Section A: Elements of Financial Statements [8 marks] Consider the case below. State whether the italicised statement that follows is Correct or Incorrect under generally accepted accounting principles. Then, give a reason for your answer.

2.1 Nana-Poku Ventures is a trading concern. During the financial year ending 31 December 2016, the Enterprise earned GHS120,000 in profit. In January 2017, the Enterprise bought 1,000 units of the 10-year bonds of Joy-Angel Holdings Ltd, financing it from the profit made in the previous year. This implies that Nana-Poku Ventures has acquired an asset.

2.2 Hudson Industries Ltd prepares and sells frozen onion puree. Last week, it sold one of its old delivery vans with net book value of GHS9,200 for GHS8,000 cash. This means that the equity of Hudson Industries Ltd has increased by GHS1,200.

2.3 Queen, Ohemaa & Associates, a firm of chartered accountants, just completed an audit engagement and has sent a bill of GHS4,000 to the client. The client has accepted the 30-day payment period offered. This means that the assets of the firm have increased while its equity has increased.