Question

QUESTION 1

The following trial balance relates to Golden Ltd at 30th

Sales (a)

Material purchases (b)

Production labour (b)

Factory overheads (b)

Distribution costs

Administrative expenses (c)

Finance costs

Investment income

Leased property - at cost (b)

Plant and equipment - at cost (b)

Accumulated amortisation/depreciation at 1/10/2017

- leased property

- plant and equipment Equity investments (e) Inventory at 1/10/17 Trade receivables Trade payables

Bank

Stated capital (GHS0.2) Income surplus (1/10/2017) Deferred tax (f)

The following notes are relevant:

September 2018 GHS'000

128,000 248,000 160,000

28,400 92,800 700

1,600 100,000

89,000

29,000 36,000

93,400 67,100

1,043,400

GHS'000 760,000

20,000

55,600 4,600 100,000 67,200 5,400 1,043,400

(a) Sales include goods sold and dispatched in September 2018 on a 30-day right of return basis. Their selling price was GHS4.8m and they were sold at a gross profit margin of 25%. In the past, Golden Ltd’s customers have always met their obligations under this type of agreement.

(b) Non-current assets:

In the course of the year, Golden Ltd produced an item of equipment for its own use. The direct materials for the equipment cost GHS6m and the labour cost GHS8m. Manufacturing overheads are 50% of direct labour cost and Golden Ltd determines the final selling price for goods by adding a mark-up on total cost of 40%. The direct materials, labour and overheads are included in the relevant expense items in the trial balance. The equipment was completed and was put to use on 1 July 2018.

All plant and equipment is depreciated at 25% per annum using the straight line method with time apportionment in the year of acquisition.

The management of Golden revalued the leased property in line with recent increases in market values. On 1 October 2017 an independent architect valued the leased property at GHS96m, which the management agreed to. The leased property had an original useful life of 20 years which has not changed. Revaluation

1

surplus is realised over the life of the leased property. The revaluation surplus will give rise to a deferred tax liability (see Note f).

All amortisation and depreciation is charged to cost of sales. No amortisation or depreciation has yet been charged on any non-current asset for the year ended 30 September 2018.

(c) In July 2018, the share price of Golden Ltd stood at GHS2.40 per share. On this date, Golden Ltd paid an interim dividend (included in administrative expenses) that was computed to give a dividend yield of 4%.

(d) Closing inventory on 30 September 2018 was valued at GHS109.6m.

(e) The equity investments had a fair value of GHS34.8m on 30 September 2018. During the year there were no purchases or disposals of any of these investments.

(f) A provision for income tax for the year ended 30th September 2018 of GHS48.6m is required. At 30th September 2018, the tax base of Golden Ltd's net assets was GHS30m less than their carrying amounts. This excludes the effects of the revaluation of the leased property. The income tax rate of Golden Ltd is 30%.

Required:

Prepare the statement of profit or loss and other comprehensive income, the statement of financial position and the statement of changes in equity for Golden Ltd for the year ended 30th September 2018.

Answer 1

Trading And Profit And Loss Account

Particular	Amount (in GHS'000)	Particular	Amount in GHS' 000
To Opening Stock	93400	By Sales	760000
To Purchases                                                                      128000		By Closing Stock	109600
Less: Raw Material used for making equipment (6000)	122000
To Production Labour wages                                       248000
Less: (cost incurred for making equipment          (8000)	240000
To Gross Profit	414200
	869600		869600
To Factory Overheads                                       160000		By Gross Profit	414200
Less: Included in making equipment         (120000)	40000	By Income Surplus(1/10/2017)	67200
To Distribution Cost	28400	By Investment Income	1600
To Administrative Expense                                     92800
Less: Expense Included in Interim Dividend    (4000)	88800
To Finance Cost	700
To Depriciation accumulated as at 2017 :
Leased Property          20000
Plant and Equipment 29000	49000
To Depriciation on Plant and Equipment	22250
To Interim Dividend	4000
To Loss on Investment	1200
To Provision for tax	48600
To Net Profit	200050
	483000		483000

Balance Sheet

Liability	Amount in (GHS'000)	Assets	Amount (In GHS' 000)
Capital	100000	Leased Property    100000
Add : Profit	200050	Less: Depriciation (5000)	95000
Trade Payable	55600	Plant and Equipment                           89000
Bank O.D(overdraft)                   4600		Add: New Equpment                           134000
Add: paid Interim Dividend     4000	8600	Less: Depriciation on plant               (22250)
Provision for tax	48600	Less: Depriciation on equipment   (8375)	192375
		Equity Investment          36000
tax Liability	91425	Less: Decrease in Price   (1200)	34800
		Trade recievables	67100
		Deffered Tax	5400
		Closing Stock	109600
	504275		504275

Answer 2

Trading And Profit And Loss Account

Particular	Amount (in GHS'000)	Particular	Amount in GHS' 000
To Opening Stock	93400	By Sales	760000
To Purchases                                                                      128000		By Closing Stock	109600
Less: Raw Material used for making equipment (6000)	122000
To Production Labour wages                                       248000
Less: (cost incurred for making equipment          (8000)	240000
To Gross Profit	414200
	869600		869600
To Factory Overheads                                       160000		By Gross Profit	414200
Less: Included in making equipment         (120000)	40000	By Income Surplus(1/10/2017)	67200
To Distribution Cost	28400	By Investment Income	1600
To Administrative Expense                                     92800
Less: Expense Included in Interim Dividend    (4000)	88800
To Finance Cost	700
To Depriciation accumulated as at 2017 :
Leased Property          20000
Plant and Equipment 29000	49000
To Depriciation on Plant and Equipment	22250
To Interim Dividend	4000
To Loss on Investment	1200
To Provision for tax	48600
To Net Profit	200050
	483000		483000

Balance Sheet

Liability	Amount in (GHS'000)	Assets	Amount (In GHS' 000)
Capital	100000	Leased Property    100000
Add : Profit	200050	Less: Depriciation (5000)	95000
Trade Payable	55600	Plant and Equipment                           89000
Bank O.D(overdraft)                   4600		Add: New Equpment                           134000
Add: paid Interim Dividend     4000	8600	Less: Depriciation on plant               (22250)
Provision for tax	48600	Less: Depriciation on equipment   (8375)	192375
		Equity Investment          36000
tax Liability	91425	Less: Decrease in Price   (1200)	34800
		Trade recievables	67100
		Deffered Tax	5400
		Closing Stock	109600
	504275		504275