Note 1

Lease
Incremental Borrowing rate
Implicit Borrowing rate
Economic useful life
Lease term

10%
10%
10 years
10 years

Present value of monthly lease payment

Lease payment x PVIFA
50,000
x

6.145

Amortisation Schedule
Monthly Payment
Interest (10%)

Date

307,250

Principal

1-Jan-14
31-Dec-14
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
31-Dec-20
31-Dec-21

50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000

30,725
28,798
26,677
24,345
21,780
18,958
15,853
12,439

19,275
21,202
23,323
25,655
28,220
31,042
34,147
37,561

31-Dec-22
31-Dec-23

50,000
50,000

8,683
4,551

41,317
45,449

Journal Entry
DR
Jan. 1, 2014

Leased Plant & Machinery

Leased Obligation

Dec. 31, 2014

Interest expense
Lease Obligation
Bank

To remove Lease
Dec. 31, 2022

Note 2
Rights Issue

Lease Obligation
Provision for depreciation
Lease Plant & Machinery

307,250

30,725
19,275

45,508
261,742

1. Number of Ordinary shares

2,000,000/ 50 = 4,000,000
2. Rights Issue
1/4 x 4,000,000 = 1,000,000
Journal Entry
DR
Suspense ( 0.72 x 1,000,000)
Share Capital (0.50 x 1, 000,000)
Share Premium (0.22 x 1,000,000)

CR
720,000
500,000
220,000

Note 10

Depreciation of Property: 25%,25%

Depreciation: Fixtures & Fittings 80%, 20%
Office Equipment:70%,30%
Motor Vehicle 100%
Legal & Professional fees: 65%,35%
Advertising Expense
Entertainment Expense: 90%,10%
Telephone:80%,20%
Miscellaneous Admin Expense
Bad debts
Office salary
Office supply
Provision for bad debts
Sales salaries expense
Amortization- Patent
Amortization- Copyright
Training Cost
Carriage outwards
Miscellaneous selling expense

Administrative Distribution
Expense
Cost
25,000
25,000
280,000
70,000
227,500
97,500
275,000
34,125
18,375
43,500
7,650
850
33,200
8,300
37,500
300,000
250,000
26,500
(172,500)
178,500
32,500
27,500
27,500
5,250
17,500
1,108,975
767,275

Note 11
Debenture

$1,750,000 Term= 3 years

1. Separate equity and Liability elements

3 years interest ( $1,750,000 x 2.402x 8%)

$
336,280

Principal/ Redemption ($1,750,000 x 0.712)

Total value of the liability
Equity element ( balancing figure)
Proceeds of Loan

1,246,000
1,582,280
167,720
1,750,000

2. Loan Balance( Effective interest method)

$
Liability element

1,582,280

Finance cost ( interest incurred)

(12% x 1,582,280)

189,874

Interest paid (8% x 1,1750,000)

carrying value as at 31 December 2014

(140,000)
1,632,154

3. Statement of Profit or Loss

Finance Cost (W2)

189,874

Statement of Financial Position

Equity - option to convert (W1)

167,720

Non- Current Liabilities

8% Convertible loan

1,632,154

Note 12
Discontinued Operations
$
Revenue
Net Assets

1,000,000
(800,000)

Gross Profit
Operating Expenses

200,000
(300,000)

Redundancy

(180,000)

Profit/(Loss) from
Operations

(280,000)

Miscellaneous Admin Expenses- Discontinued Operations

317,500
-

(280,000)

37,500

Note 3
Revaluation Calculation
Revaluation Amount
Less NBV @ date of revaluation
Revaluation Surplus
NBV @ date of revaluation (End of Year)
Cost ( Property)
Less Depreciation (4,700,000/47)

Cost of Tangible Assets

PV Balance
307,250
287,975
266,773
243,450
217,795
189,575
158,533
124,386
86,825
45,508
-

CR
307,250

Depreciatio

Fixtures & Fittings

Office Equipment
Motor Vehicle

Patent
Copyright

0.1
0.1
0.1
Amortization
325,000
/
275,000
/

Note 4
Purchases
Less Development cost

5,225,000
(500,000)
4,725,000

Note 5
According to IAS 38 Intangible Asset- the skill of employees, arising o
unlikely to be recognisable as an intangible asset, because an entity
Note 8

50,000

307,250

Accounts Receivables
Balance as per trial balance
Amount Paid
New Balance
Bad Debt
Balance as per trial balance
Bad debt incurred

1,377,500
(350,000)
1,027,500

100,000
200,000
300,000

Retained Earnings
balance as per trial balance
Prior period adjustment
Restated balance

2,377,750
(150,000)
2,227,750

Note 9
Provision for bad debt
10% x New Accounts Receivable
0.1
x
1,027,500
Decrease in Provision for bad debt
Provision from trial balance - Adjustment
275,000
102,750

