Ican 2024 Financial Reporting Question 1

Practice mixed question 1 from the 2024 Ican Financial Reporting examination.

Ican 2024 Financial Reporting Mixed
Question 1 ICAN • 2024 • FINANCIAL REPORTING • mixed
Case Stimulus
Badary PLC statement of financial position as at March 31, 2021 Assets: 31-03-21 31-03-20 Non-current assets: N'000 N'000 Property, plant and equipment 350,000 110,000 Investments 60,000 30,000 410,000 140,000 Current assets: Inventories 295,000 120,000 Trade receivables 90,000 60,000 Bank 15,000 40,000 400,000 220,000 Total assets 810,000 360,000 Equity and liabilities Ordinary share capital of 80 kobo per share 220,000 120,000 Share premium 60,000 30,000 Retained earnings 280,000 119,000 560,000 269,000 Non-current liabilities: 10% Redeemable loan notes 50,000 10,000 Current liabilities: Trade payables 65,000 14,000 Taxation 70,000 12,000 Bank overdraft 25,000 5,000 Accrued expenses 40,000 50,000 200,000 81,000 Total liabilities 250,000 91,000 Total equity and liabilities 810,000 360,000 --- PAGE BREAK --- Statement of profit or loss for the year ended March 31, 2021 N' 000 Revenue 490,000 Cost of sales (222,000) Gross profit 268,000 Administrative expenses (90,000) Distribution cost (40,000) Finance cost (5,000) Dividend received 153,500 18,500 Profit before taxation 286,500 Income tax expense (70,000) Profit for the year 216,500 Additional Information i. During the year ended March 31, 2021 plant and equipment with a carrying amount of N40,000,000 was sold for N55,000,000. The profit or loss on disposal was charged to distribution expenses. (ii) Dividend of 2 kobo per share was paid in the year ended March 31, 2021 and there were also bonus issues. (iii) Depreciation charged for the year was N10,000,000 on furniture and N30,000,000 on plant and equipment. (iv) During the year, an investment which cost N12,500,000 some years ago was disposed for N20,000,000. The profit or loss on disposal was charged to administrative expenses. (v) Dividends received were from investment in shares and immediate disposal of rights issue from the investment in shares in a blue-chip company.

Requirements

( a )
Prepare statement of cash flows of Badary Plc for the year ended March 31, 2021 using direct method in accordance with IAS 7.
( b )
Discuss the profitability, gearing and investors’ stake in Badary Plc and recommend strategies for improving or sustaining them.

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About This Question

This is Ican 2024 Financial Reporting Question 1. It is one of the mixed questions from the 2024 Ican Financial Reporting examination.

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