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  • 20 Marks

FR – Nov 2023 – L2 – Q1a – Group Financial Statements and Consolidation

Calculate the goodwill on acquisition of Danke Plc by Monko Plc as per the given financial information.

Below are the financial statements of Monko Plc and its investee company, Danke Plc for
the year ended 30 September 2023:
Statements of Profit or Loss and other Comprehensive Income for the year ended 30
September 2023



Additional information:
i) On 1 April 2023, Monko Plc acquired 75% of the equity shares of Danke Plc. Danke Plc had been experiencing difficult trading conditions and making significant losses. Taking into consideration Danke Plc’s difficulties, Monko Plc made an immediate cash payment of only GH¢1.50 per share. In addition, Monko Plc will pay a further amount in cash on 30 September 2024 if Danke Plc returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be GH¢1,800,000 but in the light of continuing losses, it value was
estimated at only GH¢1,500,000 as at 30 September 2023. The contingent consideration has not been recorded by Monko Plc. At the date of acquisition, shares in Danke Plc had a listed market price of GH¢1.20 each.
ii) On 1 April 2023, the fair values of Danke Plc’s assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GH¢2,000,000 above its
carrying amount and a remaining lease term of 10 years at that date. Depreciation is charged to cost of sales.
iii) Monko Plc transferred raw materials at their cost of GH¢4,000,000 to Danke Plc in June 2023. Danke Plc processed all of these materials incurring additional direct costs of GH¢1,400,000 and sold them back to Monko Plc in August 2023 for GH¢9,000,000. At 30 September 2023, Monko Plc had GH¢1,500,000 of these goods still in inventory.
iv) Monko Plc has recorded its investment in Danke Plc at the cost of the immediate cash payment. Other equity investments (included in the financial assets-equity investments) are carried at fair value through profit or loss as at 1 October 2022. The other equity investments have fallen in value by GH¢200,000 during the year ended 30 September 2023.
v) Monko Plc’s policy is to value the non-controlling interest at fair value at the date of
acquisition. Danke Plc’s share price at that date can be deemed to be representative of the
fair value of the shares held by the non-controlling interest.
vi) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated.
Required:
a) Compute the Goodwill on acquisition of Danke Plc. (4 marks)
b) Prepare the Consolidated Statement of Profit or Loss and other Comprehensive Income for
Monko Plc Group for the year ended 30 September 2023. (16 marks)

a) Computation of Goodwill on Acquisition of Danke Plc

Note: IFRS 3 Business Combinations says negative goodwill should be credited to the
acquirer, thus none of it relates to the non-controlling interests
(Marks are evenly spread using ticks = 4 marks)
b) Monko Plc Group
Consolidated statement of profit or loss and other comprehensive income for the year ended 30th September 2023


Workings in GH¢’000
1. Group structure
Monko 75%
NCI 25%
Date of acquisition 1 April 2023
Pre-acquisition period 6 months
Post-acquisition period 6 months


The profit on the sale of the goods back to Monko is GH¢3·6 million (9,000.000 – (4,000,000 + 1,400,000)). Therefore the unrealized profit (URP) in the inventory of GH¢1·5 million at 30 September 2022 is GH¢600,000 (3,600,000 x 1,500,000/9,000,000).

(Marks are evenly spread using ticks = 16 marks) (Total: 20 marks)

  • 5 Marks

FR – Nov 2023 – L2 – Q2a – Financial Reporting Standards and Their Applications

Calculate the maximum amount of borrowing costs that could potentially be capitalised in accordance with IAS 23 for Banda Ltd.

Banda Ltd (Banda) incurred the following borrowing costs during the financial year-end 31 December 2022:

GH¢
Overdraft interest
Foreign currency loan interest (correctly translated into GH¢)
Foreign currency exchange differences on equity
In addition, a three-year fixed rate GH¢2.4 million loan was borrowed on 1 January 2022 at 6.5%. A loan set-up fee (transaction costs) of GH¢24,000 was incurred. This increased the effective interest rate on the loan to 6.88%.

Required:
In accordance with IAS 23: Borrowing Costs, calculate the maximum amount that could potentially be capitalised as borrowing costs for the year-end 31 December 2022 (assuming an asset was being financed using all available finance).

a) Maximum amount to capitalise (IAS 23 para 6):

(5 marks)
Page 15 of 27

QUESTION TWO
a) Maximum amount to capitalise (IAS 23 para 6): GH¢’000
Overdraft 14.4 Foreign currency loan interest 100.8 Foreign currency exchange differences on equity – Effective interest on loan ((2,400 – 24) x 6.88%) 163.44
278.64 (5 marks)
b) Leases
Fugu
Ltd

Fugu
Ltd Statement of profit or loss for the year ended 31 July 2023 Operating costs: GH¢’000
Depreciation (2,013)
Finance costs:
Interest on lease (1,610.4)

(5 marks)

  • 1 Marks

BL – May 2024 – L1 – SA – Q3 – Company Law

Eligibility for appointment as an administrator of a company.

Who among the following is eligible to be appointed as an administrator of a company?
A. A chartered accountant
B. A legal practitioner
C. Administrator-General
D. An insolvency practitioner
E. A public administrator

Answer:
D. An insolvency practitioner

Explanation:
An insolvency practitioner is a professional licensed to act in the capacities of overseeing the affairs of companies in financial distress, including acting as an administrator in restructuring processes. Their expertise and licensing ensure that they can manage the legal, financial, and operational aspects of corporate insolvency.

