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- On 1 May 2002, Leo Ltd. acquired 75% of the issued ordinary shares of Jana Ltd. On that date, Jana Ltd. had revenue reserves ofSh.300...(Solved)
On 1 May 2002, Leo Ltd. acquired 75% of the issued ordinary shares of Jana Ltd. On that date, Jana Ltd. had revenue reserves ofSh.300 million.
On 1 May 2001, Leo Ltd. had acquired 30% of the issued ordinary shares of Poke a Ltd. when the latter had revenue reserves of Sh.I00 million. Leo Ltd. exercises significant influence on Pokea Ltd. and has appointed two directors to the board of Pokea Ltd.
Jana Ltd. acquired 80% of the issued ordinary shares of Wetu Ltd. on 1 November 2000 when the revenue reserves of Wetu Ltd. were Sh.125 million. The revenue reserves balance of Wetu Ltd. on 1 May 2002 was Sh.200 million.
The financial statements of Leo Ltd. and its subsidiary and associate companies for the financial year ended 30 April 2005 are as follows:
Additional information:
1. During the year ended 30 April 2005, Jana Ltd. made sales of Sh.500 million to Leo Ltd. at a profit of 25% on cost.Sh.50 million of these goods were include in the closing stock of Leo Ltd. Included in the opening stock of Leo Ltd., were goods purchased from Jana Ltd. 31,'1 on which Jana Ltd. had made a profit of Sh.6 million. All the intra-group opening stock was disposed of during the period.
2. Leo Ltd. made sales of Sh.90 million to Pokea Ltd. during the year at a profit of 20% on selling price. One third of the goods purchased by Pokea Ltd. from Leo Ltd. in the period was included in the closing stock as at 30 April 2005.
3. As at 1 May 2002, property, plant and equipment owned by Jana Ltd. Were revalued upwards by Sh.200 million. This revaluation has not yet been incorporated in the books. These property, plant and equipment are still owned by the company. Depreciation is provided on the assets at the rate of 10% per .annum on the straight line basis from the date Leo Ltd. acquired its holding in Jana Ltd
4. Leo Ltd purchased the shares in Pokea Ltd. Cum-dividend. The dividends were subsequently paid by Pokea Ltd. In this respect, Leo Ltd. Received Sh.6 million dividends from Pokea Ltd. And credited the amount to its income statement for the year ended 30 April 2002
5. Leo Ltd. does not amortise the goodwill arising on acquisition of subsidiaries but instead determines the impairment of the goodwill occurring in a period which it charges to the group income statement.
The method is applied to premium arising on investment in an associate company.
For the year ended 30 April 2005, impairment of goodwill was determined as follows:
6. Included in the current assets of Leo Ltd. is Sh.80 million due from Jana Ltd. liabilities of Jana Ltd.
7. The companies have not accrued their share of proposed dividends from either their subsidiary or associate companies.
Required:
(a) Group income statement for the year ended 30 April 2005.
(b) Group balance sheet as at 30 April 2005.
The financial statements above should comply with the requirements of:
IFRS 3 - Business Combinations
IAS 28 - Accounting for Investments in Associates
Date posted: December 10, 2021. Answers (1)
- Mzalendo Ltd., a company quoted on the Nairobi Stock Exchange, ahs a foreign subsidiary, Mgeni Ltd., whose reporting currency is the Dime. The reporting currency...(Solved)
Mzalendo Ltd., a company quoted on the Nairobi Stock Exchange, ahs a foreign subsidiary, Mgeni Ltd., whose reporting currency is the Dime. The reporting currency of Mzalendo Ltd., is the Kenya shilling (Ksh.). The financial statements of the two companies for the year ended 31 October 2005 were as follows:
Additional information:
1. Mzalendo Ltd. Acquired 75% of the ordinary share capital of Mgeni Ltd. On 1 November 2002 when the retained profits of Mgeni Ltd. Were Dime 2,876 million. The goodwill arising on the acquisition of Mgeni Ltd. is considered to be an asset of Mgeni Ltd. No amortisation of goodwill is charged on profits.
2. Other income reported by Mzalendo Ltd., is made up of interim dividend received from Mgeni Ltd., Mgeni Ltd., aid the dividend on 15 July 2005. Other income reported by Mgeni Ltd. is made up of the exchange gain on retranslating the 12% loan stock. The loan stock was obtained form a foreign country.
3. During the year ended 31 October 2005, Mzalendo Ltd., sold goods worth Ksh.900 million to Mgeni Ltd. Mzalendo Ltd. reported a profit of 25% on cost. Half of these goods were still in the inventory of Mgeni Ltd. As at 31 October 2005.
