REQUIRED

Use the information provided below to answer the following questions:

1.1

Provide a possible reason why the amount for interest expense in the Statement of

Comprehensive Income is zero.

1.2

1.3

Calculate the depreciation for the year ended 31 December 2021.

Calculate the amount that would appear in the cash flow statement for the year ended 31

December 2021 for *Profit before working capital changes

1.4

Suggest FOUR (4) control measures that you would put in place to reduce the chances of

embezzlement of cash by the employees.

1.5

What will be the impact on the value of inventory (in the Statement of Financial Position) and

the cost of goods sold (in the Statement of Comprehensive Income) if the last-in-first-out

(LIFO) method rather than the first-in-first-out (FIFO) method is used during periods of

inflation?

16

Explain THREE (3) implications of a high earnings retention ratio to the shareholders of

Mobifone Limited.

INFORMATION

The following information was extracted from the accounting records of Mobifone Limited on 31 December

2021, the end of the financial year:

ASSETS

Non-current assets 1 700 000

Fixed/Tangible assets. 1 500 000

Investments. 200 000

Current assets. 5 300 000

Inventories. 3 400 000

Accounts receivable. 1 600 000

Cash. 300 000

Total assets. 7 000 000

EQUITY AND LIABILITIES

Equity. 3 200 000

Share capital. 2 300 000

Retained earnings. 900 000

Non-current liabilities. 1 600 000

Loan: KLM Bank (15%) 1 600 000

Current liabilities. 2 200 000

Accounts payable. 2 200 000

Total equity and liabilities 7 000 000

MOBIFONE LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021

Sales (all credit). 17 000 000

Cost of sales. (14 000 000)

Gross profit. 3 000 000

Operating expenses. ?

Depreciation. ?

Other selling, general and administrative expenses. 1 400 000

Operating profit 1 000 000

Investment income 20 000

Interest expense 0

Profit before tax 1 020 000

Company tax (285 600)

Profit after tax 734 400