Question 1

The summarized accounts of Dundee for the year ended 31 March 2013 are as follows:

Statements of financial position at 31 March

2013 2012

$m $m

Non-current assets

Property, plant and equipment 4 200 3 700

Current assets

Inventories 1 500
1 600
Trade receivables 2 200
1 800
3 700 3 400
7 900 7 100

Equity

Share capital 1 200 1 200

Retained earnings 2 200 1 900
3 400 3 100

Non-current liabilities

Deferred tax 1 070 850

Finance lease liabilities 1 300 1 200

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 2 370 2 050

Current Liabilities

Trade payables 1 250 1 090

Current tax 225 205

Finance lease liabilities 500 450

Bank overdraft 155 205

2 130 1 950

Statement of profit or loss for the year ended 31 March 2013

$m

Revenue 4 300

Cost of sales (2 000)

Gross profit 2 300

Operating expenses (1 000)

Finance costs (250)

Profit before tax 1 050

Income tax expense (450)

PROFIT FOR THE YEAR 600)

Dividends paid in the year 300

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Notes

1) Depreciation charged for the year totaled $970 million. There were no disposals of
property, plant and equipment in the period.
2) There was no accrual of interest at the beginning or at the end of the year.
3) Dundee finances a number (but not all) of its property, plant and equipment purchases
using finance leases. In the period, property, plant and equipment which would have cost
$600 million to purchase outright was acquired under finance leases.

Required:

Prepare the statement of cash flows for Dundee for the year ended 31 March 2013 as per IAS
using the Indirect Method.

QUESTION 2

The following draft financial statements relates to V Ltd.

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2013
$000 $000
Sales 495
Raw materials used (49)
Staff costs (37)
Depreciation (74)
Loss on disposal (4) (164)
Operating profit before interest and tax 331
Interest expense (23)
Profit before tax 308
Taxation (87)
Profit after tax 221
Dividend (52)
Profit retained for the year 169

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Balance b/fwd 389
Bal c/fwd 558

Statements of financial position as at:

31 December 2013 31 December 2012
$000 $000 $000 $000
Non-current asset (see below) 1145 957
Current assets:
Inventory 19 16
Trade receivables 38 29
Bank 31 88 37 82
Total Assets 1,233 1,039

Share Capital and Reserves:

Ordinary shares 182 152
Share premium 141 80
Revaluation reserve 170 -
Retained 558 389
1,051 621

Non-current Liabilities:
Long term loans 70 320
Current Liabilities:
Trade payables 12 17
Taxation 79 66
Dividends declared 21 112 15 98

Total equity, reserves and liabilities 1233 1039

Schedule of non-current assets:

Land and buildings Machinery Fixtures and Total

$000 $000 fittings $000 $000

Non-current assets:

Cost/valuation: at 31/12/2010 830 470 197 1497

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Additions - 43 55 98

Disposals - (18) - (18)

Adjustment on revaluation 70 - - 70

At 31 December 2011 900 495 252 1,647

Accumulated Depreciation:

At 31/12/2010 (90) (270) (180) (540)

Charge for the year (10) (56) (8) (74)

Disposals - 12 - 12

Adjustment on revaluation 100 - - 100

At 31 December 2011 0 (314) (188) 502)

Carrying amount:

At 31/12/2011 900 181 64 1,145

At 31/12/2010 740 200 17 957

Required:

Prepare a statement of cash flows for V Ltd for the year ended 31 December 2013 using the indirect
method. (25 marks)

QUESTION 3

The financial statements of Chinotimba Ltd for the year ended 30 June 2014 are given to you for perusal.

