Question 1 The following notes are relevant: (i) Sale or Return Transaction The revenue figure includes some goods sold on sale or return basis to credit customers for GHC10 million in December 2021. The terms of sale allow customers to return the goods within three months of sale. The company generally operates on a margin policy of 30%. The inventory figure in the trial balance excludes this transaction. (ii) Construction Contract The balance on the construction contract is made up of the following items: Cost incurred to date GHC20 million Value of contract billed (work certified) GHC16 million The contract commenced on 1 January 2021 and is for a fixed price of GHC30 million. The additional costs to complete the contract are estimated at GHC5 million. Dribodi Plc's policy is to accrue profits on construction contracts based on a stage of completion given by the csts incurred to date as a percentage of the total estimated costs to complete the contract . (iii) Land and Buildings Dzibodi Plc, since its incorporation, has adopted cost model under IAS 16 to measure its land and buildings, depreciating building over 40 years [straight line) . Dzibodi Plc decided to revalue its land and building, for the first time, on 1 July 2021. A qualified valuer determined the relevant revalued amounts to be GHC13 million for the land and GHC35 million for the buildings. The buildings' remaining life at the date of the revaluation was revised to 25 years. This revaluation has not yet been reflected in the trial balance figures. Dzibodi Plc does not make a transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation surplus, neither does it recognize deferred tax implication on revaluation. iv) Right of Used Assets The leased rental paid relates to a plant acquired under a five year lease agreement on 1 January 2021 . The rentals are GHC9-2 million per annum payable in arrears on 31 December each year. The implicit interest rate is 10% per annum. The present value of the minimum lease payments [using the implicit rate as the discount factor] at the inception of the lease approximates GHC35 million. The fair value of the plant at the inception of the lease was GHC 36 million. v) Owned Plant and Equipment Owned plant and equipment includes an item of plant bought for GHS 10m on 1 January 2021 that will have a 10-year life (using straight-line depreciation with no residual value). Production using this plant involves toxic chemicals which will cause decontamination costs to be incurred at the end of its life. The present value of these costs using a discount rate of 10% at 1 January 2021 was GHS4m. Dzibodzi Plc has not provided any amount for this future decontamination cost. All other owned plant and equipment is depreciated at 12.5% per annum using the reducing balance method. No depreciation has yet been charged on any non-current asset for the year ended 31 December 2021. All depreciation is charged to cost of sales. (vi) Investment in Equity shares The investment in equity shares was acquired in January 2021 at a cost of GHS5 million At 31 December 2021 the fair value was assessed at GHS6m. Dzibodri made an irrevocable election at initial recognition of these instruments to recognise all changes in fair value through other comprehensive income. vii) Trade receivables In January 2022, Dzibodzi Plc's internal audit department discovered a fraud committed by the company's credit controller who did not return from a foreign business trip. The outcome of the fraud is that GHS4m of the company's trade receivables had been settled but the money had been stolen/embezzled by the credit controller.. Of this amount, GHS 1m relates to the year ended 31 December 2020 and the remainder relates to the year ended 31 December 2021. Dribodzi Ple is not insured against this fraud. (viii) Intangible Assets: In addition to the capitalised development expenditure (of GHS 10m ), further research and development costs were incurred on a new project which commenced on 1 January 2021 . The research stage of the new project lasted until 30 May 2021 and incurred GHS1. 2m of costs. From that date the project incurred development costs of GHS 400,000 per month. On 1 August 2021 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 31 December2021. Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development costs are charged to cost of sales (ix) Provisions Dzibordzi Ple is being sued by a customer for GHS2 m for breach of contract over a cancelled order. CL has obtained legal opinion that there is a 20% chance that Dzibordzi Ple will lose the case. Accordingly. Dzobordzi has provided GHS400,000 (GHS2 m20% ) included in administrative expenses in respect of the claim. The unrecoverable legal costs of defending the action amount to GHS 100,000 . These costs have neither been paid nor provided for in the financial records. (v) Preference shares The preference shares were issued in January 2021 . They are redeemable at a premium above their issue price which gives them an effective finance cost of 12% per annum. (xi) Convertible toan note The 10% Convertible loan note was issued on 1 January 2021 at its nominal (face) value of GHC40 milhon. Interest is payable in arrears at 31 December each year. The loan note will be redeemed on 31 st December 2023 at par. Hewever between the date of issue and date of redemption, the holders may convert the loan note into equity shares in accordance with the terms of the loan agreement. A similar instrument in the market without conversion right carries a coupon rate of 15% per annum. (xii) Income Taxation A provision for income tax for the year ended 31 December 2021 of GHC3 million is required. The balance on current tax represents the under/over provision of the tax liability for the year ended 31 December 2020. At 31 December 2021, the tax base of Dribodi Plc's net assets was GHC30 million less than their carrying amounts. This docs not include the effect of the revaluation in note (ii) above. The income tax rate of Dribodi Plc is 25%. xii) Dividend The dividends payable on the preference shares for the year had been duly paid as at 31 Dee ember 2021 . Interim dividends for equity shares were also paid at the rate of 3 pesewas per share in September 2021. The Directors have also proposed a final (additional) dividend of 2 pesewas per share to be approved by shareholders at AGM to be held in April 2022. Required: (a) Prepare the statement of profit or loss and other comprehensive income for Dzibodi Ple for the year ended 31 December 2021. (b) Prepare the statement of changes in equity for the year ended 31 December 2021 (c) Prepare the statement of financial position for Dzibodi Plc as at 31 December 