Question

All Shall Come to Pass Company was incorporated with an authorized capital of 40,000,000

equity shares of no par value.

The Trial Balance extracted from the ledgers of the company as at 31st December, 2019 is

as shown below:

                                                                            GH¢000 GH¢000                
Sales 90,675

Purchase of Raw materials 55,800
Selling and Distribution expenses 2,080
Wages and salaries of production staff 4,000
Salaries of Administrative staff 2,800

Inventory on hand 1/1/2019:
Raw materials 1,000
Work-in-Progress 1,000
Finished Goods. 3,000
Investment Property. 8,000
Buildings 10,000 2,000
Plant and Machinery. 35,800. 10,000
Fixtures and Equipment (office related) 8,000 3,000
Motor vehicles 2,600 1,200
Investment in shares. 5,000
12% Loan note (2019-2021). 6,000

Trade Payables. 1,360
Interim Equity dividends paid. 900
Bank overdrafts. 1,390
Overdraft interest and Bank charges. 800
Corporate tax. 1,200
Cash in hand. 1,100
Stated Capital-Equity shares (issued at GH¢1). 30,000
Capital Surplus 1/1/2019. 3,000
Income surplus 1/1/2019. 3,040
Investment income .... 1,500
Rental Income. 50
Administrative expenses 2,040
Production overheads excluding depreciation. 2,000
Loan interest paid. 600
VAT service. 3,535
Trade Receivables. 2,960
153,615         153,615

The following additional information is available:
i. VAT has been incorrectly recorded in the books. The sales and the purchases figure
in the Trial Balance include Output and Input Vat respectively. Vat Rate is 12.5%.
The figure of GH¢3,535,000 in the trial balance represents net VAT paid to VAT service for January-November transactions. VAT returns for December 2019 transactions were made on 25th January 2020.

ii. Inventory on hand on 31st December 2019 were as follows:

                                                                                    Cost NRV

                                                                                   GH¢000 GH¢000

Raw Materials 1, 240 1,200

WIP. 600 N/A

Finished goods 2,000 2,600

iii. Provision is to be made for:

- Directors’ Emoluments of GH¢20,000

- Auditors Remuneration of GH¢25,000

- Royalty of 1% of sales

iv. During the year the company paid the tax liability outstanding at 1/12/2018 of

GH¢800,000. Tax credit certificates amounting to GH¢160,000 were obtained by the

company in the year as result of withholding tax deducted at source by customers. An

amount of GH¢140,000 was also paid on account of 2019 provisional tax assessment.

Corporate tax rate applicable to All Shall Come to Pass Company Ltd is 30% of Net

profit.

v. The Investment Property had a fair value of GH¢8,400,000 as at 31st December 2019

according to a chartered surveyor.

vi. The policy of the company is to depreciate Property, Plant and Equipment as follows:

Buildings 2% p.a. on cost

Motor Vehicles 20% p.a. on cost

Fixtures or Equipment (office related) 10% p.a. on cost

Plant and Machinery 10% p.a. on cost

Full year depreciation on year of acquisition and non in year of disposal
vii. The building was revalued by the chartered surveyor at GH¢12,000 as at 31st

December 2019 in the accounts. The building is occupied between the factory and

office in the ratio of 60% and 40% respectively.

viii. During the year, the following additions to PPE were made.

                                                                                                  GH¢000

Motor vehicles 500

Fixtures and fitting and Equipment 1,000

These have been recorded in the books

Required:

Prepare the final accounts for internal use and in conformity with relevant International Financial

Reporting Standards.

a. Statement of Profit or Loss and Other Comprehensive Income for the year ended

31st December, 2019.

b. Statement of Changes in Equity for the year ended 31st December, 2019.

c. Statement of Financial Position as at 31st December, 2019.