Chinotimba Ltd

Statement of Profit or Loss and other Comprehensive Income for the year ended 30 June 2014:

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Revenue 27,288,500

Cost of Sales (13,564,000)

Gross profit 13,724,500

Distribution costs (4,573,000)

Administrative costs (2,883,000)

Profit from operations 6,268,500

Other income: profit on disposal of non-current assets 903,000

Interest received 50,500

Finance cost (874,500)

Profit before tax 6,347,500

Taxation (1,285,000

Profit for the period 5,062,500

=======

Chinotimba Ltd

Statement of Financial Position as at 30 June 2014:

2014 2013

$ $

ASSETS

Non-Current

Carrying amount (see additional note 2) 51,087,000 49,312,000

Current: 21,358,500 24,423,000

Inventory 13,175,000 14,682,000

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Trade receivables 6,706,000 8,223,000

Cash and Cash equivalents 1,477,500 1,518,000

Total assets 72,445,500 73,735,000

======== ========

EQUITY AND LIABILITIES:

Capital and Reserves: 53,301,000 45,633,000

Ordinary share capital 11,788,000 10,541,000

Share premium 5,990,000 5,122,500

Other components of equity 6,277,000 3,937,500

Retained earnings 29,246,000 26,032,000

Non-Current Liabilities:

7% Debentures 2,871,500 11,316,000

Current Liabilities: 16,273,000 16,786,000

Bank Overdraft 3,456,000 3,921,000

Trade Payables 11,767,000 11,902,000

Taxation 1,050,000 963,000

Total equity and Liabilities 72,445,500 73,735,000

======== =========

Additional information:

1. During the year dividends paid amounted to $1,848,500.

2. Carrying amounts are found from the following figures:

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 2014 2013

$ $

Cost of non-current assets 66,576,000 62,126,000

Accumulated depreciation (15,489,000) (12,814,000)

51,087,000 49,312,000

3. There was no outstanding amount in respect of interest payable/receivable as at either year end
or beginning of the year.
4. Operating profit is shown after charging depreciation of $3,392,000.
5. During the year, the company sold equipment for $2,833,500, realising a profit of $903,000. No
other disposal of non-current assets occurred.
6. The only revaluation of non-current assets was that of a piece of freehold land.

Required:

(a) Prepare a Statement of Cash Flows for Chinotimba Ltd for the year ended 30 June 2012 in
accordance with IAS 7 using the indirect method. (18 marks)

(b) Comment on the financial performance of Chinotimba Ltd as shown by the statement of cash
flow you have prepared. (5 marks)

(c) Provide any two reasons why Statements of Cash flows are sometimes considered more useful
than the Statement of Profit OR Loss and Other Comprehensive income report.

(2 marks)

[Total : 25 marks]

Question 4

The following balances were obtained from the financial records of ABC Ltd as at 30 April:

ABC Ltd 2014 2013

$ $

Land and buildings at valuation 1 400 000 1 100 000

Plant at cost 1 200 000 800 000

Furniture at cost 680 000 450 000

Inventories 86 000 44 000

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Investment at cost 56 000 36 000

Trade and other receivables 145 000 88 000

Bank ___-___ 46 000

3 567 000 2 564 000

Credits

Share capital 1 000 000 800 000

Retained earnings 630 000 460 000

Long term loan (interest free) 850 000 600 000

Trade and other payables 93 000 70 000

Bank overdraft 224 000 -

Zimra services 230 000 144 000

Dividends for shareholders 200 000 240 000

Revaluation surplus 200 000 150 000

Accumulated depreciation – Plant 56 000 34 000

- Furniture 84 000 66 000

3 567 000 2 564 000

Additional information:

1. On 28 December 2013 land and buildings, that appeared in the company’s records at a
value of $400 000, were sold for $460 000. Land and buildings to the value of $650 000
were acquired to expand operations.
2. No furniture was sold or scrapped during the current year. All new purchases were to
expand operations.
3. Income from investments amounted to $4 500 for the year ended 30 April 2014.
4. The income tax expense for the current year is $89 000.

