CPA
Advanced Leval
Advanvced Financial Reporting May 2018
Suggested solutions

W1

Capital reduced = 600 x 6 = 3,600
Share consolidation = 600 x 4 / 10 = 240
Cash on right issue = 240 x 3 = 720 x 11 = 7,920

Dr Cash	7,920
Cr Ordinary Share(720 x 10)		7,200
Cr Share premium(720 x 1)		720

Journal entries
	Dr Sh."000"	Dr Sh."000"
Capital reduction account	4,120
Goodwill		1,300
Development expenditure		750
Accumulated losses		2,070
Capital reduction account	3,440
Plant and machinery account		3,040
Inventory account		400
Land and building	160
Capital reduction account		160
OSC account	3,600
Capital reduction account		3,600
Share premium	2,720
Capital reduction account		2,720
Cash	7,920
OSC		7,200
Share premium		720
Creditors account	1,000
OSC account		1,000

(ii) Capital reduction account.





(iii) Statement of financial position affecting the scheme of capital reduction

Fanaka Ltd
Statement of financial position as at 1 Jan 2018
Asset	Sh."000"
Non-current assets
Land and building	3,320
Plant and machinery	1,000
Current assets
Inventory	1,500
receivables	1,700
Cash(7,920 - 1,100)	6,820
	14,340
Equity and liabilitie
OSC	10,600
Capital reserve	(1,080)
Non-current assets
10% debenture	4,000
Current liabilities
Trade payables(1,820 - 1,000)	820
	14,340

W1

Purchase consideration of Mvua Ltd

Shares = 80% x 5,000 = 4,000

3 / 4 x 4,000 = 2,400 x 5 = 12,000

Ordinary share = 2,400 x 1 = 2,400
Share premium = 2,400 x 4 = 9,600

Loan stock
500 shares => sh.100
4,000 shares => (4,000 x 100) / 500 = 800

Total Purchase consideration => 12,000 + 800 = 12,800
Control in Upepo => 2,400 / 6,000 = 40%
Associate
2,400 x 1.5 = 3,600

W2

Depreciation of Revaluation loss of 1,200

Depreciation overcharge => 1,200 / 8 x 4 / 12 = 50

W3

Inter group sales

URP = 25 / 125 x 2,000 = 400

W4

Intergroup balances = 80 + 20(cash in transit) = 100

W5

Goodwill on acquisition of Mvua Ltd

Purchase consideration		12,800
Less:Net assets acquired
OSC	5,000
Retained earnings 9,500 - (6,800 x 4 / 12)	7,233
	12,233 x 80%	(9,787)
Goodwill		3,013
Impairment loss 10%		(301.3)
		2,712

Rodi Ltd
Consolidated statement of comprehensive income Ibr the year ended 30 April 2018
	Sh."000"
Revenue[92,500 + (48,000 x 4 / 12) - 4,000]	104,500
Cost of sales[70,500 + (36,000 x 4 / 12) + 400 - 50 - 4,000]	(78,850)
Gross profit	25,650
Distribution expenses[2,500 + (1,200 x 4 / 12)]	(2,900)
Administration expenses[5,500 + (2,400 x 4 / 12)]	(6,300)
Finance cost	(100)
Imparement loss	(301)
Profit before tax	16,049
Tax expense[3,900 + (1,600 x 4 / 12)]	(4,433)
Add:Associate share of PAT(40% x 6,800 x 6 / 12)	1,360
Revaluation gain	500
Total comprehensive income	13,476
Attributable to NCI 20%[(6,800 x 4 / 12) + 5 - 400]	(374)
Attributable to parent	13,102

Rodi Ltd
Consolidated statement of financial position for as at 30 April 2018
Assets	Sh."000"
Non-current assets
PPE (18,300 + 18,900 + 500 - 1,200 + 50)	36,550
Investment(12,600 + 1,200 + 300 - 3,600 - 800)	9,700
Goodwill	2,712
Investment in associate 3,600 + (6,800 x 6/12 x 40%)	4,960
Current assets
Inventory(5,200 + 1,000 - 400)	5,800
Trade and other receivables (4,580 + 800 - 100)	5,280
Financial asset at FV(1,200 + 350)	1,550
Cash and bank(1,520 + 250 + 20)	1,790
	68,342
Equity and liabilities
Ordinary share capital(15,000 + 2,400)	17,400
Share premium	9,600
NCI (5,000 x 20% x 3.5)	3,500
Retained earnings	16,122
Other equity reserves(500 + 300)	800
Non-current liabilities
6% loan note	3,000
Deferred tax(1,600 + 1,200)	2,800
Current liabilities
Trade and other payables(5,600 + 5,600 - 80)	11,120
Current tax(2,800 + 1,200	4,000
	68,342

E Ltd
Amortization schedule
		Finance	Cash flows	Balance c/d
Year	Balance b/d	Cost(20%)	(12%)	Sh.million
2018	200	40	(24)	216
2019	216	43.2	(24)	235.2
2020	235.2	47.04	(24)	258.24

	2018	2019
Finance charge	40	43.2

(ii) Extracts from the statement of' financial position as at 3 1 December 2018 and 31 December 2019.

