Questions and Answers - Kenyaplex.com

Factors that contribute to goodwill Solved

Factors that contribute to goodwill

Date posted: December 10, 2021

Define the term goodwill

Date posted: December 10, 2021

The following list of balances as at 30 September 2009 has been extracted from the books of Brick and Stone, trading partnership, sharing the balance of... Solved

The following list of balances as at 30 September 2009 has been extracted from the books of Brick and Stone, trading partnership, sharing the balance of profits and losses in the proportions 3:2 respectively. Required: (a) Prepare a trading and profit loss account for the year ended 30 September 2009. (b) Prepare a balance sheet as at 30 September 2009 which should include summaries of the partners’ capital and current accounts for the year ended on that date. Note: In both (a) and (b) vertical forms of presentation should be used.

Date posted: December 10, 2021

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

Draw up a profit and loss appropriation account for the year ended 31 December 2007 Solved

Draw up a profit and loss appropriation account for the year ended 31 December 2007 i. Net profits sh30,350 ii. Interest to be charged on capitals: W sh2,000; Psh1,500; H sh900 iii. Interest to be charged on drawings; W sh240; P sh180; H sh130 iv. Salaries to be credited: P sh2,000; H sh3,500. v. Profits to be shared: W 50%; P 30%; H20%. vi. Current accounts: balances b/f W sh1,860; P sh946; H sh717 vii. Capital accounts: balances b/f W sh40,000; P sh30,000; H sh18,000 viii. Drawings: W sh9,200; P sh7,100; H sh6,900.

Date posted: December 10, 2021

Read the following and answer the questions below. A and B own a grocery shop. Their first financial year ended on 31 December 2002. The following balances... Solved

Read the following and answer the questions below. A and B own a grocery shop. Their first financial year ended on 31 December 2002. The following balances were taken from the books on that date:

Date posted: December 10, 2021

Contents of partnership agreement Solved

Contents of partnership agreement

Date posted: December 10, 2021

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

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

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

Bibi Maridadi owns and manages a small manufacturing business. The following balances have been extracted from her books of account at 31 January 2009 Solved

Bibi Maridadi owns and manages a small manufacturing business. The following balances have been extracted from her books of account at 31 January 2009: Required: Using the vertical method, prepare Bibi Maridadi’s manufacturing, trading and profit and loss account for the year ended 31 January 1986 and a balance sheet as at that date.

Date posted: December 10, 2021

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.