Unit: Financial Reporting
6 Questions| Sh."000" | |
| Intangible assets | 857,140 |
| Property, plant and equipment | 1,494,190 |
| Interest on loans and advances | 1,329,750 |
| Interest on customers' deposits | 750,135 |
| Loan loss reserve | 578,345 |
| Customers' deposits | 3,444,990 |
| Deposits and placements due from other banks | 389,190 |
| Interest received on deposits and placements with other banks | 19,780 |
| Interest paid on deposits and placements from other banks | 26,320 |
| Income tax credit | 28,720 |
| Ordinary share capital | 1,900,000 |
| Revaluation surplus | 300,000 |
| Depreciation on property, plant and equipment | 62,355 |
| Other interest income | 7,760 |
| Equity investments | 225,000 |
| Loans and advances | 3,675,230 |
| Retained earnings (1 January 2020) | 193,200 |
| Deposits and placements due to other banks | 484,490 |
| Long-term borrowings | 1,720,000 |
| Other interest expenses | 33,700 |
| Fees and commission income | 13,150 |
| Dividend income | 2,250 |
| Share premium | 270,000 |
| Staff remuneration expenses | 478,710 |
| Pension costs | 85,930 |
| Directors' salaries | 38,260 |
| Printing and stationery | 52,500 |
| Deferred tax asset | 37,500 |
| Tax refundable | 27,750 |
| Cash in hand and with central bank | 2,055,125 |
| Miscellaneous expenses | 3,400 |
| Sh."000" | Sh."000" | |
| Revenue | 380,000 | |
| Cost of sales | 246,800 | |
| Distribution cost | 17,400 | |
| Administrative expenses | 50,500 | |
| Interest on loan paid | 1,000 | |
| Investment income | 1,300 | |
| Profit on sale of investments | 2,200 | |
| Current tax | 2,100 | |
| Freehold property at cost (1 October 2019) | 63,000 | |
| Plant and equipment at cost | 42,200 | |
| Brand at cost (1 October 2016) | 30,000 | |
| Accumulated depreciation (1 October 2019): | ||
| Building | 8,000 | |
| Plant and equipment | 19,700 | |
| Accumulated amortisation (1 October 2019) | 9,000 | |
| Investment in equity instruments | 26,500 | |
| Inventory (30 September 2020) | 38,000 | |
| Trade receivables | 44,500 | |
| Bank | 8,000 | |
| Trade payables | 42,900 | |
| Ordinary share capital | 52,000 | |
| Retained earnings (1 October 2019) | 26,060 | |
| Other reserves (1 October 2019) | 5,000 | |
| 5% convertible loan notes 2022 | 18,440 | |
| Deferred tax | 5,400 | |
| 570,000 | 570,000 |
| 1. | Baraka Ltd. revenue include Sh. 16 million for goods sold to Chaka Ltd. on 1 October 2019 on sale or return basis. Baraka Ltd. normally makes aprofit margin of 40% on such sales. Chaka Ltd. is yet to confirm the sales. |
| 2. | Administrative expenses include an equity dividend of Sh.1,200,000 paid during the year. |
| 3. | The 5% convertible loan note was issued for proceeds of Sh.20 million on 1 October 2018. It has an effective interest rate of 8% due to the value of its conversion option. |
| 4. | During the year, Baraka Ltd. sold an equity investment for Sh.11 million. At the date of sale, it had a carrying value of Sh.8 million and had originally cost Sh.7 million. Baraka Ltd. has recorded the disposal of the investment. The remaining equity investment (the Sh.26.5 million in the trial balance) have a fair value of Sh.29 million as at 30 September 2020. The other reserve in the trial balance represents the net increase in the value of the equity investments as at 1 October 2019. Baraka Ltd. made an irrevocable decision at initial recognition of these instruments to recognise all changes in fair value through other comprehensive income and makes a transfer of realised profit from the other reserves to income surplus on disposal of the investments. Ignore deferred tax on these transactions. |
| 5. | The balance on the current tax represents the under/over provision of the tax liability for the year ended 30 September 2019. The income tax expense for the year ended 30 September 2020 is estimated at Sh.16.2 million. As at 30 September 2020, the carrying amount of Baraka Ltd. net assets were Sh.13 million in excess of their tax base. The income tax rate of Baraka Ltd. is 30%. |
