GRANDE FINALE PROBLEM-SOLVING SESSION

FINANCIAL REPORTING (B2)

FOR NOV 2024 EXAMS

&

SET 2
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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION ONE [STATEMENT OF CASH FLOWS – IAS 7]

QUESTION TWO [STATEMENT OF CASH FLOWS – IAS 7]

QUESTION THREE [STATEMENT OF CASH FLOWS – IAS 7]

QUESTION FOUR [CASH FLOWS STATEMENTS– IPSAS 2]

QUESTION FIVE [CASH FLOWS STATEMENTS– IPSAS 2]

QUESTION SIX [ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS]

QUESTION SEVEN [ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS]

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION 1

You are provided with the following draft Statements of Financial Position and Statement of Profit or
Loss and Other Compressive Income of Kimbo Ltd as at 31 st March 2022.
Kimbo Limited Statement of Financial Position as at 31 st March 2022
2022 2021
Non-Current Assets TZS. (Million) TZS. (Million)
Property, Plant Equipment (Cost) 51,000 45,000
PPE (Accumulated Depreciation) (34,000) 17,000 (27,000) 18,000
Current Assets
Inventory 15,400 12,000
Trade Receivables 18,500 22,400
Cash and cash equivalent 8,500 42,400 5,000 39,400
Total Assets 59,400 57,400
Equity and liabilities Equity
Share Capital – TZS. 1000 20,000 17,500
ordinary shares
Share premium 5,000 2,500
Revaluation 1,000 -
Retained Earnings 20,000 46,000 5,600 25,600
Current Liabilities
Trade Payables 900 12,300
Other payables and accruals 2,000 2,500
Taxation (ii) 500 2,000
Short term loan (iii) 10,000 13,400 15,000 31,800
Total Equity and Liabilities 59,400 57,400

Statement of profit or Loss and Other Comprehensive Income for the year ended 31st March 2022.
2022 2021
TZS.‘000’ TZS.‘000’
Sales 184,000 92,500
Cost of Sales (111,000) (55,500)
Gross Profit 73,000 37,000
Administrative Expenses (51,100) (26,000)
Operating profit 21,900 11,000
Other Income 2,000 0
Profit before tax 23,900 11,000
Taxation (8,500) (5,432)
Profit after tax 15,400 5,568
Other Comprehensive Income
Revaluation Gain 1,000 0
Total Comprehensive Income 16,400 5,568

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

Additional information:
1. During the year, Kimbo Ltd made a bonus issue of 1 for 10 shares and the issue was funded
from the share premium, followed by a rights issue.
2. Kimbo Ltd uses revaluation model as allowed by IAS 16: Property, Plant and Equipment.
3. An asset with a cost of TZS.5,000 million and accumulated depreciation of TZS.3,000 million
was disposed at a profit of TZS.2,000 million.
4. An independent expert in land valuation based in Geita, revalued land upward by TZS.1
billion.
5. TZS.6,500 million cash was paid for the short-term loan during the year.
6. Ordinary dividends paid for the year were debited to retained earnings.
REQUIRED:
Prepare a Statement of Cash Flow using the indirect method for the year ended 31 st March 2022 in
accordance with the requirements of IAS 7: Statement of Cash Flows.

QUESTION 2
The statement of financial position and additional information relating to Tarugayane Ltd are given below.
Tarugayane Ltd
Statement of financial position as at 31 December
TAS. 000's TAS. 000's
2019 2018
Non-current assets:
Tangible assets 400,000 325,000
Intangible assets 230,000 180,000
Investments - 25,000
Total non-current assets 630,000 530,000
Current assets
Inventory 120,000 104,000
Trade receivables 400,000 295,000
Short-term investments (90 day deposit) 50,000
Cash in hand 10,000 4,000
580,000 403,000
Total assets 1,210,000 933,000

