WEEKLY ASSIGNMENT WEEK 11 PRINT, WORK AND SUBMIT … · 2019-03-28 · Accumulated depreciation for...

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WEEKLY ASSIGNMENT

WEEK 11

PRINT, WORK AND SUBMIT YOUR ASSIGNMENT AT NEXT LECTURE

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1.1 FINANCIAL ACCOUNTING

ASSIGNMENT SET 9

QUESTION ONE

Asomdwee Enterprise is run by a sole trader. The following Trial Balance was prepared from the business

accounts on 30th September 2015.

Dr Cr

GH¢ GH¢

Capital 185,280

Inventory 24,200

Sales 421,450

Purchases 167,350

Purchase returns 6,040

Electricity 2,230

Discounts allowed 2,420

Discounts received 4,270

Motor expenses 1,580

Drawings 32,000

Bank 24,511

Salaries 108,000

Insurance 15,400

Receivables 110,140

Irrecoverable debts 1,420

Allowance for receivables 3,153

Payables 76,288

General expenses 6,780

9% Loan (2012-2019) 150,000

Loan interest 12,000

Land and buildings 340,000

Accumulated depreciation for buildings 26,000

Equipment 22,000



Accumulated depreciation for equipment 10,300

Motor vehicles 26,000

Accumulated depreciation for motor vehicles 0 13,250

896,031 896,031

The following information is also available.

i) Only 10 months’ salaries are shown in the Trial Balance. An equal amount is paid for salaries for each

month of the year.

ii) As at 30th September 2015, GH¢3,200 had been prepaid for insurance, whilst GH¢410 was owing for

general expenses.

iii) GH¢4,600 had been charged to general expenses for the owner’s private holiday.

iv) As at 30th September 2015, inventory was valued at GH¢22,500.

v) A customer, owing GH¢5,040 has been declared bankrupt. This amount is to be written off in full.

vi) An allowance for receivables is to be maintained at 3% of the remaining receivables.

vii) As at 30th September 2015, the business’s land was valued at GH¢100,000. Land is not depreciated.

viii) Depreciation is to be provided as follows:

Buildings: 4% per annum using the straight line method.

Equipment: 25% per annum using the straight line method.

Motor vehicles: 40% per annum using the reducing balance method.

ix) There were no additions or disposals of non-current assets during the financial year.

Required:

a) Prepare the Income Statement for the year ended 30th September 2015. (8 marks)

b) Prepare the Statement of Financial Position as at 30th September 2015. (6 marks)

c) i) Identify the accounting concept involved in each of the footnotes/items (i), (iii) and (v). (3

marks)

ii) Explain the correct accounting treatment in each case. (3 marks)

(Total: 20 marks)



QUESTION TWO

The Sales Ledger Control Account of PC Ltd for the year ended 31st December 2014 has been prepared

from the following information:

GH¢

Debit balance b/d 1st January 2014 128,540

Credit balance b/d 1st January 2014 2,800

Total for the year 1st January 2014 to 31st December 2014

Credit Sales 1,144,200

Cheques received from customers 1,046,200

Cash received from customers 7,100

Sales returns from customers 12,000

Discounts allowed 2,480

Dishonoured cheques 5,000

Contras purchases ledger 10,640

Irrecoverable debts 6,500

The Sales Ledger Control Account balance, which is part of the double entry system, failed to agree with

the total receivables of GH¢189,380 as shown by the Schedule of Receivables. The following errors were

subsequently discovered:

i) A customer had returned goods to PC Ltd at the selling price of GH¢2,400. The goods had been bought on

credit. No entries had been made to record the return of the goods in the accounts of PC Ltd.

ii) The discounts allowed column in the cash book had been overcast by GH¢1,080. iii) No contra entry had

been made in the receivables account in the sales ledger in respect of purchases by PC Ltd of goods at a list



price of GH¢2,000. PC Ltd received a trade discount of 10% on these goods. This transaction had been

correctly dealt with in the Sales Ledger Control Account. iv) A credit sale of GH¢3,520 to JT Ltd was

correctly recorded in the Sales ledger Control Account, but no other entry had been made.

v) A cheque received from a customer for GH¢6,900, correctly processed through the books, had subsequently

been dishonored. No entries have yet been made to record this dishonored cheque.

vi) DT Ltd, a customer, has recently been declared bankrupt and the debt of GH¢3,500 is to be written off, but

no entries have yet been made.