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 5. Sales for the current year amounted to $1 320 000 and profit before tax was $319 000.
6. On 1 March 2009, the company issued 50 000 ordinary shares at par of $4.
7.
8. On 30 September 2013, an interim dividend of $20 000 was paid and on 30 April 2014 a
final dividend of $40 000 was declared.
9. Some of the plant with a cost of $320 000 was sold during June 2008 (when the carrying
amount was $300 000) at a loss of $12 000. New plant was acquired on the same day.
Four hundred and twenty thousand dollars ($420 000) of the plant was purchased to
expand operations.
10. Depreciation on plant and furniture for the year ended 30 April 2014 amounted to $60
000.
11. Assume cost of all other assets and liabilities equal to their fair value.

Required:

Prepare a statement of cashflows of ABC Ltd for the year ended 30 April 2014 using the indirect
method.

Question 5

The following balances appeared in the books of G Ltd for the financial year ended 30 June:

2014 2013

$ $

Property, plant and Equipment 4 175 000 2 500 000

Investments 700 000 550 000

Inventory 50 000 63 000

Trade and other receivables 300 000 250 000

Prepaid expenses 8 000 10 000

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Dividends receivable 15 000 -

Cash and cash equivalents - 85 000

Cost of sales 700 000 480 000

Administrative expenses 175 000 120 000

Distribution expenses 100 000 95 000

Other expenses (including depreciation) 450 000 85 000

Finance cost 20 000 20 000

Income tax expense 166 000 133 000

Dividends declared and paid 250 000 50 000

7 109 000 4 441 000

Ordinary share capital $1 each 2 500 000 1 500 000

Share premium 380 000 400 000

Surplus on revaluation of land 150 000 100 000

Retained earnings beginning of year 405 000 143 000

10% long term loan 180 000 200 000

Deferred tax 8 000 8 000

Accumulated depreciation (PPE) 803 000 700 000

Short term portion of long term loan 20 000 -

Tax payable 65 000 60 000

Dividends payable 125 000 50 000

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Trade and other payables 200 000 35 000

Accrued interest on long term loan 5 000 -

Bank overdraft 428 000 -

Sales (credit) 1 750 000 1 200 000

Profit on sale of equipment 15 000 -

Income from investments – dividends 75 000 45 000

7 109 000 4 441 000

Additional information:

1. On 1 May 2014, the company issued capitalization shares at par to the ordinary
shareholders in the ratio of 1 share for every 5 shares held. The share premium account
was utilized for this purpose.
2. On 1 June 2014, ordinary share were issued to the public at a premium of 40%.

3. During the financial year, the following changes took place in non-current assets:

Total Land Buildings Equipment

$ $ $ $

Carrying amount beginning of year 1 800 000 800 000 1 500 000 850 000

Cost 2 500 000 800 000 200 000 1 500 000

Accumulated depreciation (700 000) - 50 000 650 000

Purchase at cost 2 125 000 - - 2 125 000

Disposal at carrying amount (200 000) - - (200 000)

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Revaluation during the year 50 000 50 000 - -

Depreciation for the year (403 000) - (3 000) (400 000)

_________________________________________________

Carrying amount end of year 3 372 000 850 000 147 000 2 375 000

Cost / Valuation 4 175 000 850 000 200 000 3 125 000
(803 000) - (53 000) (750 000)

____________________________________________________

One million dollars ($1 000000) of the purchases of plant and equipment represent replacements
of equipment disposed of.

4. The long term loan was incurred on 1 January 2008 and the capital portion is repayable
in ten equal annual installments starting on 31 July 2014.

5. New investments were purchased during the year.

Required:

Prepare a statement of cash flow of G Limited for the year ending 30 June 2014.

