1 A) Adom Ltd, is a private company in Ghana operating in the manufacturing sector. Below is a Statement of financial position and a summarized statement of income with comparatives for the year ended 31 December 2019. Statement of Financial Position as at 31 December 2019: 2019 2018 Non-Current Assets CU 250,000 Property, Plant & Equipment Research & Development CU. 200,000 40.000 240.000 250,000 Current Assets Available For Sale Investments Inventory Trade Receivables Cash and Cash equivalents 12.000 70,000 30,000 18,000 130,000 370.000 20,000 45,000 23,000 17.000 105,000 355,000 Equity Equity Share Capital(GH1 per Share) 10%PreferenceShareCapital Retained Earnings 150,000 50,000 60,000 260,000 100,000 50,000 55.000 205,000 Non-Current Liabilities 10% Loan Note 12% Debenture 50,000 5,000 55,000 90,000 3,000 93.000 Current Liabilities Trade & Other Payables Bank Overdraft 30,000 25,000 55,000 370,000 20,000 37.000 57.000 355,000 1 Statement of Financial Position as at 31 December 2019 2019 GH Sales 365.000 Cost of Sales (219.000) Gross profit 146,000 Operating expenses (55.000 Operating profit 91,000 Income Tax Expense (17,000) Finance Cost (9.000) Profit for the period 65,000 2018 GH 219,000 (156,000) 63,000 (4.000) 59,000 (8,000) (6,000) 45,000 Additional Information Industry Ratios Current Ratio: Acid test ratio: Debt to Equity Ratio: Gross Profit Margin: Net Profit Margin: Return on Capital Employed: 2.0 times 1.0 time 50% 32% 20% 22% Required: A) Prepare a report and address it to the Chief Executive Officer, analysing the financial performance and financial position of Adom Ltd based on the industry ratios above for the years 2018 and 2019. B) IAS 23 "Borrowing Costs" regulates the extent to which entities are allowed to capitalize borrowing costs incurred on money borrowed to finance the acquisition of certain assets. Required: State two (2) conditions to be met for: i) Capitalization of borrowing costs to commence ii) Capitalization of borrowing costs to cease. 5 QUESTION 2 The following is the trial balance of Akwaaba Limited, a trading company, as at 31 December, 2016: Debit GH'000 Credit GH&'000 14,500 2,500 3,000 800 1,500 3,600 8,540 5,600 68,865 500,000 Ordinary shares 8% Loan notes (2012 - 2017) 10% Preference shares (redeemable) Revaluation surplus General reserve Retained earnings - 1/1/2016 Administration expenses Selling & distribution expenses Sales Inventory - 31/12/2016 Cost of sales Loan Note interest paid Investment income Leasehold building at valuation-1/1/2016 Plant and equipment-cost/depreciation Computer equipment-cost/depreciation Motor vehicles - cost/depreciation Investment property Trade receivables Bank Trade payables Deferred tax - 1/1/2016 3,150 35,500 195 360 14,000 13,750 7,200 1,500 8,700 9,200 3,200 2,000 400 910 3,400 2,300 107,335 107,335 Additional information: i) Non-current assets: Depreciation of Property, plant and equipment is to be provided on the following bases: Plant and equipment 10%on cost Computer equipment 25%on cost Motor vehicles 20%on reducing balance Nodepreciation hasyetbeenchargedonanynon-currentassetfortheyearended31s December, 2016. . Akwaaba revalue its buildings at the end of each accounting year. At 31" December, 2016 the relevant value to be incorporated into the financial statements is GH 28,200,000 The building's remaining life at the beginning of the current year (1''January 2016) was 25 years. Akwaaba does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation surplus. Ignore deferred tax on the revaluation surplus. The company paid ordinary dividends of GH4.8 per share 30 October, 2016. The dividend payments are included in administrative expenses in the trial balance. On 4th November, 2016 the company made a bonus issue from retained earnings of one new share for every four shares in issue at GH10.00 each. This transaction is yet to be recorded in the books. Provision is to be made for a full year's interest on the Loan notes, 111) iv) vi) The investment property held at 31 December, 2016 had a fair value of GH9,700,000. There were no acquisitions or disposals of these investments during the year. In June, 2016, Akwaaba's internal audit unit discovered a fraud committed by the company's credit manager who did not return from a foreign business trip. The outcome of the fraud is that GH1,000,000 of the company's trade receivables have been stolen by the credit manager and are not recoverable. Of this amount, GH400,000 relates to the year ended 31 December, 2015 and the remainder to the current year. Akwaaba is not insured against this fraud. CorporateincometaxpayableestimatedontheprofitfortheyearisGH7,000,000. vii) Required: Prepare the following financial statements of Akwaaba Limited for publication in accordance with International Financial Reporting Standards (IFRS): a) Statement of comprehensive income for the year ended 31" December, 2016; b) Statement of changes in equity for the year ended 31st December, 2016; and c) Statement of financial position as at 31" December, 2016 (Note: Accounting policy notes are not required)