CPA
Intermediate Leval
Financial-Reporting-November 2020
ANSWERS

W1

Bonus issue of shares

14,500/29 = 500 shares

-1/4 x 500 = 125×10 = 1,250

Dr: Retained earning
Cr: Ordinary share capital

W2

Dividend payment

31/3/2019 = 500 × 2.2 = 1,100

30/6/2019 = 625 x 2.6 = 1,625

Total dividend = 2,725

W3

Finance cost

Interest on loan 8%×2,500 = 200

Preference dividend 10% x 3,000 = 300

Bank interest = 85

Total Finance cost = 585

W4

Sales on return basis

Margin 30/130 × 2,600 = 600

Cost = 2,000

Total = 2,600

W5

Depreciation of Assets

Plant and equipment 10% x 13,750 = 1,375 Cost of sales
Computer 25% 7,200 = 1,800 Administrative expenses
Motor vehicles 20% x (1,500-400) = 220 Selling and Distribution

W6

Revaluation of buildings

Balance b/d as per trial balance = 14,000
Depreciation (14,000 ÷ 25) = (560) Administrative expenses
Carrying amount = 13,440
Revalued amount = 14,100
Revaluation gain = 660

W7

AFS

Balance as per trial balance = 8,700
Revalued amount = 8,400
Less = 300

W8

Fraud
A Fraud of 300 (500-200) for the current year will be accounted for as an expense as part of Administrative expenses then 200 for the previous year will be accounted for in the retained earnings. The entire 500 will be deducted from trade receivables

W9

Tax expense

Current tax = 3,500
Deferred tax = 1,200
Total = 4,700

W10

Expense movement schedule
	Cost of sales	Administrative expenses	Selling & distribution
Balance b/d Dividend Fraud Sales & return basis Depreciation Depreciation buildings	35,500 (2,000) 1,375	8,540 (2,725) 300 1,800 560	5,600 220
	34,875	8,475	5,820

W11

Tamu Tamu Ltd Statement of Comprehensive Income For The Year Ended 30 September 2019
- Revenue(68,865-2,600) Cost of sales Gross profit Investment income Expenses Administrative expenses Selling and distribution expenses Finance cost Profit before tax Income tax Profit after tax Other comprehensive incomes Revaluation gain - building Revaluation loss-AFS Total comprehensive income	Sh 000 66,265 34,875 31,390 360 (8,475) (5,820) (585) 16,870 (4,700) 12,170 660 (300) 12,520

Tamu Tamu Ltd Statement of Chacges in Equity For The Year Ended 30 September 2019
	Ordinary	Retained	General	Revaluation
	Share capital	earnings	reserves	PPE	AFS
Balance b/d Profit for the year Revaluation gain Bonus Gain Dividend paid Fraud	14,500 1,250	3,600 12,170 (2,725) (200)	1,500 (1,250)	800 660	(300)
	15,750	12,845	250	1,460	(300)

Assets Non Current Assets PPE AFS Current Assets Inventory 3,150 +2,000 Receivables (9,200 - 500-2,600) Equity and liabilities Ordinary share capital Retained earnings General reserves Revaluation reserve - PPE - AFS Non Current liabilities 8% loan note 10% Redeemable preference shares Deferred tax 2,300 + 1,200 Current liabilities Current tax Trade payables Bank overdraft Interest on loan note (200 - 110) Preference dividend

Sh"000" 27,555 8,400 5,150 6,100 47,205 15,750 12,845 250 1,460 (300) 2,500 3,000 3,500 3,500 3,400 910 90 300 47,205

W1

Goodwill on Acquisition of Benta
Purchase consideration - Cash - Deferred 1,800×0.857 Fair Value of NCI Less: Net asset of the identifiable assets Ordinary share capital Revaluation Surplus Pre-Acquisition Retained Earnings Revaluation of Inventories Goodwill Impairment Net Good will	5,940 1,543 3,800 260 2,200 40	7,483 1,317 (6,300) 2,500 (100) 2,400

W2

Intergroup sales

Aby to Benta = 515

URP 25/125 x 75 = 15

W3

NCI
Fair value of net asset 20% x 6,410 Add: NCI Goodwill = 1,317 - (20% x 6,300) . Impairment20% × 100 Add: Inventory Revaluation -	1,282 57 (20) 0.8 1,319.8

W4

Retained Earnings
Parent Retained Earnings Add: Invested share of Post - Acquisition Retained earnings Benta = 80% (2,350-2,200) Ceda= 30% × 850 Impairment: Benta 100 × 80% Ceda unrealized profit Revalued inventory 40×90%x80% -	13,600 120 255 (80) (85) (15) (28.8) 13,766.2

