1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
K Limited prepares annual accounts to 30 September. For the year ended 30 September 2018, the directors have calculated profit from operations of $44 500. On 31 January 2018 they redeemed a 6% debenture of $100 000 together with accrued interest to that date. REQUIRED Calculate the profit for the year ended 30 September 2018. Additional information The directors have provided the following extract from the statement of financial position at 1 October 2017. Equity $ Ordinary shares of $0.25 each 500 000 Share premium 175 000 Retained earnings 540 000 1 215 000 The following information is also available: On 31 December 2017, a rights issue of ordinary shares was made at a premium of $0.15 per share on the basis of 2 ordinary shares for every 5 held on that date. The issue was fully subscribed. On 31 March 2018, a bonus issue was made on the basis of 3 ordinary shares for every 5 held on that date. Reserves were maintained in the most flexible form. On 30 June 2018, an interim dividend of $0.05 per share was paid on all shares in issue on that date. On 30 September 2018, buildings were revalued at $1 200 000. The original cost of the buildings was $1 000 000 and had been depreciated by $150 000. REQUIRED Prepare the statement of changes in equity for the year ended 30 September 2018. Ordinary shares $ Share premium $ Revaluation reserve $ Retained earnings $ At 1 October 2017 500 000 175 000 – 540 000 Workings: State one difference between a capital reserve and a revenue reserve.
9706_s19_qp_21
THEORY
2019
Paper 2, Variant 1
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On 1 December 2019 a company’s statement of financial position included the following. $ ordinary shares of $5 each 2 500 000 share premium 850 000 retained earnings 710 000 15 December paid an ordinary share interim dividend of $0.15 per share 23 December made a bonus issue of 25 000 ordinary shares Reserves were kept in their most flexible form. What were the balances on the revenue reserves and capital reserves accounts after these transactions?
9706_s20_qp_12
MCQ
2020
Paper 1, Variant 2
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The directors of K Limited are preparing the financial statements for the year ended 31 October 2019. The following information is available. Expense payments made during the year ended 31 October 2019. $ Administrative expenses 8 490 Directors’ fees 41 200 Distribution costs 16 500 Finance costs Staff wages and salaries 140 790 Distribution costs include a payment of $7200 for a six-month advertising campaign which will end on 31 March 2020. Directors’ fees are allocated between distribution costs and administrative expenses in the ratio 1 : 4. Staff wages and salaries are allocated between distribution costs and administrative expenses in the ratio 3 : 2. Non-current assets At 1 November 2018 Depreciation policy Allocation Cost $ Provision for depreciation $ Motor vehicles 160 000 32 600 20% per annum using reducing balance method 100% to distribution costs Furniture and equipment 45 000 5 500 15% per annum using straight-line method 80% to administrative expenses 20% to distribution costs In 2017 the company had issued 8% debentures (2025) for $20 000. Half of these were repaid on 1 August 2019. Debenture interest was paid up to 30 April 2019. REQUIRED Complete the income statement for the year ended 31 October 2019. Use the space on the next page for your workings. K Limited Income statement for the year ended 31 October 2019 $ Revenue 542 370 Cost of sales 259 240 Gross profit 283 130 Administrative expenses Distribution costs Profit from operations Finance costs Profit for the year Additional information At 1 November 2018 the equity section of the company’s statement of financial position was as follows. $ Ordinary shares of $0.50 each 90 000 Share premium 36 000 Retained earnings 65 600 On 30 June 2019 the company paid a dividend of $0.10 per ordinary share. At 31 October 2019 the company made a bonus issue of two ordinary shares for every three ordinary shares held. Reserves were maintained in their most flexible form. REQUIRED Prepare the statement of changes in equity for the year ended 31 October 2019. K Limited Statement of changes in equity for the year ended 31 October 2019 Share capital $ Share premium $ Retained earnings $ Total $ Workings: Additional information K Limited was formed several years ago by the partners in a business. REQUIRED State three advantages to the shareholders of trading as a limited company. Additional information The directors of a rival company, Q plc, are concerned about their company’s performance. The following information about Q plc is available. Year ended 31 October Industry averages for Non-current asset turnover 7 times 6 times 5 times 4 times Return on capital employed (%) REQUIRED Assess the performance of Q plc based on these ratios. Additional information Q plc’s liabilities include 8% debentures of $50 000. A director has suggested repaying the debentures to improve the company’s return on capital employed. REQUIRED Advise the director whether or not the company should go ahead with this suggestion. Justify your answer.
9706_s20_qp_23
THEORY
2020
Paper 2, Variant 3
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Questions Discovered
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