CPA
Intermediate Leval
Financial Reporting May 2018
ANSWERS

Workings

Note1:

Damaged goods Repair cost Carrying amount Recoverable amount Loss of inventory

800 450 1,250 (950) 300

Dr cost of goods
Cr Clossing inventory

Depreciation
Plant 12.5%x(36,000 - 16,800) Joint operation 12.5% x 12,000 Building 48,000 / 15 Total depreciation	2,400 1,500 3,200 7,100

Revaluation of investment property
Net book value Revalued amount Loss	16,000 (13,500) 2,500

Note3

Interest Dividend on ordinary shares 20,000 x 4/25

5,000 (3,200) 1,800

Note4

Deferred tax changes
Balance b/f Bal c/d (30% × 12,000) Reduction in deferred tax Tax expense Current tax Deferred tax (reduction/income)	5,200 (3,600) 1,600 8,000 (1,600) 6,400

Adjustment for cost of sales:
Balance b/d Depreciation Loss on inventory Joint operations	143,800 7,100 300 5,000 156,200

PPE adjustments:
Land and building = 63,000 - 3,200 Plant and equipment = (36,000 + 12,000 - 16,800 - 3,900) Total adjusted PPE	59,800 27,300 87,100

Zambezi Ltd. Statement of comprehensive income for the year ended 31st Oct 2017
Turnover = 213,800 + 8,000 Cost of sale Gross profit Other incomes Rental income Fair value loss on property Expenses Administrative expenses Distribution expenses Finance cost Profit before tax Tax expense Profit after tax Other comprehensive income Revaluation gains Total comprehensive income	221,800 (156,200) 65,600 1,200 (2,500) (12,600) (9,800) (1,800) 40,100 (6.400) 33,700 21,000 54,700

(b) Statement of financial position as at 31 October 2017. (10 marks)

Zambezi ltd Statement of financial position as at 31 Oct 2017
Non-current asset PPE Investment property Current assets Inventory (10,500 - 300) Receivable 13,500 + 1,500 Total assets Equity and liabilities Ordinary share capital Preference share capital Retained earnings 17,500 + 33,700 - 3,200 Revaluation Non-current liabilities Deferred tax Current liabilities Current tax Bank balance Trade payables 11,800 + 2,500	87,100 13,500 10,200 15,000 125,800 20,000 10,000 48,000 21,000 3,600 8,000 900 14,300 125,800

(a) Circumstances under which a partnership might be dissolved by operation of law.

1. Changes in legislation
2. Illegality of the partnership business
3. Insanity of a partner
4. Serious disagreement between partners
5. Death of a key partner.

(b)(i) A realisation account, partners' capital accounts and Chapeki Limited's account to close off the partnership's books.

Workings

W1

Interest on capital
Chanda 10% x 58,500 Pete 10% x 37,000 Kidole 10% x 31,500 Total interest	5,850 3,700 3,150 12,700

W2

Appropriation account
Net profit Intereston capital Commission on Kidole 15% x 20,000 Adjust net profit	91,000 (12,700) (3,000) 75,300

Profit Share

Chanda 2 / 5 x 75,300 - 30,120
Pete 2 / 5 x 75,300 = 30,120
Kidole 1 / 5 x 75,300 = 15,060

W3

Goodwill = Purchase consideration-Net asset
250,000 - (115,000 + 25,500 + 43,500 + 29,550 + 29,640 + 24,765 - 62,400 - 17,550 - 4,000)
Goodwill = 250,000 - 184,005 = 65,995

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Realization account
Land and building (123,500 - 20,150) Motor vehicle(80,600 - 54,600) Equipment Furniture and fittings Investment Inventory Receivables Realization gain Chanda 2 / 5 x 73,900 Pete 2 / 5 x 73,900 Kidole 1 / 5 x 73,900	103,350 26,000 45,800 33,500 44,800 31,200 25,400 29,560 29,560 14,780 383,950	Investment acquired Accrued expenses Bank overdraft Payables Purchase considaration	50,000 4,000 17,550 62,400 250,000 383,950

Capital account
	Chanda	Pete	Kidole		Chanda	Pete	Kidole
Drawings Investment Goodwill written off Ordinary shares	7,800 20,000 10,400 106,630	6,500 20,000 10,400 81,680	3,900 10,000 5,200 61,690	Bal b/d Current a/c Interest on capital Commission Kidole Profit sahare Realization gain	58,500 20,800 5,850 30,120 29,560	58,500 18,200 3,700 30,120 29,560	31,500 13,300 3150 3,000 15,460 14,780
	144,830	118,580	80,790		144,830	118,580	80,790

Chepekis Ltd (Purchasing Co. a/c)
Purchase considaration	250,000 250,000	OSC in Chapeki ltd Chanda Pete Kidole	106,630 81,680 61,690 250,000

(ii) Opening statement of financial position of Chapeki Limited.

