The following are the abriged trial balances of A, B and C at 31 December 2017

Alpha LtdBen Ltd Charlie Ltd

$ $ $
Credits
Share Capital: 200 000 shares 200000
140 000 shares 140000
150 000 shares 150000
Retained earnings beginning of year 300000 190000 210000
Profit before tax 250000 200000 210000
Long term liability 70000 0 95000
820000 530000 665000
Debits
Property, plant and equipment 345000 150000 437000
Investment in B Limited 165000
Investment in C Limited 232000
Trade and other receivables 205000 48000 130000
Income tax expense 75000 60000 63000
Dividends paid 30000 40000 35000
820000 530000 665000

Additional Information
1. A Ltd purchased 98 000 shares in B Limited on 1 January 2014 when B Limited's
retained earnings amounted to $90 000. The fair values of the identifiable assets, liabilities
and contigent liabilities at the acquisition date of B Ltd were considered equal to the
carrying amounts of these items.
2. B Ltd acquired 127 500 shares in C Ltd on 1 January 2015 when C Ltd's
retained earnings amounted to $120 000. The fair values of the identifiable assets and
liabilities and contigent liabilities at the acquisition date of C were considered to be
equal to the carrying amounts of these items
3. Each share carries one vote.
4. The group uses the partial goodwill method to recognise goodwill. Goodwill was not
considered to be impaired at year end.
5. The fair value of available-for-sale financial assets is equal to the cost price thereof.

Required
Prepare the consolidated annual financial statemment of A Group for the year ended 31
December 2017. Your answer must comply with the requirements of Generally Accepted
Accounting Practice.

(a) Statement of financial position 7 marks

(b) Statement of comphrensive income 3 marks
(c ) Statement of changes in equity 5 marks
(d) Workings to support your answer 5 marks
Question 4
Alpha Limited Group
Consolidated statement of financial position as at 31 December 2015
Assets $
Non current assets
Property, plant and equipment (345 000+150 000+437 000) 932000
Goodwill (4 000+1 750(70%*2 500) 5750
Current Assets
Trade and other receivables(205 000+48 000+130 000) 383000
Total Assets 1320750
Equity and Liabilities
Capital and Reserves
Share capital 200000
Retained earnings 705190
Shareholders capital and reserves 905190
Non controlling interest (70 800+179 760) 250560
Non current liabilities
Long term borrowings (70 000+95 000) 165000
Total equity and liabilities 1320750

(b) Alpha Limited Group

Consolidated Statement of comphrensive income for the year ended 31 December 2015
$
Profit before tax (250 000-28 000+200 000-29 750+210 000) 602250
Taxation (75 000+60 000+63 000) -198000
Profit for the year 404250

Total comphrensive income attributable to:

Owners of the parent 311640
Non-controlling interest (42 000+28 560+22 050) 92610
404250
(c ) Alpha Limited Group
Consolidated Statement of changes in equity and reserves for the year ended 31 December
2015
Share Retained Total NCI Total
Capital Earnings
$ $ $ $ $
Balance at 1 January 2015 200000 423550 623550 175200 798750
Profit for the year 311640 311640 92610 404250
Dividend paid -30000 -30000 -17250 -47250
200000 705190 905190 250560 1155750

Opening retained earnings

(300 000+70 000+53 550)+423 550

(d) Analysis of shareholders equity in Charlie

Total At Since NCI
Acq Acq
100% 85% 85% 15%
At Acqusition $ $ $ $
Share Capital 150000 127500 22500
Retained Income 120000 102000 18000
270000 229500 40500
Investment In Charlie 232000
Goodwill -2500
Since acquisition to beginning of current year
Retained earnings (210 000-120 000) 90000 76500 13500
Current year
Profit for the year (210 000-63 000) 147000 124950 22050
Dividends paid -35000 -29750 -5250
472000 171700 70800

Analysis of shareholders equity in Ben Limited

Total At Since NCI
Acq Acq
100% 70% 70% 30%
At Acqusition $ $ $ $
Share Capital 140000 98000 42000
Retained Income 90000 63000 27000
230000 161000 69000
Investment In Charlie 165000
Goodwill -4000
Since acquisition to beginning of current year
Retained earnings (190 000-90 000) 100000 70000 30000
Charlie Ltd retained earnings 76500 53550 22950
Goodwill -2500 -1750 0 -750
404000 123550 121200
Current year
Profit for the year (200 000-60 000) 140000 98000 42000
Profit for the year in Charlie (124950-29750) 95200 66640 28560
Dividends paid x -40000 -28000 -12000
599200 260190 179760

Group profit before tax

(250 000-(28 000)div)+(200000-29750(div)+210 000)=602 250
The following financial statements relate to H, S and A Limited.