Required:

a) Prepare a revised Sales Ledger Control Account for the year ended 31 December

2014. (9 marks)

b) Prepare a statement showing the correct total of the Schedule of Receivables for the year ended 31

December, 2014. (5 marks)

c) Discuss TWO advantages to PC Ltd of using control accounts. (6 marks)

(Total: 20 marks)

QUESTION THREE

The following is a summary from the cash book of BW Ltd for July 2015:

GH¢

Opening balance 1,530

Receipts 23,104

Payments (23,005)

Closing balance 1,629

On investigation it was discovered that:

i) Bank charges of GH¢15 shown on the bank statement have not been entered in the cash book.

ii) A cheque drawn for GH¢110 to pay a supplier has been entered in the cash book as a receipt.

iii) A cheque from a customer for GH¢120, which was banked (and included above in receipts), has been

returned by the bank, but this has not been adjusted in the company’s books.



iv) An error of transposition which occurred in the opening balance of the cash book should have been recorded

as GH¢1,350.

v) Cheques totaling GH¢264 have been sent by post to suppliers but were not presented to the company’s bank

until August 2015.

vi) The last page of a bank account paying-in book shows a deposit of GH¢1,040 which was not credited to

the account by the bank until 1st August 2015.

vii) The company’s bank statement at 31st July 2015 shows a balance of GH¢318.

Required:

a) Demonstrate any adjustments needed to the company’s accounting records.(8 marks)

b) Prepare a Bank Reconciliation Statement as at 31st July 2015. (6 marks)

c) Explain THREE benefits to BW Ltd of reconciling its cash book and bank

statement balances. (6 marks)



1.2 BUSINESS AND CORPORATE LAW

ASSIGNMENT SET 9

Q1 What are torts?

Q2 Briefly explain the following torts:

Trespass

Negligence

Defamation

Q3 Mention the remedies in torts



1.4 QUANTITATIVE TOOLS IN BUSINESS

ASSIGNMENT SET 9

NO ASSIGNMENT



2.1 FINANCIAL REPORTING

ASSIGNMENT 9

Question One

The following information has been taken from the financial statements of Haruna Ltd, a listed company

for the year ended 31 March 2017.

Statement of Profit or Loss and Other Comprehensive Income (extracts) for the year ended 31

March, 2017.

GH¢’000 Profit before interest and tax 981

Finance costs (108) Profit before tax 873

Income tax expense (305)

Profit for the year 568

Other Comprehensive income

Revaluation surplus on property, plant and equipment 418

Total comprehensive income 986

Statements of Financial Position as at 31 March

2017 2016

Assets GH¢’000 GH¢’000

Non-current assets:

Property, plant and equipment 11,250 10,500

Intangibles 500 452

11,750 10,952

Current assets:

Inventories 840 1,125

Trade and other receivables 260 210

Investments 38 18

Cash and cash equivalents 5 30

1,143 1,383

Total assets 12,893 12,335

Equity and Liabilities

Equity

Ordinary share capital 6,000 5,250

Share deals account 1,800 1,425

Revaluation surplus 750 356

Retained earnings 2,011 3,369

10,561 10,400



Non-current liabilities:

Preference share capital (redeemable) 760 600

Current liabilities:

Trade and other payables 222 210

Taxation 600 525

Ordinary dividend payable 750 600

1,572 1,335

Total equity and liabilities 12,893 12,335

Statement of Changes in Equity for the year ended 31 march 2017 (Extract) Retained

Earnings Revaluation

Surplus

GH¢’000 GH¢’000

Balance at 1 April 2016 3,369 356 Dividends declared (1,950)

Total comprehensive income for the year 568 418 Transfer from revaluation surplus to retained earnings 24 (24)

Balance as 31 March 2017 2011 750

The following additional information is relevant:

i) During the year Haruna Ltd issued both ordinary shares and redeemable preference shares for cash.

ii) Investments classified as current assets are held for the short term and are readily convertible into the

stated amounts of cash on demand.

iii) During the year, Haruna Ltd sold plant and equipment with a carrying amount of GH¢840,500 for

GH¢900,000. Total depreciation charges for the year amounted to GH¢1,100,000. Plant costing

GH¢50,000 was purchased on credit. The amount is included within trade and other payables.

iv) Trade and other payables include accrued interest of GH¢5,000 as at 31 March 2017 (2016:

GH¢10,000).

v) Intangibles relate to development costs capitalised in accordance with IAS 38 Intangible Assets. Costs

amounting to GH¢70,000 were capitalised during the year.

Required: Prepare a Statement of Cash Flows for Haruna Ltd for the year to 31 March 2017 in accordance with

IAS 7 Statement of Cash Flows. (20 marks)



2.2 MANAGEMENT ACCOUNTING

ASSIGNMENT SET 9

You are the Senior Accountant of CRYSTAL LIMITED

Purchase Wages Credit Sales

(GH) (GH)

November 2018 200,000 200,000 200,000

December 2018 250,000 200,000 300,000

January 2019 300,000 300,000 400,000

February 2019 450,000 200,000 600,000

March 2019 500,000 200,000 600,000

April 2019 600,000 250,000 650,000

May 2019 650,000 300,000 700,000

June 20169 660,000 350,000 720,000

Notes:

1. The bank balance on 31st December 2018 was overdrawn by GHc 130,000 balance was

GHc 30,000

2. Receipt for credit sales follow this pattern:

30% during the month of sale

30% during the following month

40% during the next following month

3. It is the policy of the firm to pay trade creditors as follows:

40% during the month of purchase

30% during the following month

30% during the next following month

4. Wages are paid in the month in which it is earned.

5. Operating expenses of GHc 50,000 are incurred and paid in the month of January 2019

and this is expected to increase by 10% every month.

