Question 1 (IAS 7 Consolidated Statement of Cash flows –Acquisition of a Subsidiary

during the reporting period

Jongwe Limited
Statement of financial position as at 31 December 2022
2022 2021
ASSETS $ $
Non-current assets
Property Plant and equipment 1028000 620000
Deferred Tax 0 31000
Investment in subsidiary at cost 0 88100

Current assets
Inventories 33800 8000
Trade and other receivables 772000 350000
Financial assets held at fair value 32800 78800
Cash and cash equivalents 110720 182000
1977320 1357900

EQUITY AND LIABILITIES

Share capital and reserves
Share capital 400000 200000
Retained earnings 653820 157000
Other components of equity 200000 140000
Shareholders capital and reserves 1253820 497000

Non-current liabilities
Long-term borrowings 400000 620000
Deferred Tax 9000 0

Current liabilities

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Trade and other payables 159100 147240
Dividends payable 100000 60000
Taxation 55400 33660
Total equity and liabilities 1977320 1357900

Jongwe Limited
Statement of comprehensive income for the year ended 31 December 2022
$
Revenue 1330000
Cost of sales -552000
Gross profit 778000
Other income 445820
Other expenses -146000
Finance costs -177320
Profit before tax 900500
Income tax -243680
Profit for the year 656820
Other comprehensive income
Gain on property revaluation 0
Total comprehensive income for
the year 656820

Jongwe Limited

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 Statement of changes in equity for the year ended 31 December 2022
Share Asset Retained Total
Ordinary Replace Income
Reserve
$ $ $ $
Balance at 1 January 2022 200000 140000 157000 497000
Profit for the year 656820 656820
Dividends -100000 -100000
Redeemable debentures converted
to shares 200000 200000
Transfer to asset replacement
reserve 60000 -60000 0
Closing balance 2022 400000 200000 653820 1253820

Additional Information:
1. Jongwe Limited is engaged in the transportation sector and its property, plant and
equipment consists of only delivehicles
2. No delivery vehicles were disposed of during the year. The delivery vehicles that
were bought for replacement purposes were bought at the end of the current year in
terms of an installment credit agreement. A deposit of $110,000 was paid in cash and
the remaining amount will be paid with interest over a period of 4 years.
3. Included in trade and other payables is the current portion of $100,920: (2021: NIL)
applicable to the instalment credit agreement.
4. Debentures of $400,000 were redeemed at par and the remainder was converted into
ordinary share capital.
5. Depreciation of $136,000 has been charged during the current year in respect of the
delivery vehicles.
6. Included in Profit before tax are the following income and expenses
Investment income –dividends received $88,200
Gain on sale of subsidiary $357,620
Fair value adjustment –held for trading investments -$46,000
7. The income tax expenses in the statement of profit or loss consists of the following:
Current tax $203,680
Differed tax $40,000
$243,680

8. Long-term borrowings are made up as follows:

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 2022 2021
$ $
Instalment credit agreement
liability 250000 0
Bank loan 150000 20000
Redeemable debentures 0 600000
Total 400000 620000

Required:
Prepare the Statement of Cash flows of Jongwe Limited for the year ending 31 December
2022 using the direct method in accordance with IFRS
[40]

Question 2
Asia and Ben Limited are both hardware retailers in the city of Harare in Zimbabwe. You are
given the following summarised information.

Statement of profit or loss and other comprehensive income for the year ended 31 December
2024

Asia Ben
$000 $000
Revenue (Sales) 4,300 3,024
Cost of sales (2,860) (2,296)
Gross profit 1,440 728
Less Expenses
Sundry expenses (500) (380)
Operating profit 940 348
Finance charges (40) (120)
Net Profit before tax 900 228
Taxation (200) (60)
Net profit after tax 700 168
Dividends (400) (160)
Retained profit 300 8

Statement of financial position as at 31 December 2024

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 Asia Ben
$000 $000 $000 $000
Non-current assets
Machinery at cost 5,000 5,920
Accumulated depreciation 1,800 3,200 4,640 1,280
Office Equipment at cost 260 720
Accumulated depreciation 80 180 328 392
Motor vehicles at cost 240 200
Accumulated depreciation 80 160 80 120
3,540 1,792
Current Assets
Inventory 840 680
Trade Receivables 1,600 1,200
Other receivables 200 160
Bank 80 2,720 0 2,040
6,260 3,832
EQUITY AND LIABILITIES

Issued share capital 2,400 400

Retained earnings 1,940 152
4,340 552
Long-term loans
10% Debentures 400 1,200

Current liabilities
Trade payables 400 560
Other payables 320 240
Bank overdraft 400 1,120
Dividends payable 400 1,520 160 2,080
Total Equity and liabilities 6,260 3,832

Required:

a) Calculate the following ratios for both companies [10]

i) Current ratio
ii) Quick ratio/Acid test ratio
iii) Debtors collection days
iv) Return on capital employed
v) Return on equity
vi) Gearing ratio
vii) Interest cover
viii) Dividend cover
ix) Gross profit margin
x) Net profit margin

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 b) Write a report to a potential investor and give advice as to which company to Hold,
Buy or Sale shares [10]
[40]

Question 3 (IAS 27 & 28) Complex Groups –Vertical Groups

The following are the abridged trial balances of A, B and C at 31 December 2022
Charlie
Alpha Ltd Ben Ltd Ltd
$ $ $
Credits
Share Capital: 200 000 shares 200000
140 000 shares 140000
150 000 shares 150000
Retained earnings beginning of year 300000 190000 210000
Profit before tax 250000 200000 210000
Long term liability 70000 0 95000
820000 530000 665000

Debits
Property, plant and equipment 345000 150000 437000
Investment in B Limited 165000
Investment in C Limited 232000
Trade and other receivables 205000 48000 130000
Income tax expense 75000 60000 63000
Dividends paid 30000 40000 35000
820000 530000 665000

Additional Information:

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 1. A Ltd purchased 98 000 shares in B Ltd on 01 January 2014 when B Ltd retained
earnings stood at $90,000. The fair values for net assets were considered equal to the
carrying amounts.
2. B Ltd acquired 127 500 shares in C Ltd on 01 January 2015 when C Ltd retained
earnings amounted to $120,000. The fair value of net assets were considered equal to
book values.
3. Each share carries one (1) vote.
4. The group uses the partial good method to recognize goodwill and goodwill was not
considered impaired as at year end
5. The fair value of available for sale financial assets were equal to the cost price thereof
Required:
Prepare the consolidated annual financial statements of A group for the year ending 31
December 2022. Your answer must comply with the requirements of IFRS.

a) Statement of financial position [8]

b) Statement of profit or loss [5]
c) Statement of changes in equity [5]
d) Workings to support your answer [2]
[20]

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