test 2 prep

1. MCB Lda has the following account balances as of December 31, 2024.

	Accounts	Balances (in MT)
1	Accounts payable due within a year	50,000
2	Notes payable due in 2025	70,000
3	Notes payable due in 2026	40,000
4	Accounts receivable due within a year	10,000
5	Notes receivable due in 2026	10,000
6	Bonds payable due in 2029	80,000
7	Income taxes payable	30,000
8	Short-term borrowings	20,000

1. What is the amount of current liabilities?-

2. What is the amount of noncurrent liabilities?-

3. Which of the items are not liabilities? Classify them as current assets, current liabilities or equity.

1. 50,000+70,000+30,000+20,000=170,000

2. 40,000+80,000=120,000

3. account receivables due within a year are current assets

   Note receivables dues in 2026 are non current assets

2. Syntax had 150,000MT in share capital and a 230,000MT balance of retained earnings as of December 31, 2023. During 2024, Syntax issued additional shares amounting to 120,000MT, earned 60,000MT net income and paid 15,000MT dividends. What is the ending balance of equity as of December 31, 2024?

beginning equity=150,000+230,000=380,000

ending equity= 380,000 + 120,000 + 60,000 - 15,000 = 545,000MT

USTM Lda manufactures and sells chairs in Mozambique. On 1 January 2024, it had inventory of 200 chairs valued at the same product cost of those produced in 2024. During the year 2024, the company manufactured 2,000 chairs and incurred the following product costs per chair:

Raw materials	100MT
Direct labor	150MT
Manufacturing overhead	50MT

 On 31 December, the company had an inventory of 400 chairs. During the year, the company sold its chairs at a price of 880MT each. This price included value added tax (VAT) of 10%. On 1 January 2024, the company bought a computer on credit for 60,000MT. The government allows computers to be depreciated on a straight-line basis over four years. During the year, the company also incurred the following expenses:

Salaries (paid)	100,000MT
Rent (paid in advance in 2022)	50,000MT
Telephone (to be paid in 2025)	20,000MT
Electricity and water (paid)	20,000MT

The company has an outstanding loan of 100,000MT from Standard Bank, on which it pays interest of 10% annually. The corporate income tax rate is 32%. Based on the information provided, prepare the statement of profit or loss of USTM Lda for the year ended 31 December 2024.

1. Revenue

• Selling price per chair (inclusive of VAT): 880 MT

• Selling price without VAT
  = 880 divided 110/100=800

• Number of chairs sold:
  = (Beginning Inventory + Production - Ending Inventory)
  = (200 + 2,000 - 400) = 1,800 chairs

• Revenue (net of VAT(net of vat means excluding vat)):
  = 1,800 × 800 = 1,440,000 MT

2. Cost of Goods Sold (COGS)

Unit product cost:

• Raw materials = 100 MT

• Direct labor = 150 MT

• Manufacturing overhead = 50 MT
  Total cost per chair = 100+150+50=300MT

COGS = 1,800 chairs × 300 MT = 540,000 MT

3. Gross Profit = Revenue – COGS

= 1,440,000 – 540,000 = 900,000 MT

4. Operating Expenses

Item	Amount (MT)
Salaries (paid)	100,000
Telephone (accrued)	20,000
Electricity and water (paid)	20,000
Depreciation (Computer)	60,000 ÷ 4 = 15,000
Interest on Loan	100,000 × 10/100 = 10,000
Total Operating Expenses	165,000 MT

5. Profit Before Tax = Gross Profit – Operating Expenses

= 900,000 – 165,000 = 735,000 MT

6. Income Tax Expense (32%)

= 32% of 735,000 = 235,200 MT

7. Net Profit for the Year

= 735,000 – 235,200 = 499,800 MT

4. Pedro and Manuel decided to set up a company called P&M Furniture Lda to manufacture tables. They invited some of their many friends to buy shares in the company. They engage in the following transactions during the year 2023