NOTE: All workings must be shown

Answer 1

87140 PROFIT & LOSS STATEMENT AND COMPRREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 31.12.2019 SALES INDIRECT INCOME INVESTMENT INCOME RENTAL INCOME 1500 50 TOTAL INCOME 88690 1000 1000 3000 COST OF GOODS SOLD OPENING RAW MATERAIL OPENING WIP OPENING FINISHED GOODS PURCHASE OF RAW MATERIAL LESS:- CLOSING RAW MATERAIL CLOSING WIP CLOSING FINISHED GOODS 5000 55800 240 600 2000 2840 57960 DIRECT EXPENSES WAGES & SALARIES OF PRODUCTION STAFF PRODUCTION OVERHEAD DEPRECIATION ON BUILDING 4000 2000 1200 7200 GROSS PROFIT 23530 2800 800 2040 600 EXPENSES ADMINISTRATIVE EXPENSES SALARY TO ADMINISTRATIVE STAFF INTEREST AND CHARGES ADMINISTRATIVE EXPENSES LOAN INTEREST PAID DIRECTOR EMOLUMNET AUDITOR REMUNERATION ROYALTY 1% OF SALES DEPRECIATION ON BUILDING DEPRECIATION ON VEHICLE DEPRECIATION ON FIXTURE DEPRECIATION PLANT AND MACHINERY 20 25 871.4 800 520 800 3580 12856.4 SELLING & DISTRIBUTION EXP SELLING & DISTRIBUTION EXPENSES NET PROFIT 2080 8593.6 30% CORPORATION TAX INTERIM DIVIDEND LESS:- PREVIOUS YEAR TAX DEMAND PAID 2578.08 900 900 NET PROFIT TRANSFER TO BALANCE SHEET OPENING INCOME SURPLUS CLOSING INCOME SURPLUS 4215.52 4040 8255.52 INCOME AS PER PROFIT AND LOSS STATEMENT 4215.52 OTHER COMPREHENSIVE INCOME ADJUSTMENT PROFIT ON REVALUATION OF BUILDING PROFIT ON REVALUATION OF INVESTMENT 6000 400 6400 TOTAL INCOME 10615.52

STATEMENT OF FINANCIAL POSITION AS ON 31.12.2019 PARTICULAR EQUITY AND LIBILITY EQUITY SHARE CAPITAL CORPUS INCOME SURPLUS PROFIT ON REVALUATION 30000 3000 8255.52 6400 47655.52 NON CURRENT LIABLITY 12% LOAN NOTES 6000 6000 CURRENT LIABILITY TRADE PAYABLES BANK OVERDRAFT EXPENSES PAYABLE CORPORATE TAX PAYABLE 1360 1390 916.4 2278.08 5944.48 TOTAL 59600 ASSETS NON CURRENT ASSETS TANGIGLE ASSETS BUILDING PLANT AND MACHINERY FIXTURES AND EQUIPMENT MOTOR VEHICLES 16000 35800 8000 2600 62400 ACCUMULATED DEPRECIATION ACCUMULATED DEPRECIATION BUILDING ACCUMULATED DEPRECIATION PLANT ACCUMULATED DEPRECIATION FIXTURES ACCUMULATED DEPRECIATION MOTOR VEHICLE 4000 13580 3800 1720 23100 39300 INVESTMENT INVESTMENT PROPERTY INVESTMENT IN SHARES 8400 5000 13400 1100 2960 CURRENT ASSETS CASH IN HAND TRADE RECEIVABLE CLOSING RAW MATERAIL CLOSING WIP CLOSING FINISHED GOODS 240 600 2000 2840 6900 TOTAL 59600 0 STATEMENT FOR CHANGES IN EQUITY SHARE CAPITAL IN THE BEGINNING INCOME SURPLUS IN THE BEINGING NET PROFIT FOR THE YEAR 30000 4040 4215.52 38255.52

