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Question 1 The trial balance below was extracted from the records of Quality Commercial Bank Plc as at 31 December 2022: GHC’m GHC’m Interest Income------------------------------------------------------- 4,950 Interest on customers’ deposits----------------------------------- 850 Net Commission and fees income-------------------------------- 900 Gains on foreign currency transactions------------------------------ 40 Dividend Income ----------------------------------------------------- 30 Operating Expenses----------------------------------------------------- 2,400 Directors Emolument ---------------------------------------------- 20 Auditor’s Fees------------------------------------------------------ 40 Dividend paid (note vi)--------------------------------------------- 20 Loan Impairment provision (1 January 2022)-(note iv)------- 410 Rental Income from Investment Property-(note iii)------------ 90 Corporate (Current) Income Tax -(note ii)------------------- 100 Retained Earnings (1 January 2022)------------------------------------ 1,700 Capital Surplus (1 January 2022) ------------------------------ 20 Statutory Reserve ( 1 January 2022)- (note v)---------------------` 640 Stated Capital (50 million equity shares ) - 1 January 2022- 100 Cash on hand ------------------------------------------------------- 340 Balances with Central Bank------------------------------------------ 3,050 Investment in Government Securities ---------------------------- 10,900 Investments in Listed Financial Instruments ------------------- 160 Receivables from other banks------------------------------------- 1,610 Payables to other banks ---------------------------------------- 50 Overdrafts, loans and advances ----------------------------- 15,700 Sundry Receivables and Prepayments---------------------------- 500 Property Plant and Equipment [PPE] (note i)------------------- 1,240 Accumulated Depreciation of PPE (I January 2022) [note i) 410 Investment Property –(note iii)-------------------------------------- 240 Customers’ Deposits -------------------------------------------------- 24,530 Expense trade payables and accruals------------------------------------ 3,300 -------- ----------- 37,170 37,170 ====== ====== The following additional notes are relevant: 1. Property, Plant and Equipment is analysed as follows : Cost Ac. Dep. Rate of Depreciation GHC’m GHC’m Land and Building 450 90 2% p.a straight line Computers and Equipment 750 300 25% p.a straight line Motor Vehicles 40 20 25% p. a straight line The land and buildings were acquired on commencement of business in January 2012, There have neither been further acquisition nor disposal since then. The directors caused the properties to be revalued in January 2022. The valuers assigned value of GHC400 million but advised that the estimated remaining useful life should be maintained. The directors wish to incorporate this valuation in the 2022 financial statements. 2 ii) There was neither current tax liability nor current tax asset as at 1 January 2022. During 2022, the company paid GHC100,000 for corporate tax on interim assessment. The bank is subject to 20% corporate tax. Ignore deferred tax implications. iii) The Investment property was acquired in January 2022. The rental income from the investment property [GHC90 million ] relates to the three- year period ending 31 December 2024. The bank adopts fair value model in subsequent measurement of the investment property and fair value assessment at 31 December 2022 puts the valuation at GHC 250 million. iv) Loan impairment provision at the end of the year (i.e as at 31 December 2022) is to be increased to GHC510 million. v) In compliance with the Banking Act, 12.5% of profit after tax is to be transferred to Statutory Reserve. vi) On I5th November 2022, the directors paid an interim dividend of GHC0.40 (40 pesewas) per share . No further dividend is recommended for the year. vii) In order to satisfy the Central Bank minimum stated capital requirement, the shareholders, at an Emergency Meeting on 24th December 2022, approved a bonus issue of one share for each one held (out of retained earnings ) to be credited at the current market price of GHC5 per share. This decision is to be reflected in the 2022 financial statements. Required a) Prepare the Income Statement and Statement of Changes in Equity for the year ended 31 December 2022 as well as Statement of Financial Position as at 31 December 2022 in a format that accords with relevant legislations and International Financial Reporting Standards b) Draft any four accounting policies that have been applied in preparing the financial statements