Ias 1 and 1as 7 Review Questions

COVENANT FINANCIAL CONSULTANTS CPA (T) REVIEWS
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
QUESTION 1
The following trial balance has been extracted from the books of Zaga plc as at 31 st March 2010
$000 $000
Property (land $120,000+building $250,000) 370 -
Equipment, at cost 196 -
Vehicles, at cost 284 -
Goodwill, at cost 300 -
Accumulated depreciation at 1April 2009 - -
 Building - 90
 Equipment - 76
 Vehicles - 132
Inventory at 1 April 2009 107 -
Trade receivable and payables 183 117
Allowance for receivables - 8
Bank balance - 57
Corporation tax - 6
Ordinary shares of $1 each - 200
Retained earnings at 1April 2009 - 503
Sales - 1,432
Purchases 488 -
Directors’ fees 150 -
Wages and salaries 276 -
General distribution costs 101 -
General administrative expenses 186 -
Dividend paid 20 -
Rent received - 30
Disposal of vehicle - 10
2,661 2,661
The following information is also available:
1. The price of property has increased significantly in recent years and on 1 April 2009, the directors
decided to revalue the land and buildings. The directors accepted the report of an independent
surveyor who valued the land at $160,000 and the buildings at $240,000 on that date. This has not
yet been reflected in the accounts. Zaga does not make an annual transfer to retained profits to
reflect the realisation of the revaluation gain.
2. The company’s depreciation policy is as follows

 Building 4% p.a. straight line
 Equipment 40% p.a. reducing balance
 Vehicles 25% p.a. straight line
In all cases, a full year’s depreciation is charged in the year acquisition and no depreciation is
charged in the year of disposal. None of the assets had been fully depreciated by 31 st March
2009
On 1st February 2010, a vehicle used entirely for administrative purposes was sold for $10,000.
The proceeds were banked and credited to a disposal account but no entries were made in
relation to this disposal. The vehicle had cost $44,000 in August 2006. This was the only
disposal of a non-current asset made during the year to 31st March 2010
3. Depreciation is apportioned as follows

Cost of sales Distribution costs Administrative expenses
 Building 50% 30% 20%
 Equipment 30% 50% 20%
 Vehicles 40% 20% 40%
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4. The inventories at the close of business on 31st March 2010 costs $125,000. Included in this
figure are inventories that cost $10,000, but which can be sold for only $4,000.
5. Trade receivables include a debt of $8,000 which is to be written off. The allowance for
receivables is to be adjusted to 4% of the receivables which remain after this debt has been
written off.
6. Accrued wage and salaries were $2,000. One-quarter of wages and salaries were for distribution
staff and the remaining three-quarters were for administrative staff.
7. $3000 was Prepayment for general administrative expenses. Also General administrative
expenses include bank overdraft interest of $9,000
8. Corporation tax for the year to 31st March 2009 was over-estimated by $6,000. The corporation
tax liability for the year to 31st March 2010 is estimated to be $30,000
9. On 1st January 2010, the company made bonus issue of shares on the basis of four new for
every five already held. Bonus issue was funded from the retained earnings. On 1st February
2010 following the issue of the bonus shares, the company made a rights issue of one new share
for every three shares already held. The shares were offered at $1.25 per share and the shares
were taken up. This has not been entered into the books.
10. A dividend of 10 cents per ordinary share was paid on 31st December 2009. No further
dividends are proposed for the year to 31st March 2010
Required:
Prepare the statement of profit or loss and other comprehensive income, statement of changes in
equity and statement of financial position of Zaga plc for the year ended 31 March 2010 in
accordance with IAS 1 “Presentation of Financial Statements”.
QUESTION 2
The chief Accountant of Wintyapa Company has prepared the following list of account balances as at
December 31st 2012
Tshs
Ordinary Shares @ tshs. 500 fully paid 450,000,000
10% Debentures (secured) 200,000,000
Accumulated profits 1st January 2012 242,000,000
General reserves as at 1st January 2012 171,000,000
Land and Buildings at cost 1st January 2012 430,000,000
Plant and machinery at cost 1st January 2012 830,000,000
Accumulated depreciation 1st January 2012 –Buildings 20,000,000
Accumulated depreciation 1st January 2012 –Plant and Machinery 222,000,000
Inventories 1st January 2012 190,000,000
Sales 2,695,000,000
Purchases 2,152,000,000
Ordinary dividend 15,000,000
Debenture interest 10,000,000
Wages and salaries 254,000,000
Light and heat 31,000,000
Sundry expenses 113,000,000
Suspense account 135,000,000
Trade and other receivables 179,000,000
Trade and other payables 195,000,000
Cash 126,000,000
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Other information
i) Sundry expenses include tshs 9 million paid in respect of insurance for the year ended
September 1, 2013. Light and heat does not include an invoice of ths 3 million for
electricity for three months ended January 2, 2013 which was paid in February 2013.
Light and heat also include tsh 20 million relating to salesman commission.
ii) The Suspense Account is in respect of the following items;