6. Fixed costs of GHc 12,000 is paid every month starting the second half of the year.

7. A bad debt of GHc 20,000 which was written off in 2018 will be recovered in the last

month of the second quarter.



8. A second hand van which cost GHc 80,000 two years ago with a depreciation of GHc

20,000 is expected to be sold in April for GHc 30,000.

9. The company’s tax liability of GHc 100,000 for the year ended 2018 will be paid in

four equal monthly instalments in the new year starting in January.

10. Dividend for the year ended 2018 of GHc 60,000 is expected to be paid evenly

throughout the New Year.

11. A recapitalization exercise which began in 2018 is expected to yield GHC 120,000

every quarter of 2019 out of which GHc 400,000 will be used to improve the

information technology infrastructure of the company.

Required:

i.) Prepare a cash budget for the months of January to June 2019. 12 marks

ii).What will be your advice to management based on the outcome? 3 marks



2.3 AUDIT AND ASSURANCE

ASSIGNMENT SET 9

QS1 Explain the components of an internal control system

QS2 Discuss the need for internal control with a prospective client

Q3 Distinguish between substantive audit procedures and analytical audit procedures



2.4 FINANCIAL MANAGEMENT

ASSIGNMENT SET 9

QUESTION ONE

a. One of the key expectations of the Finance Manager is to ensure the success of the organisation.

Describe FOUR (4) key factors that are indicative of a successful organisation.

b. The quarterly report of the treasury unit of Buruwa Limited contains a paragraph on government

policy targets and progress towards achievement of the targets. The Technical Director has express

disagreement about the time spent in discussing these policies as wasteful because the policies have no

relevance to the business activities of the confectionery company.

Required:

As Head of Finance, you have been tasked to discuss SIX (6) points on government revenue

mobilisation policies to agree or disagree with the Technical Director’s position

c. Explain the following terms

i. Financial intermediation

ii. Financial disintermediation

d. Sankofa Ltd has a dividend cover of 4 times and recorded the following earnings after tax.

Required:

Calculate the average dividend growth rate for Sankofa Ltd



Question Two a. Describe FOUR (4) ways in which the investment appraisal approach of a Municipal Assembly will

differ from a mining company

b. God is King Ltd has been printing all its magazines from Dubai due to the comparative cost

advantage. The company is considering establishing its own printing department, and the R&D team

have identified a printing machine which will meet the quality and cost specifications of God is King

Ltd. The machine also has the capacity to print to meet the market needs of the company. The machine,

which has a useful life of 5 years, will cost GHS800,000 and immediate installation cost will be

GHS50,000. Fixed cost for maintaining the machine will be 170,000 per annum over the machines

useful life and additional working capital of 30,000 will be introduced in year 2. The use of this

machine will generate a contribution of GHS 500,000 per annum for five (5) years. Corporate income

tax rate, payable in areas, is 25% and the companies after tax cost of capital is 20%. No capital

allowance is permitted.

Required:

Calculate the NPV for the project and advise management on whether to accept or reject the project.



2.5. PUBLIC SECTOR ACCOUNTING

ASSIGNMENT SET 9

NO ASSIGNMENT



2.6 CORPORATE STRATEGY, ETHICS AND GOVERNANCE

ASSIGNMENT SET 9

NO ASSIGNMENT

3.1 CORPORATE REPORTING

ASSIGNMENT SET 9

NO ASSIGNMENT



3.2 ADVANCED AUDIT AND ASSURANCE

ASSIGNMENT SET 9

Read on Internal Audit II from the ICA manual and set 10 multiple questions.



3.3 ADVANCED FINANCIAL MANAGEMENT

ASSIGNMENT SET 9

Question One

a) Under conditions of inflation, it is common for interest rates to rise possibly at a rate different

from those applicable to goods and services.

Required:

i) Explain TWO possible reasons for this phenomenon.

ii) Discuss the implications of high or fluctuating interest rates for:

• Business financing; and

• Assets-holding decisions.

(Give examples of the types of actions that a company might take)

b) Your Uncle has won lotteries and has decided to invest the funds in various Securities. His

financial advisor advised him to invest 40% of the proceeds into Government Securities (Treasury

Bills) and the balance invested in the Stock Market, with funds spread equally among the Securities

listed on the market.

