INSTITUTE OF CHARTERED SECRETARIES AND

ADMINISTRATORS IN ZIMBABWE

SUGGESTED SOLUTIONS : JUNE 2020

FINANCIAL ACCOUNTING & REPORTING

QUESTION 1

i) D
ii) A
iii) A
iv) D
v) C
vi) B
vii) D
viii) D
ix) B
x) B

QUESTION 2

Doro Co Ltd
Statement of Profit or Loss and other Comprehensive Income for the year ended 31
December 2019
$ $
Revenue 14 800
Less Cost of sales (1390+8280+1560) 8 110
Gross profit 6 690
Distribution costs (1080+190-120) 1 150
Administrative costs (1460+70-60) 1 470
Depreciation of buildings (2% x 8000) 160
Depreciation of Plant & Machinery (20%x12800) 2 560 5 340
Profit from operations 1 350
Finance costs 200
Profit for the year 1 150
Other comprehensive income
Revaluation gain 1 500
Total Comprehensive Income for the year 2 650

Statement of Changes in Equity for the year ended 31 December 2019

Ordinary
Share Share Retained
Capital Premium Revaluation Income Total
Balance at 1 January 2019 10 000 4 000 3 000 3 140 20 140
Capital issued 4 000 - - - 4 000
Profit for the year - - - 1 150 1 150
Revaluation of land - - 1 500 - 1 500
Dividends - - - 700 700
Balance at 31 December 2019 14 000 4 000 4 500 3 590 26 090

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Financial Accounting and Reporting Suggested Solutions: June 2020 Page 2 of 6
Statement of Financial Position as at 31 December 2019
$ $
ASSEST
NON-CURRENT ASSETS
Property, Plant & Equipment
Land at Valuation 12 000
Buildings (8000 - (2130+160)) 5 710
Plant & Equipment (12800-(2480+2560)) 7 760
25 470
CURRENT ASSETS
Inventory 1 560
Trade receivables 4 120
Prepaid expenses 180
Cash at bank 160 6 020
Total Assets 31 490

EQUITY & LIABILITIES

SHARE CAPITAL & RESERVES
Ordinary Share Capital (10000+4000) 14 000
Share Premium 4 000
Revaluation Reserve 4 500
Retained Income 3 590
26 090
NON CURRENT LIABILITIES
10% Loan 2 000

CURRENT LIABILITIES
Trade Payables 2 240
Accruals (190+70+200+700) 1 160 3 400
Total Equity & Liabilities 31 490

QUESTION 3

Realisation Account
$ $
Freehold property 30 000½ Payables: Discount received 100½
Equipment 15 000½ Bank: Freehold property 31 000½
Stock 8 000½ Equipment 4 800½
½
Receivables 4 500 Inventory 2 900½
½
Dissolution costs 800 Receivables 4 500½
Capitals:
E 6 000½
T 6 000½
V 3 000½
58 300 58 300

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Financial Accounting and Reporting Suggested Solutions: June 2020 Page 3 of 6
 Loan Account
Bank 2 000½ Balance b/d 2 000

Payables Account
Bank 2 900½ Balance b/d 3 000
Realisation 1001
3 000 3 000

Freehold Property Account

Balance b/d 30 000 Realisation 30 000½

Equipment Account
Balance b/d 15 000 Realisation 15 000½

Inventory Account
Balance b/d 8 000 Realisation 8 000½

Receivables Account
Balance b/d 4 500 Realisation 4 500½

Bank Account
Balance b/d 2 100½ Dissolution costs 800½
Realisation: Loan: T 2 000½
½
Freehold property 31 000 Capital Accounts: E 33 700½
Equipment 4 800½ T 6 700½
Inventory 2 900½ Payables 2 900½
Receivables 4,500½
Capital Account: V 800½
46 100 46 100

Current Accounts
E T V E T V
Balance b/d - 300 - Balance b/d 700 - 200
½
Capital Accounts 700 -½ ½
200 Capital Account -½ 300 ½
-½
700 300 200 700 300 200

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Financial Accounting and Reporting Suggested Solutions: June 2020 Page 4 of 6
 Capital Accounts
E T V E T V
Current account - 300 - Balance b/d 39 000 13 000 2 000
Realisation 6 000 6 000 3 000 Current account 700 - 200
½
Bank 33 700 6 700 - Bank - - 800 each
39 700 13 000 3 000 39 700 13 000 3 000

QUESTION 4

Vision Pvt Ltd

Cash Budget for three month ending 30 April 2019½

February March April
$ $ $
Opening balance 1 950 4 510 5 138

Add Cash Receipts

Cash sales 2 400 1 200 1 800
Receipts from receivables 4 410 3 528 1 764
Total Receipts 6 810 4 728 3 564

Less Payments
Payments to payables 900 1 350 2 025
Direct labour 400 600 900
Production overheads 1 200 600 900
Selling overheads 1 000 800 400
Fixed overheads 750 750 750
Total payments 4 250 4 100 4 975

Closing balance 4 510 5 138 3 727

QUESTION 5

a)
First Last
i) Gross profit margin 55% 62%
ii) Mark-up percentage 89% 84%

iii) Earnings per share 0.19 0.15

iv) Return on Capital employed 21% 11%

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Financial Accounting and Reporting Suggested Solutions: June 2020 Page 5 of 6
b) Solution missing
i) Cost of sales = 100/150 * $960,000 = $640,000
ii) Closing inventory = 360y/640,000 * 90 = $160,000
iii) Current liabilities = (160,000+40,000)/3.2 = 62,500
iv) Acid test ratio = 40,000/62,500 = 0.64:1

“End of Suggested Solutions”

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