Tshs
Proceeds from issue of 100,000 ordinary shares 120,000,000
Proceeds from the sale of plant 300,000,000
420,000,000
Less: consideration for acquisition of Mwami & co. (285,000,000)
135,000,000
iii) The assets of Mwami & Co. which was acquired on March 3, 2012 were valued as
follows;
Tshs
Investments 231,000,000
Inventories 34,000,000
265,000,000
Inventories acquired were sold during 2012. The investments were still held by
Wintyapa Company at December 31, 2012. Goodwill has not been impaired in value.
iv)Property was acquired some years ago. The cost of buildings was estimated at shs 100
million and the estimated useful life of the assets was 50 years at the time of purchase.
As at December 31, 2012 the property is to be valued at tshs 800 million.
v) The plant which was sold in (ii) above had cost of tshs. 350 million and had a net book
value of tshs 274 million as on January 1, 2012. Tshs 36 million depreciation is to be
charged on Plant and Machinery for the year ended December 31, 2012.
vi)The management wish to provide for,

1. Debenture interest due
2. Transfer to general reserve of tshs. 16 million
3. Audit fees of tshs 4 million
vii) Inventories at December 31, 2012 were valued at tshs. 220 million
viii) Taxation is to be ignored
REQUIRED
Prepare the following financial statements of Wintyapa as at 31st December 2012
a) The statement of comprehensive income
b) The statement of financial position
c) The statement of changes in equity
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QUESTION 3
The trial balance of Mingora Imports Limited at 31 December 2015 is as follows.
Rupees in million
Dr Cr
Patent rights 60
Work-in-progress, 1 January `2015 125
Leasehold buildings at cost 300
Ordinary share capital 600
Sales 1,740
Staff costs 260
Accumulated depreciation on buildings, 1 January 2015 60
Inventories of finished games, 1 January 2015 155
Consultancy fees 44
Directors’ salaries 360
Computers at cost 50
Accumulated depreciation on computers, 1 January 2015 20
Dividends paid 125
Cash 440
Receivables 420
Trade payables 92
Sundry expenses 294
Accumulated profits, 1 January 2015 121
–––––– ––––––
2,633 2,633
════ ════
The following information is also relevant.
(1) Closing inventories of finished games are valued at Rs. 180 million. Work in progress has
increased to Rs. 140 million.
(2) The patent rights relate to a computer program with a three year lifespan.
(3) On 1 January 2015 buildings were revalued to Rs. 360 million. This has not yet been
reflected in the accounts. Computers are depreciated over five years. Buildings are now to
be depreciated over 30 years.
(4) An allowance for bad debts (irrecoverable debts) of 5% is to be created.
(5) There is an estimated bill for current tax of Rs. 120 million which has not yet been
recognised.
Required
Prepare an statement of profit or loss (analysing expenses by nature for the year ended 31
December 2015 and a statement of financial position as at that date.
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IAS 7 STATEMENT OF CASH FLOWS
QUESTION 1
The statement of comprehensive income, statement of financial position and cash account for Lee ltd for the
year 2004 are given below.
Statement of comprehensive income for the year ending 31 st December 2004
$ $
Sales 6,500
Less: Cost of goods sold (3,000)
Gross profit 3,500
Add: Investment income: Interest received 50
3,550
Less: Expenses
Distribution costs 2,400
Administration expenses 600
Finance charge: Interest paid 100 3,100
Profit before tax 450
Income tax expenses 80
Profit for the year 370
Statement of financial position as at 31st December

