KKT Ltd, a manufacturing Company, has extracted the following balances on 31 De Dr '000 Cm 000 75 Stated Capital Income surplus Share Deals Capital Surplus Bond Pre-operating Expenses 44,000 Development cost 80,000 Bank and Cash 50,000 Trade Debtors Trade creditors Taxation 1/1/09 Sale of plant 124,000 2 Stock 1/1/09 -W.I.P. 250,000 -Finished Goods 220,000 -Raw Materials 230,000 Turnover Rent received-storage space Purchases of raw materials Wages and salaries Pension costs- SSF 1,8 906,000 180,000 10,000 Rent & Rate Insurance 60,000 18,000 Power, heart and light 120,000 General expenses 52,000 Audit fees and expenses 10,000 Interest received on fixed deposit 16,000 Interest paid on bank overdraft 12,000 Advertising Directors' fees Traded-in furniture Rental paid to Patapa Lid Rental income received from Mamapa Enterprise 10,000 20,400 26,000 9,600 5,200 Non-current assets at cost and depr1/1/09 - Capital WIP 180,000 Building (factory) 202,000 50,000 Plant and Mach. 360,000 100,000 Office Furniture 80,000 40,000 Corporate tax paid 20,000 Deferred Tax as at 1 January 2,000 200,000 36,000 Notes: c'm Raw Materials Work in progress Finished goods 284 230 248 Payments to Contractor: plant installation Grants received government a. Closing stocks were as follows: b. Buildings, plant& machinery & furniture were depreciated at 2%, 10%, &15% per annum respectively on cost. During the year 100m cedis value of capital work in progress were completed and were transfer to buildings. A plant initially costing $24 million and accumulated depreciation of 11m and revalued on 10th February, 2008 at 20 million, was sold for $32m on 2nd March 2009 During the year an old furniture with initial cost of 20m and net book value of com and saleable value of e10 million was traded in exchange for a new furniture costing 36m. The difference of 26 million has been paid. A new building property for office was leased from Patapa Ltd on 2nd January 2009 under finance lease agreement with following terms: fair value at Ghe80 million, ten annual rentals of Ghe9.6 million payable on 31" December. Use sum of years' digit method. On 15th January 2009 KKT Ltd leased out one of the factory buildings with cost of Ghe30 million and accumulated depreciation of Gh5 million to Mamapa Enterprise under a ten year finance lease agreement with the following terms: the fair value was Ghe40 million annual rentals of Ghe5.2 million receivable by 31" December c. Expenses were apportioned as follows; Wages and salaries Rates, rates and insurance Factory 70 60 90 60 Administration % 30 40 10 40 Power, heat and light General expenses d. The company is registered with 2,000,000 ordinary shares of no par value and 1,000,000 have been issued and fully paid for cash. On 1 January 2009 there were 100,000 ordinary shares previously acquired. During the year 50,000 shares were acquired at total costs of GHC 20 million and took place before the closure of register of members. In December 2009 the company made a bonus share issue of one share for every ten shares held that qualify for dividend at consideration of GHC 150 million. 88 e. The pre-operating expenses of $44m were incurred from October to December 2002 when the company was set up. Directors have resolved that it should have been amortised over 10 years after set up. f. Corporate tax provision for the year ended 31/12/09 was 60m. The company provided for a similar tax of $36m in the previous year but the tax authorities arrived at 26m. g.. It acquired an administration block with an estimated useful life of 50 years at a cost of GHC22 million for the past five and half years until 30 June 2009, when it moved its office to a new building at the factory site. The building was reclassified as an investment property and \ leased out under a 4 year lease and annual rental of GHC1.2 million. The fair value of the building at 30 June 2009 was GHC24 million when the company left it to the site. As at 31 December 2009 the fair value was GHC25.8 million. All these had not reflected in the books. h. The carrying value of the net assets of the company was higher than the Tax Bases of the net assets by GHC 60 million. i. ABC ltd issued a Bond for GHC47.63 million on 1 January 2009 and will be redeemed on 31 December 2011 for GHC60 million; resulting an effective interest rate of 8% per annum. j. The Company started installation of a new plant costing GHC 200 million in 1 January 2009. The project was financed by and overdraft facility of GHC150 million at an interest of 20% perannum. The installation was completed on 31 August 2009 and commissioned on 30th November 2009. Payments to the contractor were scheduled as follows; 1 January 2009 31 July 2009 GHC 150 million GHC 50 million 1. On 31 march 2009 the company received a government grant of GHC 36 million to acquire a specialized plant costing GHC 80 million. The estimated useful life is 10 years. k. The company has undertaken a research to develop a new product at a cost of GHC 80 million as directors were confident that the project will be successful. Development of the product started on 1 July 2009. It is the policy of directors to amortise the cost over 10 years. Required: prepare in accordance with the Companies Code, Act 179 for publication: 1. Income Statement (profit and loss account) for the year ended 31/12/09 2. Statement of Financial Position as at the year end 3. notes ASSIGNMENT QUESTION KKT Ltd, a manufacturing