ACCA f1 with answers 20006

Answers Part Examination – Paper 1.1(INT) Preparing Financial Statements (International Stream) December 2006 Answers Section A 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A B A D D B C C D D D A A C B D B A A C B D A A Workings for computational MCQs A 0/inventory Purchases COGS 650 – 195 Inventory Remaining inventory Inventory lost 380 480 –––– 860 455 –––– 405 220 –––– 185 –––– A + 500 + 500 no change ––––– 1,000 ––––– B 500 – (75% x 450) D 180 + (40% x 500) – 30 B 838,000 – 72,000 = 766,000; allowance 60,000 14 A 3/ x 10,800 + 1/4 x 12,000 = 11,100; prepayment 3/4 x 12,000 17 D 20% x (1,000,000 + 400,000 + 5,600,000) 19 18 B 100 + 50 + 60; 80 – 50 + 30 22 B 1: (40,000 + 60,000 – 50,000) x = 100,000 – 95,000 = 5,000 cash lost 3: (40,000 + 60,000 – 50,000 – 2,500 inventory loss) x = 95,000 23 D 834,600 + 134,600 – 4,800 + 8,700 – 144,400 25 A Payables ledger control account Cash paid to suppliers 1,364,300 Purchase returns 41,200 Contras against debit balances in receivables ledger 48,000 Discounts 8,200 Closing balance 128,200 –––––––––– 1,589,900 –––––––––– Opening balance Purchases Refunds received from suppliers 318,600 1,268,600 2,700 –––––––––– 1,589,900 –––––––––– 20 Section B Golding Balance sheet as at 30 June 2006 Non-current assets Land and buildings Plant and equipment Cost or valuation $000 Accumulated depreciation $000 Net book value $000 9,000 6,000 ––––––– 15,000 ––––––– 200 4,400 –––––– 4,600 –––––– 8,800 1,600 ––––––– 10,400 Current assets Inventories Receivables (3,600 – 280) Cash 4,700 3,320 1,200 –––––– 9,220 ––––––– 19,620 ––––––– Capital and reserves Called up share capital Share premium account Revaluation reserve (5,000 + 4,000 – 4,000 – 2,400) Retained earnings (see working) Non-current liabilities 8% Loan notes Current liabilities Payables Accruals (500 + 250) Working Retained earnings balance July 2005 Draft profit less: irrecoverable debts bonuses depreciation 5,000 2,200 2,600 5,570 ––––––– 15,370 1,000 2,500 750 ––––––– $000 $000 3,250 –––––– 19,620 ––––––– $000 4,600 2,900 280 250 1,400 ––––––– 21 1,930 –––––– 970 ––––––– 5,570 ––––––– (a) Dr $ 70,000 (1) Sales Share capital Share premium Cr $ 50,000 20,000 (2) Suspense Interest payable Interest receivable 16,000 (3) Sales Purchases Suspense 16,000 16,000 8,000 8,000 32,000 OR Suspense Sales 48,000 Purchases Suspense 64,000 Sales 64,000 48,000 64,000 Suspense Suspense Purchases (4) Suspense Rent (b) 64,000 48,000 48,000 36,000 36,000 – $ Profit per draft accounts Adjustments (1) Sales (2) Interest (3) Sales/Purchases (4) Rent + $ 830,000 70,000 16,000 32,000 –––––––– 102,000 Revised profit 22 36,000 –––––––– 882,000 102,000 –––––––– 780,000 –––––––– Joyce Cash flow statement for the year ended 30 June 2006 $000 Cash flows from operating activities Profit before taxation (working 1) Adjustments for Depreciation Interest expense $000 22,200 13,000 720 ––––––– 35,920 (4,900) (8,900) (2,100) ––––––– 20,020 (720) (6,200) ––––––– Increase in inventories Increase in receivables Decrease in payables Cash generated from operations Interest paid Income taxes paid Net cash from operating activities Cash flows from investing activities Purchase of property plant and equipment (Working 3) 13,100 (19,000) ––––––– Net cash used in investing activities Cash flows from financing activities Proceeds of issue of share capital Proceeds of issue of loan notes Dividends paid (19,000) 2,000 2,000 (4,000 ) ––––––– Net cash from financing activities – ––––––– (5,900) 4,600 ––––––– (1,300) ––––––– Net decrease in cash Cash at July 2005 Cash at 30 June 2006 WORKINGS Calculation of profit for year Dividends Tax