Required:

Advise your Uncle’s Portfolio risk (beta coefficient).

c) A company manufacturing specialized electronic equipment has so far sold only inside the

country where it is established. It has considerable surplus capacity and the Chairman has asked

you, as his Finance Director, to prepare a draft memorandum for the board on his proposal to open

up export business to a number of countries.

Required:

Draft this memorandum, setting out the main points that would need to be considered before

arriving at a final decision, under the following headings:

i) Export pricing and profitability;

ii) Credit terms and methods of obtaining payment;

iii) Risks and methods of avoiding them;

iv) Forms of representation or local organization in export markets.

(Where appropriate, indicate advantages, disadvantages or your own recommendations).



Question Two

a) The amount of dividends subsidiaries pay to the parent company depend on the parent

company’s dividend policies. Again, dividend repatriation represent significant flow for parent

companies and contribute to dividend payments.

Required:

Discuss FOUR factors that affect dividend repatriation policies of Multinational Companies.

b) DoGood Ltd is evaluating Phinex Ltd using the Free Cash Flow to the Firm (FCFF) and Free

Cash Flow to Equity (FCFE) valuation approaches.

DoGood Ltd has gathered the following information (in current Ghana Cedis terms):

• Phinex Ltd has net income of GH¢250 million, depreciation of GH¢90 million, capital

expenditures of GH¢170 million, and an increase in working capital of GH¢40 million.

• Phinex Ltd will finance 40% of the increase in net fixed assets (capital expenditures less

depreciation) and 40 % of the increase in working capital with debt financing.

• Interest expenses are GH¢150 million. The current market value of Phinex's outstanding

debt is GH¢1,800 million.

• FCFF is expected to grow at 6.0% indefinitely, and FCFE is expected to grow at 7.0%.

• The tax rate is 30%.

• Phinex Ltd is financed with 40 % debt and 60% equity. The before-tax cost of debt is 9%

and the before-tax cost of equity is 13%.

• Phinex Ltd has 10 million outstanding shares.

Required:

i) Using the FCFF valuation approach, estimate the total value of the firm, the total market value

of equity, and the value per share. (6 marks)

ii) Using the FCFE valuation approach, estimate the total market value of equity and the value per

share.



3.4 TAXATION AND FISCAL POLICY

ASSIGNMENT SET 9

a. Jack Ben Ltd is private limited liability company registered under the laws of Ghana. The

company’s total shares are held Jack Ben, his wife and 3 other close friends. Even though

the company has been making significant profit over the years no dividend has been

declared and paid to shareholders. Jack Ben, a major shareholder in a Board meeting

proposed that adding one more shareholder will help in achieving their tax planning

objective. You have been approached as a final level ICAG tax student to advise them on

the relevance of the number of shareholders in a limited liability company setting.

b. ABC Ltd is a resident company engaged in Agro processing. As part of efforts to

diversify its operations, it plans to acquire interest in XYZ Ltd, Real estate company

resident company. At the last AGM held on 15th March, some shareholders were of the

view that ABC Ltd should acquire 20% of the shares of XYZ ltd.

The managing director of ABC ltd was of the view that the company should rather invest

and acquire 25% shares to give it enormous influence in XYZ Ltd.

Your firm has been identified to give a professional advise on the two proposals to help

in decision making.

Required

What are the tax implication on the two proposals and which proposal will you advise

ABC Ltd to adopt to leverage on the tax benefits.

c. Rocus Ltd has the following summarized income statement relating to 2018 year of

assessment:

GH¢

Revenue 200,000

Cost of Sales 130,000

Gross Profit 70,000



Operating expenses 40,000

Net profit 15,000

Upon a closer scrutiny, the following came up:

i) Dividend net of withholding tax received from KB Ltd was GH¢10,000. The amount

received was added to revenue above. Bambara Ltd has 20% equity interest in KB Ltd.

ii) Bad debts of GH¢2,000 was recovered. This was adjusted to the Income Surplus

Account.

iii) A penalty of GH¢3,200 was paid and has been added to operating cost to determine

the net profit as disclosed.

iv) Capital allowance agreed with Ghana Revenue Authority was GH¢3,000.00 and

depreciation of GH¢2,500 was added to operating cost.

v) Taxes paid in previous quarters amounting to GH¢2,400 was added to operating cost

to determine the net profit.

vi) It came to light that an amount of GH¢24,800 net of 5% withholding tax relating to

supply of goods was not brought into the accounts at all on account of omission. The

withholding tax was certified correct.

Required:

Determine the tax payable by Rocus Ltd and comment

WEEKLY ASSIGNMENT WEEK 11 PRINT, WORK AND SUBMIT … · 2019-03-28 · Accumulated depreciation for...

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