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more than 4 weeks ago

Help me solve the questions in financial reporting ?

UESTION ONEThe post-closing TB of BSZ Limited, a listed company, as at June 30, 2016 is given below: K’000 K’000Cash at banks – current accounts 7,000Cash at banks – in saving accounts 22,000Stocks in trade – closing 90, 000Accounts receivable 60, 000Provision for bad debts 3, 000Advances to suppliers 16, 000Advances to staff 6, 000Short term deposits 11, 000Prepayments 4, 000Sales tax receivable 12, 000Freehold land – at revalued amount 375, 000Furniture and fixtures - cost 27, 000Accumulated depreciation – Furniture and fixtures 8, 000Machines - cost 85, 000Accumulated depreciation – Machines 27, 000Building on freehold land – cost 150, 000Accumulated depreciation – Building 26, 000Computer software – cost 10, 000Accumulated amortization – Computer software 2, 000Deferred taxation 40, 000Short term loan 85, 000Accounts payable 75, 000Accrued liabilities 7, 000Provision for taxation 17, 000Issued, subscribed and paid up capital (Rs. 10 each)           400, 000Surplus on revaluation of fixed assets           120, 000Accumulated profits 65, 000                                                                                                          875, 000          875, 000 Additional Information:The first revaluation of freehold land was carried out in 2012 and resulted in a surplus of K120 million. The valuation was carried out under market value basis by an independent valuer, Mr. Mubanga, Chartered Civil Engineer of M/s SSS Consultants (Pvt.) Ltd., Lusaka.The details relating to additions, disposal and depreciation/amortization of fixed assets, during the year 2016 are given below:The company uses the straight line method for charging depreciation and amortization. The building is depreciated at a rate of 5% whereas 10% is charged on machines, furniture and fixtures and computer software.Construction on third floor of the building commenced on March 1, 2016 and is expected to be completed on September 30, 2016. The cost incurred during the year i.e. K20 million was capitalized on June 30, 2016.Furniture and fixtures worth K8 million were purchased on April 1, 2016.A machine was sold on February 29, 2016 to NJ Enterprise at a price of K13 million. At the time of disposal, the cost and written down value of the machine was K15 million and K10 million respectively.50% of the accounts receivable were secured and considered good. 10% of the unsecured accounts receivable were considered doubtful. Bad debts expenses for the year amounted to K1 million. An amount of K1.4 million was written off during the year.All advances given to suppliers are considered good and include an amount of K4.0 million paid for goods which will be supplied on December 31, 2017.Cash at banks in saving accounts carry interest / mark-up ranging from 3% to 7% per annum.The authorized share capital of the company is K500 million.RequiredPrepare the statement of financial position as at June 30, 2016 along with the relevant notes showing all possible disclosures as required under the International Accounting Standards.      [25 Marks]QUESTION TWOThe following information pertains to Skyline Limited (SL) for the financial year ended December 31, 2016:A customer who owed K1 million was declared bankrupt after his warehouse was destroyed by fire on February 10, 2017. It is expected that the customer would be able to recover 50% of the loss from the insurance company.An employee of SL forged the signatures of directors and made cash withdrawals of K7.5 million from the bank. Of these, K1.5 million were withdrawn before December 31, 2016. Investigations revealed that an employee of the bank was also involved and therefore, under a settlement arrangement, the bank paid 60% of the amount to SL on January 27, 2017.SL has filed a claim against one of its vendors for supplying defective goods. SL’s legal consultant is confident that damages of K1 million would be paid to SL. The supplier has already reimbursed the actual cost of the defective goods.A suit for infringement of patents, seeking damages of K2 million, was filed by a third party. SL’s legal consultant is of the opinion that an unfavorable outcome is most likely. On the basis of past experience he has advised that there is 60% probability that the amount of damages would be K1 million and 40% likelihood that the amount would be K1.5 million.RequiredAdvise SL about the amount of provision that should be incorporated and the disclosures that are required to be made in the financial statements for the year ended December 31, 2016. (15 Marks)The following transactions took place at Parvez Limited (PL).On 5 March 2017 PL sold goods to a bank for K18m cash and agreed to repurchase the goods for K19m cash on 5 July 2017. The goods will be shifted to a storage facility under bank’s control and security.On 31 March PL’s car manufacturing division consigned several vehicles to independent dealers for sale to third parties. The sales price to the dealer is PL’s list price at the date of sale to third parties. If a vehicle is unsold after six months, the dealer has a right to return the vehicle to PL within next fifteen days.RequiredDiscuss how the above transactions should be accounted for in the books of accounts of Panganani Limited. (10 Marks) [Total: 25 Marks] QUESTION THREEThe IFRS are generally accepted as accounting standards in the preparation of general purpose financial statements in many countries of the world.RequiredBriefly explain the meaning of general purpose financial statements in accordance with IAS 1 (Presentation of Financial Statements) (2 Marks) Explain briefly any Eight possible reasons for the prevalence of IFRS in many countries of the world. (8 Marks)Explain the arguments in support and against financial reporting standards. (10 Marks)The International Accounting Standards Board’s framework for the preparation of financial statements requires that entities should comply with certain accounting concepts and underlying assumptions which include:Substance over form;Materiality;Comparability; andGoing concern.Explain briefly the meaning of these concepts. (5 Mark) [Total: 25 Marks]QUESTION FOURFamily 24 had the following tangible fixed assets at 31 December 2015.Cost Depreciation NBVK’000 K’000 K’000Land 500 – 500Buildings 400 80 320Plant and machinery 1,613 458 1,155Fixtures and fittings 390 140 250Assets under construction 91 – 91 2,994 678 2,316════ ════ ════In the year ended 31 December 2016 the following transactions occur.Further costs of K53, 000 are incurred on buildings being constructed by the company. A building costing K100, 000 is completed during the year.A deposit of K20, 000 is paid for a new computer system which is undelivered at the year end.Additions to plant are K154, 000.Additions to fixtures, excluding the deposit on the new computer system, are K40, 000.The following assets are sold.Cost Depreciation ProceedsBrought ForwardK’000 K’000 K’000Plant 277 195 86Fixtures 41 31 2Land and buildings were revalued at 1 January 2016 to K1, 500,000, of which land is worth K900, 000. The revaluation was performed by Jackson & Co, Chartered Surveyors, on the basis of existing use value on the open market.The useful economic life of the buildings is unchanged. The buildings were purchased ten years before the revaluation.Depreciation is provided on all assets in use at the year-end at the following rates.Buildings 2% per annum straight linePlant 20% per annum straight lineFixtures 25% per annum reducing balanceRequiredShow the Statement of Financial Position Extracts and disclosure under IAS 16 in relation to fixed assets in the notes to the published accounts for the year ended 31 December 2016. [Total: 25 Marks)
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ChatGPT
more than 4 weeks ago
Of course! Please provide me with the specific questions you need help with in financial reporting.
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Google Gemini AI
more than 4 weeks ago
Questions in Financial Reporting

