financial
statement can be published. Hewlett’s trial balance from the general ledger at 31
December 20X2 showed the following balances.

Tshs Tshs
“000” “000”
Revenue - 2,648,000
Loan note interest paid 3,000 -
Purchases 1,669,000 -
Distribution costs 514,000 -
Administrative expenses 345,000 -
Interim dividend paid 6,000 -
Inventories at 1 January 20X2 444,000 -
Trade receivables 545,000 -
Trade payables - 434,000
Cash and cash equivalents 28,000 -
50c ordinary shares - 100,000
Share premium - 244,000
General reserve - 570,000
Retained earnings at 1 January 20X2 - 349,000
4% Loan note repayable 20X8 (issued 1 April - 150,000
20X0)
Land and Building: cost (including Tshs. 60m land) 380,000 -
Accumulated depreciation at 1 January 20X2 - 64,000
Plant and equipment: cost 258,000 -
Accumulated depreciation at 1 January 20X2 - 126,000
Investment property at 1 January 20X2 548,000 -
Rental income - 48,000
Proceeds form sale of equipment - 7,000
4,740,000 4,740,000

Further information to be taken into account:

a) Closing inventories were counted and amounted to Tshs. 388m at cost. However,
shortly after the year end out-of-date inventories with a cost of Tshs. 15m were sold
for Tshs. 8m.
b) The company decided to change its accounting policy with respect to its 10 year old
land and buildings from the cost model to the revaluation model. The revalued
amounts at 1 January 20X2 were Tshs. 800m (including Tshs. 100m for the land).
No further revaluation was necessary at 31 December 20X2. The company wishes to
treat the revaluation surplus as being realised over life of the asset.
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c) Due to a change in the company’s product portfolio plans, an item of plant with a
carrying value Tshs 22m at 31 December 20X1 (after adjusting for depreciation for
the year) may be impaired due to a change in use. An impairment test conducted at
31 December, revealed its fair value less costs to sell to be Tshs. 16m. The asset is
now expected to generate an annual net income stream of Tshs. 3.8m for the nex 5
years at which point the asset would be disposed for Tshs. 4.2m. An appropriate
discount rate is 8%. 5 year discount factors at 8% are:
Simple Cumulative
0.677 3.993

d) The income tax liability for the year is estimated at Tshs. 27m. Ignore deferred tax
e) An interim dividend of 3c per share paid on 30 June 20X2. A final dividend of 1.5c
per share was declared by the directors on 28 January 20X3. No dividends were paid
or declared in 20X1.
f) During the year, Hewlett Co disposed of some malfunctioning equipment for Tshs.
7m. the equipment had cost Tshs. 15m and had accumulated depreciation brought
forward at 1 January 20X2 of Tshs. 3m. There were no other additions or disposal to
property, plant and equipment in the year.
g) The company treats depreciation on plant and equipment as a cost of sale and on
land and building as an administration cost. Depreciation rates as per the company’s
accounting policy note are as follows:
Buildings Straight line over 50 years
Plant and equipment 20% reducing balance
Hewlett’s accounting policy is to charge a full year’s depreciation in the year of
an asset’s purchase and none in the year of disposal.
h) During the year on 1 Julay 20X2, Hewlett made a 1 for 4 bonus issue, capitalizing its
general reserve. This transaction had not yet been accounted for. The fair value of
the Company’s shares on the date of the bonus issues was Tshs. 7.50 each.
i) Hewlett uses the fair value model of IAS 40. The fair value of the investment
property at 31 December 20X2 was Tshs. 586m.

Required:

i. Prepare statement of profit or loss and other comprehensive income

ii. Prepare the statement of changes in equity for Hewlett Co for the year to 31
December 20X2 and
iii. Prepare a statement of financial position at that date in accordance with IFRS
insofar as the information permits.