QUESTION 6

The following trial balance relates to Q Limited as at 30 September 2017:

$000 $000

Revenue (note i) 213 500

Cost of sales 136 800

Distribution Costs 17 500

Administrative Expenses (note ii) 19 000

Loan note interest paid (note ii) 1 500

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Investment income 400

Equity shares of 25 cents each 60 000

60% Loan note (note ii) 25 000

Retained earnings 1 October 2016 4 300

Land and Buildings at Cost (land element $10 million 50 000

(note iii)

Plant and Equipment at Cost (note iii) 83 700

Accumulated depreciation at 1 October 2016:

Buildings 8 000

Plant and Equipment 33 700

Equity financial asset investments (note iv) 17 000

Inventory at 30 September 2017 24 800

Trade receivable 28 500

Bank 2 900

Current Tax (note v) 1 100

Deferred Tax (note v) 1 200

Trade payables 36 700

382 800 382 800

Additional Information:

i) On 1 October 2016 Q Limited sold one of its products for $10 million (included in revenue in
the Trial Balance). As part of the sale agreement, Q Limited is committed to the on-going
servicing of this product until 30 September 2019 that is 3 years from the date of sale.

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 The value of this service has been included in the selling price of $10 million. The estimated
cost to Q Limited of the servicing is $600 000 per annum and Q Limited’s normal gross profit
margin on this type of servicing is 25%. Ignore discounting.

ii) Q Limited issued a $25 million, 6% loan on 1 October 2016. Issue cost were 1 million and
these have been charged to administrative expenses. Interest is paid annually on 30
September each year. The loan will be redeemed on 30 September 2019 at a premium
which gives an effective interest rate on the loan of 8%.

iii) Non – Current Assets

Q Limited had been carrying land and buildings at depreciated cost but due to a recent in
property prices, it decided to revalue its property on 1 October 2016 to market value. An
independent valuer confirmed the value of the property at $60 million (land element $12
million) as at that date and the Directors accepted this valuation.

The property had a remaining life of 16 years at the date of its revaluation. Q Limited will
make a transfer from the revaluation reserve to retained earnings in respect of the
realization of the revaluation. Ignore deferred tax on the revaluation.

On 1 October 2016, Q Limited had a processing plant installed at a cost of $10 million which
is included in the trial balance of plant and equipment at cost. The process the plant
performs will cause immediate contamination of the nearby land. Q Limited will have to
decontaminate (clean up) this land at the end of the plant’s 10 year life (straight line
depreciation). The present value (discounted at a cost of capital of 10% per annum) of the
decontamination is $6 million. Q Limited had not made any accounting entries in respect of
this cost.

All other plant and equipment are depreciated at 12 ½ per annum using the reducing
balance method. No depreciation has yet been charged on any non – current asset for the
year ended 30 September 2017. All depreciation is charged to cost of sales. Other than
referred to above, there were no acquisitions or disposals of non- current assets.

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 iv) The investments had a fair value of $15.7 million as at 30 September 2017. There were no
acquisitions or disposals of these investments during the year ended 30 September 2017.

v) The balance on the current on the current tax represents the under/over provision of the
tax liability for the year ended 30 September 2016. A provision for income tax for the year
ended 30 September 2017 of $7.4 million is required. At 30 September 2017 Q Limited had
taxable temporary differences of $5 million requiring a provision for deferred tax. Any
deferred tax adjustment should be reported in the profit or loss. The income tax rate of Q
Limited is 20%

REQUIRED:

a) Prepare the statement of Profit or Loss and other comprehensive income for Q Limited for
the year ended 30 September 2017. (12 marks)

b) Prepare the statement of changes in equity for Q Limited for the year ended 30 September
2017. (3 marks)

c) Prepare the statement of financial position of Q Limited as at 30 September 2017.

(12 marks)
d) Calculate the increase in the carrying amount of property, plant and equipment during the
year ended 30 September 2017 from the perspective of:

i) The change between the opening and closing statement of financial position.
(1 mark)
ii) The statement of cash flows. (1 mark)

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iii) Comment on which perspective may be more useful to users of Q Limited’s financial
statement. ( 1 mark)
[Total: 30 marks]

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