Statement of profit or loss and other comphrensive income for the year ended 30 June 2017.
H Ltd S Ltd A Ltd
$ $ $
Sales 980200 490100 245050
Cost of Sales -245050 -147030 -98020
Gross Profit 735150 343070 147030
Distrubution costs -98020 -24505 -29406
Adminstration cost -49010 -29406 -34307
Operation costs 588120 289159 83317
Dividend receivable:
S Limited 70000 0 0
A Limited 12500 0 0
Profit before tax 670620 289159 83317
Company tax -245000 -107800 -39200
Net profit 425620 181359 44117

Statement of changes in equity for the year ended 30 June 2017

H Ltd S Ltd A Ltd
$ $ $
Balance brought forward 946400 283920 185920
Net profit after tax 425620 181359 44117
Dividends declared -250000 -100000 -50000
Closing balance 1122020 365279 180037

Statements of financial position as at 30 June 2017

H Ltd S Ltd A Ltd
Assets $ $ $
Tangible non-current assets 980000 295000 260000
Investments in quoted companies
70% in S Ltd 344000 0 0
25% in A Ltd 63000 0 0
Current Assets
Inventory 343070 396981 38208
Trade receivables 352872 88218 34307
Dividends receivables 82500 0 0
Cash at bank 85300 42600 52460
2250742 822799 384975

Equity and Reserves

Share capital 500000 250000 100000
Retained earnings 1122020 365279 180037
Shareholders capital and reserves 1622020 615279 280037
Non- Current Liabilities
Long term loan 378722 107520 54938
Current liabilities
Dividends payable 250000 100000 50000
2250742 822799 384975

Additional Information
1. When H Ltd acquired its interest in the other companies many years ago, the retained
earnings were $150 000 and $ 86 200 for S Ltd and A Ltd respectively.

Required
Prepare the following sets of financial statements.
(a) consolidated statement of Profit and Loss and other Comphrensive income for the year
ended 30 June 2017.
(b) consolidated statement of changes in equity for the year ended 30 June 2017.
(c ) consolidated statement of financial position as at 30 June 2017.
H Limited and its subsidiary
Consolidate Statement of Profit or Loss and other comphrensive income for the year ended
$
Sales (980 200+490 100) 1470300
Cost of sales (245 050+147 030) -392080
Gross Profit 1078220
Distrubution cost (98 020+24 505) -122525
Admistration costs (49 010+ 29 406) -78416
Share of Agrippa's Profits (25% of 83 317) 20829
Profit before tax 898108
Taxation
H Ltd an its subsidiary (245 000+107 800) -352800
A share (25% of 39200) -9800
Profit after tax 535508

Attributable to equity holders of parent 481100

attributable to non-controlling interest 54408
535508

H Ltd and its subsidiary

Consolidated Statement of changes in equity and reserves
Details Share CapiRetaine E Total NCI Total
$ $ $ $ $
Balance b/d 500000 1065074 1565074 160176 1725250
Comphrensive income 481100 481100 54408 535508
Dividend -262500 -262500 -30000 -292500
500000 1283674 1783674 184584 1968258

H Limited and its subsidiary

Consolidated Statement of Financial Position as at 30 June 2017
Assets $
Non Current Assets
Tangible non current assets (980 000+295 000) 1275000
Goodwill 64000
Investment in A Ltd 86459
Current Assets
Inventory (343 070+396 981) 740051
Trade receivable (353 872+88 218) 441090
Cash at bank (85 300+42 600) 127900
2734500
Equity and Liabilities
Capital and Reserves
Share Capital 500000
Retained earnings 1283674
Shareholders capital and reserves 1783674
Non controlling interest 184584
Non current liabilities
Long term loan (378 722+107 520) 486242
Current liabilities
Dividends payable (250 000+30 000) 280000
2734500
Investment in A $
Cost of investment 63000
Post acquisition reserves (99 720 +44 117) * 25% 35959
Dividend payable -12500
86459

Analysis of shareholders equity in S Limited

Total At Acq Since AcqNCI
At Acquisition $ $ $ $
Share capital 250000 175000 75000
Retained earnings 150000 105000 45000
400000 280000 120000
Investment in S 344000
Goodwill 64000
Since Acq to Beg of Current yr
Retained earnings (283 920-150 000) 133920 93744 40176
Current year
Profit for the year 181359 126951 54408
Dividends declared -100000 -70000 -30000
615279 150695 184584

Calculation of Goodwill
Consideration Paid 344000
NCI's share of net assets (250000 +150000) x 30% 120000
464000
Net Assets acquired represented by equity
Share Capital 250000
Retained Earning 150000 400000
Goodwill 64000

