CPA
Intermediate Leval
Financial Reporting November 2019
ANSWERS

Workings

W1

Depreciation
Building (2% x 50,000) Plant and equipment 12.5% (25,000-13,000) Motor vehicle (20% × 12,000) Furniture and fittings (10% x 4,000)	1,000 1,500 2,400 400 5,300

W2

Interest on Capital
Chanda(10%x30,000) Pete(10%x20,000) Tenda(10%x10,000)	3,000 2,000 1,000 6,000

W3

Appropriation for profit
Net profit Interest on capital Depreciation Adjusted profit Profit share: 1. Chanda=2/5x17,500 2. Pete=2/5X17,500 3. Tende=1/5x17,500	28,800 (6,000) (5,300) 17,500 7,000 7,000 3,500

W4

Goodwill
Purchase consideration Net asset Asset taken over Liabilities taken over Goodwill	137,620 (32,700)	110,000 (104,920) 5,080

Realization Account
	Sh"000"	Sh"000"		Sh"000"
Property Plant and equipment Motor vehicle Furniture and fittings Receivables Inventory Cash and bank Realization gain 1. Chanda 2. Pete 3. Tenda	7,912 7,912 3,956	54,000 10,500 4,800 2,000 18,200 25,300 8,120 19,780	Bank loan Payables Purchase consideration	18,000 14,700 110,000
		142,700		142,700

Partners capital account
Drawings Equity	Chanda 1,580 50,612	Pete 1,170 39,302	Tenda 710 20,086	Bal b/d Current account Profit Interest on capital Realization gain	Chanda 30,000 4,280 7,000 3,000 7,912	Pete 20,000 3,560 7,000 2,000 7,912	Tenda 10,000 2,340 3,500 1,000 3,956
	52,192	40,472	20,796		52,192	40,472	20,796

Chapete Ltd Statement of financial position as at 1 July 2019
Non-current assets Property Plant and equipment Motor vehicle Furniture and fittings Goodwill Current assets Inventory Receivables Cash Total assets Equity and liabilities Ordinary share capital Liabilities Bank loan Payables	Sh. "000" 57,000 16,000 9,500 3,500 5,080 25,300 18,200 8,120 142,700 110,000 18,000 14,700 142,700

Note 1:
Provisions = 5.06
Payable = 5.06 - 4 = 1.06

Discounting factor 5060 × 0.9091 × 6/12 = 230

Note 2:
Depreciation on buildings = 2% x (110,000) = 2,200
Plant and equipment = 12.5% x (56,000 - 18,000) = 4,750
Total depreciation = 6.950

Note3:
Finance cost
1,500 x 0.926 = 1,389

Note4:

Tax expense

Current tax (10,500-650) = 9,850

Deferred tax = (3,000)

Total = 6.850

Deferred tax expense
Current 30%x10,000 Bal c/d	3,000 10,900 13,900	Bal b/d	13,900 13,900

Note5:
Issue of shares
Dr. Cash 1,500 × 16 = 24,000
Cr: Ordinary share 1,500 × 10 = 15,000
Cr. Share premium 1,500 × 6 = 9,000

Note 6:

Fair value changes in investment property
121,500-120,000 = 1,500

W1

Depreciation

Depreciation on building = 2% x 50,000 Plant and equipment 12.5% (25,000 - 13,000) Motor vehicle 20% × 12,000 Furritures and fittings 10% x 4,000 Total depreciation

= 1,000 = 1,500 = 2,400 400 5,300

W2

Interest on capital

Chanda 10% x 30,000 Pete 10% x 20,000 Tende 10%x10,000

3,000 2,000 1,000 6,000

W3

Appropriation for profit

Net profit Interest on capital Depreciation Adjusted profit

28,000 (6,000) (5,300) 17,500

Profit share:

Chanda 2/5 x 17,500 = 7,000
Pete 2/5 x 17,500 = 7,000
Tende 1/5 x 17,500 = 3,500

W4:

Goodwill:

Purchase consideration Net Asset (Asset - Liabilities) Assets taken over 137,620 Liabilities taken over (32,700) Goodwill.

110,000 104,920 5,080

Note:

Construction contract 2019 revenue recognized = 80% × 45,000 = 2018 revenue recognized = 50% x 45,000 =

36,000 22,500 13,500

W5:

Property Plant and Equipment (PPE) Land Building (110,000 22,000 - 2,200) Plant and equipment (56,000 - 18,000 - 4,750)

60,000 85,800 33,250 179,050

W6:
Expenses
Cost of sales = 108,500 +7,500 +4,950 +2,200=122,950
Administration expense = 44,000+ 600 = 44,600
Distribution = 23,600
Finance = 6,200+230+(1,928-1,500)=6,858

