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Consolidated Statement of Financial Statement Review Question: ABC Company acquired 80% of the outstanding shares of XYZ Company on January 1, 2023, for $500,000 in cash. At that time, the fair value of the non-controlling interest was assessed at $125,000. On December 31, 2023, the fair value of the non-controlling interest has increased to $140,000. The separate statements of financial position for ABC Company and XYZ Company on December 31, 2023, are as follows: ABC Company XYZ Company: Assets: Cash: $100,000 $50,000 Accounts Receivable: $150,000 $120,000 Inventory: $200,000 $180,000 Property, Plant, and Equipment: $600,000 $700,000 Investments in XYZ Company: $500,000 Total Assets: $1,550,000 $1,050,000 Liabilities: Accounts Payable: $100,000 $80,000 Long-Term Debt: $500,000 $400,000 Total Liabilities: $600,000 $480,000 Equity: Share Capital: $300,000 $200,000 Retained Earnings: $650,000 $370,000 Total Equity: $950,000 $570,000 Total Equity and Liabilities $1,550,000 $1,050,000 Required: Prepare the consolidated statement of financial position for ABC Company and its subsidiary, XYZ Company, as of December 31, 2023.

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14. NBAA NOV 2016 (a) IAS 37 Provision, Contingent Liabilities and Contingent Assets I an important standard regulating the recognition of liabilities and the use of provisions. It has been especially useful in controlling the abuse of provisions to manage reported earnings. Required: Define a provision and discuss in details the three conditions that must be satisfied in order for a provision to be recognised under IAS 37. (b) The following transactions and events should be recorded/reported by Hamisa plc in compliance with the requirements of IAS 37: (i) A decision was taken by the board of Hamisa plc shortly before the year end to close down a division. The costs of the closure are estimated to total TZS.30 billion. The decision was announced in principle, but detailed implementation plans have not been made yet. (ii) Hamisa plc has traditionally repainted its premises every five years. The next painting is due in one year’s time. The entity proposes to accrue TZS.22,000,000 as a provision for the expected cost of repainting the premises. (iii) Hamisa plc has sold 5,000 units of a product to customers during the past 12 months with a year’s warranty attended. Past experience has shown that 3% of goods sold require repair within the warranty period at an average cost of TZS.200,000 per unit. (iv) Hamisa plc has guaranteed the debts of its associate company up to a maximum amount of TZS.3 billion. The associate is in excellent financial health and the directors are of the opinion that it is unlikely the guarantee will ever be called in. Required: Discuss briefly how each of the above transactions and events should be recorded/reported as per IAS 37. Show journal entries where relevant, and state the reason(s) for the proposed

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Question One Deller has a defined contribution pension scheme. However, during the year, it introduced a new post-employment plan (the Fund) for its employees as a way of enhancing the benefits they will receive when they retire. Deller makes monthly contributions into the Fund that are equal to a set percentage of the salary cost. Upon retirement, employees will receive annual payments from the Fund based on their number of years of service and their final salary. The Fund is voluntary and Deller can cancel it at any point. Deller has a history of paying employees benefits that are substantially above the national average, with annual increases in excess of inflation. Deller has won many accolades as a ‘top employer’ and received positive coverage from the national press when the Fund was announced. The leadership team are well trusted by the employees.

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Question 12 (a) Discuss the requirements of IAS 38 with respect to the initial recognition and measurement of intangible assets acquired (1) separately for cash, (2) as part of a business combination, and (3) internally generated. (b) Chalii Plc (Chalii) has entered into the following transactions during the financial year ended 31 July 2022: (ii) (iii) On 1 August 2021 Chalii acquired the exclusive Tanzanian distribution rights for a unique home entertainment digital set-top box. The cost of the rights to Chalii was TZS 21 million, and the term of the deal was 3 years. On 1 August 2021 Chalii commenced work on promoting the brand and developing sales of the product referred to in (i) above. This effort was hugely successful, and the "Chalii" brand became massively popular and well known. Chalii wishes to include the brand in its financial statements for year ended 31 July 2022 at its estimated fair value of TZS 120 million. Chalii wishes to replicate its Tanzanian success in other countries by selling the product into other markets. The company has spent TZS 5.000.000 during the year researching the Kenya market and ar resea wishes to capitalise this expenditure as an intangible asset. REQUIRED: In each of the scenarios (i) to (iii) above, outline the appropriate accounting treatment for the year ended 31 July 2022.

