QUESTION ONE THEORY TYPE QUESTIONS The following trial balance extracts (i.c. it is not a complete trial balance) relate to Evening Class as at 30 June 2015: Revenue (note (i)) Ghs000 Ghs000 Cost of sales 194,590 159,300 Research and development costs (note (ii)) 14,040 Distribution costs 6,480 Administrative expenses (note (iv)) 12,240 Loan note interest and dividends paid (notes (iv) and (vii)) 7,000 Investment income 250 Equity shares of Ghsl each (note (vii)) 30,000 5% loan note (note (iv)) 25,000 Retained earnings as at 1 July 2014 7,200 Revaluation surplus as at 1 July 2014 4,500 Other components of equity 10,500 Property at valuation 1 July 2014 (note (iii)) 31,500 Plant and equipment at cost (note (iii) 29,200 9,100 Accumulated depreciation plant and equipment 1 July 2014 Financial asset equity investments at fair value 1 July 2014 (note (v))10,800 The following notes are relevant: (i) Revenue includes a Ghs2 million sale made on 1 January 2015 of maturing goods which are not biological assets. The carrying amount of these goods at the date of sale was Ghs 1.5 million. Moston is still in possession of the goods (but they have not been included in the inventory count) and has an unexercised option to repurchase them at any time in the next three years. In three years' time the goods are expected to be worth Ghs4 million. The repurchase price will be the original selling price plus interest at 12% per annum from the date of sale to the date of repurchase. (ii) Evening Class commenced a research and development project on 1 January 2015. It spent Ghs1.2 million per month on research until 31 March 2015, at which date the project passed into the development stage. From this date it spent Ghs1.8 million per month until the year end (30 June 2015), at which date development was completed However, it was not until 1 May 2015 that the directors of Evening Class were confident that the new product would be a commercial success. Expensed research and development costs should be charged to cost of sales. (iii) Non-current assets: 3 in (iv) Evening Class's property is carried at fair value which at 30 June 2015 was Ghs32 million. The remaining life of the property at the beginning of the year (1 July 2014) was 17 years. Evening Class does not make an annual transfer to retained earnings respect of the revaluation surplus. Ignore deferred tax on the revaluation. Plant and equipment is depreciated at 20% per annum using the reducing balance method. No depreciation has yet been charged on any non-current asset for the year ended 30 June 2015. All depreciation is charged to cost of sales. The 5% loan note was issued on 1 July 2014 at its nominal value of Ghs20 million incurring direct issue costs of Ghs450,000 which have been charged to administrative expenses. The loan note will be redeemed after three years at a premium which gives the loan note an effective finance cost of 6% per annum. Annual interest was paid on 30 June 2015. At 30 June 2015, the financial asset equity investments had a fair value of Ghs8.5 million. There were no acquisitions or disposals of these investments during the (v) (vi) (vii) year. A provision for current tax for the year ended 30 June 2015 of Ghs1.4 million is required, together with an increase to the deferred tax provision to be charged to profit or loss of Ghs650,000. Evening Class paid a dividend of 20 cents per share on 30 March 2015, which was followed the day after by an issue of 10 million equity shares at their full market value of Ghs2.40. The share premium on the issue was recorded in other components of equity. Required: (a) Prepare the statement of profit or loss and other comprehensive income for Evening Class for the year ended 30 June 2015. (b) Prepare the statement of changes in equity for Evening Class for the year ended 30 June 2015. (c) Prepare extracts from the statement of cash flows for Evening Class for the year ended 30 June 2015 in respect of cash flows from investing and financing activities. Note: The statement of financial position and notes to the financial statements are NOT required. 4 QUESTION ONE THEORY TYPE QUESTIONS The following trial balance extracts (i.c. it is not a complete trial balance) relate to Evening Class as at 30 June 2015: Revenue (note (i)) Ghs000 Ghs000 Cost of sales 194,590 159,300 Research and development costs (note (ii)) 14,040 Distribution costs 6,480 Administrative expenses (note (iv)) 12,240 Loan note interest and dividends paid (notes (iv) and (vii)) 7,000 Investment income 250 Equity shares of Ghsl each (note (vii)) 30,000 5% loan note (note (iv)) 25,000 Retained earnings as at 1 July 2014 7,200 Revaluation surplus as at 1 July 2014 4,500 Other components of equity 10,500 Property at valuation 1 July 2014 (note (iii)) 31,500 Plant and equipment at cost (note (iii) 29,200 9,100 Accumulated depreciation plant and equipment 1 July 2014 Financial asset equity investments at fair value 1 July 2014 (note (v))10,800 The following notes are relevant: (i) Revenue includes a Ghs2 million sale made on 1 January 2015 of maturing goods which are not biological assets. The carrying amount of these goods at the date of sale was Ghs 1.5 million. Moston is still in possession of the goods (but they have not been included in the inventory count) and has an unexercised option to repurchase them at any time in the next three years. In three years' time the goods are expected to be worth Ghs4 million. The repurchase price will be the original selling price plus interest at 12% per annum from the date of sale to the date of repurchase. (ii) Evening Class commenced a research and development project on 1 January 2015. It spent Ghs1.2 million per month on research until 31 March 2015, at which date the project passed into the development stage. From this date it spent Ghs1.8 million per month until the year end (30 June 2015), at which date development was completed However, it was not until 1 May 2015 that the directors of Evening Class were confident that the new product would be a commercial success. Expensed research and development costs should be charged to cost of sales. (iii) Non-current assets: 3 in (iv) Evening Class's property is carried at fair value which at 30 June 2015 was Ghs32 million. The remaining life of the property at the beginning of the year (1 July 2014) was 17 years. Evening Class does not make an annual transfer to retained earnings respect of the revaluation surplus. Ignore deferred tax on the revaluation. Plant and equipment is depreciated at 20% per annum using the reducing balance method. No depreciation has yet been charged on any non-current asset for the year ended 30 June 2015. All depreciation is charged to cost of sales. The 5% loan note was issued on 1 July 2014 at its nominal value of Ghs20 million incurring direct issue costs of Ghs450,000 which have been charged to administrative expenses. The loan note will be redeemed after three years at a premium which gives the loan note an effective finance cost of 6% per annum. Annual interest was paid on 30 June 2015. At 30 June 2015, the financial asset equity investments had a fair value of Ghs8.5 million. There were no acquisitions or disposals of these investments during the (v) (vi) (vii) year. A provision for current tax for the year ended 30 June 2015 of Ghs1.4 million is required, together with an increase to the deferred tax provision to be charged to profit or loss of Ghs650,000. Evening Class paid a dividend of 20 cents per share on 30 March 2015, which was followed the day after by an issue of 10 million equity shares at their full market value of Ghs2.40. The share premium on the issue was recorded in other components of equity. Required: (a) Prepare the statement of profit or loss and other comprehensive income for Evening Class for the year ended 30 June 2015. (b) Prepare the statement of changes in equity for Evening Class for the year ended 30 June 2015. (c) Prepare extracts from the statement of cash flows for Evening Class for the year ended 30 June 2015 in respect of cash flows from investing and financing activities. Note: The statement of financial position and notes to the financial statements are NOT required. 4