· web viewmost of quami ltd’s competitors value their inventory using the average cost (avco)...

EXCEL PROFESSIONAL INSTITUTE

WEEKLY ASSIGNMENT

WEEK 4

PRINT, WORK AND SUBMIT YOUR ASSIGNMENT AT NEXT LECTURE(Ignore assignment for courses you have not registered)

1.1 FINANCIAL ACCOUNTING


ASSIGNMENT 4

Question 1Mr. Joy was given an amount of GHS 120,000.00 as his inheritance on January 2017 and decided to use the money run a second hand clothes shop under a business name First Selection Enterprise. On 2nd January 2017 he deposited the entire amount into the business bank account.The following transactions took place during his first month of business; January 2017.

GHSJanuary2: Purchased of goods and paid by cheque 40,000

2: Purchased office premises and paid by cheque 10,0003: Sold goods on credit to Lucky Ent 35,0004: Cash sales banked 60,0005: Bought goods and paid by cheque 17,50015: Cash withdrawn from bank for office use 20,00017: Bought goods from Nyame Ent on credit 35,00021: Paid advertising expenses by cash 2,00025 Received from Lucky Ent a cheque 25,00027: Paid to Nyame Ent by cheque 25,00028: Paid rent by cash 8,00031 Paid salaries by cash 3,500

You are required to:

a. Open Ledger Accounts to record the transactions; and b. Extract a Trial Balance as at 31st January, 2017


1.2 QUANTITATIVE TOOLS IN BUSINESS

ASSIGNMENT 4

Question one

Dodoo Ltd. has decided to set up a sinking fund to replace an asset in 6 years’ time. The value of the fund after 6 years will be GHS 80,000 and the fund is expected to earn interest at the rate of 8% per annum.

The asset to be replaced has been bought for GHS 55,000 and it is to be depreciated on a straight-line basis with scrap value of GHS 7,000.

Required:a. What must the annual payment into the fund, commencing one year from

now, with a final payment at year 6b. What must the annual payment into the fund, commencing now, with a final

payment at year 6c. Prepare a schedule showing the WDV of the existing assets and the growth of

the fund


1.3 BUSINESS AND CORPORATE LAWASSIGNMENT 4

1) Explain the types of companies known to you under the Companies Act, 1963 (Act 179) (12 marks)

2) ‘A promise to keep an offer open for a specified period can be withdrawn by the promisor before expiration of the period’

Required: Explain whether this is a true position of the law in Ghana now (8 marks)

3) A partner in a firm in the course of an authorized duty incurred liability of which he/she made personal payment. The partner later made claims of re-imbursement of expenses incurred. At a meeting of the partners of the firm, the re-imbursement was declined. Required: Explain whether the partner has any rights to claim re-imbursement. (7 marks)

4) Three friends pooled their resources to form a company. After some time and while the company was running, differences arose among them. Each claimed ownership of the company.

Required: Explain the concept of legal personality of a Company in the light of the above facts (7 marks)

5) Distinguish between invitation to treat and an offer. Identify TWO examples of invitation to treat. (8 marks)

6) Zealow & Associates is a consultancy firm of Accountants. Kingsley Gyeabour, a prospective business man has decided to establish a fuel filling station. He therefore sought the professional advice of the consultancy firm. The firm advised that based on their assessment, the turnover for a day’s sale will be 1200 gallons of ordinary petrol and 1000 gallons of diesel. Relying on the statement of the firm, Gyeabour established the filling station. He later realized that the actual turnover was 100 and 200 for petrol and diesel respectively. Gyeabour intends to sue and seeks your advice. Required: Advise Gyeabour.

7) The Constitution of the Republic of Ghana, 1992 enshrines the fundamental human rights and freedoms of persons in the territorial jurisdiction of the Republic of Ghana. State TWO situations where the Republic may interfere with the rights and freedoms of persons. (10 marks


2.1 FINANCIAL REPORTINGASSIGNMENT 4

QUESTION 1

I. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors contains

guidance on the use of accounting policies and accounting estimates.