Non Controlling Interest

Share of NCI at acquisition 120000
Post Acquisition (365279-150000) 215279 x30% 64584
184584

Current year retained earning NCI

Profit for the year = (181359 x30%) 54408
Shasha Ltd acquired 80% of the share capital of Takanai Ltd on the 1st January 2015
when the reserves of Takanai Ltd were $125 000. Shasha Ltd paid an initial cash
consideration of $1 000 000. In addition, Shasha Ltd issued 200 000 shares consideration
with a nominal value of $1.80 at the date of acquisition. It was also agreed at acquisition
that Shasha Ltd would pay a further $500 000 in three years time (1st January 2018).
Current interest rates are at 10% per annum. The shares and deferred consideration have
not yet been recorded.

The following are statements of financial position of Shasha Ltd and Takanai Ltd
as at 31 December 2016
Shasha Takanai
Limited Limited
EQUITY AND LIABILITIES $ $
Share capital 2000000 500000
Retained earnings 1400000 300000
Non-current liabilities
Long-term loan 3000000 400000
Current Liabilities
Trade and other payables 1250000 650000
7650000 1850000

ASSETS
Property, plant and equipment 5500000 1500000
Investment in Takanai Limited 1000000 0
Current Assets
Inventory 550000 100000
Trade and other receivables 400000 200000
Cash 200000 50000
7650000 1850000

The Shasha Limited Group measures non-controlling interests using the fair value method.
At the date of acquisition the fair value of the 20% Non-controlling interest was $380 000.

The consolidated goodwill has been impaired by one fifth of its value.

Required

Prepare the consolidated statement of financial position as at 31 December 2016

To the nearest thousand dollars
[30 marks]
SHASHA GROUP
Consolidated statements of financial position as at 31 December 2017
EQUITY AND LIABILITIES $
Share capital (2000 + 200) 2200000
Share premium 160000
Retained earnings 1223000
Shareholders Capital and Reserves 3583000
Non-controlling interest 355000
Non-current liabilities
Long-term loan (3000 + 400) 000 3400000
Deferred Consideration (375 + 79) 000 454000
Current Liabilities
Trade and other payables (1250 + 650)000 1900000
9692000
ASSETS
Property, plant and equipment (5500 +1500) 000 7000000
Goodwill (1490-298) 1192000
Current Assets
Inventory (550 + 100) 000 650000
Trade and other receivables (400 +200) 000 600000
Cash (200 + 50) 250000
9692000

Workings DR CR
Adjustments $ $
Investment in Takanai (200 000 x $1.80) 360000
Share capital 200000
Share premium 160000

Investment in Takanai (Present value of $500 000) 375000

Deferred Consideration 375000

Unwind discount
375 000 x 10% 37.5 412500
412 500 x 10% 41.3
78.8
Retained earnings 79
Deferred consideration 79

Goodwill
Cost of investment (1 000 + 360 + 375) 1735
Fair value of NCI at acquired 380
Net assets at acquisition 625
Goodwill 1490
Goodwill is impaired by 20% (1490) x .20 298
NCI (20% of $298 ) 60
Shareholder 238

Goodwill on reporting date

(1490-298) 1192

Non-Controlling
Share of net assets at SFP (20% OF $800) 160
Share of goodwill (380-125) 255
Impairment of goodwill -60
355

Consolidated retained earnings

SFP Holding co 1400
Unwinding of discount -79
Post acquisition reserves (80% of $175) 140
Impairment of goodwill H company's share -238
1223
AC 416-Individual assignment Due date 30 September 2018

Assignment 1

The following are the draft statements of financial position of Shaka Ltd and Taka Ltd
as at 31 December 2017 Shaka Taka
Limited Limited

$ooo $ooo
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 190000 60000
Retained earnings 210000 36500
Revaluation Surplus 41400 4000
Shareholders equity and reserves 441400 100500

Non-current liabilities
Deferred Consideration 28000 0

Current Liabilities 137300 28150

Trade and other payables 606700 128650

ASSETS
Non-current Assets
Property, plant and equipment 392000 84000
Investments 120000 0
512000 84000

Current Assets
Cash, Inventory & Trade and other receivables 94700 44650
606700 128650

The following information is relevant:

(1) On 1 January 2017 Shaka Limited acquired 80% of the share capital of Taka Limited.
At this date the retained earnings of Taka Limited were $34 million and the revaluation
surplus stood at $4 million. Shaka Limited paid an initial cash amount of $92 million and
agreed to pay the owners of Taka Limited a further $28 million on 1 January 2019.
The accountant has recorded the full amounts of both elements of the consideration
in investments. Shaka Limited has a cost of capital of 8%. The appropriate discount
rate is 0.857.