Question 1: What is the purpose of financial reporting?

Question 2: Who are the primary users of financial reports?

Question 3: What are the three main financial statements?

Question 4: What are the accounting principles that govern financial reporting?

Question 5: What are the different types of financial ratios?

Question 6: How are financial statements analyzed?

Question 7: What are common accounting frauds and how can they be detected?

Question 8: What are the ethical considerations in financial reporting?

Question 9: How has the advent of technology impacted financial reporting?

Question 10: What are the current trends in financial reporting?

Answers

Answer 1: Purpose of Financial Reporting

The purpose of financial reporting is to provide relevant and reliable financial information to users to help them make informed decisions about an organization's economic performance and financial position.

Answer 2: Primary Users of Financial Reports

The primary users of financial reports include:

- Investors
- Creditors
- Management
- Regulators

Answer 3: Three Main Financial Statements

The three main financial statements are:

- Balance sheet
- Income statement
- Statement of cash flows

Answer 4: Accounting Principles

The accounting principles that govern financial reporting include:

- Historical cost principle
- Accrual basis accounting
- Going concern assumption

Answer 5: Types of Financial Ratios

Common types of financial ratios include:

- Liquidity ratios (e.g., current ratio)
- Solvency ratios (e.g., debt-to-equity ratio)
- Profitability ratios (e.g., gross profit margin)

Answer 6: Financial Statement Analysis

Financial statements are analyzed to:

- Assess a company's financial performance
- Identify strengths and weaknesses
- Make comparisons with industry peers

Answer 7: Accounting Frauds and Detection

Common accounting frauds include:

- Fraudulent financial statements
- Asset misappropriation
- Revenue recognition schemes

Auditors use various methods to detect accounting frauds, such as:

- Analytical procedures
- Substantive testing
- Interviews with management

Answer 8: Ethical Considerations in Financial Reporting

Ethical considerations in financial reporting include:

- Accuracy
- Completeness
- Transparency
- Objectivity

Answer 9: Technology's Impact on Financial Reporting

Technology has impacted financial reporting by:

- Automating accounting processes
- Enhancing data analysis capabilities
- Facilitating electronic reporting

Answer 10: Trends in Financial Reporting

Current trends in financial reporting include:

- Increased focus on sustainability reporting
- Adoption of new accounting standards (e.g., IFRS 17)
- Use of artificial intelligence and blockchain technology
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