4. The relevant exchange rates at select dates were as follows:
Required:
a) Consolidated income statement for the year ended 31 October 2005 in Kenya Shillings.
b) Consolidated balance sheet as at 31 October 2005 in Kenya Shillings.
(Round the figures to the nearest 1 million where necessary)
Date posted: December 10, 2021. Answers (1)
- Hope Limited is a company quoted on the stock exchange. On 1 October 2005, the company sold off its entire shareholding of 80% in Old...(Solved)
Hope Limited is a company quoted on the stock exchange. On 1 October 2005, the company sold off its entire shareholding of 80% in Old Limited and acquired 75% holding in New Limited. The following statements relate to the three companies:
Additional information
1. Hope Limited had acquired its investment in Old Limited on 1 April 2003 for shs. 900 million when the retained profits of Old limited amounted to sh. 300 million. By 31 March 2005, half of the goodwill on the acquisition of Old Limited had been impaired.
2. Hope Limited also acquired sh. 100 million of the 10% loan stock in New Limited on 1 October 2005.
3. During the year ended 31st March 2006, Hope Limited sold goods worth sh. 50 million to Old Limited before Old limited was disposed of.
In addition, Hope Limited sold goods worth sh.200 million to New Limited in the period after New Limited’s acquisition. Hope Limited reported a profit margin of 40% on all the inter company sales. Half of these goods were still held by by the subsidiaries by 31 March 2006.
4. The other incomes appearing in the income statement of Hope Limited are made up of profit on sale of Old Limited and dividends received from New Limited. All the companies paid their dividends on 31 December 2005. However, New Limited had not paid interest on loan stock. This unpaid interest was included as part of the accruals.
5. As at 31 March 2006, inter-company balances were as follows:
6. The fair values of all the net assets in the subsidiaries were the same as the book values on the dates of acquisitions except for an item of plant in the books of New Limited whose fair value was shs.10 million above the book value on 1 October 2005. The group depreciates plant at 20% per annum using the straight-line method.
7. No goodwill in either subsidiary company was impaired during the year ended 31 March 2006.
Required:
a) Consolidated income statement for the year ended 31 March 2006.
b) Consolidated statement of changes in equity (showing only the retained profits column)
c) Consolidated balance sheet as at 31 March 2006.
Date posted: December 10, 2021. Answers (1)
- Hadel Ltd., a public limited company incorporated in Kenya owns 75% of the ordinary share capital of Scot Ltd.., a public limited company incorporated in...(Solved)
Hadel Ltd., a public limited company incorporated in Kenya owns 75% of the ordinary share capital of Scot Ltd.., a public limited company incorporated in a foreign country. The reporting currency of Scot Ltd is the domes (DM) whereas that of Hadel Ltd is the Kenya shilling (Ksh). Hadel Ltd acquired its shareholding in Scot on 1 May 2008 at 120 million domes (DM) when the retained profits of Scot Ltd were 80 million domes (DM). Scot Ltd has not revalued its assets or issued any share capital since 1 May 2008.
The following are financial statements of Hadel Ltd and Scot Ltd.
Required:
Consolidated income statement for the year ended 30 April 2009.
Date posted: December 10, 2021. Answers (1)
- The statements of financial position of H Ltd, S Ltd, A Ltd, J Ltd and B Ltd as at 31 October 2009 are as follows:(Solved)
The statements of financial position of H Ltd, S Ltd, A Ltd, J Ltd and B Ltd as at 31 October 2009 are as follows:
Additional information:
1. H Ltd purchased 75% of the ordinary shares of S Ltd on 1 November 2007, when the balance of the earnings of S Ltd was sh. 80 million.
2. S Ltd purchased 30% of the ordinary shares of A Ltd on 1 November 2007 were sh. 140 million.
3. H Ltd and another company, Ukwala Ltd, each bought 50% of the share capital of J Ltd on 1 May 2009. H Ltd and Ukwala Ltd have a joint control of J Ltd. Both companies are to account for their Joint venture using proportionate consolidation; combining items on a line by line basis. J Ltd’s retained earnings on 1 May 2009 were sh. 110 million.
4. On 1 May 2009, H Ltd acquired 45 million ordinary shares of shs. 10 each in B Ltd when the retained earnings of B Ltd were sh.400 million.
5. On 1 May 2009, the fair values of the identifiable net assets of B Ltd, approximated book value except for leasehold whose book value was sh. 40 million below its fair value. The property is depreciated to nil residual value over the term of the lease. On 1 May 2009, there were 10 years remaining of the lease.