Required:

Explain the basis on which the management of an entity must select its accounting policies and

distinguish, with an example, between changes in accounting policies and changes in accounting

estimates.

II. The directors of Quami Ltd are disappointed by the draft profit for the year ended 30

September 2017. The company’s assistant accountant has suggested one area where she

believes the reported profit may be improved:

Most of Quami Ltd’s competitors value their inventory using the average cost (AVCO)

basis, whereas Quami Ltd uses the first in first out (FIFO) basis. The value of Quami

Ltd’s inventory at 30 September 2017 (on the FIFO basis) is GHS20 million, however on

the AVCO basis it would be valued at GHS18 million. By adopting the same method

(AVCO) as its competitors, the assistant accountant says the company would improve its

profit for the year ended 30 September 2017 by GHS2 million. Quami Ltd’s inventory at

30 September 2016 was reported as GHS15 million, however on the AVCO basis it

would have been reported asGHS13.4 million.

Required:


Comment on the acceptability of the assistant accountant’s suggestion and quantify how

it would affect the financial statements if it were implemented under IFRS.

QUESTION 2

Consar specializes in long-term contracts. In each contract, Consar is entitled to receive

payments regarding the progress of the work, so revenue should be recognized over time. One of

its contracts, with Better Homes, is to build a complex of luxury flats. The price agreed for the

contract is GHS40 million and its scheduled date of completion is 31 December 2017. Details of

the contract to 31 March 2016 are:

Commencement date 1 July 2015

Contract costs: GHS000

Architects’ and surveyors’ fees 500

Materials delivered to site 2,800

Direct labour costs 3,500

Overheads are apportioned at 40% of direct labour costs

Estimated cost to complete (excluding depreciation – see below) 14,800

Plant and machinery used exclusively on the contract cost GHS3,600,000 on 1 July 2015. At the

end of the contract it is expected to be transferred to a different contract at a value of

GHS600,000. Depreciation is to be based on a time apportioned basis. Better Homes paid a

progress payment of GHS12,800,000 to Consar on 31 March 2016.

At 31 March 2017 the details for the construction contract have been summarized as:


GHS

000

Contract costs to date (i.e. since the start of the contract) excluding all depreciation 20,400

Estimated cost to complete (excluding depreciation) 6,600

A further progress payment of GHS16,200,000 was received on 31 March 2017. Consar accrues

profit on its construction contracts using the percentage of completion basis as measured by the

percentage of the cost to date compared to the total estimated contract cost.

Required:

Prepare extracts of the financial statements of Consar for the contract with Better Homes for:

I. the year to 31 March 2016

II. the year to 31 March 2017.

MANAGEMENT ACCOUNTING


ASSIGNMENT 4Question 1: EasiITEasiIT Ltd operates a standard costing system. The company provides the following cost and revenue extract for the year 2016 for their product, Easistick

Budgeted ActualSales value 3,000,000 3,020,80

0Sales price (per unit) 120 118Production (units) 25,000 26,000Opening Inventory (units) 200 300Fixed Production overheads 300,000 320,000Fixed Administration overheads 40,000 50,000Direct material per unit 20 20Direct labour 48 48Variable production overheads 24 24

Requireda. Prepare profit statement for EasiIT Ltd using marginal costing and full costing technique10 marksb. Reconcile the two profits 4 marksc. If the company experience 20% growth in sales, by what percentage will their profit increase 6 marks

Question 2: Flexing Refinery

The following information relates to process 3 of a three-stage production process for the month of Feb 2017 for Flexing refinery.

