Nabdam Ltd (Nabdam) operates in the media and publications industry and reports under IFRS. The 2018 financial statements of Nabdam are still in draft form. The audit is ongoing, and the company intends to authorise the financial statements in April 2019.
Nabdam rents a distribution warehouse in Korle, located beside the River Odorna. On 3 January 2019, the River Odorna burst its banks and GH¢650,000 of Nabdam’s inventory was destroyed by the flood. The inventory was not insured and Nabdam will not receive any compensation for the loss. The company is not sure how to account for this event. The destroyed inventory is included in the inventory figure that is disclosed on Nabdam’s draft statement of financial position at 31 December 2018.
Required:
Explain with justification, the appropriate accounting treatment of the above transaction.                                               (4 marks)

On 1 August 2018, Asawase Ltd entered into an agreement to acquire a motor vehicle. The terms of the agreement were that the vehicle would be leased for 5 years from the date of inception, subject to a deposit of GH¢19,972 and 5 annual payments of GH¢6,500 in advance, commencing on 1 August 2018. The fair value of the vehicle and the present value of the lease payments were GH¢48,000 at inception. The interest rate implicit in the lease is 8%.
Required:
In accordance with IFRS 16: Leases, show with appropriate calculations, the accounting entries required to record the transaction above in the financial statements for the year ended 31 July 2019.                                                                  (7 marks)

RoyCo acquired a brand new property (land and buildings) on 1 January 2016 for GH¢40 million (including GH¢15 million in respect of the land). The asset was revalued on 31 December 2017 to GH¢43 million (including GH¢16.6 million in respect of the land). The buildings element was depreciated over a 50-year useful life to a zero residual value. The useful life and residual value did not subsequently need revision. On 31 December 2018 the property was revalued downwards to GH¢35 million as a result of the recession (including GH¢14 million in respect of the land).
The company makes a transfer from revaluation surplus to retained earnings in respect of realised profit.
Required:
Calculate the amounts recognised in profit or loss and in other comprehensive income for the years ended 31 December 2017 and 31 December 2018.                                                                                                                                                     (6 marks)

Daaho Ltd (Daaho) manufactures and distributes security equipment. Daaho prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 August each year.
On 31 August 2019, the taxation liability account in the books of Daaho Ltd showed a debit balance of GH¢17,500 after paying the 2018 liability. The estimated liability for 2019 is GH¢84,500 and no entry has yet been made to record this.
Required:
Explain the appropriate accounting treatment of the above transaction for the year end 31 August 2019.                        (3 marks)

The draft statements of financial position of Atia Ltd and that of Santana Ltd as at 30 June 2019 are as follows:

Additional relevant information:
i) On July 1, 2018, Atia Ltd purchased 21 million shares of Santana Ltd. At this date the retained earnings of Santana Ltd were estimated at GH¢17 million whereas the revaluation surplus was GH¢2 million respectively.
ii) Atia Ltd paid an initial amount of cash of GH¢46 million and agreed to pay the shareholders of Santana Ltd a further GH¢14 million on July 1, 2020. The financial accountant has recorded the full amounts of both elements of the consideration in the investments as shown in the statement of financial position.
iii) Atia Ltd has a cost of capital of 8% per annum.
iv) During the accounting period, Atia Ltd sold goods totaling an amount of GH¢4 million to Santana Ltd at a gross profit margin of 25%. At 30 June 2019, Santana Ltd still had a total of GH¢0.5 million of these goods in inventory. Atia Ltd has a normal margin usually to third party customers at 45%.
v) On the acquisition date, the fair values of Santana Ltd’s net assets were equal to their carrying amounts with the exception of some inventory, which had cost GH¢ 1.5 million but had a fair value of GH¢1.8 million. On 30 June 2019, 10% of these goods remained in the inventories of Santana Ltd.
vi) It is the policy of Atia Ltd to value the non-controlling interest using the fair value method. For this purpose, the value of the non-controlling interest at acquisition date is estimated at GH¢7.5 million.
vii) Impairment test was conducted at the year end and no goodwill impairment occurred.
Required:
Prepare the consolidated statement of financial position of the Atia group as at 30 June 2019.                                     (20 marks)

c) The development of the IASB Conceptual Framework for Financial Reporting over the years has led to the IASB producing a body of accounting standards that have the advantages for those companies that adopt them. The Framework is also of value to auditors, and the users of financial statements, and more generally help interested parties to understand the IASB’s approach to the formulation of an accounting standard.