No.	Date	Transaction	Amount (MT)
1	1-Jan	They issued a total of 100.000 shares of 2MT nominal value at 100mt per share. These shares were fully subscribed and paid for.
2	1-Jan	They also negotiated a 1.000.000,00MT loan from Access Bank at 20% interest rate per annum. The bank agreed to allow them to start repaying the principal amount from 2024 while only the interest will be paid in 2023.
3.	1-Jan	They bought equipment on credit from Machines Lda for 3.000.000,00MT. The equipment has a usefull life of 5 years and depreciated on a straight-line basis
4.		During the year, they produced 2.500 units. The costs are as follows: Raw material cost per unit = 3.000MT Direct labor cost per unit = 2.000MT Manufacturing overhead per unit = 1.000MT The raw materials were bought on credit from Timberland Ltd
5.		During the year, they sold a total of 2.000 units at 10.000MT per unit. (Note that 1.800 units were sold on cash while 200 units were sold on credit).
6.		Rent for the year (paid in cash)	500.000
7.		Salaries for the year (paid in cash)	2.000.000
8.		Utilities for the year (paid in cash)	200.000
9.		Marketing expenses (paid in cash)	300.000
10.		During the year, they paid Machines Lda on account	2.500.000
11.		During the year, they paid Timberland Lda	5.000.000
12.		The company income tax rate is 20% payable in the following year but must be provided for in the income statement.

Required: Based on the above information, prepare the Statement of Profit and Loss (Income Statement, the Statement of Changes in Equity, and Statement of Financial Position for P&M Furniture Lda. Please show all work and general ledger posting were necessary.

Income Statement (for the year ended 31 December 2023)

Item	Calculation	Amount (MT)
Revenue	2,000 units × 10,000 MT	20,000,000
Cost of Goods Sold	Product cost - number of goods sold (3,000 + 2,000 + 1,000) MT × 2,000 units	12,000,000
Gross Profit	Revenue-cost of goods sold 20,000,000 – 12,000,000	8,000,000
Operating Expenses	Rent + Salaries + Utilities + Marketing + Depreciation over 5 years	500,000 + 2,000,000 + 200,000 + 300,000 + 600,000 = 3,600,000
Operating Profit	Gross profit- operating expenses 8,000,000 – 3,600,000	4,400,000
Finance Costs	Loan amount x interest rate 1,000,000 x 20/100	200,000
Profit Before Tax	Operating profit-finance expenses 4,400,000 – 200,000	4,200,000
Income Tax (20%)	20% of 4,200,000 4,200,000 x 20/100	840,000
Net Profit	4,200,000 – 840,000	3,360,000

Statement of Changes in Equity (for the year ended 31 December 2023)

Particulars	Share Capital (MT)	Retained Earnings (MT)	Total Equity (MT)
Opening Balance	10,000,000	0	10,000,000
Net Profit for the year	–	3,360,000	3,360,000
Dividends Paid	–	0	0
Closing Balance	10,000,000	3,360,000	13,360,000

Statement of Financial Position (as at 31 December 2023)

Assets

Item	Calculation	Amount (MT)
Non-Current Assets
Equipment (net)	3,000,000 – 600,000	2,400,000
Current Assets
Inventory	500 units × 6,000 MT	3,000,000
Trade Receivables	200 units × 10,000 MT	2,000,000
Bank (balancing)	Total Assets – Others	10,800,000
Total Assets	Sum of all assets	18,200,000

Equity+Liabilities

Item	Amount (MT)
Equity
Share Capital	10,000,000
Retained Earnings	3,360,000
Total Equity	Share Capital + Retained Earnings 13,360,000
Non-Current Liabilities
Loan from Bank	1,000,000
Current Liabilities
Machines Lda Payable	3,000,000 – 2,500,000 = 500,000
Timberland Lda Payable	(2,500 units × 3,000 MT) – 5,000,000 = 2,500,000
Income Tax Payable	840,000
Total Liabilities	4,840,000
Total Equity & Liabilities	13,360,000 + 4,840,000 = 18,200,000