GHCOpening Inventory- 300 units complete as to:Materials from Process 2 100% 13,200Added material 90% 3,450

Labour 80% 1,620Production Overhead 80% 2,430


20,700

In Feb 2017, a further 1800 units were transferred from Process 2 at a valuation of GHC81,000. Added materials amounted to GHC19,800 and direct labour to GHC9,810. Production overhead is absorbed at the rate of 150% of direct labour cost. Closing inventory at 28th February 2017 amounted to 450 units complete as to:

Required

a. Prepare process 3 account for Feb 2017 using the FIFO method[15 marks]

b. State three similarities and two differences between job costing and contract costing 5 marks

40 marks

2.3 AUDIT AND ASSURANCEASSIGNMENT 4

Materials from Process 2 100%Added material 60%Labour and overhead 50%


You are a manager in the audit firm of Lincel Ltd.; and this is your first time you have worked on one of the firm’s established clients, Bruce Ltd.. The main activity of Bruce Ltd. is providing investment advice to individuals regarding saving for retirement, purchase of shares and securities and investing in tax efficient savings schemes. Bruce is regulated by the relevant financial services authority.

You have been asked to start the audit planning for Bruce Ltd., by Mr. Soon, a partner in Lincel Ltd.. Mr. Soon has been the engagement partner for Bruce Ltd., for the past nine years and so has excellent knowledge of the client. Mr. Soon has informed you that he would like his daughter Afi to be part of the audit team this year; Afi is currently studying for her first set of knowledge level papers for her ICAG qualification. Mr. Soon also informs you that Mr. Fac, the audit senior, received investment advice from Bruce Ltd. during the year and intends to do the same next year.

In an initial meeting with the finance director of Bruce Ltd., you learnt that the audit team will not be entertained on Bruce Ltd.’s yacht this year as this could appear to be an attempt to influence the opinion of the audit. Instead, he has arranged a balloon flight costing less than one-tenth of the expenses of using the yacht and hopes this will be acceptable. The director also states that the fee for taxation services this year should be based on a percentage of tax saved and trust that your firm will accept a fixed fee for representing Bruce Ltd. in a dispute regarding the amount of sales tax payable to the taxation authorities.

Required:

i) Explain the ethical threats which may affect the auditor of Bruce Ltd.

ii) For each ethical threat, discuss how the effect of the threat can be mitigated.

(15 marks)

2.4 FINANCIAL MANAGEMENTASSIGNMENT 4

1. KL Games uses wooden boxes as the container for a product that it makes. It has a requirement for 40 wooden boxes a day, for each of the 250 working days (50


weeks) in each year. The boxes are currently bought in batches of 200 from a local supplier for GHS2 each. The cost of ordering the boxes from the local supplier is GHS65, regardless of the size of the order.

The annual inventory holding cost is 25% of the inventory value.

Required(a) Calculate the economic order quantity and the frequency of placing orders.Calculate the annual saving in costs that would be obtained by using the EOQ as the order size instead of buying in batches of 200 boxes per order.

(b) Recommend whether or not it is worthwhile to make use of the local supplier's new quantity discount scheme below.

Order quantity Discountboxes0 – 999 0%1,000 – 4,999 5%5,000 10%

2. DON is a small manufacturing company. Its summarized accounts for the last two years are presented below:

Balance sheets as at 31st MarchYear 5 Year 6

GHS000 GHS000 GHS000 GHS000

Fixed assets 820 1,000Current assetsInventory 340 420Trade receivables 360 570Cash 10 0

710 990 Total assets 1,530 1,990

Equity and liabilitiesEquity shares of GHS0.25 400

400Accumulated profits 450

530Total equity 850 930Medium‐term bank loan 200 200Current liabilitiesBank overdraft 140 250Trade payables 280 510Other payables 60 100

480 860


Total equity and liabilities 1,530 1,990

Income statements for the year ending 31st March:Year 5 Year

6GHS000 GHS000

Sales 1,800 2,900Gross profit 210 260Profit before tax 120 160Taxation 30 40

90 120

DON paid dividends of GHS 40,000 each year to the equity shareholders.

RequiredEvaluate whether DON is over-trading and recommend ways to remedy overtrading.

Over-trading is defined as expanding a business quickly with insufficient long-term finance, and relying excessively on short-term sources of finance. A business entity is therefore over-trading when it attempts to carry on a growing volume of business with insufficient working capital.