(2) On 1 January 2017, the fair values of Taka Limited's net assets were equal to their
 carrying amounts with the exception of some inventory which had cost $3 million
but had a fair value of $3.6 million. On 31 December 2017, 10% of these goods
remained in the inventories of Taka Limited.

(3) During the year Shaka Limited sold goods totaling $8 million to Taka Limited at a
gross profit margin of 25%. On 31 December 2017, Taka Limited had $1 million of these
goods in inventory. Shaka Limited's normal margin (to third party customers) is 45%.

(4) Shaka Group uses the fair value method to value non-controlling interest. At acquisition
the non-controlling interest was valued at $15 million.

Required:

Prepare the consolidated statement of financial position of Shaka group as at 31 December

2017. Show the relevant workings.
(25 marks)
SHAKA GROUP
Consolidated statements of financial position as at 31 December 2017
EQUITY AND LIABILITIES $
Share capital 190000
Retained earnings 209398
Revaluation Surplus 41400
Shareholders Capital and Reserves 440798
Non-controlling interest 15392
Total equity and reserves 456190

Non-current liabilities
Long-term loan 0
Deferred Consideration (23996 + 1 920) 25916
Current Liabilities
Trade and other payables (137 000 + 28 150) 165450
647556
ASSETS
Property, plant and equipment 476000
Goodwill 32396
Current Assets
All inclusive (94 700 + 44 650 + 60 -250) 139160
647556

At Acq SOFP date Post Acq Res

$ $ $
Share Capital 60000 60000
Retained Earnings 34000 36500 2500
Revaluation Surplus 4000 4000
Fair value adjustment 600 60 -540
98600 100560 1960

Goodwill
Cash consideration 92000
Deferred cash consideration (28 000 x .0857) 23996
NCI @ acquisition 15000
Net assets represented by equity -98600
Goodwill 32396

Non-Controlling Interest
At acquisition 15000
Post acquisition share (1960 x20%) 392
NCI Value on SOFP 15392
Consolidated retained earnings
SFP Holding co 210000
Unwinding of discount (23 996 x 8%) -1920
Post acquisition reserves (80% of $1960) 1568
209648

Consolidated financial statements are of little value when considering the value
of a subsidiary
There a number of intercompany transactions done below the market rates
There is also a related party relationship which influences how transactions are
presented in the consolidated financial statement.
Individual Assignment 2 Due date 30 September 2018

Mozila Group
Draft consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2017
$
Revenue 872930
Cost of sales -600000
Gross profit 272930
Other income 95870
Other expenses -113100
Finance costs -14830
Profit before taxation 240870
Taxation -72561
Profit after taxation 168309
Other comprehensive income
Property revaluation net of tax ( taxation $27 000) 153000
Available for sale investments net of tax (taxation $4 500) 10500
Total comprehensive income for the year 331809

Profit for the year attributable to:

Equity holders of the parent 159909
Non-controlling interest 8400
Total comprehensive income for the year 168309

Total comprehensive income for the year attributable to:

Equity holders of the parent 323409
Non-controlling interest 8400
Total comprehensive income for the year 331809

Mozila Ltd Group

Consolidated trial balance on 31 December 2017 and December 2016
2017 2016
Credits $ $
Share Capital - $2 ordinary shares 130000 100000
Share Premium 15000 15000
Revaluations surplus 153000 0
Asset replacement reserve 50000 30000
Mark-to market reserve 10500 0
Retained earnings 391612 397563
Non-controlling interest 34820 36900
Long-term borrowings 426800 300000
Deferred tax 31500 0
Trade and other payables 618800 660990
Bank overdraft 44900 2100
Shareholders for dividends 18000 8000
Current tax payable 42973 148000
1967905 1698553
Debits
Property, plant and equipment 825000 635500
Goodwill at carrying amount 11000 12000
Available for sale investments 385000 180000
Inventories 440000 800000
Trade and other receivables 306905 71053
1967905 1698553

Mozila Limited Group

Consolidated statement of changes in equity & reserves for the year ended 31 Dec 2017
Details Ordinary Share Revalue Asset Mark- Ma Retained Total NCI Total
Shares Premium Reserve Replace R Reserves Income
$ $ $ $ $ $ $ $ $
Opening 100000 15000 0 30000 0 397563 542563 36900 579463
Profit F Y 159909 159909 8400 168309
Comp TIY 153000 0 10500 0 163500 0 163500
Share Iss 30000 0 0 0 0 0 30000 30000
Dividends -145860 -145860 -10480 -156340
Trans ARR 20000 -20000 0 0
Closing 130000 15000 153000 50000 10500 391612 750112 34820 784932

Additional information

1- No PPE were sold during the year. All the additions to PPE were in respect of
delivery vehicles to enable the group to be in a position to expand its operations.

