GHANA TECHNOLOGY UNIVERSTIY COLLEGE

(FACULTY OF I.T BUSINESS)

ALL CAMPUSES

MID-SEMESTER TAKE-HOME EXAMINATION

SEPTEMBER, 2021

BACHELOR OF BUSINESS ADMINISTRATION

LEVEL 200 & 400

FINANCIAL ACCOUNTING II

DATE OF SUBMISSION: 7TH SEPTEMBER, 2021

Answer all questions.

Requirement for the Take-Home Examinations
•The above examination should be done in accordance with all the rule and regulations
governing examinations as detailed in the GTUC student’s handbook
•Use Times New Roman as font style in size 12 of 2.0 spacing
•The cover page of the soft copy should have the name of student with his/her respective student
index number.
•The exams should be submitted in portable document format (PDF).

1
QUESTION 1

Asetrapa Ltd is a listed company reporting under IFRS. During the year ended 31 December,
2012, the company changed its accounting policy with respect to property valuation. There are
also a number of other issues that need to be finalized before the financial statement can be
published.
Asetrapa Ltd’s trial balance from the general ledger at 31st December, 2012 showed the
following balances:

GH¢'000 GH¢'000
Revenue 2,648
Loan note interest paid 3
Purchases 1,669
Distribution cost 514
Administrative expenses 345
Interim dividend paid 6
Inventories at 1st January, 2012 444
Trade receivable 545
Trade payable 434
Cash and cash equivalent 28
Stated capital (ordinary shares issued at 50p) 100
Capital surplus 314
Retained earnings at 1st January, 2012 849
4% loan note repayable 2018 (issued 2010) 150
Land and buildings: cost (including GHC120m land, 380
 Accumulated depreciation at 1st January, 2012 64
Plant and equipment: cost, 258
 Accumulated depreciation at 1st January, 2012 126
Investment property at 1st January, 2012 548
Rental income 48
Proceeds from sale of equipment 7
4,740 4,740

Further information to be taken into account:

(a) Closing inventories were counted and amounted to GHC388m at cost. However, shortly after
the year end out-of-date inventories with a cost of GHC15m were sold for GHC8m.
(b) The company decided to change its accounting policy with respect to its 10 year old land and
buildings from the cost model to the revaluation model. The revaluation amounts at 1st January,
2012 were GHC800m (including GHC100m for the land). No further revaluation was necessary
at 31st December, 2012. The company wishes to treat the revaluation surplus as being realized
over the life of the assets.

(c) Due to a change in the company’s product portfolio plans, an item of plant with a carrying
value GHC22m at 31st December, 2011 (after adjusting for depreciation for the year) may be
impaired due to change in use. An impairment test conducted at 31st December, 2012, revealed

2
its fair value less costs to sell to be GHC16m. The asset is now expected to generate an annual
net income stream of GHC3.8m for the next 5 years at which point the asset would be disposed
for GHC4.2m. An appropriate discount rate is 8%. 5 year discount factors at 8% are:
Simple Cumulative
0.677 3.993

(d) The income tax liability for the year is estimated at GHC27m. lgnore deferred tax.

(e) An interim dividend of 3p per share was paid on 30th June, 2012. A final dividend of 1.5p per
share was declared by the directors on 28th January, 2013.

(f) During the year, Asetrapa Co. disposed of some malfunctioning equipment for GHC7m. The
equipment had cost GHC15m and had accumulated depreciation brought forward at 1st January
2012 of GHC3m. There were no other additions or disposal to property, plant and equipment in
the year.

(g) The company treats depreciation on plant and equipment as a cost of sale and on land and
buildings as an administration cost. Depreciation rates as per the company’s accounting policy
notes are as follows:
Buildings Straight line over 50 years
Plant and equipment 20% reducing balance

Asetrapa Ltd’s accounting policy is to charge a full years depreciation in the year of an asset’s
purchase and none in the year of disposal.

(h) On 1st July 2012, Asetrapa Ltd made a bonus issue of 1 share for every 4 held capitalizing its
retained earnings. This transaction has not yet been accounted for. The fair value of the
company’s shares on the date of the bonus issue was GHC7.50 each.

(i) Asetrapa Ltd uses the fair value model of IAS 40. The fair value of the investment property at
31st December, 2012 was GHC586m.

Required:

(a) Prepare Statement of profit or loss and other comprehensive income for the year ended 31st
December 2012;

(b) Prepare Statement of changes in equity for the year ended 31st December 2012

(c) Prepare Statement of financial position as at 31st December 2012

(Work to nearest 1 million Ghana Cedis)

[Total: 25 marks]

3
QUESTION 2

Pramso Ltd has a product line producing processed cocoa beans for export. The carrying amount
of the net assets employed on the line as at 31 December 2012 was GH₵572,000. There is an
indication that the export market would be adversely affected in 2015 by competition from
producers of synthetic cocoa. The Finance Director estimates the net realizable value of the net
assets as at 31/12/2012 to be only GH₵350,000.
The board of directors has approved a budget for the years ended 31/12/2013, 31/12/2014 and
31/12/2015.
The assumptions underlying the budgets are:
Unit costs and revenue GH₵
Selling price 50
Buy in cost (20)
Production cost:
 Materials, Labour & Overhead (3.75)
 Head office Overhead apportioned (1.25)
Cash inflow per unit 25.00

2012 2013 2014 2015

Estimated sales volume at 31/12/2012 - 8000 11000 4000

The rate obtained elsewhere for companies in the same industry with similar size and risk profile
(equivalent to discount factor) is 10% per annum.

Required: Calculate the impairment loss if any for 31/12/2012.

[Total: 5 marks]