1.4. Reconciliation and verification
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 385 questions
The company accountant of J plc had prepared draft financial statements for the year ended 30 June 2024. The following balances remained in the books of account. $ 6% bank loan (2024) 11 000 Bank 1 980 Inventory 83 900 Other payables 3 150 Other receivables 5 320 Plant and equipment Cost Provision for depreciation 137 000 66 940 Property Cost Provision for depreciation 60 000 8 160 Retained earnings 122 300 Share capital (ordinary shares of $1 each) 70 000 Share premium 4 280 Taxation 13 600 Trade payables 21 450 Trade receivables 32 680 The draft statement of profit or loss showed a profit for the year of $83 250. It has since been discovered no account had been taken of the following errors and omissions. Closing inventory had been understated by $2 000. Administrative expenses included an interim dividend of 3% that had been paid on 1 April 2024. An amount of $1 250 prepaid on distribution costs had been treated as an accrual. The 6% bank loan (2024) had been repaid on 30 June 2024. The property was purchased on 1 July 2021 and had been correctly depreciated for each of the two years ended 30 June 2023 using the straight-line method at 2% per annum. However, the depreciation charge on the property for the year ended 30 June 2024 had been incorrectly calculated using the reducing balance method at 10% per annum. The taxation liability at 30 June 2024 had been over estimated by $3 000. Calculate the corrected carrying value of Property at 30 June 2024. Calculate the revised profit for the year ended 30 June 2024. Workings: Prepare the statement of financial position at 30 June 2024. Use the space provided on page 5 to show your workings. J plc Statement of financial position at 30 June 2024 Additional information The directors of J plc are aware that one factor causing the value of plant and equipment to depreciate is wear and tear. State two other factors that may cause the value of plant and equipment to depreciate. State the formula for each of the following ratios. Ratio Formula Profit margin Return on capital employed Additional information Having calculated both these ratios, the directors are pleased that both achieve the company’s targets. They are wishing to expand and are planning to acquire additional plant and equipment with an estimated cost of $80 000. They are considering two financing options but are also concerned as to the effect that these will have on the ratios. Option 1 Request a five-year bank loan to purchase the equipment outright. Option 2 Take out a three-year lease agreement for the equipment. Advise the directors which option they should choose. Justify your advice by considering both financial and non-financial factors.
9706_w24_qp_23
THEORY
2024
Paper 2, Variant 3
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Questions Discovered
385