2.5. PUBLIC SECTOR ACCOUNTINGASSIGNMENT 4

QUESTION ONE


During the course of the financial year, the Minister under the authority of the president shall review the Budget. Where in the course of the review, it is found that the amount of money appropriated by the Appropriation Act for any purpose is insufficient, a supplementary budget estimate showing the sum required shall be laid before Parliament for approval.

1. State and explain three (3) circumstances that may give rise to the request for supplementary estimate. (6 marks)

(b) State the duration of appropriation and warrants. (2 marks)

2. Explain the term budget instruction & its content

3. Write short notes on the following terms as used in Public sector Accounting.

(i) Notification of revised estimate

(ii) Evasion of expenditure control

(iii) Progressive Tax

4. Government fiscal policy is the use of taxation and other budgetary measures to regulate the national economy.

Required:(i)State three (3 objectives of government fiscal policy.(3 marks)(ii) State the use of three (3) fiscal policy instruments to regulate the national economy.

II.6 CORPORATE STRATEGY, ETHICS AND GOVERNANCE ASSIGNMENT SET 4QUESTION ONE


Eland – the countryIII. Eland is an industrial country with a relatively high standard of living. Most commercial and

domestic consumers have computers and printers. However, the economic performance of the country has declined for the last seven years and there are large areas of unemployment and poverty. The economic problems of the country have led to a significant decline in tax revenues and so the government has asked its own departments (and the public sector as a whole) to demonstrate value-for-money in their purchases. The government is also considering privatising some of its departments to save money. The Department of Revenue Collections (DoRC), which is responsible for collecting tax payments in the country, has been identified as a possible candidate for future privatisation.

IV. The people of Eland are enthusiastic about the principles of reuse and recycling. There has been a notable rise in the number of green consumers. Mindful of this, and aware of the economic benefits it delivers, the government is also encouraging its departments (and the economy as a whole) to recycle and reuse products.

V. The printer consumables marketVI. There is a significant computer printer market in Eland, dominated by Original Equipment

Manufacturers (OEMs). Many of these are household names such as Landy, IPD and Bell-Tech. OEMs also dominate the printer consumables market, which is worth about $200m per year. However, there are also independent companies who only supply the printer consumables (printer cartridges and toner cartridges) market, offering prices which significantly undercut the OEMs. The printer and printer consumables markets are both technology driven, with companies constantly looking for innovations which make printing better and cheaper.

VII. The emergence of independent printer consumables suppliers has not been welcomed by the OEMs. They have brought legal actions against the independents in an attempt to make refilling their branded products illegal. However, they have not succeeded. The government in Eland has ruled this to be anti-competitive. However, the OEMs continue to promote their case with political parties, claiming that they need the revenues from printer consumables to fund innovations and advances in printer technology. They also regularly issue statements which worry consumers, claiming that printers may be harmed by using ink which is not from the OEM. Landy has been particularly aggressive in this regard. It continues to pursue legal claims against the independents and has also issued a statement which makes clear that if one of their printers is found to be faulty whilst using non-Landy ink, then the printer’s warranty will be void.

VIII. It is relatively easy to enter the independent printer consumables market and so companies tend to compete on price. There is little brand loyalty amongst consumers, who regularly change their choice of brand. The independent companies constantly focus on finding technologies which make the print cartridges cheaper to buy and are of better quality. Used print cartridges can be reused for their material alone (recycled), or reused by being refilled with ink. However, there are still printing products on the market which can only be used once, or are expensive to recycle.

IX. ReInk CoX. ReInk Co (ReInk) was formed five years ago by Dexter Black, a technology entrepreneur with

expertise in printer technologies. He still remains the only shareholder. He set up ReInk to


produce and market his designs for reusable ink systems. ReInk is focused primarily on the reuse of printer cartridges by using a process to refill them with ink.