Capital and reserves

Share capital (TAS. 1 ordinary shares) 200,000 150,000
Share premium account 160,000 150,000
Revaluation reserve 100,000 90,000
Retained earnings 140,000 80,000
600,000 470,000
Non-current liabilities
Long-term loan (100,000)
Provisions for liabilities and charges: Deferred taxation (80,000) (60,000)
180,000 60,000
Creditors: amount falling due in less than one year
Trade creditors 122,000 108,000
Bank overdraft 188,000 185,000
Taxation 120,000 110,000
430,000 403,000
Total equity and liabilities 1,210,000 933,000

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

Additional information
(a) During the year interest of TAS75,000,000 was paid, and interest of TAS25,000,000 was received.
(b) Plant, with an original cost of TAS90,000,000 and Carrying amount of TAS50,000,000 was sold for
TAS37,000,000. Depreciation for the same financial year amounted to TAS90,000,000.
(c) The proceeds of the sale of non-current asset investments were TAS30,000,000.
(d) Tax paid to the Inland Revenue during 2019 amounted to TAS110,000,000.
(e) Dividends of TAS80,000,000 were paid during 2019
REQUIRED
Prepare a cash flow statement for Tarugayane Ltd for the year ended 31 December 2019

QUESTION 3
Kihimbi Limited is involved in the manufacture of building products and its financial statements are as follows
2017 2018
TAS’000 TAS’000
Non-Current Assets
Property, Plant & Equipment 7,680 5,910
Total Non-Current Assets 7,680 5,910
Current Assets
Inventories 2,070 1,830
Trade Receivables 1,170 1,020
Cash & Cash Equivalents 75 168
Total Current Assets 3,315 3,018
Total Assets 10,995 8,928
Equity & Liabilities Equity
Share Capital 360 300
Share Premium 90 75
Retained Earnings 5,697 3,603
Revaluation Surplus 180 120
Total Equity 6,327 4,098
Non-Current Liabilities
Long Term Loan 2,250 2,400
Total Non-Current Liabilities 2,250 2,400
Current Liabilities
Trade Payables 2,208 2,250
Bank Overdraft 60 90
Current Tax Payables 150 90
Total Current Liabilities 2,418 2,430
Total Equity & Liabilities 10,995 8,928
Notes:
(i) Kihimbi Limited’s income tax expense for 2017 was TZS63,000.
(ii) The cost of Property, Plant & Equipment (PPE) at 1 January 2017 amounted to TZS7,290,000. The
company’s depreciation policy is to depreciate all assets at 10% straight line on cost from the date of purchase
to the date of sale. On 1 October 2017, Kihimbi Limited sold PPE which had a carrying value of
TZS520,000. This PPEhad originally cost Kihimbi Limited TZS800,000 and the company made a loss of
TZS20,000 on the sale of this PPE. The additions to PPE for Kihimbi Limited occurred on 31 December
2017.
(iii) Kihimbi Limited’s finance cost for the year amounted to TZS48,000. This was paid in full.
(iv) Kihimbi Limited paid a dividend of TZS86,000 in 2017.
REQUIREMENT: Prepare a Statement of Cash Flows for the year-ended 31 December 2017 for Kihimbi
Limited in accordance with IAS 7 - Statement of Cash Flows.

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION 4
Mvuvi Regulatory Authority (MRA) is operating under the Ministry of Livestock and Fishing (MOLF), MRA is
responsible for registering and monitoring public and private fishing companies in the United Republic of
Tanzania. Recently you have been appointed as Chief Accountant of MRA and it has come to your attention that
Statement of Cash Flow for the year ended 30th June 2017 is missing but you were given the following financial
statements.
MRA STATEMENT OF FINANCIAL POSITION AS AT 30TH JUNE 2017
30/6/2017 30/6/2016
TZS '000 TZS '000
ASSETS
Current Assets
Cash and cash equivalents 1,857,900 1,005,000
Receivables from non-exchange transactions 348,500 183,250
Receivables from exchange transactions 149,000 157,500
Inventories (Consumables) 182,250 107,250
Non Current Assets 2,537,650 1,453,000