Company, has extracted the following balances on 31 December, 2009. Dr '000 Cr '000 Stated Capital 750,000 80,000 Income surplus Share Deals 30,000 Capital Surplus 60,000 Bond 47,630 Pre-operating Expenses 44,000 Development cost 80,000 Bank and Cash 50,000 Trade Debtors Trade creditors Taxation 1/1/09 Sale of plant 124,000 297,170 68,000 32,000 Stock 1/1/09 -W.I.P. 250,000 -Finished Goods 220,000 -Raw Materials 230,000 Turnover Rent received- storage space Purchases of raw materials Wages and salaries Pension costs- SSF 1,898,000 56,000 906,000 180,000 10,000 Rent & Rate Insurance 60,000 18,000 Power, heart and light 120,000 General expenses 52,000 Audit fees and expenses 10,000 Interest received on fixed deposit 16,000 Interest paid on bank overdraft 12,000 Advertising Directors' fees Traded-in furniture Rental paid to Patapa Ltd Rental income received from Mamapa Enterprise 10,000 20,400 26,000 9,600 5,200 Non-current assets at cost and depm1/1/09 - Capital WIP 180,000 50,000 Building (factory) 202,000 Plant and Mach. 360,000 100,000 Office Furniture 80,000 40,000 Corporate tax paid 20,000 Deferred Tax as at 1 January 2,000 Payments to Contractor: plant installation 200,000 Grants received government 36,000 Notes: a. Closing stocks were as follows: Raw Materials Work in progress Finished goods 284 230 248 b. Buildings, plant & machinery & furniture were depreciated at 2%, 10%, &15% per annum respectively on cost. During the year 100m cedis value of capital work in progress were completed and were transfer to buildings. A plant initially costing $24 million and accumulated depreciation of ellm and revalued on 10th February, 2008 at 20 million, was sold for $32m on 2nd March 2009 During the year an old furniture with initial cost of 20m and net book value of com and saleable value of 10 million was traded in exchange for a new furniture costing 36m. The difference of 26 million has been paid. A new building property for office was leased from Patapa Ltd on 2nd January 2009 under finance lease agreement with following terms: fair value at Ghe80 million, ten annual rentals of Ghe9.6 million payable on 31 December. Use sum of years' digit method. On 15th January 2009 KKT Ltd leased out one of the factory buildings with cost of Ghe30 million and accumulated depreciation of Ghe5 million to Mamapa Enterprise under a ten year finance lease agreement with the following terms: the fair value was Ghe40 million annual rentals of Ghe5.2 million receivable by 31 December c. Expenses were apportioned as follows; Wages and salaries Rates, rates and insurance Power, heat and light Factory % 70 60 90 60 Administration % 30 40 10 40 General expenses d. The company is registered with 2,000,000 ordinary shares of no par value and 1,000,000 have been issued and fully paid for cash. On 1 January 2009 there were 100,000 ordinary shares previously acquired. During the year 50,000 shares were acquired at total costs of GHC 20 million and took place before the closure of register of members. In December 2009 the company made a bonus share issue of one share for every ten shares held that qualify for dividend at consideration of GHC 150 million. e. The pre-operating expenses of 44m were incurred from October to December 2002 when the company was set up. Directors have resolved that it should have been amortised over 10 years after set up. f. Corporate tax provision for the year ended 31/12/09 was 60m. The company provided for a similar tax of 36m in the previous year but the tax authorities arrived at 26m. g.. It acquired an administration block with an estimated useful life of 50 years at a cost of GHC22 million for the past five and half years until 30 June 2009, when it moved its office to a new building at the factory site. The building was reclassified as an investment property and \ leased out under a 4 year lease and annual rental of GHC1.2 million. The fair value of the building at 30 June 2009 was GHC24 million when the company left it to the site. As at 31 December 2009 the fair value was GHC25.8 million. All these had not reflected in the books. h. The carrying value of the net assets of the company was higher than the Tax Bases of the ne assets by GHC 60 million. i. ABC ltd issued a Bond for GHC47.63 million on 1 January 2009 and will be redeemed on 31 December 2011 for GHC60 million; resulting an effective interest rate of 8% per annum j. The Company started installation of a new plant costing GHC 200 million in 1 January 2009 The project was financed by and overdraft facility of GHC150 million at an interest of 20% perannum. The installation was completed on 31 August 2009 and commissioned on 30th November 2009. Payments to the contractor were scheduled as follows; 1 January 2009 31 July 2009 GHC 150 million GHC 50 million 1. On 31 march 2009 the company received a government grant of GHC 36 million to acquire: specialized plant costing GHC 80 million. The estimated useful life is 10 years. k. The company has undertaken a research to develop a new product at a cost of GHC 80 mill as directors were confident that the project will be successful. Development of the product started on 1 July 2009. It is the policy of directors to amortise the cost over 10 years. Required: prepare in accordance with the Companies Code, Act 179 for publication: 1. Income Statement (profit and loss account) for the year end- 31/12/09 2. Statement of Financial Position as at the year end 3. notes