1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
The directors of Y Limited have provided the following balances at 30 June 2022. $ 6% debentures (2025–2026) 60 000 Administrative expenses 89 540 Bank overdraft 1 440 Carriage inwards 4 310 Delivery vehicles – valuation 74 000 Distribution costs 72 910 Dividends paid 6 400 Finance costs 1 800 Inventory at 1 July 2021 105 600 Office equipment – cost 54 600 Office equipment – provision for depreciation 22 300 Provision for doubtful debts 3 540 Purchases 338 200 Retained earnings 16 920 Returns inwards 7 550 Revenue 615 300 Share capital (ordinary shares of $1 each) 80 000 Trade payables 48 650 Trade receivables 93 240 The following information is also available. Inventory at 30 June 2022 was valued at $126 800. Inventory at 30 June 2022 included damaged goods costing $3200 that could be sold for $3950 after repairs costing $910. The delivery vehicles have an estimated value at 30 June 2022 of $62 000. Office equipment is to be depreciated at 10% per annum using the reducing balance method. Administrative expenses included $1800 office rent for the three months ending 31 August 2022. Distribution costs of $850 were owing at 30 June 2022. The 6% debentures (2025–2026) were issued in 2017. An irrecoverable debt of $490 is to be written off to administrative expenses. The provision for doubtful debts is to be maintained at 4% of trade receivables. 10 There is no interest charged on the bank overdraft. REQUIRED Prepare the income statement for the year ended 30 June 2022. Y Limited Income Statement for the year ended 30 June 2022 $ Revenue Cost of sales Gross profit Administrative expenses Distribution costs Profit from operations Finance costs Profit for the year Workings: Cost of sales Administrative expenses Distribution costs Prepare the statement of financial position at 30 June 2022. Y Limited Statement of Financial Position at 30 June 2022 Additional information The directors of Y Limited wish to repay the 6% debentures (2025–2026) early. They are considering making a rights issue of one ordinary share for every two shares held at a premium of 50%. REQUIRED Advise the directors whether or not they should make a rights issue of ordinary shares to repay the debentures. Justify your answer.
9706_w22_qp_21
THEORY
2022
Paper 2, Variant 1
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The following balances have been extracted from the draft financial statements of H Limited at 30 September 2022. $ 8% bank loan (2028–2029) 28 000 Cash and cash equivalents 2 590 Inventory 48 900 Plant and machinery at net book value 52 000 Property at valuation 65 000 Retained earnings 27 350 Revaluation reserve 23 000 Share capital (ordinary shares of $1 each) 80 000 Share premium 19 400 Trade payables 17 140 Trade receivables 26 400 The directors discovered that the following had not been accounted for. Plant and machinery had been purchased for $16 500. This was settled by the part‑exchange of machinery with a net book value of $11 800 and a bank payment of $4700. No depreciation for the year had been charged. Plant and machinery is depreciated at 10% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase and none in the year of disposal. A bonus issue of one ordinary share for every four shares held had been made on 1 June 2022. The directors had decided to keep the reserves in the most flexible form. An interim dividend of $0.03 per share had been paid on 1 September 2022 on all shares in issue at that date. Property had been revalued downwards by $4000. One half of the 8% bank loan (2028–2029) had been repaid on 30 September 2022. A provision for doubtful debts of 5% was to be made. REQUIRED Prepare the journal entry to record the bonus issue of shares. Dates and narrative are not required. Calculate the net book value of plant and machinery at 30 September 2022. Calculate the adjusted balance of cash and cash equivalents at 30 September 2022. Calculate the adjusted balance of retained earnings at 30 September 2022. Prepare the statement of financial position at 30 September 2022. H Limited Statement of Financial Position at 30 September 2022 Explain two differences between capital reserves and revenue reserves. Explain one accounting concept applied when making a provision for doubtful debts.
9706_w22_qp_22
THEORY
2022
Paper 2, Variant 2
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The following information is available. $ balance of trade receivables at the start of the year 48 000 balance of trade receivables at the end of the year 65 300 trade discount given to credit customers 3 000 cash discount taken by credit customers 4 500 irrecoverable debt written off during the year 6 200 increase in allowance for irrecoverable debts for the year 2 700 cash received from credit customers during the year 516 000 What is the total value of credit sales for the year?
9706_w23_qp_12
MCQ
2023
Paper 1, Variant 2
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B Limited provided the following information for the year ended 30 September 2023. $ 8% debenture (2025) 60 000 Administrative expenses 161 100 Allowance for irrecoverable debts at 1 October 2022 3 820 Cash and cash equivalents 4 680 Distribution costs 84 650 Dividend paid 4 000 Finance costs 3 950 Inventory 74 000 Other payables 1 860 Other receivables Property plant and equipment at 1 October 2022 Cost / valuation 408 400 Accumulated depreciation 110 650 Retained earnings at 1 October 2022 45 850 Revaluation reserve at 1 October 2022 10 000 Share capital (ordinary shares of $1 each) at 1 October 2022 200 000 Share premium at 1 October 2022 14 000 Trade payables 57 150 Trade receivables 82 680 The revaluation reserve relates to land only. The gross profit for the year ended 30 September 2023 was $321 070. The following information is also available. Property plant and equipment at 1 October 2022 Cost / valuation $ Accumulated depreciation $ Depreciation method Allocation of depreciation Land 95 000 Nil – Nil Buildings 215 000 53 750 5% per annum straight line 60% administrative expenses Equipment 98 400 56 900 20% per annum reducing balance 40% distribution costs Total 408 400 110 650 There were no acquisitions or disposals of non-current assets during the year. Prepare an extract from the statement of profit or loss for the year ended 30 September 2023 commencing with the gross profit for the year. B Limited Statement of profit or loss for the year ended 30 September 2023 $ Gross profit for the year Distribution costs Administrative expenses Profit from operations Finance costs Profit before taxation Taxation Profit for the year Workings: Distribution costs Administrative expenses Prepare the statement of financial position at 30 September 2023. Use the space provided on page 7 to show your workings. B Limited Statement of financial position at 30 September 2023 Additional information The directors wish to raise additional finance and they are considering two options. Option 1: make a rights issue of one ordinary share for every four shares held at a premium of $0.10 per share. Option 2: issue a further 8% debenture (2028) to raise $50 000. Advise the directors which option they should choose. Justify your answer.
9706_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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A business maintains an allowance for irrecoverable debts of 2% of trade receivables. At the beginning of the financial year on 1 January the trade receivables total was $48000. At the end of the financial year on 31 December the trade receivables total was $37000. When the business owner prepared the statement of profit or loss for the year ended 31 December, an irrecoverable debt of $1600 which had occurred during the year had not been written off. No adjustment had been made to deal with the allowance for irrecoverable debts at 31 December. By which amount was the profit for the year overstated?
9706_w24_qp_11
MCQ
2024
Paper 1, Variant 1
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Questions Discovered
637