Property, plant and equipment 4,261,000 3,404,000

Building under construction (Mwanza office) 1,274,000 -
Intangible assets 127,500 145,000
Investment Property 1,800,000 1,750,000
7,462,500 5,299,000
TOTAL ASSETS 10,000,150 6,752,000
LIABILITIES

Current Liabilities
Employee benefits payable (Staff expenses) 497,500 289,500
Accrued expenses 37,500 -
Non Current Liabilities 535,000 289,500
Deferred revenue 546,000 -
TOTAL LIABILITIES 1,081,000 289,500
NET ASSETS 8,919,150 6,462,500
NET ASSETS/EQUITY
Capital fund 6,165,000 5,350,000
Revaluation Reserve 327,500 277,500

Accumulated surplus 2,426,650 835,000

TOTAL NET ASSETS 8,919,150 6,462,500

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

MRA STATEMENT OF FINANCIAL PERFORMANCE THE YEAR ENDED 30TH JUNE 2017

REVENUE FROM NON-EXCHANGE TRANSACTIONS TZS’000

Regulatory levy 2,880,250
Service in kind – (salaries for teachers from overseas) 77,500
License Fees 798,800
Application Fees 205,000
Government Subvention (MOLF) 1,274,000
Fund from Donor Agencies 1,700,000
Transferred land 129,000
REVENUE FROM EXCHANGE TRANSACTIONS
Rent 416,750
Total Revenue 7,481,300
EXPENSES
Staff expenses 2,425,250
Operating expenses 1,258,700
Contribution to government entities 430,100
Admin expenses 737,750
Other expenses 245,350
Loss on disposal 6,250
Depreciation 508,250

Amortization 17,500

entories expenses 260,500

TOTAL EXPENSES 5,889,650

SURPLUS/(DEFICIT) 1,591,650

You are availed with the following additional information :

(i) Receivables from exchange transactions represent rent not received as at 30 th June 2017 for the 7th floor
of Dar es Salaam office building which is rented out to other organizations.
(ii) Receivables from non exchange transactions refer to regulatory fee charged but not received as at 30 th
June.
(iii) Construction of Mwanza Office is being done on a two hectors of land which were transferred freely from
Mwanza City Council (MCC) in December 2016. It was established that the same size of land could be sold
at TZS. 129,000,000 at a date of transfer. MCC indicated that the transferred land should be used for
construction of MRA office. The transferred land is included in the value of PPE.
(iv) Deferred revenue represent unspent amount for the fund received from the Ministry of Livestock and
Fishing (MOLF). MOLF directed MRA to use the fund in construction of MRA office in Mwanza otherwise
the fund should be returned to the Ministry.
(v) MRA hosted a number of experts from a well recognized institution for the purpose of providing training
to local fishing companies, the international institutions took the responsibility of paying salaries to this
group of experts and it was revealed that these teachers were paid TZS. 77,500,000 salaries for the year
ended.
(vi) Investment Property was revalued and increased in value by the tune of TZS. 50,000,000.

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

(vii) Funds received from Donor Agencies were for the purchases of the Office equipment in Mwanza office.
The transfer agreement indicates that fund should be used for buying equipments for Mwanza office. Due
to delay in completion of the construction of Mwanza office, Management used 60% of the fund received
from Donor Agencies in in paying operating expenses.

(viii) In March 2017, MRA sold five old Motor vehicles the carrying amount of these Motor vehicles on the date
of sale were TZS. 48,750,000.
(ix) Accrued expenses represent unpaid electricity bill for the month of June 2017, electricity bills form part
of the administration expenses.
(x) Payment for operating expenses includes TZS.335,500,000 which were paid to purchase consumables
during the year.
REQUIRED:
Prepare:

(i) MRA Statement of cash flow for the year ended 30th June 2017. [ 25 Marks]
(ii) Briefly explain why is it important for MRA to prepare a cash flow statement. [5 Marks]

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION 5

Pona Government Hospital (POGH) is a public hospital operating under the Ministry of Health. You
have been assigned to finalize the preparation of financial statements for the year ended 30th June 2020
and you realized that the Cash Flow Statement is missing.
You are availed with the Statement of Financial Position and Statement of Financial Performance.