| 6. | Non current assets: The freehold property has a land element of Sh.13 million. The building element is being depreciated on a straight line basis. Plant and equipment is depreciated at a rate of 40% per annum on reducing balance method. Baraka Ltd.'s brand in the trial balance relates to a product line that received bad publicity during the year which led to falling sales revenues. An impairment review was conducted on 1 April 2020 which concluded that based on estimated future sales, the brand had a value in use of Sh.12 million and a remaining useful life of only three years. However, on the same date as the impairment review, Baraka Ltd. received an offer to purchase the brand for Sh.15 million. Prior to the impairment review of the brand, it was being depreciated using the straight line method over a 10 year life. No depreciation/amortisation has yet been charged on any non current asset for the year ended 30 September 2020. Depreciation, amortisation and impairment charges are all charged to cost of sales. |
| Sh."000" | Sh."000" | |
| Capital: Abel | 32,000 | |
| Capital: Benta | 16,000 | |
| Capital: Chale | 10,000 | |
| Current account: Abel | 2,000 | |
| Current account: Benta | 2,000 | |
| Current account: Chale | 1,000 | |
| Drawings in cash: Abel | 2,000 | |
| Drawings in cash: Abel | 1,200 | |
| Drawings in cash: Abel | 1,200 | |
| Freehold property at cost | 51,600 | |
| Motor vehicles at cost | 24,000 | |
| Furniture and fittings at cost | 12,000 | |
| Accumulated depreciation - Motor vehicle | 7,200 | |
| Accumulated depreciation - Furniture and fittings | 7,200 | |
| Inventory (31 May 2020) | 28,800 | |
| Cost of sales | 60,800 | |
| Sales | 120,000 | |
| Administrative expenses | 12,000 | |
| Selling and distribution expenses | 6,000 | |
| Accounting and audit expenses | 2,400 | |
| Incorporation expenses | 1,200 | |
| Trade receivables and trade payables | 18,000 | 12,200 |
| Prepayments and accruals | 1,000 | 600 |
| Loan from Benta (10% interest per annum) | 12,000 | |
| Bank balance | 2,000 | |
| 223,200 | 223,200 |
| 1. | The partners were sharing profits and losses equally after allowing for annual salaries of Sh.3 million for Abel and Sh.2.2 million each for Benta and Chale. |
| 2. | The partners agreed on the following conditions for conversion to a company:
Freehold property 54 Furniture and fittings 4.8 Motor vehicles 24
|
| 3. | The sales during the second half of the year after conversion were 50% above that of first half. However, the gross profit percentage remained the same throughout the year. |
| 4. | The selling and distribution expenses were proportional to the sales for each period. All the expenses were incurred evenly throughout the year. |
| 5. | Salary drawings were made evenly. Drawings made after incorporation were to be treated as directors' salaries. |
| 6. | There were no purchases or sales of non-current assets during the year. Depreciation is to be provided on cost per annum as follows: Motor vehicles - 20% Furniture and fittings - 10% |
| 7. | No dividends are paid or proposed but it is decided to write off the incorporation expenses and also Sh.7 million of goodwill. Goodwill is treated as having arisen from purchase of a business. |
| Ambaza | Rudisha | |
| Non-current assets: | Sh."000" | Sh."000" |
| Property, plant and equipment | 37,300 | 24,060 |
| Investments | 52,600 | 4,800 |
| 89,900 | 28,860 | |
| Current assets: | ||
| Inventories | 6,350 | 5,200 |
| Accounts receivable | 4,360 | 1,950 |
| Bank | 1,390 | - |
| 12,100 | 7,150 | |
| Total assets | 102,000 | 36,010 |
| Equity and liabilities: | ||
| Equity and reserves: | ||
| Ordinary share capital (Sh.10 each) | 43,000 | 16,500 |
| Retained earnings | 34,560 | 8,190 |
| 77,560 | 24,690 | |
| Non current liabilities: | ||
| 12% debentures | 8,200 | 2,800 |
| Deferred tax | 3,900 | 1,200 |
| 12,100 | 4,000 | |
| Current liabilities: | ||
| Accounts payable | 5,710 | 1,760 |
| Taxation | 5,330 | 2,410 |
| Dividends | 1,300 | 1,200 |
| Bank overdraft | - | 1,950 |
| 12,340 | 7,320 | |
| 102,000 | 36,010 |
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