Chapeki Ltd Statement of financial position as at 1st Oct 2017
Assets Non-current resets Lands and building Motor vehicle Office equipment Furnitures and fixtures Goodwill Current assets Inventory (31,200 x 95% ) + 15,000 Receivables 25,400 × 97.5% Cash 50,000 - 15,000 - 4,000 Total asset Equity and liabilities Ordinary share capital Non-current liabilities Debentures Current liabilities Payables Bank overdraft	Sh '000' 115,000 25,500 43,500 29,550 65,995 44,640 24,765 31,000 379,950 250,000 50,000 62,400 17550 379,950

Maendeleo commercial bank ltd Income statement for the ended 31 December 2017
Interest incomes Loan advances to customers Finance lease Deposit with other bank Government bonds Interest expenses On customer deposits On deposit with other bank Net interest Add: other incomes Fees and commission received Forex commission receivable Other operating income Less: other expenses Fees and other expenses Impairment of loans and advances Admin exp General operating expenses Impairment of intangible assets (20% x 6,450) Allowance for unservice loan (2% x 396,810) Profit before tax Tax expense Profit after tax	7,500 168 450 2,520 11,580 9,420 1,290 7,936.2	Sh.millions 15,042 14,040 3,024 7,230 (7,668) 31,668 5,592 330 4,500 (33,196.2) 8,893.8 (6,300) 2,593.8

(ii) Statement of financial position as at 31 December 2017.

Maendeleo commercial bank ltd Statement of financial position as at 31 December 2017.

Assets Deposit with central bank Deposit due from other banks Government bonds Loan& advances 396,810 - 7,936.2 Other asset Deferred tax asset Other investment PPE Intangible asset 6,450 - 1,290 Equity &liabilities Ordinary share capital Share premium Revaluation reserve 1,380 + 6,000 Statutory reserves Retained revenue 49,920 + 2,593.8 Non-current liabilities Deferred tax liability Customer deposits Deposits from other bank Current liabilities Current tax liability Other liabilities

Sh million 38,400 57,600 46,230 388,873.8 2,145 180 468 12,750 5,160 551,806,8 15,255 270 7,380 5,730 52,513.8 4,338 452,985 6,600 3,435 3,300 551,806,8

Gain on disposal = 40 - 14 = 26m

Amortization schedule
Period 2016 2017 2018	Bal b/d 40,000,000 27,678,800 14,371,904	Interest8% 3,200,000 2,214,304 1,149,752	Payment 15,521,200 15,521,200 15,521,200	Principle 12,321,200 13,306,896 14,371,448	Bal c/d 27,678,800 14,371,904

Income statement
Interest expense(Debit) Depreciation=40m/3(Debit)	2016 3,200,000 13,333,333	2017 2,214,304 13,333,333	2018 1,149,752 13,333,333

Statement of financial position
Non-current assets Plant(NBV) Non-current liabilities Lease obligation Current liabilities Lease obligations	2016 26,666,666 14,371,904 13,306,896	2017 13,333,333 14,371,448	2018 -

Note1

Fair value adjustment for land
Carrying amount Fair value of acquisition Fair value gain Total fair value gain = 8,500 - 5,000	5,000 7,000 2,000 3,500

Note2

Plant and Equipment
F.V gain Depreciation 4,000 / 5	4,000 800

Note3
Inter group sales



Unrealized profit 20/100x450 = 75
Dr Cost of sale(+)
Cr Clossing inventory(-)

Intergroup balance = 240
Dr payable(-)
Cr Receivable(-)

Note 4:

Goodwill on acquisition
Purchase consideration 18,000 + 500 Net asset acquired Ordinary share capital Retained earning Fair value adjustment(2,000 + 4,000) Preference shares Goodwill Impairment for the year Net goodwill	5,000 400 6,000 11,400×80%	18,500 (9,120) (500) 8,880 (1,488) 7,392

Workings

W1

Return earnings
Parent retained earning Add: investee(s ltd) post-acquisition R.E 80%(14,580-400-800-75 Less: impairment of goodwill	51,840 10,644 (1,488) 60,996

W2

Non-controlling interest (NCI)
Ordinary share capital Retained earnings 14,580-800-75 Revaluation 4,000+3,500 Add: preference share NCI	5,000 13,705 7,500 26,205x20%	5,931 1,500 7,431

H group Consolidated statement of financial position as at 31 march 2018

Asset Non-current assets Land and buildings 22,000+12,000+3,500 Plant& equipment 20,450+10,220+4,000-800 Goodwill Current assets Inventories 9,850+6,590+75 Trade reccevable 11,420+3,820-240 Cash and bank Equity and liabilities Ordinary share capital 10%preference share Retained earning Non-controlling interest Non-current liabilities 10%debentures 12,000+4,000 Current liabilities Trade payables 6,400+4,510-240 Bank overdraft Taxation 2,470+1,980

Sh "000" 37,500 33,870 7,392 16,365 15,000 490 110,617 10,000 500 60,996 7,431 16,000 10,670 570 4.450 110,617