Pona Government Hospital (POGH)Statements of Financial Position as at 30th June, 2020.

(TZS 000,000)
2020 2019
ASSETS
Current Assets
Cash and Cash Equivalents 54,602 36,799
Receivables 11,745 9,762
Inventory 4,566 4,195
Total Current Assets 70,913 50,756
Non-Current Assets
Property, Plant and
177,000 158,000
Equipment
Intangible Assets 6,368 6,513
Total Non - Current Assets 183,368 164,513
TOTAL ASSETS 254,281 215,269
Current Liabilities
Employees benefits payable 15,619 7,850
Provisions 500 350
Borrowings 940 350
Total current liabilities 17,059 8,550
Non- Current Liabilities
Borrowings 23,500 8,700
Total non-current liabilities 23,500 8,700
Total Liabilities 40,559 17,250
NET ASSETS 213,722 198,019
EQUITY /NET ASSETS
EQUITY
Tax payers Fund 79,163 79,163
Revaluation Reserve 46,874 42,300
Accumulated Surplus
87,685 76,556
/Deficit
TOTAL NET ASSETS AND
213,722 198,019
LIABILITIES

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

Pona Government Hospital (POGH) Statement of Financial Performance for the year ended
30Th June, 2020.
(TZS 000,000)
REVENUE
Revenue from non-exchange transactions
Revenue from patient related activities 282,080
Total Revenue 282,080
Expenses
Employees benefits 199,500
Medicine costs 25,700
Depreciation 10,400
Amortization 1,050
Other expenses 32,890
Finance cost 1,231
Total expenses 270,771
Operating surplus 11,309
Loss on disposal of equipment (180)
SURPLUS FOR THE PERIOD 11,129

The following information is relevant:

(i) During 2019/2020 the hospital incurred costs of TZS. 1,255,000,000 on research and
development of patients management system. Research costs of TZS. 350,000,000 were written
off to the statement of financial performance as other operating expenses. The remainder of
TZS.905, 000,000 were development costs which were capitalized.
(ii) The loss on disposal of assets relates to some outdated medical equipment with a net book value
of TZS. 200,000,000. The proceeds from disposal were received during the year.
(iii) The inventory balance relates to medicine costs.
(iv) The receivables balances relate to income from patient related activities.
(v) The revaluation reserve relates entirely to property, plant and equipment.
(vi) During 2019/2020 new long-term loans of TZS. 20,000,000,000 were received from the
Hospital Financing Facility. Some long-term loans were also repaid during the year.
(vii) During the year ended 30th June, 2020 new provisions totaling TZS. 150,000,000 were set up for
new medical negligence claims and were included in other expenses.
(viii) Finance cost due during the year were paid accordingly.
REQUIRED:
(a) Prepare the Cash Flow Statement for the Pona Government Hospital (POGH) for the year
ended 30Th June, 2020 using the direct method. (20 marks)

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION 6
The following is an extract of Balila’s financial statements (final accounts) for the year ended 30 April 2019.
Income statement for the year ended 30 April 2010
TAS TAS
Sales 375,000
Less: cost of sales
Inventory at 1st May 2009 32,000
Add: Purchases 281,250
Cost of goods available for sale 313,250
Less: Closing inventory 28,000 285,250
Gross profit 89,750
Less: expenses 44,750
Profit for the year (net profit) 45,000

TAS TAS
Assets
Non-current(fixed) assets 428,000
Current assets
Inventory (stock) 28,000
Trade receivables(debtors) 22,500
Cash and bank 1,500 52,000
Total assets 480,000