2- After negotiations with the bank the directors of Maria Ltd Group managed to obtain an
increase in the long term loan of $200 000.

3- Other expenses consist of the following:

Depreciation $87 100-00
Auditors' remuneration $ 25 000-00
Impairment of goodwill $1 000-00

4- Other income consists of rent received.

5- Assume a 30% tax rate

Required
Use the direct method to:
Prepare the consolidated statement of cash flows for the year ended 31 December 2017.
(30 marks)

Mozila Limited Group

Consolidated statement of changes in equity & reserves for the year ended 31 Dec 2017
Description Opening Changes Transfers Dividends Closing
Balance during yeaduring year Balance
$ $ $ $
Ordinary share capital 100000 30000 130000
Share premium 15000 0 15000
Revaluation Reserve 0 153000 153000
Asset Replacement reserve 30000 20000 50000
Mark-to- market reserve 0 10500 10500
Retained earnings 397563 159909 -20000 -145860 391612
Total shareholders equity 542563 373409 -20000 -145860 750112
Non-Controlling interest 36900 8400 -10480 34820
Total Equity 579463 381809 -20000 -156340 784932
Mozila Limited Group
Consolidated Statement of cash flow for the year ended 31 December 2017
Notes $ooo $ooo
CASH FLOW FEOM OPERATING ACTIVITIES
Cash receipts from customers 1 637078
Cash payments to suppliers and employees 2 -307190
Cash generated from operations 329888
Interest paid 3 -14830
Taxation paid 4 -177588
Dividend paid - Owners of parent 5a -135860
Dividend paid- Non Controlling Interest 5b -10480
Net cash flow from operating activities -8870
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property plant and equipment 6 -96600
Purchase of available for sales 7 -190000
Investment income 8 95870
Net cash out flow from investing activities -190730
CASH FLOW FROM FINANCING ACTIVITIES
Long term loan received from bank 9 200000
Decrease in long term liabilities 9 -73200
Issue of shares 10 30000
Net cash flow from financing activities 156800
Cash and cash equivalents during the year. -42800
Cash and cash equivalents at the begining of year -2100
Cash and cash equivalents at the end of the year -44900

Notes to cash flow

1 Cash received from customers $

Gross revenue 872930
Increase in debtors [ 306905-71053= 235852) -235852
Cah received from customers 637078
2 Cash payments to suppliers and employees $0
Cost of sales (Given) 600000
Changes in inventory [440 000-800 000 Closing] -360000
Changes in trade payables - decrease [660990-618800] 42190
282190
Other cash payment
[Revenue -Cost Of Sasles-Net Profit Before Tax ]
[872930 - 600 000- 240870] 32060
Adjustments
Depreciation [given] Its not a payment deduct -87100
Other income (given) - to be shown separately 95870
Impairment of goodwill -1000
Finance cost (Given - to be shown separately) -14830
25000 25000
307190

3 Interest paid $
[ Given ] 14830

4 Taxation $
[148000 + 72561 + 31500-31500-42973] 177588

5(a) Dividends paid to shareholders of parents $

[ 8000 OB + 145860 SCE - 18000 (Cb)] 135860

5(b) Dividend paid to Non Controlling Interest $

[36900 + 8400- 34820Cb ] 10480

6 Purchase of property plantand equipment $

[825000-180000]- [635500-87100] 96600

7 Purchase of available for sale investments $

[ 385 000-15000 -180000] 190000

8 Investment income rentals received $

[Given] 95780

9 Increse in long term loan $

[300000 + 200000-426800] -73200
 Increase in long term loan 200000
Net effect on the long term loan 126800