2004 2003
$ $ $ $
ASSETS
NON-CURRENT ASSETS
Non-current assets at cost: tangible 4,140 3,800
Less: Accumulated depreciation 2,300 1,800
Net book value 1,840 2,000
Non-current asset investment 400
-
2,240 2,000
CURRENT ASSETS
Inventory 380 480
Account receivable 150 180
Prepaid administration expenses 20 40
Cash 680 100
1,230 800
3,470 2,800
EQUITY AND LIABILITIES
EQUITY
Ordinary share capital 1,400 1,000
Revaluation surplus 40 -
Retained profits 770 450
2,210 1,450
NON –CURRENT LIABILITIES
Debentures 900 1,000
CURRENT LIABILITIES
Trade creditors 325 300
Accrued distribution costs 10 35
Tax 25 15
360 350
3,470 2,800
Additional information
i. Equipment that had cost $200 and with a net book value of $100 was sold for $300. Depreciation and gain
or loss in disposal of noncurrent assets are included in distribution costs
Required: Prepare a cash flow statement for the year to 31 st December 2004. Use
a) The direct method
b) The indirect method
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QUESTION 2 (ACCA Adapted)
Tangier is a public listed company. Its summarised financial statements for the years ended 31 March 2012 and the
comparative figures are shown below.
Statements of comprehensive income for the year ended 31 March:
2012 2011
Revenue $m $m
2,700 1,820
Cost of sales (1,890) (1,092)
–––––– ––––––
Gross profit 810 728
Distribution costs (230) (130)
Administrative expenses (345) (200)
Finance costs (40) (5)
–––––– ––––––
Profit before tax 195 393
Income taxexpense (60) (113)
–––––– ––––––
Profitfor the year 135 280
Other comprehensive income 80 nil
–––––– ––––––
Total comprehensive income 215 280
–––––– ––––––
Statements of financial position as at 31 March:
2012 2011
$m $m $m $m
Assets
Non-current assets
Property, plant and equipment 680 410
Intangible asset: manufacturing licence 300 200
Investment at cost: shares in Raremetal 230 nil
–––––– ––––
1,210 610
Current assets
Inventory 200 110
Trade receivables 195 75
Bank nil 395 120 305
–––– –––––– –––– ––––
Total assets 1,605 915
–––––– ––––
Equity
Equity shares of $1 each 350 250
Reserves
Revaluation 80 nil
Retained earnings 375 295
–––––– ––––
805 545
Non-current liabilities
5% loan notes 100 100
10% secured loan notes 300 400 nil 100
–––– ––––
Current liabilities
Bank overdraft 110 nil
Trade payables 210 160
Current tax payable 80 400 110 270
–––– –––––– –––– ––––
Total equity and liabilities 1,605 915
–––––– ––––
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The following information is relevant:
Depreciation/amortisation charges for the year ended 31 March 2012 were:
$m
Property, plant and equipment 115
Intangible asset: manufacturing licence 25
There were no sales of non-current assets during the year, although property has been revalued.
Required:
Prepare the statement of cash flows for the year ended 31 March 2012 for Tangier in
accordance with the indirect method in accordance with IAS 7 Statement of cash flows.
QUESTION 3
The balance sheets and additional information relating to Pennylane Ltd are given
below. Prepare a cash flow statement for Pennylane Ltd for the year ended 31
December 2003
Pennylane Ltd
Balance Sheets as at 31 December
TAS. TAS.
000's 000's
2003 2002
Non-current assets:
Tangible assets 400 325
Intangible assets 230 180
Investments - 25
Total non-current assets 630 530
Current assets
Stocks 120 104
Debtors 400 295
Short-term investments (90 day deposit) 50
Cash in hand 10 4
580 403
Creditors: amount falling due in less than one year
Trade creditors 122 108
Bank overdraft 188 185
Taxation 120 110
430 403
Net current assets 150 -
Total assets less current liabilities 780 530
Creditors: amounts falling due after more than one year
Long-term loan (100)
Provisions for liabilities and charges: Deferred taxation (80) (60)
600 470