	2018	2019
Non-current liabilities
Bond	216	235.2

Bal b/d	30,540
Add:Return on plan asset(5% x 30,540)	1,527
Contribution by employees	1,260
Contribution by employers	360
Less:Benefits paid	(1,080
	32,607
Acturial gain(bal fig)	1,241
Bal c/d	33,848

(ii) Statement of changes in the present value of plan obligations in accordance with IAS 19 for the year ended 30 November 2017.

Bal b/d	33,600
Current service cost	420
Post service cost	270
Interest cost(5% x 33,600)	1,680
Less:Benefits paid	(1,080)
	34,890
Acturial loss(bal fig)	351
Bal c/d	35,241

(iii) Statement of changes in net assets available for benefits for the plan itself as required by IAS 26 (Accounting and Reporting by Retirement Benefit Plans).

Ufanisi Ltd
Statement of changes in net assets for the year ended 30/11/2017
Incomes		Sh."000"
Contribution - employees		1,260
Employer		360
Dividend income		414
Interest income		240
Rental income		166.5
Profit on disposal of plan investment		300
		2,740.5
Expenses
Benefits paid	1,080
Foreign exchange losses	600
Foreign tax on income	90
Administrative income	210
General expenses	60	(2,040)
Profit		700.5
Add:Other comprehensive income
Acturial changes(1,241 - 351)		890
Total comprehensive income		1,590.5

W1

Sales on behalf of P Ltd
Commission = 10% x 2,400 = 240
Net proceed to remit = 2,400 - 240 = 2,160

W2

Purchase from foreign supplier

Exchange loss
As at Jan 2018 = 2,200 x 10	22,000
As at March 2018 = 2,200 x 11	24,200
Exchange loss	2,200/11 = 200

W3

Financial instrument | convertible bond

Value of liability component
Present value interest + PV of principal
Interest = 6% x 3,000 = 180
180 x PVIFA(3,9%) + 3,000 x PVIF(3,9%)
(180 x 2.5313) + (3,000 x 0.7722) = 2,772

Total value of the bond	3,000
Less:liability component	(2,772)
Equity component	228

Dr Cash/Bank	3,000
Cr liability	2,772
Cr Equity	228

Year	Bal b/d	Finance cost(9%)	Cash flows(6%)	Balance c/d
2017	2,772	249.5	(180)	2,841.5

W4

Depreciation of assets

Building 3,600/40 = 90(admin exp)
Plant and machinery (2,400 - 150)/15 = 150(cost of sale)

W5

Expenses

	Cost of sales	Admin	Distribution	Finance
Balance per trial balance	5,670	2,830	1,890	1,560
Depreciation	150	90	-	-
Finance cost on bond	-	-	-	249.5
Exchange loss	200	-	-	-
provision for damages	-	-	(1,200)	-
Staff training(intangible)	-	156	-	-
	6,020	3,076	690	1,809.5

W6

Tax expence

	Sh."000"
Current tax	980
Deferred tax 270 - (30% x 840)	(18)
	962

W7

PPE

13,420 + 3,600 + 2,400 - 2,910 - 90 - 150 = 16,270

G Ltd
Statement of comprehensive income for the year ended 31 March 2018
	Sh."000"
Revenue (18,960 - 2,400)	16,560
Cost of sale	(6,020)
Gross profit	10,540
Other incomes
Investment income	120
Commission income	240
Expenses
Administration expenses	(3,076)
Selling and distribution expenses	(690)
Finance cost	(1,809.5)
Profit before tax	5,324.4
Tax expense	(962)
Profit after tax	4,362.5

	Ordinary	Share	Retained
	share capital	premium	earnings	Revaluation
Balance b/d	5,800	1,400	5,410	1,500
Profit after tax	-	-	4,362.5	-
	5,800	1,400	9,772.5	1,500

Assets	Sh."000"
Non-current assets
PPE	16,270
Intangible assets(1,750 - 156)	1,594
Current assets
Inventory	4,730
Trade and other receivables	1,270
Cash in hand	380
Financial assets at fair value	1,250
	25,494
Equity and liabilities
OSC	5,800
Share premium	1,400
Retained earnings	9,772.5
Revaluation	1,500
Equity reserve(bond)	228
Non-current liabilities
Deferred tax(30% x 840)	252
6% bond	2,841.5
Current liabilities
Current tax(980 - 740)	240
Trade and other payables(920 + 200)	1,120
Proceeds payable to P Ltd	2,160
Interest payable(cash flows)	180
	25,494