10 New Share (Purchase) $

[30000] 30000
Marongwe Limited Marongwe Limited
Statement of financial position as at 31 December 2017 Statement of cash flow for th
2017 2016
ASSETS $ $ Cash flows from operating a
Non-current assets Cash receipts from customer
Property Plant and equipment 1028000 620000 Cash paid to suppliers and em
Deferred Tax 0 31000 Cash generated from operati
Investment in subsidiary at cost 0 88100 Interest paid
Income tax paid
Current assets Dividends paid
Inventories 33800 8000 Net cash flow from operatin
Trade and other receivables 772000 350000 Cash flow from investing acti
Financial assets held at fair value 32800 78800 Proceeds on sale of subsidiar
Cash and cash equivalents 110720 182000 Purchase of vehicles
1977320 1357900 Dividend received
Net cash flow from investing
EQUITY AND LIABILITIES Cash flow from financing acti
Share capital and reserves Redemption of debentures
Share capital 400000 200000 Net proceeds from long term
Retained earnings 653820 157000 Cash flow from financing acti
Other components of equity 200000 140000 Net decrease in cash and cas
Shareholders capital and reserves 1253820 497000 Cach and cash equivalents at
Cash and cash equivalents at
Non-current liabilities
Long-term borrowings 400000 620000 Matange Limited
Deferred Tax 9000 0 Notes to cash flow
1 Cash receipts from custome
Current liabilities 1 Cash receipts from custome
Trade and other payables 159100 147240 Revenue
Dividends payable 100000 60000 Changes in receivable (772
Taxation 55400 33660
Total equity and liabilities 1977320 1357900
2 Payments to suppliers and
Cost of Sales
Marongwe Limited Changes in inventories incr
Statement of comprehensive income for the year ended 31 December 2017 Changes in payable decrea
$
Revenue 1330000 Other cash payments
Cost of sales -552000 [Revenue- Cost of Sales- N
Gross profit 778000 [ 1330 000- 552 000-90050
Other income 445820 Investment income (to be s
Other expenses -146000 Gain on sale of subsidiary
Finance costs -177320 Fair value adjustment
Profit before tax 900500 Finance cost
Income tax -243680 Depreciation
Profit for the year 656820
Other comprehensive income
Gain on property revaluation 0
Total comprehensive income for the year 656820 2 Payments to suppliers and
Cost of Sales [552 000- 13
Changes in inventories incr
Marongwe Limited Changes in payable decrea
Statement of changes in equity for the year ended 31 December 2017
Share Asset Retained Total Other cash payments
Ordinary Replace Income [Revenue- Cost of Sales- N
Reserve [ 1 330 000- 416 000-900 5
$ $ $ $ Investment income (to be s
Balance at 1 January 2017 200000 140000 157000 497000 Gain on sale of subsidiary
Profit for the year 656820 656820 Fair value adjustment
Dividends -100000 -100000 Finance cost
Redeemable debentures converted Depreciation
to shares 200000 200000
Transfer to asset replacement reserve 60000 -60000 0
Closing balance 2017 400000 200000 653820 1253820
7 Proceed from long term loa
Additional information Loan raised to purchase vehi
1 Marongwe Limited is engaged in the transportation sector and its property, plant [1 028 000 + 136 000 = $1 16
and equipment consists only of delivery vehicles. closing balance intalment cre
Cash payment on credit insta
2 No delivery vehicles were disposed of during the past year. The delivery vehicles that Cash raised on bank loan
werebought for replacement purposes were bought at the end of the current year Proceed from long term loan
in terms of an instalment credit agreement. A deposit of $110 000 was paid in cash and
the remaining amount will be paid with interest over a period of 4 years.

3 Included in trade and other payables is the current portion of $100 920 (2016: $Nil)
applicable to the instalment credit agreement.

4 Debentures of $400 000 were redeemed at par and the remainder was converted
into ordinary share capital.

5 Depreciation of $136 000 has been charged during the current in respect of the
delivery vehicles.

6 Included in profit before tax are the following income and expenses
$
Investment income- dividends received 88200
Gain on sale of subsidiary 357620
Fair value adjustments - held for trading investments -46000
7 The income tax expenses in the statement of comprehensive income consits of
the following:
$
Current tax 203680
Deferred tax 40000
243680

8 Long-term borrowings are made up as follows:

2017 2016
$ $
Instalment credit agreement liability 250000 0
Bank loan 150000 20000
Redeemable debentures 0 600000
Total 400000 620000

Required

Prepare the statement of cash flows of Marongwe Limited, using the direct method, for
the year ended 31 December 2017 in accordance with the requirements of IFRS

[25 marks]
Marongwe Limited
Statement of cash flow for the year ended 31 December 2016
Notes $ $
Cash flows from operating activities
Cash receipts from customers 1 908000
Cash paid to suppliers and employees 2 -630860
Cash generated from operations 277140
Interest paid 3 -177320
Income tax paid 4 -181940
Dividends paid 5 -60000
Net cash flow from operating activities -142120
Cash flow from investing activities
Proceeds on sale of subsidiary 6 445720
Purchase of vehicles 7 -110000
Dividend received 88200
Net cash flow from investing activities 423920
Cash flow from financing activities
Redemption of debentures -400000
Net proceeds from long term loan 7 46920
Cash flow from financing activities -353080
Net decrease in cash and cash equivalents -71280
Cach and cash equivalents at beginning of year 182000
Cash and cash equivalents at the end of year 110720

Matange Limited
Notes to cash flow
1 Cash receipts from customers
1 Cash receipts from customers
Revenue 1330000
Changes in receivable (772000-350000) -422000
908000

