Question 1
ICAN
•
2021
•
FINANCIAL REPORTING
•
mixed
Case Stimulus
The following is the trial balance of Almajiri Nigeria Limited as at September 30, 2018
N‟m N‟m
Revenue 60,000
Cost of sales 40,800
Distribution costs 2,900
Administrative expenses 4,440
Interest on bank borrowings 40
Research and development costs 1,720
Leasehold property (at valuation Oct. 1, 2017) 10,000
Plant and equipment (at cost) 15,320
Plant and equipment (accum. depr. at Oct. 1, 2017) 4,920
Capitalised development expenditure (Oct. 1, 2017) 4,000
Development expenditure (accum. amortiz. at Oct. 1, 2017) 1,200
Closing inventory (30 Sept. 2018) 4,000
Trade receivables 8,620
Bank 260
Trade payables & provisions 4,760
Preference dividend paid 160
Dividend paid on ordinary shares 1,200
Ordinary shares at 25k each 10,000
8% Redeemable preference shares at N1 each (year 2020) 4,000
Retained earnings brought forward 4,900
Deferred tax 1,160
Leasehold property revaluation reserve -- 2,000
93,200 93,200
The following information were extracted from the records of Almajiri Nigeria Limited.
Additional Information
(i) One of the reputable customers of Almajiri Nigeria Limited sued the company for N400 million for breach of contract over a cancelled order. Almajiri Nigeria Limited obtained a legal opinion that there is 20% chance that Almajiri will lose the case. Accordingly, it has provided for N80 million (N400 million x 20%) included in administrative expenses in respect of the claim. The unrecoverable legal cost of defending the action was estimated at N20 million and these have not been provided for as the legal action will not go to court until next year.
(ii) The directors of the Company have estimated the provision for income tax for the year ended September 30, 2018 at N2,280 million. The required deferred tax provision at September 30, is N1,200 million.
(iii) The redeemable preference shares were issued on April 1, 2018 at par. They are redeemable at a large premium which gives them an effective finance cost of 12% per annum.
(iv) The leasehold property had a remaining life of 20 years at October 1, 2017. The company‟s policy is to revalue its property at each year end and as at September 30, 2018 it was revalued at N8,600 million.
(v) On October 1, 2017 an item of plant and equipment was disposed of for N500 million cash. The proceeds have been treated as revenue by the company. The plant is still included in the company‟s trial balance figure at the cost of N1,600 million and accumulated depreciation of N800 million (to date of disposal). All plants and equipment are depreciated at 20% per annum using reducing balance method. Depreciation and amortisation of all non-current assets are charged to cost of sales.
(vi) In addition to capitalised development expenditure of N4,000 million further research and development cost were incurred on a new project which commenced on October 1, 2017. The research stage of the new project lasted until December 31, 2017 and incurred N280 million costs, from that date the project incurred development cost of N160 million per month. On April 1, 2018 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development as at September 30, 2018.
Requirements
(
a
)
Statement of profit or loss and other comprehensive income for the year ended September 30, 2018.
(
b
)
Statement of changes in equity for the year ended September 30, 2018.
(
c
)
Statement of movement in property, plant and equipment to be included in published financial statements.
(
d
)
Statement of financial position as at September 30, 2018.
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About This Question
This is
Ican
2021
Financial Reporting
Question 1.
It is one of the
mixed
questions from the
2021
Ican
Financial Reporting
examination.