XI. Key technical elements of ReInk’s innovative process for refilling cartridges have been patented, but in Eland, such patents only last for eight years. The current patent has a further six years to run. The company was established in a declining industrial town in Eland with high unemployment. Government grants were available for two years to help support hi-tech industry and purpose built factories were cheap, readily available and, initially, rent free. Although the company now pays rent for its factory and offices, the annual rent is relatively low. The area has a good supply of people suitable for administrative and factory jobs in the company. ReInk’s location is also close to an attractive area of countryside, which Dexter felt would appeal to the technology experts needed to help him exploit and develop his printer technology ideas. It would help provide a good standard of living and relatively cheap property and so he could attract good staff for modest salaries. His assumption proved correct. He has been able to attract an expert team of technologists who have helped him develop a unique approach to printer cartridge reuse. As one of them commented, ‘I took a pay cut to come here. But now I can afford a bigger house and my children can breathe fresh country air.’

XII. ReInk is an attractive company to work for and the team of technologists are enthusiastic about working with such an acknowledged industry expert, where technical innovation is recognised and rewarded. Both his staff and competitors acknowledge Dexter’s technical expertise, but his commercial expertise is less well regarded. Dexter recognised this as a weakness and it was the prime driver behind his decision to recruit two new directors to the company.

XIII. To fund the development of the printer refilling technology, ReInk has needed significant bank loans and a substantial overdraft. Although the company has made a small operating profit for the last three years, interest repayments have meant that it has recorded a loss every year. It currently has revenues of $6m per year, 20% of which are derived from a long-term contract with the DoRC. ReInk is not one of the independent companies currently being sued by Landy.

XIV. To help him address these continuing financial losses, Dexter recently recruited a sales director to attempt to increase revenue through improved sales and marketing and a human resources (HR) director to review and improve staffing practices. Together with the financial director and Dexter himself, they make up the board of ReInk. Although both of these recently appointed directors had the commercial expertise which Dexter lacked, neither has been a success. The technologists within the company are particularly scathing about the two new appointments. They claim that the sales director has never really made the effort to understand the market and that ‘he does not really understand the product we are selling’. There has been no evidence so far that he has been able to generate more sales revenue. The HR director upset the whole company by introducing indiscriminate cost cutting and attempting to regrade staff to reduce staff costs. The technologists believe that the HR director ‘clearly has no experience of dealing with professional staff’.

XV. Despite the appointment of the new sales director, ReInk is still not recognised by the majority of the consumers who were surveyed in a recent brand awareness survey. No significant marketing is undertaken outside of the development and promotion of ReInk’s website. In


search results, it often appears alongside companies which appear to offer similar services and usually have very similar trading names.

XVI. ReInk continues to struggle financially, and its bank, Firmsure, in response to its own financial difficulties, has recently reduced ReInk’s overdraft facility, creating a cash flow crisis which threatens the company’s very existence. At present, it does not have enough cash to meet next month’s payroll payments. The employees of the company are well aware of the company’s financial position and although they are proud of the company’s technical achievements, they believe that the company may soon go into administration and so many are actively looking for other jobs in the industry or in the area. A combination of poor management (particularly from the new directors) and the company’s uncertain financial position has demotivated many of the employees, particularly the technologists who have created the company’s vital technical edge over its competitors.

XVII. Vi Ventures (VV)XVIII. Vi Ventures are venture capitalists who inject money and management expertise into struggling

companies, in exchange for a certain degree of control, ownership and dividend reward. They have acknowledged financial and management competencies which they have used in a variety of commercial environments. They are experienced change managers. VV have been introduced to ReInk by Firmsure and they are considering some form of involvement. Actual arrangements are still under consideration and will only be discussed after they have made their standard assessment of ReInk’s strategic position. This standard assessment report contains two elements:

XIX. – A SWOT analysisXX. – A TOWS matrix analysis

XXI. REQUIRED:XXII. (A) Undertakes a SWOT analysis of ReInk Co. (20 marks)

XXIII. (B) And, in the light of your analysis above, recommends possible strategic options for each quadrant of a TOWS matrix of ReInk Co. (12 marks)

3.1 CORPORATE REPORTINGASSIGNMENT 3


3.2 ADVANCED AUDIT AND ASSURANCE

ASIGNMENT 4QUESTION 1

You are the partner responsible for the audit of ABC Co, for the year ended 30th April, 2014. The final audit has been completed and you have asked the


audit manager to draft the audit report. The manager is aware that there is guidance for auditors relating to audit report in ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report. The manager has asked for your assistance in this matter.

