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cpa 3 financial reporting 1 revision 6


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By Omosa


Description/Abstract

QUESTIONS NUMBER ONE P Ltd and its subsidiary Consolidated income statement for the year ended 31 December 2003 Sh’000 Turnover (600000+400000-5000) 995,000 Profit before tax 378,000 Share of PAT in A ltd (30%*70,000) 21,000 399,000 Taxation: group (60000+45000) (105,000) Profit after Tax 294,000 Profit attribuatable to Minority interest (60,000) Profit attributable to P Ltd 234000 Proposed dividends (60,000) Retained profit for the year 174,000 Retained profit b/f 40,000 Retained profit c/f 214,000 Statement of retained profit b/f Sh000 Year Sh000 c/f Sh000 P ltd 40,000 138,000 178,000 M ltd 0 27,000 27,000 B ltd 0 9,000 9,000 Group 40,000 174,000 214,000 Working B/fSh000 Year Sh000 c/f Sh000 P ltd:as per B/Cs 40,000 80,000 120000 Dir. Receivable from M:OSC - 36,000 36000 B :OSC - 12,000 12000 Negative Goodwill 11,000 11,000 Unrealised profit on Inventory - (1,000) (1000) 40,000 138,000 178000 M ltd:As per B/Cs 60,000 45,000 105000 Less Pre acquisition (60,000) 0 (60,000) Post acquisition 0 45,000 45,000 Share of P ltd @60% 0 27,000 27,000 B ltd: as per B/Cs 50,000 30,000 80,000 Less Pre acquisition (50,000) 0 (50,000) Post acquisition 0 30,000 30,000 Share of P ltd @30% 0 9,000 9,000 P LTD AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 Sh’000 Sh’000 Non Current Assets: Property, plant and equipment (375+195-80-25-55) Goodwill Inv. In A ltd Current Assets: Inventory Debtors (80+65) Dividends due from minority Interest Cash at bank (75+50+24.8) Total Assets EQUITY AND LIABILITIES Share capital: Share of Revaluation Reserve in Assoc. Retained profits Minority interest Shareholders funds Current liabilities: Creditors Taxation Proposed Dividends (60+(MI40%x60) 410,000 - 82,000 492,000 174,000 145,000 12,000 125,000 456,000 948,000 300,000 18,000 0 214,000 544,000 112,000 644,000 115,000 105,000 84,000 304,000 TOTAL EQUITY AND LIABILITIES 948,000 WORKING COST OF CONTROL ACCOUNT (S ltd) Shm Shm Inv 105 OSC(60%*140) 84 PSC(40%*50) 20 Goodwill to P&L 11P&L(60%x(60-40) 12 116 116 COST OF CONTROL ACCOUNT (A ltd) working A/C Inv 55 OSC (30%x100) 30 P&L (30%x50) 15 Premium 10 Profit before tax Sh „m. Profit before tax in P 200 Profit before Tax in M 180 Unrealised profit on closing invrntory (1) Negative goodwill 11 Preference dividend received from M by P (12) 378 -Note that under the current IFRS 3 Negative goodwill should be reported immediately as income when it arises. -Note also that evevn though the examiner has stated that P Ltd has not yet accounted for its shate of dividends receivable from M Ltd and B Ltd; we have assumed that h ltd has already accounted for Preference dividends which is included in the PBT. This is because the preference dividends are not shown as a current liability in the books of M Ltd. Which Means that it is either paid or the question has an error. Therefore the most logical assumption is that the subsidiary co has already paid the preference dividend by the balance sheet date. -The bonus shares in most cases if it is paid out of the pre acquisition profits then it will not affect the computation of goodwill like in the above case. The dividend was paid nearly at the beginning of the year so it means that the pre acquisition profits will reduce by sh40 million and share capital increases by the same. However if the bonus shares are paid out of post acquisition retained profits then this will affect the computation of goodwill because we need the reserves at acquisition.. The approach is to use the reserves at acquisition but the bonus shares received by the holding company in the post acquisition period should be shown as a separate capital reserve paid out of the post acquisition retained profits of the subsidiary. Minority interest in the income statement PAT 135,000 PSC OSC Div 30,000 (135.000) MI@60%18000 105000 @40%42000 Total MI=18+42=60000 Investment in Associate co shm Cost of investment in Associate co. 55 Add holding company’s share of post acqusiton. Profits 9 Add holding conpanys share of post acquisition Rev reserve 18 82 Alternatively Investing company’s share of net assets in Associate(30%x240) 72 Add Premium 10 82 Net assets in associate co, are same as shareholders funds plus the revaluation gain. MINORITY INTEREST (Balance sheet) Shm. Shm. OSC(40%x140) 56 PSC(60%x50) 30 P&L(40%(105-40)) 26 Balance c/d 112 NUMBER TWO X & Y, K & L REALISATION A/C X&Y Sh..000. K&L Sh..000. A&B Sh..000. C&D Sh..000. Property Fixtures & fittings Motor vehicles Stock Investments Debtors XYKL: Creditors Capital: X Y K L 740 180 300 830 80 680 507 480 360 - - 1,000 140 180 660 - 580 585 - - 345 230 