Cash / Bank Account Ledger

Date	Debit (MT)	Credit (MT)	Description
Jan 1	10,000,000		Share capital received
Jan 1	1,000,000		Loan from Access Bank received
	18,000,000		Cash sales (1,800 units × 10,000 MT)
–		500,000	Rent paid
–		2,000,000	Salaries paid
–		200,000	Utilities paid
–		300,000	Marketing paid
–		2,500,000	Payment to Machines Lda
–		5,000,000	Payment to Timberland Lda
	29,000,000	10,500,000
			29,000,000-10,500,000= 18,500,000
–		18,500,000	Balance c/d
Total	29,000,000	29,000,000

5. The following information relate to ABC Lda for the year ended 2023.

No		Amount (MT)
1.	Profit after tax	5.500.000
2.	During the year, the company bought new equipment at the cost of 1.200.000MT. This equipment has a 5-year useful life and is depreciated on a straight line basis	1200000/5= 240,000
3.	Total depreciation for other long-term tangible assets for the period is 120.000MT.	120,000
4.	During the period, some old assets were sold for 10.000MT
5.	Tax for the year to the tune of 300.000MT was provided for and deducted from the profit before tax. However, the actual tax paid during the year was 150.000MT
5.	During the year, the company paid dividend of 150.000MT
6.	During the year, the company issued 1.000.000 additional shares of 1MT nominal value for 50MT per share, and this was fully subscribed for and paid-up in cash.
7.	The company repaid loan with interest to the tune of 1.000.000MT. Out of this amount, 200.000MT was interest on the loan whereas 800.000MT represents principal repayment. The interest deducted in the income statement.
8.	During the year, the company obtained additional loan 1.000.000MT

From the Company’s Statement of Financial Position for the 2023 and 2022, the following additional information were extracted:

	2023 (MT)	2022 (MT)	Amount
Inventories	762.000	801.000	801.000-762.000=39,000
Accounts receivable	319.000	437.000	437,000 – 319,000 = 118,000
Accounts payable	2.660.000	3.000.000	2,660,000 – 3,000,000 = –340,000

Required: Based on the above inform, prepare the cash flow statement of the Company for the year ended 31 December 2023.

Cash Flows from Operating Activities

Description	Amount (MT)
Net profit after tax	5,500,000
Add: Depreciation on new equipment (1,200,000 ÷ 5)	240,000
Add: Depreciation on other assets	120,000
Less: Increase in inventories (762,000 - 801,000)	39,000
Add: Decrease in accounts receivable (437,000 - 319,000)	118,000
Less: Decrease in accounts payable (3,000,000 - 2,660,000)	(340,000)
Add: Interest Expense (non-cash reversal)	200,000
Net Cash from Operating Activities	5,877,000

Cash Flows from Investing Activities

Description	Amount (MT)
Purchase of new equipment	(1,200,000)
Proceeds from sale of old assets	10,000
Net Cash Used in Investing Activities	(1,190,000)

Cash Flows from Financing Activities

Description	Amount (MT)
Proceeds from issue of shares (1,000,000 × 50MT)	50,000,000
Dividend paid	(150,000)
Repayment of loan principal	(800,000)
New loan received	1,000,000
Net Cash from Financing Activities	50,050,000

Net Increase in Cash for the Year

= 5,877,000 – 1,190,000 + 50,050,000 = 54,737,000 MT

6. The authorized share capital of Cerveja de Moçambique Lda is 200,000 shares of 15MT each. On 1 January 2024, the company issued 100,000 shares for 40MT per share. At the end of the company’s financial year on the 31 December 2024,

   • How much will the company record as its share capital, and in which of its financial statements?

   • How much will it record as share premium and in which of its financial statements?

   • Assuming the company made a profit of 2,000,000MT during the year ended 2024 and paid a dividend of 500,000MT, how much will the total equity of the company be as at 31 December 2024 and in which of the financial statements will this this be recorded?