6. On 1 November 2007, the book value of the identifiable net assets of A Ltd was sh. 20 million below their fair value. The assets revalued are not to be depreciated.
7. Included in the closing inventory of H Ltd is shs. 12 million worth of goods purchased from J Ltd which cost sh. 8 million.
8. In the year ended 31 October 2009, H Ltd sold goods to B Ltd at a price of sh. 15 million. H Ltd had marked up these goods by 50% on cost. B Ltd held 50% of these goods in its closing inventory on 31 October 2009.
9. As at 31 October 2009, H Ltd owed J Ltd sh. 12 million. As at the same date, S Ltd owed H Ltd sh. 13 million and A Ltd Sh 20 million. All the current accounts between the companies were in agreement.
10. As at 31 October 2009, it was estimated that since the date of acquisition, goodwill had suffered impairment loss by the following percentages:
S Ltd = 40%
B Ltd = 25%
The goodwill of J Ltd and the premium on acquisition of A Ltd had not been impaired since the date of acquisition.
11. It is groups’ policy to value the non-controlling interest at fair value or the market value. The fair value of the non-controlling interest in S Ltd at the date of acquisition was Sh. 120 million, while the fair value of the non-controlling interest in B Ltd, at the date of acquisition was shs. 124 million.
Required:
Consolidated statement of financial position as at 31 October 2009, J Ltd should be accounted for using the proportionate consolidation method as per IAS 31(Interest in Joint ventures)
Date posted: December 10, 2021. Answers (1)
- Hamisi Limited acquired 36 million shares of Galole Limited on 1 April 2008. Galole Limited is a foreign subsidiary whose currency is the Falanga (Fn).
The...(Solved)
Hamisi Limited acquired 36 million shares of Galole Limited on 1 April 2008. Galole Limited is a foreign subsidiary whose currency is the Falanga (Fn).
The following statements of financial position relate to Hamisi Limited and Galole Limited as at 31 March 2010
Additional information:
1. Hamisi Limited acquired the shares in Galole Limited when the retained profits of Galole Limited were Fn 260 million. It is the policy of the group to value non-controlling interest on the basis of net identifiable tangible assets. By 1 April 2009, all the goodwill in Galole Limited had been written off.
2. During the year ended 31 March 2010, Galole Limited sold goods to Hamisi Limited and reported a profit mark-up of a third. The inventory of Hamisi Limited included goods valued at sh. 10 million purchased from Galole Limited. (The exchange rate was Sh.1=Fn.5). Hamisi Limited had sent a cheque of Sh.10 million to Galole Limited to clear the inter-group balance which had not been received by Galole Limited as at 31 March 2010.
3. Galole Limited acquired some property on 1 April 2009 for Fn 250 million and took a loan to finance this acquisition. The buildings had an estimated useful life of 25 years with depreciation being on the straight-line method. The buildings were professionally valued at Fn 300 million on 31 March 2010. This is already reflected in the financial statements. The policy of the group is to show buildings at depreciated historical cost.
4. Galole Limited operates with a significant degree of autonomy from Hamisi Limited.
5. The relevant exchange rates are as follows:
Required:
a) Briefly explain the factors to be considered when choosing the presentation currency of financial statements.
b) The consolidated statement of financial position as at 31 March 2010. (Apply the requirements of IAS 21[The Effects of Changes in Foreign Exchange rates])
Date posted: December 10, 2021. Answers (1)
- Head Limited sold off its entire shareholding of 80% in Shoulder Limited and acquired 75% of the shares of Stem Limited during the year ended...(Solved)
Head Limited sold off its entire shareholding of 80% in Shoulder Limited and acquired 75% of the shares of Stem Limited during the year ended 30 September 2010. Head Limited also acquired 40% of the shares of Angle Limited.
The following income statements relate to the four companies:
Additional information:
1. Head Limited had acquired it s shareholding in Shoulder Limited at a cost of Sh 2200 million on 1 October 2007 when the retained earnings of Shoulder Limited were Sh.500 million. The ordinary share capital of Shoulder Limited was Sh. 2,000 million and there were no other reserves. The fair value of the non-controlling interest in Shoulder Limited on the same date was Sh.550 million.
2. During the year ended 30 September 2010, Head Limited acquired the investment in Stem Limited and Angle Limited. The details of the acquisitions are as follows:
On the date of its acquisition, Stem Limited had an item of plant that was Sh.270 million below its fair value. Plant is depreciated at 20% per annum with a full year’s charge in the year of purchase or revaluation.