Closing balance $000 4,000 8,200 28,000 ––––––– 40,200 ––––––– $000 18,000 22,200 ––––––– 40,200 ––––––– Income taxes Cash Closing balance $000 6,200 8,000 ––––––– 14,200 ––––––– Opening balance Income statement $000 6,000 8,200 ––––––– 14,200 ––––––– Non-current assets Opening balance Revaluation reserve Purchases $000 130,000 12,000 19,000 –––––––– 161,000 –––––––– 0pening balance Profit for year $000 Depreciation 13,000 Closing balance 148,000 –––––––– 161,000 –––––––– (a) Following the matching concept, to reflect in operating profit the cost of use of tangible non-current assets (the amount of economic benefits consumed) (b) It is not normally necessary to depreciate land, unless it is subject to depletion in some way – a quarry for example Buildings should be depreciated like any other non-current asset so as to allocate their depreciable amount (cost or valuation) over their useful economic life 23 (c) (i) Straight line The depreciable amount of an asset, less any residual value, is written off in equal instalments over its estimated useful economic life (ii) Reducing balance Depreciation is calculated as a percentage of the net book value of the asset at the end of each period Other answers to (c) considered on their merits (a) If the event provides evidence of conditions that existed at the balance sheet date, adjustment must be made, if material Adjustment is also required if an event after the balance sheet date indicates that the going concern basis of accounting is no longer appropriate (b) (i) Non-current assets are normally valued at cost or valuation less depreciation If the going concern basis was no longer appropriate, net realisable value on the basis of a short-term sale would have to be adopted instead, and the assets would be included in current assets (ii) Inventory is normally valued at the lower of cost and net realisable value If the going concern basis no longer applied, net realisable value on the basis of a short-term sale would have to be substituted (iii) Loan notes, if shown as non-current liabilities, would have to be reclassified as current liabilities 24 Part Examination – Paper 1.1(INT) Preparing Financial Statements (International Stream) December 2006 Marking Scheme Heading Land and building valuation accumulated depreciation 1 1/ –––– Plant and equipment cost accumulated depreciation Inventory Receivables Cash Share capital Share premium account Revaluation reserve Retained earnings Loan notes Accruals Payables Format (a) (b) 1/ 1/ –––– 1/ + 1/2 1 1/ 1/ 2 ––––– 131/ –––––2 + 1/2 x (or x max 3) 4x1 –––– 11 –––– 1/ + 1/ Heading 2 Operating profit x 1/2 + tax Depreciation Interest expense Increase in inventory Increase in receivables Decrease in payables Net cash inflow from operating activities All other items in statement x 1/2 Calculation of non-current asset payment 1/ + 1/ Balances 2 Revaluation reserve Depreciation (c) 11 1/ 1/ 1/ 1/ 1/ 1/ 1 1/ ––––2 21/2 1 ––––– 14 / –––––2 (a) (b) max 11 11/2 11/2 Cash movement Layout 1/ 1/ 1/ 1/ x 1/2 1/ 11/2 max 12 1/ 1/ Land – not depreciated Land – mention of depletion Buildings – cost or valuation Spread over useful economic life 1 –––– 2x2 –––– –––– 25 (a) (b) 11/2 1/ ––––2 Conditions at b/s date Materiality Going concern 2+2+1 –––– –––– 26 ... Examination – Paper 1.1(INT) Preparing Financial Statements (International Stream) December 2006 Answers Section A 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A B A D D B C C D D D A A C... is calculated as a percentage of the net book value of the asset at the end of each period Other answers to (c) considered on their merits (a) If the event provides evidence of conditions that