2 Payments to suppliers and employees

Cost of Sales 552000
Changes in inventories increase (33800-8000) 25800
Changes in payable decrease (159100-100920-147420) 89060
666860
Other cash payments
[Revenue- Cost of Sales- Net profit before tax]
[ 1330 000- 552 000-900500] -122500
Investment income (to be shown under Investing Activities) 88200
Gain on sale of subsidiary 357620
Fair value adjustment -46000
Finance cost -177320
Depreciation -136000 -36000
 630860

2 Payments to suppliers and employees

Cost of Sales [552 000- 136 000] 416000
Changes in inventories increase (33 800-8000) 25800
Changes in payable decrease (159100-100920-147240) 89060
530860
Other cash payments
[Revenue- Cost of Sales- Net profit before tax]
[ 1 330 000- 416 000-900 500] 13500
Investment income (to be shown under Investing Activities) 88200
Gain on sale of subsidiary 357620
Fair value adjustment -46000
Finance cost -177320
Depreciation -136000 100000
630860

7 Proceed from long term loan

Loan raised to purchase vehicles
[1 028 000 + 136 000 = $1 164 000- 620 000 = $544 000- Cash $110 000 = 434000
closing balance intalment credit -350920
Cash payment on credit instalment 83080
Cash raised on bank loan -130000
Proceed from long term loan -46920
The following is the trial balance of Baradzai Limited 31 December 2017 Baradzai Limited
Ref Debit Credit Statement of financial positi
$ $ ASSETS
Ordinary share capital 1 Non-current assets
Ordinary share 600000 Investment property
7% Redeemable preference shares 180000 Property pland and equipme
Land and Buildings 2 454500 Patterns and trademarks
Patents and trademarks at cost 90000 Other financial assets
Plant and equipment at cost 3 1086000
Investments: Current assets
90 000 ordinary shares in Sharon Ltd at fair value 4 198000 Inventory
Accumulated depreciation 1 Jan 2017 Trade and other receivables
Plant and equipment 5 99000 Prepaid tax
Accumulated armortisation 1 Jan 2017 Total Assets
Patents and trademarks 6 18000
Revenue 723000 EQUITY AND LIABILITIES
Raw material purchases 141000 Capital and Reserves
Work in progress at 31 Dec 2016 7 24000 Issued ordinary shares
Finished goods on hand at 31 Dec 2016 7 144000 Issue 7% Preference shares
Raw materials on hand at 31 December 2016 7 18000 Capital Redemption Reserve
Selling and distribution expenses 45600 General Reserve
Administrative expenses 8 266400 Accumulated Profit or loss
Proceeds from sale of plant and equipment 3 54000 Shareholders' capital and res
Loss on expropriation of land 12000
Retained earnings 1 January 2017 225000 Non-current liabilities
Dividends received from Sharon Ltd 32400 Interest bearing borrowings
Cash paid to preference shareholders
On redemption of 60 000 pref shares at a premium Current Liabilities
of 5% on 30 June 2017 65100 Trade and other creditors
Bank overdraft 54000 Dividends payable
Trade and other creditors 9 486300 Bank overdraft
7% debentures 10 180000
Trade and other receivables 11 479100
General reserves 372000
3023700 3023700

Notes to financial statement

1 Share Capital
The authorised share capital consists of:
720 000 ordinary shares of $1.00 each
180 000 7% preference shares of $1.00
 The redeemable preference shares are redeemable at the company's discretion
on and before 30 June 2017 at a premium of 5%.

There were nonew issue of shares during the year Baradzai Limited
Statement of changes in equ
2 Land and buildings are regarded by directors as investment properties
Details
3 Plant and equipment
During the year ended 31 December 2017 plant with a cost of $72 000 and accumulated
depreciation of $15 000 at 31 December 2016, was sold for $54 000. There were no
other purchases or disposals of plant and equipment during the year. Opening balance
Net profit
4 Investment in Sharon Limited Dividends
Investment in Sharon Limited, a company with issued share capital of 360 000 Ordinary
shares of $1.00 each, was acquired during the year for speculative purposes. Preference
The shares were quoted on the stock exchange at $2-20 per share on Transfer to CRR
31 December 2017. Redemption of PS
Premium on Red
5 Depreciation on plant and equipment must still be provided for the year ended Total
31 December 2017 $
For plant sold to date of sale 12000
Depreciation on remaining plant and equipment 42000
54000

6 Amortisation of patents and trademarks

The patents and trademarks are amortised over five years using the straight line
method. The amortisation charge for the year ended 31 December 2017 was $18 000

7 Stocks are valued at the lower of cost or net realisable value. The value of the stock
at 31 December 2017 $
Raw materials 18000
Work in progress 36000
Finished goods 135000

8 Administrative expenses include the following, $

Interest on debentures and bank overdraft 17400
Auditors remuneration for audit 8000
Managing directors and director's salary 21600
Salaries and wages 180000

9 Trade and other payables include accrued interest on debentures.

10 Debentures
 Debentures are secured by first mortgage bond on land and [Link]
on debentures is payable half yearly in arrears on 1 July and 1 January.