Required:I. Define an ‘Emphasis of Matter paragraph’ and explain, providing

examples, the use of such a paragraph.

II. Define an ‘Other Matter paragraph’ and explain, providing examples, the use of such a Paragraph.

Note. You are not required to produce draft paragraphs

Question 2You are also responsible for providing direction to more junior members of the audit department of your firm on technical matters. Several recent recruits have asked for guidance in the area of auditor’s liability. They are keen to understand how an audit firm can reduce its exposure to claims of negligence. They have also heard that in some countries, it is possible to restrict liability by making a liability limitation agreement with an audit client. Required:Explain five methods that may be used by an audit firm to reduce exposure to litigation claims.

(20 marks)

3.3 ADVANCED FINANCIAL MANAGEMENTASSIGNMENT 4

Question 1


A company is considering a project with a small positive NPV of GHC3m but there is a possibility of further expansion using the technologies developed for the initial project. The expansion would involve undertaking a second project in four years’ time. Currently, the present values of the cash flows of the second project are estimated to be GHC90m and its estimated cost in four years is expected to be GHC140m. The standard deviation of the project’s cash flows is likely to be 40% and the risk free rate of return is currently 5%.

Evaluate and advise on the acceptability of the proposed project using Black Scholes pricing option.

Question 2

Duck Co is considering a five-year project with an initial cost of GHC37,500,000 and has estimated the present values of the project’s cash flows as follows:

Year 1 2 3 4 5

Present values(GHC 000s) 1,496.9 4,938.8 9,946.5 7,064.2 13,602.9

Swan Co has approached Duck Co and offered to buy the entire project for GHC28m at the start of year three. The risk free rate of return is 4%. Duck Co’s finance director is of the opinion that there are many uncertainties surrounding the project and has assessed that the cash flows can vary by a standard deviation of as much as 35% because of these uncertainties.

Should the project be accepted using Black Scholes pricing option?

3.4 TAXATION AND FISCAL POLICYASSIGNMENT 4


Question one

Good Food Manufacturing Company Ltd, a self-assessed tax payer with the Large Taxpayer

Office (LTO) of the Ghana Revenue Authority estimated its chargeable income for the

assessment year 2017 to be GH¢45,000,000. The company introduced product which was highly

patronage by old and new customers in April 2017 that led to increase production and sales. This

has led to revision its estimated chargeable income to GH¢60,000,000 in May 2017.

In July, one of production plants was shut down due to major technical problem. This

necessitated revision of chargeable income to GH¢48,000,000

In November the same year after the third quarter interim accounts, the Directors were advised

by the Auditors to adjust their chargeable income to avoid an imposition of a penalty by the

LTO. This was adhered to and subsequently revised the estimate further to GH¢75,000,000.

The company submitted its 2017 annual returns on due date of 31st March 2018 and posted

actual chargeable income of GH¢140,000,000.

Required:

(a) Compute the installment payment for the four (4) quarters in the assessment year 2017.

(16 marks)

(b) Compute any penalty payable by the company.

(4 marks)

(c) Determine the outstanding tax payable by the company assuming all the installment payments

were made on due date.

Please note the following:

(i) The company’s basis period is 1st January to 31st December.

(ii) The corporate tax rate is 25%

Question Two

a. Highlight three circumstances, the Commissioner- General may by notice in writing,

cancel a taxpayer identification number or tax clearance certificate issued.

b. A tax that has been assessed may be remitted by the Commissioner- General on grounds

of impossibility of collection the tax.


Explain the circumstance under which tax may be remitted on the grounds of

impossibility.

c. The Commissioner–General may serve a notice in writing on a third party debtor where

taxpayer fails to pay tax on the due date. State the amount considers by the ACT as an

amount of money to be owed to a taxpayer by third party debtor.

· web viewmost of quami ltd’s competitors value their inventory using the average cost (avco)...

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