Creditors Bal: investment XYKL: Debtors Stock Motor vehicles Fictures Property Cash book: Fixtures Goodwill 520 76 646 845 280 160 1,000 - 630 600 - 551 639 130 - - 1,350 450 4,157 3,720 4,157 3,720 CAPITAL A/C A Sh..000. B Sh..000. C Sh..000. D Sh..000. A Sh..000. B Sh..000. C Sh..000. D Sh..000. Investment Cash Bal c/d - 210 1,800 76 - 1,500 - 275 1,200 - 70 900 Bal b/d Current A/c Realisation Cash 1,500 30 480 - 1,050 50 360 116 1,100 30 345 - 700 40 230 - 2,010 1,576 1,475 970 2,010 1,576 1,475 970 CASH BOOK Sh..000. Sh..000. Bal b/d Y: Capital Realisation: Fixtures 340 116 - - - 1,350 Bal b/d X K L XYKL - 210 - - 246 90 - 275 70 915 456 1,350 456 1,350 XYK&L Balance Sheet as at 01.01.2004 Sh.’000’ Sh.’000’ Non Current Assets Property Fixtures & Fittings Motor vehicles Goodwill Current Assets Stock Debtors Cash EQUITY AND LIABILITIES Capital: X Y K L 1,484 1,197 1,161 1,000 160 410 1,080 2,650 3,842 6,492 1,800 1,500 1,200 900 5,400 Current Liabilities Creditors 1,092 1,092 TOTAL EQUITY 6,492 AND LIABILITIES NUMBER THREE MR. MWENDA PROFIT & LOSS A/C FOR YEAR ENDED 31.12.03 Head Office Branch Combined Sh..000 Sh..000. Sh..000 Sh..000. Sh..000 Sh..000. Sales GSTB Goods sent and lost Cost of sales Opening stock Purchases Goods received by branch Closing stock Gross profit Insurance receivable Expenses Depreciation: Furniture Rent and rates Wages Genera expenses Profit before commission 519 2,797.90 - 473.7 31.2 80 170 300 2,800 1,200 4,000 (17.5) 3,982.5 (2,843.28) 1,139.22 10.5 1,149.72 (581.2) 568.52 270.6 - 1,182.5 126.45 10 40 130 250 1,871.66 - 1,871.66 - 1,871.66 (1,326.65) 545.01 - 545.01 (430) 115.01 (11.501) 103.50 789.6 2,797.98 - 600.15 41.2 120 300 550 4,671.66 - 4,671.66 - 4,671.66 (2,987.43) 1,684.23 - 1,694.73 (1,011.2) 683.53 (68.353) 615.177 10% commission (56.852) 511.668 9 MR. MWENDA BALANCE SHEET AS AT31.12.03 Non Current Assets Land & buildings Furniture & equipment Branch current a/c Current Assets Stock Debtors Insurance receivable Cash in transit Cash Current Liabilities Creditors Staff commission accrued Bank overdraft 473.7 160 10.5 24 80 728.2 247.8 56.852 - 1,400 280.8 1.680.8 129.569 2,253.917 1,788.74 (150) 126.45 120 - - 20 266.45 165.38 11.501 50 - 90 90 - 90 129.569 129.569 600.15 280 10.5 24 100 1,014.65 413.18 68.353 50 1,400 370.8 1,770.8 - 1,770.8 2,253.917 1,788.74 (150) Head office current account Financed by Capital Less drawings Retained profit 1,638.74 615.177 2,253.917 1,638.74 615.177 2,253.917 BRANCH CURRENT ACCOUNT Sh..000. Sh..000. Balace b/d Profit 1,567.56 103.509 Lost goods Cash in transit 17.5 24 Remittance Balace c/d 1,500 129.569 1671.069 1671.069 HEAD OFFICE CURRENT A/C Sh..000. Sh..000. Remittance Balace c/d 1,524 129.569 Balace b/d Profit 1,550.06 103.509 1,653.569 1,653.569 NUMBER FOUR (a) Abatement explained: When assets are insufficient to pay any class of legacies, all legacies in that category or class shall be reduced to a fraction of the original amount. This is known as abatement – it enables all legacies to be partially satisfied with the few assets available. If assets are insufficient to pay specific legacies, these will abate rateably and no general or residuary bequests shall be paid. If assets are sufficient to pay specific legacies but insufficient to pay general legacies, the general legacies shall abate rateably and no residuary bequest shall be fulfilled. (b) Classifications of Legacies (i) Specific (ii) General (iii) Demonstrative (iv) Residual (v) Pecuniary legacy (i) Specific legacy is a testamentary gift of a particular part or the property of the testator, which identifies the part of a sufficient description whether in specific or in general terms and manifests an intention that that part shall be in enjoyed or taken in the state and condition indicated by that description. (ii) General legacy is a testamentary gift, whether specific or general, of property described in general terms to be provided out of the general estate of the testator, whether or not also charged on any specific part of his estate. (iii) Demonstrative legacy is a testamentary gift which is in its nature general but which manifests an intention that the gift shall be primarily satisfied out of a special fund or a specified part of the property described in general terms to be provided out of the general estate of the testator, whether or not also changed or any specific part of his estate. (iv) Residual legacy is a gift of the remainder of the estate of the deceased after all their legacies have been paid. (c) QYB Retirement benefit Scheme Statement of changes in net assets for the year ended 30September 2003 Sh.’000’ Sh.’000’ Contributions Received: From employers: Normal From members: Normal Mem
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