Required:
Summarize the contents (scope) of the IASB’s Conceptual Framework for Financial Reporting.                                    (4 marks)

d) Explain how Tatale Ltd should account for the following items, justifying your answer by reference to the definitions and recognition criteria in the IASB Conceptual Framework for Financial Reporting.
i) Photographs of the company’s founders, which are of great sentimental and historical value.
ii) Donation of GH¢10,000 received from a philanthropist.
iii) Obsolete plant now retired from use.                                                                                                                             (6 marks)

Lease and hire purchase are very popular options of financing assets. These options vary from each other in many aspects: ownership of the asset, depreciation, rental payments, duration, tax impact, repairs and maintenance of the asset and the extent of finance.
Thereatta Ltd is a listed advertisng company operating in Ghana. The Board of Thereatta Ltd (Thereatta) were contemplating on the most suitable option to finance one of its machinery before settling on Hire Purchase. On 1 January 2016, Thereatta acquired a machinery on hire-purchase basis from Askona Ltd agency. The terms of the Hire Purchase agreement requires Thereatta to make four annual installments of GH¢6,000 each payable at the end of each year. There is no down payment. Interest is charged at 20% per annum and is included in the annual installments.
Because of financial difficulties, Thereatta after having paid the first and second installments respectively could not pay the third yearly instalment due on 31 December 2018, whereas the vendor repossessed the machinery. Thereatta provides depreciation on the machinery at 10% per annum according to the written down value method.
Required:
Show the accounting treatment of the Machinery account and the account of Askona Ltd agency in the books of Thereatta. (All workings must be shown).                                                                                                                                                (12 marks)

The dissolution of a partnership is the process during which the affairs of the partnership are wound up. This should not be confused with the term dissolution when applied to a limited company, which is the event that marks the conclusion of the winding-up.
Required:
Explain THREE (3) differences between dissolution of a partnership and dissolution of a limited liability company.                                                                                                                                                                                                               (3 marks)

Zangi Ltd is a private company in Ghana and extracts from its most recent financial statements are provided below:
          Statement of profit or loss for the year ended 31 March

Required:
a) Calculate the following ratios using the information in the financial statements above.
i) Operating profit margin
ii) Gross profit margin
iii) Return on assets employed
iv) Debt to equity
v) Interest cover
vi) Current ratio
vii) Quick ratio
(6 marks)

b) Comment on the profitability, liquidity and gearing of the company for the two year periods based on the ratios computed above and advice management where appropriate.                                                                                                           (9 marks)

The following trial balance was extracted from the books of Frafraha Ltd (Frafraha) on 31 March 2018.

The following notes may be relevant:
i) Frafraha applies the revaluation model of IAS 16 Property, Plant & Equipment to its land and buildings. A revaluation took place on 31 March 2017 and resulted in the fair value of GH¢62 million shown above. This figure included GH¢22 million in respect of land. The buildings were deemed to have a 40-year useful economic life remaining at that date. No depreciation has yet been charged for the accounting period ended on 31 March 2018. All depreciation is charged to cost of sales. On 31 March 2018, a further revaluation took place which revealed a fair value of GH¢24 million for the land, and GH¢41 million for the buildings. This is to be recorded in the books in accordance with the accounting policy of Frafraha.

Plant & equipment is being depreciated at 25% per annum straight line from the date of purchase to the date of sale. On 1 October 2017, a piece of plant was purchased at a cost of GH¢12 million. This replaced another piece of plant which had cost GH¢8 million some years ago and was fully depreciated prior to 31 March 2017. A trade-in allowance of GH¢1 million was received for the old plant. The only entries made to record this transaction were to credit cash and debit suspense with the net payment of GH¢11 million. No other item of plant was more than three years old at 1 April 2017.

ii) The inventories figure in the trial balance is the opening inventories balance measured on the first-in first-out (FIFO) basis. Due to a change in Frafraha’s business, the company decided to change its accounting policy with respect to inventories to a weighted average basis, as follows:
.                                            31 March 2016              31 March 2017
                                                 GH¢’000                         GH¢’000
FIFO                                          33,200                             37,300
Weighted average                    30,300                             34,100
Closing inventories at 31 March 2018, measured under the weighted average basis, amounted to GH¢41.2 million.

iii) Intangible assets consist of capitalised development costs of GH¢30 million. These relate to products in development at 1 April 2017. No revenue has yet been earned from any of these products. They are all expected to be successful once ready for market, with the exception of one project. The amount previously capitalised in respect of this project was GH¢6 million. However, adverse developments have led to the decision to abandon the project as it was unlikely to be successful in the marketplace. During the year further expenditure was incurred on other qualifying projects and was charged to administration expenses. The amounts are as follows:

• Prototype development costs GH¢3 million.
• Marketing research to determine the optimal selling strategy GH¢1 million.
• Basic research which may lead to future projects GH¢4 million.

iv) Frafraha commenced construction of a new warehouse on 1 May 2017.The building was completed and available for use on 30 November 2017. The cost of construction amounted to GH¢9 million, funded out of general borrowings, which comprise two bank loans as follows:

• GH¢4 million of bank loan finance at 6% interest.
• GH¢6 million of bank loan finance at 4.5% interest.
  All interest costs have been expensed in the year to 31 March 2018 but no other entries has been passed in respect of this. Ignore any depreciation in relation to the new warehouse.

v) Corporate tax for the year is estimated at GH¢0.25 million.
Required:
Prepare, in a form suitable for publication to the shareholders of Frafraha Ltd the Statement of Profit or Loss for the year ended 31 March 2018 and Statement of Financial Position as at 31 March 2018.                                                                     (20 marks)