Equity and liabilities

Equity:
Capital 300,000

Non-current liabilities
Long-term loan 150,000

Current liabilities
Trade payables (creditors) 30,000
Total equity plus liabilities 480,000
The following have been calculated for Mokiri, a competitor in the same type of business.
i) Gross profit ratio 28.2%
ii) Net profit ratio 6%
iii) Return on capital employed 5%
iv) Return on total assets 8%
v) Current (working capital) ratio 1.5:1
vi) Liquid (acid test) ratio 0.7:1
vii) Receivables days (Debtors collection period) 28 days
viii) Payables days (creditors payment period) 35 days
ix) Inventory turnover (rate of stockturn) 5 times
Required
a) Calculate the same ratios for Balila’s business. In order to gain full marks you must show the formula or your
workings for each calculation.
b) (i) Name the business which performed better during the year ended 30 April 2010.
(ii) Justify your answer to (b) (i) by comparing the ratios which you have calculated with the same ratios given
for Mokiri

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

SOLUTION
Balila Mokiri
Return On Capital Employed (ROCE) 10% 5%
Return on asset (ROA) 9.4% 8%
Gross profit as a percentage of sales (Margin) 23.93% 28.2%
Net profit as a percentage of sales 12% 6%
Current ratio 1.17:1 1.5:1
Quick ratio (acid-test ratio) 0.8:1 0.7:1
Accounts receivable collection period 22days 28 days
Accounts payable payment period 39days 35 days
Inventory turnover (times) 9.5times 5 times
a) Both Balila’s ROCE and ROA are now higher than the industry average. The higher the return the more efficiently
the capital is being employed within the business and assets are efficiently utilized in generation of business profit.
This indicate that Balila’s Business has performed better than Mokiri Business, that is for each shs 100 invested
in Balila return is shs10, while for each shs 100 invested in Mokiri return is sh5

b) The main causes for better performance seems to be the following

Balila’s Gross profit ratio however, is considerably lower than Mokiri’s gross profit ratio, this suggests that, may
be Balila has reduced its selling price, which has attracted many buyers to purchase the product (i.e sales
maximization strategy).

Balila’s net profit ratio is higher than Mokiri’s net profit, this indicates that operating expenses in Balila’s business
are being controlled well than in Mokiri’s Business.

The current ratio and quick ratio in Balila’s business is higher than in Mokiri business. The quick ratio for both
businesses are below 1 (satisfactory), this suggests that both business have short term liquidity problems and
should have difficulty in paying its debts as they become due.

Balila’s Receivable as a proportion of sales is lower than in Mokiri’s business. This may indicate that the Balila’s
credit control policy is being applied more effectively than in Mokiri’s business. Balila collects debts faster so that
cash become available sooner.

Balila’s period of credit taken from suppliers is much higher than Mokiri business. i.e. Balila is given longer time
to pay his debts and has more time to make use of his creditors cash.

Balila’s Inventory turnover is higher than in the Mokiri’s Business, this may indicate increase in demand due to
improved efficiency of business activity, and decrease in selling price. Balila sells his goods faster and should
therefore make his profit faster than Mokiri.

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

QUESTION 7
The trading Inventory of Akida, retailer has been reduced during the year ended 31st March 2024 by $6,000
from its commencing figure of $21,000. A number of financial ratios and related statistics have been complied
relating to the business of Akida street for the year ended 31st March 2024. The following are the detailed
information.
Joan street
%
Net profit as % net capital employed* 15
Net profit to Sales 9
Sales to Net capital employed 1662/3
Fixed assets to sales 45
Working capital ratio
Current assets 400
Current liabilities
Acid test ratio
Bank + debtors 275
Current liabilities
Gross profit to sales 25
Debtor’s collection period
Debtors x 365 361/2 days
Sales
Stock turnover (based on average stock for the year) 10times
Akida Street has supplied all the capital for his business and has had no drawings from the business during the
year ended 31 March 2024
Required: Prepare the statement of comprehensive income for the year ended 31March 2024 and the
statement of financial position as at that date of Akida street in as much detail as possible.

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 FINANCIAL REPORTING (B2) GRANDE FINALE SOLVING SESSION NOV 2024 (SET 2)

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