Accounts Receivables
New Balance
Less Provision for bad debt

1,027,500
(102,750)
924,750

Note 13
Journal Entry
DR
General Reserve
Retained Earnings

CR
200,000
200,000

Workings:
1. Finance Cost

Interest Paid
8% Convertible Loan interest
Bank 5% x 4,750,000
6% Preference share (6% x 1,000,000)

2. Revenue
Sales
Less return inwards
Less discount allowed

3. Cost of Sales

30,725
189,874
237,500
60,000
518,099

$
13,586,750
(410,000)
13,176,750
(3,000)
13,173,750
$

Opening stocks
Purchases(5,225,000 - 500,000)
Carriage inwards
Returns outwards
Goods available for sale
Closing stock

925,000
4,725,000
365,000
(250,000)
5,765,000
(854,300)
4,910,700

Discount received

(2,750)

Depreciation of financial lease

Depreciation of Property

30,725
50,000
4,988,675

4. Investment
Investment in Government bonds
Investments, NCB
Investment in Hanson Inc. stock

450,000
425,000
1,500,000
2,375,000

5. Share Capital shares

Ordinary shares capital (2,000,000/0.50)
Right Issue (1/4 x 4,000,000)

4,000,000
1,000,000
5,000,000

6. Property, Plant & Equipment

Cost:
At Start

Fixtures &
Motor
Fittings
Property
Vehicle
3,500,000
5,500,000
2,750,000

Revaluation
Surplus
3,500,000

1,400,000
6,900,000

2,750,000

735,000

500,000

577,500

350,000
1,085,000
2,415,000

100,000
600,000
6,300,000

275,000
852,500
1,897,500

Depreciation:
At Start
Charge for year

7. Other income
income from tax exempt bonds
Rent received
Royalty received

$
7,500
77,500
198,250

Commission received

75,000
358,250

6,000,000
(4,600,000)
1,400,000

OCI

100,000
50% Cos- $50,000
25% Distribution- $25,000
25% Administrative-$25,000

4,700,000
(100,000)
4,600,000
Depreciation
x
x
x

3,500,000
3,250,000
2,750,000

350,000
325,000
275,000

ation
10
10

32,500
27,500

e skill of employees, arising out of the benefits of training costs, are most
gible asset, because an entity does not control the future actions of its staff.

102,750

172,250

BS

Office
P&M
Equipment Leased
Toal
3,250,000
307,250
15,000,000

3,250,000

307,250

227,500 325,000
552,500
2,697,500

1,400,000
16,400,000

2,040,000
30,725
30,725
276,525

1,080,725
3,120,725
13,586,525

Omega Corporation
Statement of Profit or Loss and other comprehensive Income
for the year ended December 31, 2014
$
Revenue

13,173,750

Cost of Sales

(4,988,675)

Gross Profit

8,185,075

Other Income

358,250

Distribution Cost

(767,275)

Administration Expense

(1,108,975)

Other Expense

Finance Cost

(518,099)

Share of Profit from associates

250,000

Profit before Tax

6,398,976

Income Tax expense

(700,000)

Profit for the year for continuing operations

5,698,976

Loss from Discontinued Operation- Warehouse

Profit for the year

(280,000)
5,418,976

Other Comprehensive Income:

Revaluation Gain

1,400,000

Total Comprehensive Income

6,818,976
Omega Corporation

Statement of changes in Equity for the year ended December 31

Particulars

Share Capital

Share
Premium

Bal. @ start

2,000,000

325,000

Rights Issue

500,000

220,000

General
Reserve
225,000

Revaluation Surplus
Transfer

Revaluation
Reserve
0
1,400,000

200,000

Equity to convert
Dividend
Profit for the year

1,400,000

Bal. @ December 31,

2014

2,500,000

545,000

425,000

1,400,000

Omega Corporation
Statement of Financial Position for thr year ended December 31, 2014
Non-Current Asset
$
Property, Plant & Equipment
13,586,525
Intangible Assets
Investments
2,375,000
Total Non-Current Assets
Current Assets
Inventory
Accounts Receivables
Bank
Total Current Assets

854,300
924,750
2,378,250
4,157,300

Equity & Liabilities

Equity & Reserve:
Equity to convert
Share Capital
Share Premium
General Reserve
Capital Reserve
Revaluation Reserve
Retained Earnings

167,720
2,500,000
545,000
425,000
87,000
1,400,000
7,246,476

12,371,196

Non- Current Liability

Lease obligation- Plant & Machinery
6% Redeemable Preference shares
Lease obligation- Plant & Machinery

266,773
1,000,000
1,632,154

2,898,927

Current Liability
Bank Loan
Tax payable
Accounts payable
Lease obligation- Plant & Machinery
Interest owing

4,750,000
700,000
675,000
21,202

on

r ended December 31, 2014

Equity
0

Capital
Reserve
87,000

Retained
Earnings
2,227,750

Total
4,864,750
720,000
1,400,000

(200,000)
167,720

0
167,720

(200,000)

-200,000

5,418,976

6,818,976

167,720

87,000 7,246,726

12,371,446