3. On 1 July 2010, Head Limited sold its investment in Shoulder Limited at a price of Sh.3,430 million. This disposal has not been reflected in the income statement of Head Limited.
4. During the year, the companies traded as follows:
5. Goodwill of Shoulder Limited had been impaired by half as at 1 October 2009. Any goodwill arising in Stem Limited and Angle Limited is impaired by 20%.
6. All dividends were paid on 31 August 2010.
Required:
a) The group income statement for the year ended 30 September 2010.
b) The statement of changes in equity showing only the retained profits column.
Date posted: December 10, 2021. Answers (1)
- Host Limited, its subsidiary Supa Limited and sub-subsidiary Sport Limited operate in the media industry.
The following financial statements relate to the three companies for the...(Solved)
Host Limited, its subsidiary Supa Limited and sub-subsidiary Sport Limited operate in the media industry.
The following financial statements relate to the three companies for the year ended 31 December 2010:
Additional information:
1. Host Limited acquired 90% of the ordinary share capital of Supa Limited on 1 January 2005 when the retained profit, of Supa Limited were Sh. 1,425 million. Subsequently, Supa Limited acquired 80% of the ordinary share capital of Sport Limited on 1 January 2007 when the retained profits of Sport Limited were Sh.950 million.
2. During the year 2010, Sport Limited sold goods to Supa Limited at a selling price of Sh.480 million making a profit of 25% on cost. Sh.75 million -worth of these goods were still in the inventory of Supa Limited at the end of the year Supa Limited still owed Sport Limited Sh. 100 million as at 31 December 2010.
3. During the year 2010, Supa Limited sold goods to Host Limited at a selling price of Sh.260 million making a profit of /) on cost. Sh.60 million worth of these goods were still in the inventory of Host Limited as at the end of the year. Host Limited still owed Supa Limited Sh.50 million as at 31 December 2010.
4. During the year, Host Limited sold an item of plant to Supa Limited at a selling price of Sh.240 million reporting a profit of 20% on cost. The group charges depreciation at the rate of 20% on cost and this is included as part of the cost of sales.
5. The entire goodwill of Supa Limited has been impaired and by 31 December 2009, 60% of the goodwill of Sport Limited was impaired. An additional half of the balance of goodwill in Sport Limited is considered impaired. The group uses the partial goodwill method.
Required:
a) Consolidated income statement for the year ended 31 December 2010.
b) Consolidated statement of changes in equity (retained profits only) as at 31 December 2010.
c) Consolidated statement of financial position as at 31 December 2010.
Date posted: December 10, 2021. Answers (1)
- Hunga Limited, a company quoted on the securities exchange, acquired 80% of Shika Limited several years ago. On 1 January 2012 Hunga limited sold half...(Solved)
Hunga Limited, a company quoted on the securities exchange, acquired 80% of Shika Limited several years ago. On 1 January 2012 Hunga limited sold half of its investment in Shika Limited and acquired 75% of the equity shares of Shujaa Limited.
The financial statements for the year ended 30 June 2012 for the three companies are as given below.
Additional information:
1. Hunga Limited had acquired its shareholding in Shika Limited for Sh.2,400 million when the retained profits of Shika Limited amounted to Sh. 1,500 million. There was no fair value adjustment at the time of this acquisition.
2. Hunga Limited sold half of the investment in Shika Limited for Sh.1.500 million. This disposal has already been accounted for by Hunga Limited but not by the group. The fair value of the remaining investment in Shika Limited was Sh.1, 300 million on the date of disposal.
3. Between 1 January 2012 and 30 June 2012. Hunga Limited sold to Shujaa Limited goods worth Sh.500 million reporting, a profit of Sh. 100 million. Half of the goods were still in the inventory of Shujaa Limited as at 30 June 2012.
4. Intercompany receivables and payables were as follows as at 30 June 2012:
5. As at 1 July 2011, half of the goodwill of Shika Limited had been impaired. The goodwills of the companies were not impaired in the current year to 30 June 2012. The group uses the partial goodwill method when preparing the consolidated financial statements.
Required;-
a) Group statement of comprehensive income for the year ended 30 June 2012.
b) Group statement of financial position as at 30 June 2012.
Date posted: December 10, 2021. Answers (1)
- Describe four shortcomings of cost accounting.(Solved)
Describe four shortcomings of cost accounting.
Date posted: February 15, 2019. Answers (1)
- Explain what 'integrated reporting' entails.(Solved)
Explain what 'integrated reporting' entails.
