QUESTION 1

The following trial balance relates to Golden Ltd at 30th

Sales (a)

Material purchases (b)

Production labour (b)

Factory overheads (b)

Distribution costs

Administrative expenses (c)

Finance costs

Investment income

Leased property - at cost (b)

Plant and equipment - at cost (b)

Accumulated amortisation/depreciation at 1/10/2017

- leased property

- plant and equipment Equity investments (e) Inventory at 1/10/17 Trade receivables Trade payables

Bank

Stated capital (GHS0.2) Income surplus (1/10/2017) Deferred tax (f)

The following notes are relevant:

September 2018 GHS'000

128,000 248,000 160,000

28,400 92,800 700

1,600 100,000

89,000

29,000 36,000

93,400 67,100

1,043,400

GHS'000 760,000

20,000

55,600 4,600 100,000 67,200 5,400 1,043,400

(a) Sales include goods sold and dispatched in September 2018 on a 30-day right of return basis. Their selling price was GHS4.8m and they were sold at a gross profit margin of 25%. In the past, Golden Ltds customers have always met their obligations under this type of agreement.

(b) Non-current assets:

In the course of the year, Golden Ltd produced an item of equipment for its own use. The direct materials for the equipment cost GHS6m and the labour cost GHS8m. Manufacturing overheads are 50% of direct labour cost and Golden Ltd determines the final selling price for goods by adding a mark-up on total cost of 40%. The direct materials, labour and overheads are included in the relevant expense items in the trial balance. The equipment was completed and was put to use on 1 July 2018.

All plant and equipment is depreciated at 25% per annum using the straight line method with time apportionment in the year of acquisition.

The management of Golden revalued the leased property in line with recent increases in market values. On 1 October 2017 an independent architect valued the leased property at GHS96m, which the management agreed to. The leased property had an original useful life of 20 years which has not changed. Revaluation

1

surplus is realised over the life of the leased property. The revaluation surplus will give rise to a deferred tax liability (see Note f).

All amortisation and depreciation is charged to cost of sales. No amortisation or depreciation has yet been charged on any non-current asset for the year ended 30 September 2018.

(c) In July 2018, the share price of Golden Ltd stood at GHS2.40 per share. On this date, Golden Ltd paid an interim dividend (included in administrative expenses) that was computed to give a dividend yield of 4%.

(d) Closing inventory on 30 September 2018 was valued at GHS109.6m.

(e) The equity investments had a fair value of GHS34.8m on 30 September 2018. During the year there were no purchases or disposals of any of these investments.

(f) A provision for income tax for the year ended 30th September 2018 of GHS48.6m is required. At 30th September 2018, the tax base of Golden Ltd's net assets was GHS30m less than their carrying amounts. This excludes the effects of the revaluation of the leased property. The income tax rate of Golden Ltd is 30%.

Required:

Prepare the statement of profit or loss and other comprehensive income, the statement of financial position and the statement of changes in equity for Golden Ltd for the year ended 30th September 2018.