Question Seven (7) The following trial balance relates to Kofi Karikari Lid as at 30th September 2020. GI "rillic) GHI"million Revenue 760.000 Cost of sales 493.60 Distribution costs 34.80 Administrative expenses 101.00 Loan interest paid 2.00 Investment income 7.00) Bank 16.00 Freehold property-ut cost 1st October 2011 126,00 Plant and equipment at cost 84.40 Brand - at cost 1st October 2016 60.00 Accumulated depreciation - at Ist October 2019: Page 10 of 13 16.00 39.40 Discount Factor @8% Year 1 0.926 Year 2 0.857 Year 3 0.794 Cumulative for 3 years 2.577 (ii) Included in Kofi Karikan's revenue is GH432 million for goods sold to a customer on 1st ) October 2019. The terms of the sale are that Kofi Karikari will incur after sale service costs of GH2.4 million per annum for four years. Kofi Karikari Lid normally makes a gross profit margin of 40% on such servicing work. Note: Ignore discounting liv) Administrative expenses include an equity dividend of 105Gp per share paid during the year. after the rights issue in (v). 1) On 1 February 2020, there was a fully subscribed rights issue of one new share for every four held at a price of GHe 1.40 each. The proceeds of the issue have been received and the issue has been correctly accounted for in the above trial balance (vi) The balance on current tax represents the under over provision of the tax liability for the year ended 30th September 2019. The directors have estimated the provision for income tax for the year ended 30th September 2020 to be GH432.4 million. At 30th September 2020, the carrying amount of Kofi Karikuri's net assets exceeded their tax base by GHc26 million. The deferred tax on 30th September 2020 includes GHe 3.6 million tax relating to revalued non-current assets in ) above. The income tax rate for Koli Karikan is 30% (vii) Kofi Karikari uses the fair value model of IAS 40 Investment properties. The fair value of the investment property at 30th September 2020 was GH+65 million (vist) The 5% convertible loan note was issued for proceeds of GH 40 million on 1st October 2018. It is a four year loan with an annual effective interest rate of 8% due to the value of its conversion option. . (ix) In August 2020, before the financial statements were authorized for issue, Directors of Kofi Kurikari discovered a matonal crror in which GH0.75 million worth of electricity invoices pad for the period to 30th September 2019 had been overlooked and omitted from the accounting records of the same period. Required 4.20 18.00 81.80 Buildings Plant and equipment Current tax Accumulated amortization - brand 1stOctober 2019 Trade payables Investment property Inventory at 30th September 2020 Trade receivables Equity shares GH1:30th September 2020 Equity option Share premium 30th September 2020 5% convertible loan Retained earnings Ist October 2019 Deferred tax 53.00 76.00 89.00) 104.00 3.98 10.00 36.90 52.12 10.80 1.140.00 1.140.00 The following additional information is relevant: Page 12 of 13 (i) The non-current assets have not been depreciated for the year ended 30thSeptember 2020. Kofi Karikari has a policy of revaluing its freehold property at the end of each accounting year. A a qualificd surveyor has valued the property at 30th September 2020 at GH114 million. (See note (vi)). The frechold property has a land clement of GHe26 million. The buildings element is being depreciated on straight line basis at a rate of 8% per annum. While plant and equipment is depreciated at 40% per annum using the reducing balance method (11) Kofi Karikari's brand in the trial balance relates to a product line that received bad publicity during the year which led to falling sales revenue. An impairment review was conducted on 1st April 2020 which reviewed that, the brand is now expected to generate net cash flows ofGH49313 million per annum for the next three years. On the same date. Kofi Karikari received an offer to purchase the brand for GH 30 million The brand is amortized using straight line method over a 10 year life. Depreciation, amortization and impairment charges are all charged to cost of sales. An appropriate annual discount rate is 8% al Prepare the statement of profit or loss and comprehensive income for Kofi Karikari Lid for the year ended 30th September 2020. (8 marks) b) Prepare a statement of changes in cquity of Kofi Karikari for the year ended 30th September 2020. (4 marks) c) Prepare the statement of financial position as at 30th September 2020. (8 marks) Page 11 of 13 