2021. Question 1 The following notes are relevant: (i) Sale or Return Transaction The revenue figure includes some goods sold on sale or return basis to credit customers for GHC10 million in December 2021. The terms of sale allow customers to return the goods within three months of sale. The company generally operates on a margin policy of 30%. The inventory figure in the trial balance excludes this transaction. (ii) Construction Contract The balance on the construction contract is made up of the following items: Cost incurred to date GHC20 million Value of contract billed (work certified) GHC16 million The contract commenced on 1 January 2021 and is for a fixed price of GHC30 million. The additional costs to complete the contract are estimated at GHC5 million. Dribodi Plc's policy is to accrue profits on construction contracts based on a stage of completion given by the csts incurred to date as a percentage of the total estimated costs to complete the contract . (iii) Land and Buildings Dzibodi Plc, since its incorporation, has adopted cost model under IAS 16 to measure its land and buildings, depreciating building over 40 years [straight line) . Dzibodi Plc decided to revalue its land and building, for the first time, on 1 July 2021. A qualified valuer determined the relevant revalued amounts to be GHC13 million for the land and GHC35 million for the buildings. The buildings' remaining life at the date of the revaluation was revised to 25 years. This revaluation has not yet been reflected in the trial balance figures. Dzibodi Plc does not make a transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation surplus, neither does it recognize deferred tax implication on revaluation. iv) Right of Used Assets The leased rental paid relates to a plant acquired under a five year lease agreement on 1 January 2021 . The rentals are GHC9-2 million per annum payable in arrears on 31 December each year. The implicit interest rate is 10% per annum. The present value of the minimum lease payments [using the implicit rate as the discount factor] at the inception of the lease approximates GHC35 million. The fair value of the plant at the inception of the lease was GHC 36 million. v) Owned Plant and Equipment Owned plant and equipment includes an item of plant bought for GHS 10m on 1 January 2021 that will have a 10-year life (using straight-line depreciation with no residual value). Production using this plant involves toxic chemicals which will cause decontamination costs to be incurred at the end of its life. The present value of these costs using a discount rate of 10% at 1 January 2021 was GHS4m. Dzibodzi Plc has not provided any amount for this future decontamination cost. All other owned plant and equipment is depreciated at 12.5% per annum using the reducing balance method. No depreciation has yet been charged on any non-current asset for the year ended 31 December 2021. All depreciation is charged to cost of sales. (vi) Investment in Equity shares The investment in equity shares was acquired in January 2021 at a cost of GHS5 million At 31 December 2021 the fair value was assessed at GHS6m. Dzibodri made an irrevocable election at initial recognition of these instruments to recognise all changes in fair value through other comprehensive income. vii) Trade receivables In January 2022, Dzibodzi Plc's internal audit department discovered a fraud committed by the company's credit controller who did not return from a foreign business trip. The outcome of the fraud is that GHS4m of the company's trade receivables had been settled but the money had been stolen/embezzled by the credit controller.. Of this amount, GHS 1m relates to the year ended 31 December 2020 and the remainder relates to the year ended 31 December 2021. Dribodzi Ple is not insured against this fraud. (viii) Intangible Assets: In addition to the capitalised development expenditure (of GHS 10m ), further research and development costs were incurred on a new project which commenced on 1 January 2021 . The research stage of the new project lasted until 30 May 2021 and incurred GHS1. 2m of costs. From that date the project incurred development costs of GHS 400,000 per month. On 1 August 2021 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 31 December2021. Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development costs are charged to cost of sales (ix) Provisions Dzibordzi Ple is being sued by a customer for GHS2 m for breach of contract over a cancelled order. CL has obtained legal opinion that there is a 20% chance that Dzibordzi Ple will lose the case. Accordingly. Dzobordzi has provided GHS400,000 (GHS2 m20% ) included in administrative expenses in respect of the claim. The unrecoverable legal costs of defending the action amount to GHS 100,000 . These costs have neither been paid nor provided for in the financial records. (v) Preference shares The preference shares were issued in January 2021 . They are redeemable at a premium above their issue price which gives them an effective finance cost of 12% per annum. (xi) Convertible toan note The 10% Convertible loan note was issued on 1 January 2021 at its nominal (face) value of GHC40 milhon. Interest is payable in arrears at 31 December each year. The loan note will be redeemed on 31 st December 2023 at par. Hewever between the date of issue and date of redemption, the holders may convert the loan note into equity shares in accordance with the terms of the loan agreement. A similar instrument in the market without conversion right carries a coupon rate of 15% per annum. (xii) Income Taxation A provision for income tax for the year ended 31 December 2021 of GHC3 million is required. The balance on current tax represents the under/over provision of the tax liability for the year ended 31 December 2020. At 31 December 2021, the tax base of Dribodi Plc's net assets was GHC30 million less than their carrying amounts. This docs not include the effect of the revaluation in note (ii) above. The income tax rate of Dribodi Plc is 25%. xii) Dividend The dividends payable on the preference shares for the year had been duly paid as at 31 Dee ember 2021 . Interim dividends for equity shares were also paid at the rate of 3 pesewas per share in September 2021. The Directors have also proposed a final (additional) dividend of 2 pesewas per share to be approved by shareholders at AGM to be held in April 2022. Required: (a) Prepare the statement of profit or loss and other comprehensive income for Dzibodi Ple for the year ended 31 December 2021. (b) Prepare the statement of changes in equity for the year ended 31 December 2021 (c) Prepare the statement of financial position for Dzibodi Plc as at 31 December 2021