Skytex Ltd Statement of profit or loss for the year ended 30 September 2019
Revenue (216,000 +13,500) Cost of sales Gross profit Investment income Fair value gain Expenses Administration expenses Selling and distribution expenses Finance cost Profit before tax Tax expense Profit for the year	Sh."000" 229,500 (122.950) 106.550 600 1,500 (44,600) (23,600) (6,858) 33.592 (6,850) 26,742

Skytex Ltd Statement of Changes in equity for the year ended 30 September 2019
	Ordinary Share	Share Premium	Retained Earnings	Conversion Option
Balance b/d Issue of shares Profit for the year Conversion of loan Balance c/d	61,000 15,000 - - 76,000	- 9,000 - - 9,000	177,000 - 26,742 - 203,742	- - - 900 900

Skytex Ltd A statement of financial position as at 30 September 2019.

Assets Non-current assets PPE Investment property Current assets Inventory Trade and other receivables (27,300 + 13,500) Bank balance Total assets Equity and liabilities Ordinary share capital Share premium Retained earnings Conversion reserve Non-current liabilities Deferred tax (13,900 - 30% x 10,000) Current liabilities Trade and other payables (23,800 + 7,500 + 600 + 230) 6% convertible loan Current tax Total Equity and liabilities

Sh. "000" 179,050 121,500 18,750 40,800 7,600 367,700 76,000 9,000 203,742 900 10,900 32,130 24,528 10,500 367,700

Maweo Insurance Company Ltd Revenue account for the year ended 30th September 2019
	Marine	Fire		Marine	Fire
Gross premium - Agent - Broker - Direct client Add: premium bal c/d Less: premium bal b/d Net premium Net claims Commission ceded Bad debts Management expenses Reserves bal c/d Profit	3,000 1,500 500 1,970 (800) 6,170 2,920 700 370 450 6,170 960	2,500 600 1,000 1,200 (700) 4,600 1,870 300 320 380 2,300 1,930	Claims paid Claims bal c/d Claims bal b/d Add: Legal expenses Survey expense Net claims Net premium Unearned premium Commission accepted	2,770 750 (1,100) 280 220 2,920 6,170 4,800 600	2,100 480 (840) 130 1,870 4,600 2,500
	11,570	7,100		11,570	7,100

Maweo insurance company Ltd Statement of financial position as at 30 September 2012
Assets Non-current assets PPE Investment in government bond Current assets Sundry receivable Bank account Premium bal c/d (1,970+ 1,200) Equity and liabilities Ordinary share capital Retained earnings (450+1,071) Earned premium bal c/d (6,170+2,300) Liabilities Payables Claims payable (750+480) Tax payable	Sh."000" 10,500 1,400 750 90 3,170 15,910 4,000 1,521 8,470 230 1,230 459 15,910

Beyond Ltd Consolidated statement of financial position as at 30th June 2019

Non-current assets PPE (1,162,800+321,390+60,000-5000) Goodwill Investment in associate Current assets Inventories (523,600+398,500-1,333) Trade receivables (401,860+203,650-16,000) Cash and cash equivalent (52,600 +1100) Cash in transit Equity and liabilities Ordinary share capital Share premium Non-controlling interest Retained earnings Current liabilities Trade and other payables (385,200+148,500 - 11,000) Income tax (53,900 + 23,600) Deferred payment

Sh."000" 1,539,190 145,860 120,500 920,764 589,510 53,700 5,000 3,374,524 600,000 100,000 152,413.4 1,781,910.6 522,700 77,500 140,000 3,374,524

Orlando Bank Limited Statement of cash flow for the year ended 31 October 2019

Operating cash flows activities Profit before tax Adjustments Impairment of loans and adjustments Amortization of intangible assets Depreciation on PPE Other operating expenses (169,317-30,688-6,077) Profit on sale of PPE Dividend income Interest income Interest expense Working capital adjustments Increase in loans and advances (1,190,782-1,145,133) Increase in advances to bank (214,875 - 107,407) Increase in deposit from customer (3,368,400-3,078,071) Decrease in liabilities and provision (171,718-359,192) Gross operating cash flows Less: tax paid (33,617 +6,626 - 5,778) Net operating cash flows Investing Activities Cashflows Purchase of governinent securities (2,037,292 - 1,851,337) Acquisition of: - PPE - Intangible asset Dividend received Proceeds on disposal of PPE (120-120)- 42 Interest received Net investing cash flows Financing activities cash flows Interest paid Dividend paid Net financing cash flows Cash and cash equivalents Cash and cash equivalent bal b/d Cash and cash equivalent bal c/d

Sh"000" 112,062 93,492 6,077 30,688 132,552 (42) (9,685) (364,524) 107,571 (45,649) (107,468) 290,335 (187,474) 57,935 (34,463) 23,472 (185,955) (46,641) (12,046) 9,685 42 131,292 (113,623) (94,578) (4,800) (99,378) (174,536) 752,303 577,767