  • 1 Marks

BL – May 2024 – L1 – SA – Q2 – Company Law

Identifying which type of company is exempted from holding an Annual General Meeting (AGM).

Which of the following is NOT required to hold an Annual General Meeting?
A. A one-member company
B. A micro company
C. A private company
D. A municipal company
E. An unlimited liability company

Answer:
A. A one-member company

Explanation:
A one-member company is exempt from the legal requirement of holding an Annual General Meeting (AGM) since there is only one member involved. The purpose of AGMs is to provide a forum for multiple shareholders to discuss and decide on company matters, which is redundant for a single-member entity.

  • 1 Marks

BL – May 2024 – L1 – SA – Q1 – The Nigerian Legal System

Understanding the legislative authority of a state's House of Assembly.

Under the 1999 Constitution, the list that contains matters which a House of Assembly could legislate upon to the exclusion of the National Assembly is the:
A. Exclusive Legislative List
B. Concurrent Legislature List
C. Discretional Legislative List
D. Residual Legislative List
E. Remainder Legislative List

Answer:
D. Residual Legislative List

Explanation:
The Residual Legislative List contains matters that are within the exclusive authority of state governments, meaning that only the House of Assembly of a state can legislate on these matters. The National Assembly has no power to legislate on issues under the Residual List, giving state governments autonomy in these areas

  • 20 Marks

BMF – May 2024 – L1 – SB – Q6 – Communications in Business

Discussion on formal communication, attributes of an effective communication system, and characteristics of effective and bad reports.

Managers that do not design effective communication models risk the long-run survival of their organisations.

a. Define the term “Formal communication.” (2½ Marks)

b. State FIVE attributes of an effective communication system. (7½ Marks)

c. List SIX features of effective reports. (6 Marks)

d. State FOUR features of bad reports. (4 Marks)

a. Formal communication refers to official communication that follows pre-defined channels in an organization. It typically flows through hierarchical structures and can take the form of reports, memos, official meetings, and emails.

b. Attributes of an effective communication system:

  1. Clarity: The message must be clear and easily understood.
  2. Consistency: Communication should be consistent in tone, style, and content.
  3. Feedback Mechanism: The system should allow for feedback from the recipients to ensure understanding.
  4. Appropriate Channels: The use of proper channels for different types of communication, whether formal or informal.
  5. Timeliness: Communication should be timely to ensure that information is relevant and actionable.

c. Features of effective reports:

  1. Clear purpose: The report must have a clear and specific objective.
  2. Conciseness: The report should be brief and to the point.
  3. Accurate and relevant information: All the information must be correct and relevant to the subject matter.
  4. Logical structure: The report should be well-organized with a logical flow of ideas.
  5. Actionable recommendations: The report should offer practical and implementable solutions.
  6. Proper formatting: The report must follow a professional format that enhances readability.

d. Features of bad reports:

  1. Unclear purpose: The report lacks a defined goal, making it difficult to follow.
  2. Lengthy and disorganized: The report is overly long and lacks structure, causing confusion.
  3. Inaccurate or incomplete information: Important data is missing or incorrect, leading to poor decision-making.
  4. Unprofessional presentation: The report is poorly formatted, which makes it difficult to read and understand.
  • 1 Marks

FA – May 2016 – L1 – SA – Q15 – Financial Statements Preparation

A question on how to account for carriage inwards.

Carriage inwards are:
A. Credited to the cost of sales
B. Debited to the cost of sales
C. Credited to the profit or loss
D. Debited to the profit or loss
E. Debited to equity

Answer:
B. Debited to the cost of sales

Explanation:
Carriage inwards refers to the costs incurred for transporting goods into the company. These costs are typically added to the cost of sales because they form part of the total cost of getting goods ready for sale.
  • 1 Marks

FA – May 2016 – L1 – SA – Q14 – Recording Financial Transactions

A question regarding the meaning of purchases in accounting.

Purchases in accounting refer to goods bought for:
A. Repairs
B. Owners’ use
C. Resale
D. Office use
E. Permanent use

Answer:
C. Resale

Explanation:
In accounting, purchases refer to goods bought with the intent to resell them. These goods are typically part of the company’s inventory and are intended for sale to customers. Purchases for personal or office use do not count under this definition.
  • 1 Marks

FA – May 2016 – L1 – SA – Q13 – Accounts of Not-for-Profit Entities

A question on identifying the excess of expenditure over income in a not-for-profit organization.

The excess of expenditure over income in a Not-for-Profit organization is:
A. Accumulated fund
B. Working capital
C. Deficit
D. Surplus
E. Accruals

Answer:
C. Deficit

Explanation:
In a not-for-profit organization, when expenditure exceeds income, the result is a deficit. This is the opposite of a surplus, which occurs when income exceeds expenditure.
  • 1 Marks

FA – May 2016 – L1 – SA – Q12 – Control Accounts

A question about the meaning of the purchases ledger item in the control account.

The item “Purchases Ledger – N7,200,000” in the control account means:
A. Cash Purchases during the period
B. Credit purchases during the period
C. Receivables set off against payables
D. Cash Payable
E. Cash Receivable

Answer:
C. Receivables set off against payables

Explanation:
The amount of N7,200,000 in the purchases ledger represents the set-off between amounts owed to and by a customer or supplier. This means that instead of settling the balances individually, they are netted off.

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