1. 100,000 x 15= 1,500,000MT- since the question is asking about share capital and not share premium we use the nominal value and not the 40mt price(issue price price). it’s shown Statement of Financial Position (Balance Sheet) under equity

2. 40-15=25 which is premium per share therefore share premium is 100,000x25=2,500,000 It’s shown under Equity in the Statement of Financial Position (Balance Sheet)

3. Total Equity formula = Share Capital + Share Premium + Retained Earnings + Other Reserves (if any)

   • Retained Earnings = Net Profit – Dividends = 2,000,000 – 500,000 = 1,500,000MT

   • total equity= 1,500,000+2,500,000+1,500,000= 5,500,000mt.

The Total Equity of 5,500,000MT will appear in the Statement of Financial Position (Balance Sheet) as of 31 December 2024, under the Equity section.

Mention the three sections of the statement of cash flows.

Operating Activities, Investing Activities, Financing Activities

A company makes a payment of 100,000MT for loan taken from Standard Bank. This amount is comprised of 20,000MT as interest and 80,000MT as principal. Indicate the financial statements and section of the financial statement in which these components of the payment will be recorded and as what.

Interest Portion (20,000MT):

Financial Statement: → Statement of Profit or Loss (Income Statement)

Recorded as: → Interest Expense

Why: Interest is a cost of borrowing and therefore an operating expense that reduces net profit.

Principal Portion (80,000MT)

Financial Statement: → Statement of Financial Position (Balance Sheet) & → Statement of Cash Flows

Recorded as:

  In the Balance Sheet: Reduction in Loan Payable (liability decreases)

In the Statement of Cash Flows: Shown under Financing Activities as a cash outflow

Mention two items that will be added back to the net profit of a company and two items that will be deducted to determine its cash flow from operations.

added- Depreciation & amortization

deducted- increase account receivable & increase in inventory

Mention two items that will be added and two items that will be deducted to determine the cash flow from investing activities of a company.

deducted- loans made to other entities & purchase of intangible assets

Added- proceeds from sale of PPE & Cash received from loan repayments

Mention two items that will be added and two items that will be deducted to determine the cash flow from financing activities of a company.

Added- proceeds from other forms of loans or credit facilities & sale of treasury stock

Deducted- repurchase of treasury stock & payment of dividends

1. INCOME STATEMENT (also called Profit or Loss Statement)

This shows performance (profit or loss) over a period.

Main Formulas:

Concept	Formula
Revenue (Net of VAT)	Total Sales ÷ (1 + VAT Rate)
Gross Profit	Revenue – Cost of Goods Sold (COGS)
COGS	Quantity Sold × Unit Cost
Operating Profit (EBIT)	Gross Profit – Operating Expenses
Profit Before Tax (PBT)	Operating Profit – Interest Expense
Income Tax Expense	Profit Before Tax × Tax Rate
Net Profit (After Tax)	Profit Before Tax – Tax Expense

STATEMENT OF CHANGES IN EQUITY

Shows how owner's equity changed during the year.

Main Formulas:

Concept	Formula
Ending Share Capital	Beginning Share Capital + New Shares Issued (at nominal value)
Share Premium	(Issue Price – Nominal Value) × Number of Shares Issued
Ending Retained Earnings	Beginning Retained Earnings + Net Profit – Dividends
Total Equity	Share Capital + Share Premium + Retained Earnings + Other Reserves

BALANCE SHEET (Statement of Financial Position)

Shows what the company owns and owes at a point in time.

Main Equation:

Assets = Liabilities + Equity

Concept	Formula
Current Assets	Cash + Accounts Receivable + Inventory + Prepayments (due within 12 months)
Non-Current Assets	Equipment + Property + Note Receivables (due in more than 12 months) – Accumulated Depreciation
Current Liabilities	Accounts Payable + Short-Term Loans + Interest Payable (due within 12 months)
Non-Current Liabilities	Long-Term Loans + Notes Payable (due in more than 12 months)
Equity	Share Capital + Share Premium + Retained Earnings

INVENTORY & COST CALCULATIONS

Formula
COGS (Periodic)	Opening Inventory + Purchases – Closing Inventory
Units Sold	Opening Inventory + Production – Closing Inventory
Unit Cost	Total Cost ÷ Total Units Produced
Gross Profit	Revenue – COGS