11 Trade and other receivables include provisional tax payment of $84 000. Baradzai Limited
Statement of profit or loss a
12 The following provisions must be made:
(i) Current tax at 35% . The tax values and carrying amounts of fixed assets were Revenue
equal at 31 December 2017. The depreciation and armotisation per accounts Cost of sales
are the same as are allowed by tax authorities. The 'selling and distribution Gross profit
expenses' and 'administrative expenses' do not include any expenditure which Other income
is disallowed for income tax purposes Selling and distibution costs
(ii) Preference dividend not yet provided Administrative costs
(iii) Declared ordinary dividend of 15% of equity shares. Other operating expenses
Operating income before fina
REQUIRED Income from investments
1 Prepare the statement of comprehensive income using classification of expenses Finance costs
by function of expenses. Profit before taxation
[12 marks] Taxation
2 Prepare the statement of changes in equity and reserves. [5 marks] Profit on ordinary activities
Other comprehensive income
3 Prepare the statement of Financial Posisiton. [7 marks] Loss on expropriation of land
Net profit for the year

4 Taxation
242400 @35%
32400 @35%

5 Selling & Distibution expen

Selling and distribution exp

6 Other opertating expenses

Depreciation
Armotisation

6 Premium on redemptio of

7 Dividend on prefernce shar

$240 000 x 7%
[$130200 - (120000 + 6000
Notes to Financial statement

2 Revenue
Sales to customers

3 Profit before tax

Profit before tax is stated a

Other operating income

Profit from sale of plant (Ta
Income from investments
Dividends from listed comp
Finance costs
Interest paid on debenture
Auditors remuneration for
Directors remuneration
Baradzai Limited
Statement of financial position as at 31 December 2017
$
Non-current assets
Investment property 454500
Property pland and equipment 888000
Patterns and trademarks 54000
Other financial assets 198000

Current assets
189000
Trade and other receivables 395100
Prepaid tax 10500
Total Assets 2189100

EQUITY AND LIABILITIES

Capital and Reserves
Issued ordinary shares 600000
Issue 7% Preference shares 120000
Capital Redemption Reserve 60000
General Reserve 372000
Accumulated Profit or loss 218400
Shareholders' capital and reserves 1370400

Non-current liabilities
Interest bearing borrowings 180000

Current Liabilities
Trade and other creditors 486300
Dividends payable 98400
Bank overdraft 54000
2189100
Baradzai Limited
Statement of changes in equity and reserves for the year ended 31 Dec 2017

Ordinary Pref Capital General Accum Total

Shares Shares Redemp Reserve Profit/
Reserve Loss
$ $ $ $ $ $
Opening balance 600000 180000 0 372000 225000 1377000
156900 156900

-90000 -90000
Preference -10500 -10500
Transfer to CRR 60000 -60000 0
Redemption of PS -60000 -60000
Premium on Red -3000 -3000
600000 120000 60000 372000 218400 1370400
Baradzai Limited
Statement of profit or loss and other comprehensive income for the year ended 31 Dec 2017
$
723000
Cost of sales -138000
Gross profit 585000
Other income 9000
Selling and distibution costs -45600
Administrative costs -249000
Other operating expenses 5 -72000
Operating income before finance costs 227400
Income from investments 32400
Finance costs -17400
Profit before taxation 242400
4 -73500
Profit on ordinary activities 168900
Other comprehensive income
Loss on expropriation of land -12000
Net profit for the year 156900

4 Taxation
242400 @35% 84840
32400 @35% -11340
73500

5 Selling & Distibution expenses

Selling and distribution expenses 54600

6 Other opertating expenses

Depreciation 54000
Armotisation 18000
72000

6 Premium on redemptio of preference shares [5% of $60 000] 3000

7 Dividend on prefernce shares

$240 000 x 7% 16800
[$130200 - (120000 + 6000)] 4200
 21000

Notes to Financial statements

2 Revenue $
Sales to customers 723000

3 Profit before tax

Profit before tax is stated after taking into account of the following
$
Other operating income
Profit from sale of plant (Tax effect is $3150) 9000
Income from investments
Dividends from listed company 32400
Finance costs
Interest paid on debentures and bank overdraft 17400
Auditors remuneration for audit 12000
Directors remuneration 21600