Question Seven (7) The following trial balance relates to Kofi Karikari Lid as at 30th September 2020. GI "rillic) GHI"million Revenue 760.000 Cost of sales 493.60 Distribution costs 34.80 Administrative expenses 101.00 Loan interest paid 2.00 Investment income 7.00) Bank 16.00 Freehold property-ut cost 1st October 2011 126,00 Plant and equipment at cost 84.40 Brand - at cost 1st October 2016 60.00 Accumulated depreciation - at Ist October 2019: Page 10 of 13 16.00 39.40 Discount Factor @8% Year 1 0.926 Year 2 0.857 Year 3 0.794 Cumulative for 3 years 2.577 (ii) Included in Kofi Karikan's revenue is GH432 million for goods sold to a customer on 1st ) October 2019. The terms of the sale are that Kofi Karikari will incur after sale service costs of GH2.4 million per annum for four years. Kofi Karikari Lid normally makes a gross profit margin of 40% on such servicing work. Note: Ignore discounting liv) Administrative expenses include an equity dividend of 105Gp per share paid during the year. after the rights issue in (v). 1) On 1 February 2020, there was a fully subscribed rights issue of one new share for every four held at a price of GHe 1.40 each. The proceeds of the issue have been received and the issue has been correctly accounted for in the above trial balance (vi) The balance on current tax represents the under over provision of the tax liability for the year ended 30th September 2019. The directors have estimated the provision for income tax for the year ended 30th September 2020 to be GH432.4 million. At 30th September 2020, the carrying amount of Kofi Karikuri's net assets exceeded their tax base by GHc26 million. The deferred tax on 30th September 2020 includes GHe 3.6 million tax relating to revalued non-current assets in ) above. The income tax rate for Koli Karikan is 30% (vii) Kofi Karikari uses the fair value model of IAS 40 Investment properties. The fair value of the investment property at 30th September 2020 was GH+65 million (vist) The 5% convertible loan note was issued for proceeds of GH 40 million on 1st October 2018. It is a four year loan with an annual effective interest rate of 8% due to the value of its conversion option. . (ix) In August 2020, before the financial statements were authorized for issue, Directors of Kofi Kurikari discovered a matonal crror in which GH0.75 million worth of electricity invoices pad for the period to 30th September 2019 had been overlooked and omitted from the accounting records of the same period. Required 4.20 18.00 81.80 Buildings Plant and equipment Current tax Accumulated amortization - brand 1stOctober 2019 Trade payables Investment property Inventory at 30th September 2020 Trade receivables Equity shares GH1:30th September 2020 Equity option Share premium 30th September 2020 5% convertible loan Retained earnings Ist October 2019 Deferred tax 53.00 76.00 89.00) 104.00 3.98 10.00 36.90 52.12 10.80 1.140.00 1.140.00 The following additional information is relevant: Page 12 of 13 (i) The non-current assets have not been depreciated for the year ended 30thSeptember 2020. Kofi Karikari has a policy of revaluing its freehold property at the end of each accounting year. A a qualificd surveyor has valued the property at 30th September 2020 at GH114 million. (See note (vi)). The frechold property has a land clement of GHe26 million. The buildings element is being depreciated on straight line basis at a rate of 8% per annum. While plant and equipment is depreciated at 40% per annum using the reducing balance method (11) Kofi Karikari's brand in the trial balance relates to a product line that received bad publicity during the year which led to falling sales revenue. An impairment review was conducted on 1st April 2020 which reviewed that, the brand is now expected to generate net cash flows ofGH49313 million per annum for the next three years. On the same date. Kofi Karikari received an offer to purchase the brand for GH 30 million The brand is amortized using straight line method over a 10 year life. Depreciation, amortization and impairment charges are all charged to cost of sales. An appropriate annual discount rate is 8% al Prepare the statement of profit or loss and comprehensive income for Kofi Karikari Lid for the year ended 30th September 2020. (8 marks) b) Prepare a statement of changes in cquity of Kofi Karikari for the year ended 30th September 2020. (4 marks) c) Prepare the statement of financial position as at 30th September 2020. (8 marks) Page 11 of 13