QUESTION TWO Two neighbouring countries have chosen to organize their electricity supply industries in different ways. In country A, electricity supplies are provided by a nationalised industry. On the other hand in country B electricity supplies are provided by a number of private sector companies. Required: (a) Explain how the objectives of the nationalised industry in country A might differ from those of the private sector companies in country B. (b) Briefly discuss whether investment planning and appraisal techniques are likely to differ in the nationalised industry and private sector companies. Sh. Million 2 Other 81 12727 Directors' emoluments: Fees emoluments Other staff costs: Wages and salaries cost (NSSF) benefits Sh. Million 14 3 86 Social security 2 3 Termination 105 13. Auditors' remuneration Loss on disposal of motor vehicles The average number of staff employed by the company during the year was 603. The authorized share capital of the company is made up of 90 million ordinary shares of Sh.5 each. Required: Prepare the Income Statement and the Statement of Changes in Equity for the year ended 31 March 2003 and the Balance Sheet as at 31 March 2003. CL Limited prepares its Balance Sheet showing Total Assets and Total Equity and Liabilities. Any notes necessary to ensure that the Financial Statements are prepared in accordance with Internation Financial Reporting Standards should be added, but using only the information included above. Do not compute the Earnings Per Share for the year. Payable within one year Million payments Payable later than one year but not later than five years 3 Sh. Million 557 5 5 8. Finance costs comprise: Sh. Million Interest on bank loan 9 Interest on bank overdraft Interest on finance leases 16 2 27 9. Finance income: Sh. Million Interest received on bank deposits 2 10. Inventories comprise: Sh. Million Raw materials 48 Work in progress 29 Finished goods 51 Stores and spares 58 186 11. 12. The depreciation charge for the year on the plant and machinery was Sh.52 million and the amortisation charge of the prepaid operating lease rental was Sh.2 million All depreciation and amortisation charges are included in cost of sales Other expenses included in the various functional expenses or cost of sales are: 6. March 2003. The amortisation charge for the year was Sh.5 million. The tax expense for the year is as follows: Current taxation based on adjusted profit at 30% Deferred tax expense Ignore deferred tax on the revaluation surplus Sh. Million 17 17 7. Finance lease payable comprise: Minimum Present lease value of payments minimum Sh. lease 3. 4. 5. The buildings had been revalued by NENE and SIKWA, Registered Valuers and Estate Agents, on an open market basis. Accumulated depreciation on historical cost of buildings as at 31 March 2003 was Sh.20 million No impairment losses have occurred in the life of the company Capital work in progress relates to ongoing construction of a new kin. The compensating tax payable was in respect of the previous year's dividend paid in the year. The directors have proposed that a dividend of 10% be paid for the year ended 31 March 2003. No entry has been made in the financial statements to reflect this. Proposed dividends are accounted for as a separate component of equity until they have been ratified at a general meeting. Deferred expenditure represents development costs relating to production of new products that are written off over four years. Expenditure of Sh.20 million was incurred early in the year to 31 Additional information 1. 2. Borrowings comprise: Bank overdraft (interest are payable in the year 20%) Bank loan, repayable 31 March 2005 (interest rate 13% fixed) Buildings: Historical cost Depreciation charge for the year included in cost of sales Sh.million 53 50 103 60 CL's accounting policy in relation to the difference between depreciation based on the revalued amount of buildings (Sh.6 million) and depreciation based on the buildings' historical cost (Sh.2 million) is to treat it as revaluation surplus realized as the buildings are used. This transfer for the year has not yet been made. NUMBER ONE Centum Ltd(CL). is a company quoted on the Nairobi Stock Exchange. It makes up its accounts to 31 March each year. The balance of the company as at 31 March 2003 is as follows: Sh. Million Sh. Million Administrative expenses 99 Borrowings 103 Buildings: Valuation at 1 April 1998 180 Accumulated depreciation 30 Capital work in progress 74 Cash and bank balances 5 Cost of sales Compensating tax payable Deferred income taxes Deferred expenditure Distribution costs Finance leases payable Finance costs Finance income Inventories Other operating expenses Other operating income Plant and machinery: Cost depreciation Accumulated Prepaid operating lease rental: Cost Amortisation of prepaid operating lease rental Revaluation reserve Share capital Share premium Taxation Turnover (net of VAT) Trade and other payables Trade and other receivables Revenue reserve Unclaimed dividends 601 8 151 15 109 7 27 2 186 3 4 907 80 50 17 17 194 2.497 2.497