TRAIL BALANCE DEBIT CREDIT ADJUSTEM DEBIT CREDIT SALES 90675 -3535 87140 PURCHASE OF RAW MATERIAL 55800 55800 SELLING & DISTRIBUTION EXPENSES 2080 2080 WAGES & SALARIES OF PRODUCTION STA 4000 4000 SALARY TO ADMINISTRATIVE STAFF 2800 2800 INVENTORY RAW MATERIAL 1000 1000 INVENTORY WORK IN PROGRESS 1000 1000 INVENTORY FINISHED GOODS 3000 3000 INVESTMENT PROPERTY 8000 400 8400 BUILDING 10000 6000 16000 ACCUMULATED DEPRECIATION BUILDING 2000 2000 4000 PLANT AND MACHINERY 35800 35800 ACCUMULATED DEPRECIATION PLANT 10000 3580 13580 FIXTURES AND EQUIPMENT 8000 8000 ACCUMULATED DEPRECIATION FIXTURES 3000 800 3800 MOTOR VEHICLES 2600 2600 ACCUMULATED DEPRECIATION MOTOR VEHICLE 1200 520 1720 DEPRECIATION 6900 6900 INVESTMENT IN SHARES 5000 5000 12% LOAN NOTES 6000 6000 TRADE PAYABLES 1360 1360 INTERIM DIVIDEND 900 900 BANK OVERDRAFT 1390 1390 INTEREST AND CHARGES 800 800 CORPORATION TAX 1200 1338.08 2538.08 PREIVIOUS YEAR TAX PAID 900 900 TAX PAYABLE 2278.08 2278.08 CASH IN HAND 1100 1100 EQUITY SHARE 30000 30000 CAPITAL CORPUS 3000 3000 INCOME SURPLUS 4040 4040 PROFIT ON REVALUATION 6400 6400 INVESTMENT INCOME 1500 1500 RENTAL INCOME 50 50 ADMINISTRATIVE EXPENSES 2040 2040 PRODUCTION OVERHEAD 2000 2000 LOAN INTEREST PAID 600 600 VAT SERVICE 3535 -3535 0 TRADE RECEIVABLE 2960 2960 DIRECTOR EMOLUMNET 20 20 AUDITOR REMUNERATION 25 25 ROYALTY 1% OF SALES 871.4 871.4 EXPENSES PAYABLE 916.4 154215 154215 24962.56

1000 THERE IS DIFFERECNE IN TRAIL OF HENCE IT IS ADDED IN INCOME SURPLUS POINT-| VAT PAID TO BE ADJUSTED AGAINST SALE 3535 COST NRV CLOSING STOCK POINT -II CLOSING INVENTORY RAW MATERIAL WIP FINISHED GOODS 1200 240 240 600 NA 2000 600 2000 2600 POINT -III PROVISIONS TO BE MADE DIRECTOR EMOLUMNET AUDITOR REMUNERATION ROYALTY 1% OF SALES 20 25 =87140* 1% 871.4 POINT-IV OTHER TAX PAID OLD OUTSTAINDING LIABLITY PAID 100 800 WITHHOLDING TAX DEDUCTED FURTHER TAX PAID TOTAL TAX PAID 160 140 300 AS PER TRIAL TAX PAID 1200 TOTAL TAX DUE CURRENT YEAR TAX PAID 2578.08 300 TAX PAYABLE 2278.08 POINT V INVESTMENT VALUE BOOK VALUE OF INVESTMENT ADDITION TO CAPITAL CORPUS 8400 8000 400

POINT VI DEPRECIATION BUILDING 20% ON COST COST DEPRECIATION FACTORY OFFICE 10000 60% 40% 2000 1200 800 MOTOR VEHICLE 20 % ON COST DEPRECIATION 2600 520 FIXTURES AND EQUIPMENT DEPRECIATION 10% ON COST 8000 800 PLANT AND MACHINERY DEPRECIATION 10% ON COST 35800 3580 POINT VII BUILDING COST DEPRECIATION FOR THE YEAR OPENING DEP NET VALUE BUILDING REVALUED NET PROFIT ON REVALUATION 10000 2000 2000 6000 12000 6000 POINT VIII ADDITION TO PPE MOTOR VEHICLE FIXTURES AND FITTING 500 1000