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Assume that you gave a cash payment commitment to be effected 10 years from now amounting to 98 million shillings. You can only save for the next 4 years at a rate of 10 million shillings a year by depositing the amount at the end of each year to a savings bank account which pays interest at a rate of 12 percent per annum. The rate of interest is expected to remain stable over the next 10 years. (a) What deficit will you have at the end of the 10th year when the payment falls due? (b) If you are given a chance to borrow money free of charge, an amount which can be deposited today as a lump sum to the same account against the expected deficit at the end of year 10, how much would you borrow?

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Korongo Mbaka wishes to choose the best of two equally costly cash flow streams: Annuity A and annuity B. A is an annuity due with a cash inflow of Tshs.9,000,000 for each of 10 years. B is an ordinary annuity with a cash inflow of Tshs. 10,000,000 for each of 1 years. Assume that Korongo can earn 15 per cent on his investments. Required: On a purely subjective basis, which annuity do you think is more attractive? Why) (3 marks) Find the future value at the end of year 6 for both annuity A and 8. (3 marks) Use your findings in part b (ii) to indicate which annuity is more attractive. Compare your findings to your subjective response in part b (i). (4 marks) (Total: 20 marks)

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ABC Co. is a registered company in Tanzania selling building materials in large quantities. The company is having problems in management of its working capital and the company's finance director has been looking into ways to improve the company's working capital management. ABC Co. has revenue from credit sales of TZS.1,337,500,000 per year and although its credit terms require all credit customers to settle outstanding invoices within 40 days, on average customers have been taking longer. Approximately 1.2% of credit sales turn in to bad debts which are not recovered. Trade receivable currently stand at TZS.222,900,000 and ABC Co. has a cost of short-term finance of 5% per year. The company's finance director is considering a proposal from a factoring company, KG Co. which was invited to tender to manage the sales ledger of ABC Co. on a with-recourse basis. KG Co. believes that it can use its expertise to reduce average trade receivables days to 36 days, while cutting bad debts by 75% and reducing administration costs by TZS.2,500,000 per year. A condition of the factoring agreement is that KG Co. would also advance ABC Co. 80% of the value of invoices raised at an interest rate of 8% per year. KG Co. would charge an annual fee of 0.70% of credit sales. Assume that there are 360 days in each year. REQUIRED: Advise whether the KG Co's offer is financially acceptable to ABC Co.

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The Board of Directors of Nyanguli Plc is discussing whether to alter the company’s capital structure. Corporate registration permits Nyanguli Plc to repurchase its own shares and it is proposed to issue TZS.5 billion of new debentures at par, and use the funds to repurchase ordinary shares. A summary of Nyanguli’s current Statement of Financial Position as at 31st December 2022 is as follow: TZS. ‘Million’ Non-current assets (net) 24,500 Current assets 12,300 Current liabilities (8,600) 28,200 Financed by Ordinary shares (par value TZS.25) 4,500 Reserves 14,325 18,825 5% debentures (redeemable at par in ten years’ time) 9,375 28,200 The company’s current ordinary share price is TZS.167 and its debenture price is TZS.80 per TZS.100. Nyanguli’s Finance Director does not expect the market price of the existing ordinary shares or debentures to change as a result of the proposed issue of new debentures. Debenture interest is payable at the end of each year. Issue costs and transactions costs may be assumed to be negligible. Nyanguli’s cost of equity is estimated by a leading firm of stockbrokers to be 17%. REQUIRED: (i) With supporting assumptions and calculations, evaluate the likely effect on the weighted average cost of capital of Nyanguli Plc if the company restructures its capital under the assumption of no corporate tax and under the assumpting of a 35% corporate tax. (8

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ANSWERED

Shu Naito

Numerade educator

Probability Return A Return B return C 0.25 -20% 5% -5% 0.25 10% 20% 5% 0.25 30% -12% 5% 0.25 50% 9% -3% calculate correlation coefficient between A and B

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Taha T

Numerade educator

P Return A RB RC 0.25 -20% 5% -5% 0.25 10% 20% 5% 0.25 30% -12% 5% 0.25 50% 9% -3% calculate correlation coefficient between A and B

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monica w.