Abby Group Consolidated statement of financial position as at 30th April 2020

Asset Non Current assets PPE (25,290+5,420) Goodwill Investment in associate Current Assets Inventory 2,750 +1,295 +4-15 Receivables 2,135+ 1,010 Cash and Bank Balance (1,220+575) Equity and Liabilities Ordinary share capital Revaluation reserve Retained profit Non-Controlling interest Non-current liabilities Deferred consideration 10% debentures 2,450+500 Deferred tax 1,920+375 Current liabilities Trade payables Current tax 1,345+360

Sh"million" 30,710 2,400 550 4,034 3,145 1,795 42,634 12,500 2,700 13,766.2 1,319.8 1,543 2,950 2,295 3,855 1,705 42,634

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Revaluation account
	Mika	Nira		Mika	Nira
Plant & Equipmenr Fixtures & fittings -	600 200 200	200 100 700	Free hold property	1,000 - -	1,000 - -
	1,000	1,000		1,000	1,000

Determining profit or loss before conversion

Capital Balance c/d = capital balance b/d + Profit -Drawings

Profit = Capital Balance c/d + Drawings -Capital bal b/d

Capital balance c/d Drawings (4,750 + 1,220) Less: capital bal b/d (14,200 + 11,300) Revaluation (200 + 700) Profit

28,700 6,000 (25,500) (900) 8,300

Profit Share:
Mika: 4/5 x 8,300 = 6,640
Nira: 1/5 x 8,300 = 1,600

Ordinary share capital issued
13,000 x 100 = 13,000

to Mika = 4/5 x 13,000 = 10,400
to Nira = 1/5 x 13,000 = 2,600

Determining adjusted capital for debenture issue
	Mika	Nira
Capital balance b/d Revaluation gain Add: Profit for the period Less: drawings Capital bal as at 30 September 2019 Add: Revaluation changes (12,000+ 11,340-8,000-12,840) = 2,500 Updated capital	14,200 200 6,640 (4.780) 16,260 - 2,000 18,260	11,300 700 1,660 (1,220) 12,440 - 500 12,940

15% debentures to be issued:
6% rate of return.
Mika: 6/100 x 18,260 = 1,095
Nira: 6/100 x 12,940 = 776.4

15% debentures to be issued
Mika: 1,095 ÷ 15/100 = 7,300
Nira: 776.4 ÷ 15/100 = 5,176

	Mika	Nira		Mika	Nira
Drawings 15%debentures Share capital - Cash (balance figure)	4,780 7304 10,400 - 556	1,220 5,176 2,600 - 5,164	Balance b/d Revalation Profit Revaluation gain -	14,200 200 6,640 2,000 -	11,300 700 1,660 500 -
	23,040	14,160		23,040	14,160

MN Ltd. Statement of financial position of MN Ltd. as at 30 September 2019
Asset Non current asset Free hold property Plant & Equipment Fixtures & fittings Current assets Inventory Trade receivables Total Assets Equity and liabilities Ordinary share capital Non current liabilities 15% debenture(7,304+5,176) Current liabilities Account payable Bank overdraft Total Equity and liabilities	Sh 000 - 12,000 26,000 6,000 - 6,700 11,340 62,040 - 13,000 - 12,480 - 19,840 16,720 62,040

Workings

Bank Overdraft
Balance b/d(Bank) Payment as Capital:Mika :Nira Bank overdraft Balance b/d Bank Overdraft	250 (556) (5,164) (11,250) 16,720

Revenue account
	Crop	Livestock		Crop	Livestock
Opening Inventory - Purchases - - Crop expenses Other crop expenses Napier grass labour Dairy cattle expenses - - Manure Maize purchases Profit	3,600 1,980 2,160 1,080 - 6,480 720 - - - - 600 37,080	54,900 2520 10,440 4,000 6,120 - - 1,000 1,080 9,480 1,440 1,500 11,920	Sales Clossing Inventory - Drawings Manure/Maize sales - -- - - -	36,000 11,340 - 2,700 1,080 - 1,080 1,500 - - - - 53,700	27,360 8,100 3,000 54,000 ,5,400 1,620 4,320 600 - - - - 104,400

David Wekesa Income statement for the year ended 31 October 2019
Revenue - Crop -Livestock Expenses Depreciation: Tractors 20% × 32,400 :Carts 12% x 3,000 General expenses Profit before tax Tax Profit after tax	37,080 11,920 (8,100) (360) (10,800) 29,740 (3,600) 26,140

David Wekesa Statement of Financial Position as at 31 October 2019
Non current assets Land and buildings Tractors (32,400-8100) Other cattles Carts (3,000-360) Current Assets Inventory Cash at Bank Capital and liabilities Capital balance 163,080 Add: profit26,140 Less: drawings(5,400) Current liabilities Trade Payables Tax	90,000 24,300 6,000 2,640 64,800 15,300 203,040 183,820 15,620 3,600 203,040