Capital and reserves
Share capital (TAS. 1 ordinary shares) 200 150
Share premium account 160 150
Revaluation reserve 100 90
Profit and loss account 140 80
600 470
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(a)During the year interest of £75,000 was paid, and interest of £25,000 was received.
(b)The following information relates to tangible fixed assets:
31.12.2003 31.12.2002
TAS. 000's TAS. 000's
Cost 740 615
Accumulated depreciation (340) (290)
Net book value 400 325
(d) The proceeds of the sale of fixed asset investments were £30,000.
(e) Plant, with an original cost of £90,000 and a net book value of £50,000, was sold
for £37,000.
(f) Tax paid to the Inland Revenue during 2003 amounted to £110,000.
(f ) Dividends of £80,000 were paid during 2003
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QUESTION 4
The statement of financial position and statement of profit or loss for Klea for the year to
31st March 2015 are provided below.
Statement of financial position as at 31st March 2015
2015 2014
Rs. in ‘000
Assets
Non-current assets
Intangible assets 300 200
Property, plant and equipment 3,450 1,600
Financial assets 400 200
–––––– ––––––
4,150 2,000
–––––– ––––––
Current assets
Inventory 3,200 2,000
Trade receivables 2,400 2,000
Cash and cash equivalents 32 580
–––––– ––––––
5,632 4,580
–––––– ––––––
Total assets 9,782 6,580
–––––– ––––––
Equity and liabilities
Equity
Issued share capital 3,000 2,000
Share premium account 838 560
Retained earnings 910 354
–––––– ––––––
Total equity 4,748 2,914
–––––– ––––––
Revaluation surplus 1,000 -
Non-current liabilities
Interest-bearing loans and liabilities 1,600 2,000
Current liabilities
Bank overdraft 414 -
Trade payables 1,600 1,266
Taxation 420 400
–––––– ––––––
2,434 1,666
–––––– ––––––
Total liabilities 4,034 3,666
–––––– ––––––
Total equity and liabilities 9,782 6,580
════ ════
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Statement of profit or loss for the year ended 31st March 2015
Rs. in ‘000
Revenue 10,000
Other income 100
Change in inventory of finished goods and WIP 1,300
Raw materials and consumables used 4,000
Employee benefits costs 3,000
Depreciation and amortisation expense 800
Other expenses 1,724
––––––
Total expenses (9,524)
–––––
1,876
Finance costs (320)
Finance income 50
–––––
Profit before tax 1,606
Income tax expense (650)
–––––
Profit for the year 956
════
(i) Non-current assets Rs. in ‘000
2015 2014
Cost Deprec’n Cost Deprec’n
Intangible assets 700 400 400 200
Property, plant and equipment 5,000 1,550 3,000 1,400
(ii) At 1 April 2014 land was revalued from Rs. 1million to Rs. 2 million.
(iii) During the year, plant and machinery costing Rs. 600,000 and depreciated by
Rs. 500,000 was sold for Rs. 150,000.
(iv) The interest bearing loans relate to debentures which were issued at their
nominal value. Rs. 400,000 of these debentures were redeemed at par during
the year.
(v) Ordinary shares were issued for cash during the year.
(vi) Rs. 100,000 of current asset investments held as cash equivalents were sold
during the year for Rs. 94,000.
(vii) Dividends paid in the year were Rs. 200,000 relating to the 2014 proposed
dividend and a Rs. 200,000 interim dividend for 2015.
Required
Prepare a statement of cash flows for Klea for the year ended 31 March 2015 in accordance
with IAS 7 using the indirect method
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COVENANT FINANCIAL CONSULTANTS CPA (T) REVIEWS

IAS 1 PRESENTATION OF FINANCIAL STATEMENTS

2. The company’s depreciation policy is as follows

3. Depreciation is apportioned as follows

ii) The Suspense Account is in respect of the following items;

vi)The management wish to provide for,

Statement of financial position as at 31st December

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