Date posted: February 15, 2019. Answers (1)
- In the context of integrated reporting:
i. Discuss any two components of an integrated report.
ii. Explain four guiding principles that underpin the preparation of an integrated...(Solved)
In the context of integrated reporting:
i. Discuss any two components of an integrated report.
ii. Explain four guiding principles that underpin the preparation of an integrated report.
Date posted: February 15, 2019. Answers (1)
- Explain the benefits that would accrue from the adoption of international public sector accounting standards (IPSASs) by governments and public entities.(Solved)
Explain the benefits that would accrue from the adoption of international public sector accounting standards (IPSASs) by governments and public entities.
Date posted: February 15, 2019. Answers (1)
- The following information has been compiled by the Ministry of Finance for the fiscal year ended 30 June 2009:(Solved)
The following information has been compiled by the Ministry of Finance for the fiscal year ended 30 June 2009:
Date posted: February 15, 2019. Answers (1)
- The International Public Sector Accounting Standards (IPSASs) are developed by the International Public Sector Accounting Standards Board (IPSASB) to enhance uniformity in the way...(Solved)
The International Public Sector Accounting Standards (IPSASs) are developed by the International Public Sector Accounting Standards Board (IPSASB) to enhance uniformity in the way public sector organizations prepare their financial statements. The Board (IPSASB) is promoting the international adoption and application of these standards.
Required:
Highlight four challenges that the Board is facing in promoting the use of IPSASs.
Date posted: February 15, 2019. Answers (1)
- The following data has been collected from the Ministry of Trade and Commerce for the fiscal year ended 30 June 2010:(Solved)
The following data has been collected from the Ministry of Trade and Commerce for the fiscal year ended 30 June 2010:
Required:
The following statements in accordance with IPSAS 1 (Presentation of Financial Statements):
i) Statement of financial performance for the year ended 30 June 2010.
ii) Statement of financial position as at 30 June 2010.
Date posted: February 15, 2019. Answers (1)
- The following summary of receipts and payments was extracted from the records of the Ministry of Finance for the fiscal year ended 30 June 2010.(Solved)
The following summary of receipts and payments was extracted from the records of the Ministry of Finance for the fiscal year ended 30 June 2010.
Required:
The statement of comparison of budget and actual amounts for the fiscal year ended 30 June 2010 in accordance with International Public Sector Accounting Standard (IPSAS) 24 (Presentation of Budget Information in Financial Statements
Date posted: February 15, 2019. Answers (1)
- i. A certain government agency has a widely published environmental policy in which it undertakes to clean up all contamination arising from its operations. The...(Solved)
i. A certain government agency has a widely published environmental policy in which it undertakes to clean up all contamination arising from its operations. The government agency has a record of honoring agency operates. During the course of a naval exercise, a vessel was damaged and a substantial amount of oil leaked. The government agency agreed to pay for the costs of the immediate clean-up and the costs of monitoring and assisting marine animals and birds.
Required:
In the context of International Public Sector Accounting Standard Number 19 (Provisions, Contingent Liabilities, and Contingent Assets}, evaluate how the costs in the above, scenario would be accounted for.
ii. Mashinani City Council constructed a 20 storey office building for use by the council at a cost of Sh.800 million. This building came into use on 1 January 1996 and it was expected to have a useful life of 40 years. During the year 2010, National Safety Regulations required that owing to security concerns, the top 4 storeys of high-rise buildings should be left unoccupied for the foreseeable future. These regulations were to come into force on 31 December 2010. As at 31 December 2010, the building had a fair value less costs to sell of Sh.450 million. As at the same date, the replacement cost of a similar 20 storey building was Sh.850 million.
Required:
Using the service units approach, evaluate whether there is any impairment loss as at 31 December 2010 in accordance with the requirements of International Public Sector Accounting Standard Number 21 (Impairment of Non-Cash-Generating Assets).
Date posted: February 15, 2019. Answers (1)
- In relation to-International Public Sector Accounting Standards (IPSASs).
i) Explain any three benefits that would accrue to a government as a result of the adoption of...(Solved)
In relation to-International Public Sector Accounting Standards (IPSASs).
i) Explain any three benefits that would accrue to a government as a result of the adoption of IPSASs.
ii) Analyze, any two limitations that, state (or. county) governments in your country are likely to face in implementing IPSASs.
Date posted: February 15, 2019. Answers (1)
- In the context of IPSAS 19 (Provisions, Contingent Liabilities and Contingent Assets), explain the meaning of the term 'constructive obligation'.(Solved)
In the context of IPSAS 19 (Provisions, Contingent Liabilities and Contingent Assets), explain the meaning of the term 'constructive obligation'.
Date posted: February 15, 2019. Answers (1)