a.

Hope Limited.
Comprehensive Income Statement for the Year ended 31st December, 2010.
GHS
Revenue 182,500,000
Cost of Sales (w 3a) (137,400,000)
Gross Profit 45,100,000
Distribution Costs (8,500,000)
Administrative expenses (25mil -7.4mil) (w 1b) (17,600,000)
Investment income (700,000)
Finance costs (300,000 +400,000(w3b) +3,060,000(w2) (3,760,000)
Profit before tax 14,540,000
Income tax expense (5,600,000+900,000-250,000) (w4) (6,250,000)
Profit for the year (j) 8,290,000
Other comprehensive income
Gain on available-for-sale investments (16,500,000-5,800,000) 10,700,000
Gain on revaluation of land and building (w3b) 800,000
Total other comprehensive gain for the year (k) 11,500,000
Total comprehensive income (j+k) 19,790,000
 b.
Statement of Changes in Equity for the year ended 31st December, 2010
Share Share Other Revaluation Retained Total
Capital Premium equity Reserve Earnings Equity
GHS’000 GHS’000 reserve GHS’000 GHS’000 GHS’000
GHS’000

Balance b/d 31/12/09 40,000 - - 10,000 12,700 62,700

Right issue (w1a) 4,000 (6,000) - - - (2,000)
Dividends (w1b) - - - (7,400) (7,400)
Comprehensive income - - 10,700 800 8,290 1,970
Balance c/d 31/12/2010 44,000 (6,000) 10,700 10,800 13,590 55,270

c.
Statement of Financial Position as at 31st December,2010
GHS’000 GHS’000
Assets
Non-current assets
Property, plant and equipment (w3b) 92900
Available for sale investments 16,500
109,400
Current assets
Inventory 19,800
Trade receivables 29,000 48,800
Total assets 158,200
Equity and Liabilities
Equity (w1)
Equity shares @ 50 pesewas 50,000
Share discount (w1) (6,000)
Other equity reserve 10,700
Revaluation reserve 10,800
Retained earnings 13,590 35,090
79,090
Non-current liabilities
Provision for decontamination costs (w3b) 4,400
8% loan note (w2) 30,600
Deferred tax (w4) 3,750 38,750
Current liabilities
Trade payables 21,700
Bank overdraft 4,600
Current tax payable 5,600 31,900
Suspense 8460
Total equity and liabilities 158,200

Workings
1. a. Rights issue and dividends paid.
50,000,000
⇒Total number of shares per trial Balance = = 100,000,000 shares
0.50

As at 31st December, 2010.

Therefore, a right issue for 1 for 4 on 1st July, 2010 will result to
4
⇒ 100,000,000 − ( × 100,000,000)
5

⇒20,000,000 new shares.

∴Share capital to be recorded

⇒ 20,000,000 shares × 0.20 pesewas = GHS 4,000,000.

Share Discount

⇒20,000,000 shares × (0.50 − 0.20) = 𝐺𝐻𝑆 6,000,000

b. Dividends

On 29th February, 2010

⇒0.03× 80,000,000 = GHS 2,400,000

On 31 August ,2010
⇒0.05× 100,000,000 = GHS 5, 000,000

Total dividends = GHS 7,400,000

∴GHS 7, 400,000 in respect to dividends is included in Administrative expenses.

2. Loan Note
Finance cost on the loan ⇒ 10% × GHS 30,000,000 = GHS 3,000,000
Actual loan paid GHS 2,400,000
Difference to be added to carrying amount of
Loan note GHS 600,000
New face value of Loan
⇒GHS 30,000,000 + GHS 600, 000
⇒GHS 30,600,000

3. a. Adjusting Costing of Sales for depreciation

GHS
Cost of sales as per trial balance 128,500,000
𝐺𝐻𝑆 36,000,000
Add Depreciation of building ( ) 2,000,000
18
𝐺𝐻𝑆 10,000,000+4,000,000
Depreciation of new plant ( ) 1,400,000
18
Depreciation of existing plant and equipment
((67,000-10,000-13,400) × 12.5%) 5,500,000
137,400,000

b. Property, plant and equipment.

Gross Cost of new plant (adding present value of decontamination cost)

⇒GHS 10,000,000 + GHS 4,000,000 = GHS 14,000,000

∴Corresponding Finance cost in the current year

⇒10% × GHS 4,000,000 =GHS 400,000

Closing Provision
⇒ GHS 4,000,000 + GHS 400,000
⇒GHS 4,400,000.

Gain on revaluation and carrying amount of land and building;

GHS
st
As at 31 December,2009 (land and building) 43,000,000
Less Building depreciation (from W3a) 2,000,000
Book amount before revaluation 41,000,000
Revaluation as at 31st December,2010 41,800,000
Gain on revaluation 800,000
 Carrying amount of the plant and equipment

New plant (14,000,000 – 1,400,000) 12,600,000

Existing plant and equipment
(67,400,000-10,000,000-13,400,000-5,500,000) 38,500,000
Book Value 51,100,000

4. Deferred tax GHS

Provision needed at 31st December, 2010
(GHS 15,000,000× 25%) 3,750,000
Provision at 31st December, 2009 (4,000,000)
Reduction in tax provision 250,000