1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
R Limited is a retail company. REQUIRED Explain the meaning of 8% debentures (2025–2026). Additional information The directors of R Limited provided the following information at 1 October 2021. $000 Building at valuation Retained earnings Revaluation reserve Share capital (ordinary shares of $0.50 each) 1 200 Share premium The following transactions took place during the year ended 30 September 2022. 31 December 2021 Paid a final dividend of $0.06 per share. 31 March 2022 Made a rights issue of one ordinary share for every four shares held at a price of $0.65. The issue was fully subscribed. 31 July 2022 Made a bonus issue of one ordinary share for every six shares held. The directors decided to leave the reserves in the most flexible form. 31 August 2022 Paid an interim dividend of $0.04 per share. 30 September 2022 The building, which had originally cost $80 000, was revalued to $115 000. The profit for the year ended 30 September 2022 was $87 000. REQUIRED Prepare the statement of changes in equity for the year ended 30 September 2022. R Limited Statement of changes in equity for the year ended 30 September 2022 Share capital $000 Share premium $000 Revaluation reserve $000 Retained earnings $000 Total $000 At 1 October 2021 1 200 1 700 At 30 September 2022 Workings: Explain why dividends proposed at the end of a financial year are not shown in a company’s statement of financial position.
9706_w22_qp_23
THEORY
2022
Paper 2, Variant 3
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The following information is available for a limited company’s financial year ended 31 December. At 1 January the total equity was $350 000. This included 100 000 ordinary shares of $1 each. On 30 June there was a rights issue of 10 000 ordinary shares for $1.50 each. This was fully subscribed. On 1 October the company paid a dividend of $0.10 per ordinary share. On 1 December a dividend was proposed totalling $20 000. Profit for the year was $26 500. What was the total equity on 31 December?
9706_w23_qp_11
MCQ
2023
Paper 1, Variant 1
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A limited company has the following in its statement of financial position at 31 March. equity $ ordinary share capital 200 000 retained earnings 82 500 share premium 80 000 Ordinary shares have a par value of $0.40 each. A bonus issue is made on the basis of 3 shares for every 8 shares held at 31 March. The issue is made so that reserves are kept in their most flexible form. What are the balances on the reserve accounts after the bonus issue has been made?
9706_w23_qp_12
MCQ
2023
Paper 1, Variant 2
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Q Limited has been in business for a number of years. One of the directors is unsure of the difference between a capital reserve and a revenue reserve. Explain one difference between a capital reserve and a revenue reserve. Additional information The directors of Q Limited provided the following information for the year ended 30 June 2023. Balances at 1 July 2022 $ Share capital: ordinary shares of $0.50 each 30 000 Share premium 4 500 Revaluation reserve 6 000 Retained earnings 50 240 Total equity 90 740 8% debenture (2024) 40 000 At 1 July 2022, land, original cost $80 000, had a valuation of $86 000. No other non-current assets had been revalued. The following transactions took place during the year ended 30 June 2023. Date 1 August 2022 Made a bonus issue of one ordinary share for every six shares held. The directors maintained the reserves in the most flexible form. 1 October 2022 Paid a final dividend of $0.04 per share on all shares in issue at that date. 1 January 2023 Made a rights issue of two ordinary shares for every seven shares held at a price of $0.65 per share. The issue was fully subscribed. 1 April 2023 Paid an interim dividend of $0.02 per share on all shares in issue at that date. 30 June 2023 Land was revalued at $75 000. The draft profit for the year ended 30 June 2023 was $43 600. Prepare the statement of changes in equity for the year ended 30 June 2023. Q Limited Statement of changes in equity for the year ended 30 June 2023 Share capital $ Share premium $ Revaluation reserve $ Retained earnings $ Total $ At 1 July 2022 Additional information The directors of Q Limited have plans to expand the business at a total cost of $54 000 and are considering two options to raise finance. Option 1: Make a rights issue of four ordinary shares for every five shares held at a price of $0.75 per share. Option 2: Issue a 10% debenture (2026–2027) of $54 000. Advise the directors which option, if either, they should choose. Justify your decision.
9706_w23_qp_21
THEORY
2023
Paper 2, Variant 1
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P Limited sells electronic goods online. The directors provided the following information. Balances At 31 July 2023 $ At 1 August 2022 $ 8% debenture (2026) 36 000 – Inventory 43 190 36 800 Other payables: administrative expenses – Other receivables: administrative expenses 1 820 Other receivables: distribution costs 1 490 – Trade payables 25 250 29 610 Bank account extract for the year ended 31 July 2023 $ Payments To credit suppliers 122 050 Administrative expenses 66 920 Distribution costs 51 730 Receipts From customers 284 200 The following information is also available. All goods are despatched to customers immediately on receipt of payment. Inventory at 31 July 2023 included damaged items that had cost $3600. One half of these items will be scrapped and have no value. The remaining items will be sold for $900 after repairs costing $420. The 8% debenture (2026) was issued on 1 April 2023. The charge for taxation was estimated to be $10 700. Prepare the statement of profit or loss for the year ended 31 July 2023. Use the space provided to show your workings. P Limited Statement of profit or loss for the year ended 31 July 2023 $ Workings: Cost of sales Administrative expenses Distribution costs Additional information Balances at 1 August 2022 $ Share capital (ordinary shares of $0.50 each) 120 000 Share premium 19 000 Retained earnings 23 560 On 1 September 2022, a bonus issue of shares was made of one ordinary share for every six shares held. Reserves were maintained in their most flexible form. On 1 January 2023, a final dividend of $0.07 per share was paid on all shares in issue at 1 August 2022. On 31 March 2023, a rights issue of one ordinary share for every four shares held was made at a premium of $0.15 per share. The issue was fully subscribed. Prepare the statement of changes in equity for the year ended 31 July 2023. P Limited Statement of changes in equity for the year ended 31 July 2023 Share capital $ Share premium $ Retained earnings $ Total $ At 1 August 2022 120 000 19 000 23 560 162 560 State two examples of revenue reserves of a limited company. Advise the directors whether or not they were correct to make a bonus issue of shares rather than make a new issue of shares. Justify your answer.
9706_w23_qp_22
THEORY
2023
Paper 2, Variant 2
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The directors of J Limited provided the following information at 1 September 2022. $ Share capital (ordinary shares of $0.50 each) 60 000 Share premium 21 800 Retained earnings 32 600 Total equity 114 400 During the year ended 31 August 2023 the following transactions took place. 1 December 2022 Made a rights issue of one ordinary share for every five shares held at a premium of $0.20. The issue was fully subscribed. 1 January 2023 Paid a final dividend of 4% on all shares in issue at 1 September 2022. 1 April 2023 Made a bonus issue of three ordinary shares for every eight shares held at that date. The directors wish to leave reserves in the most flexible form. 1 June 2023 Paid an interim dividend of $0.02 per ordinary share on all shares in issue at that date. Profit for the year ended 31 August 2023 was $16 500. Prepare the following ledger accounts to record the transactions. Dates are not required. Share capital Details $ Details $ Balance b/d 60 000 Share premium Details $ Details $ Balance b/d 21 800 Retained earnings Details $ Details $ Balance b/d 32 600 Additional information J Limited currently operates a manual system of bookkeeping and the directors are now considering introducing a computerised accounting system. State three disadvantages of introducing a computerised accounting system. State three ways in which the security of data in a computerised accounting system can be assured.
9706_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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The statement of financial position of a company at 31 December showed the following: $ issued share capital: 200000 ordinary shares at $1 per share During the following year, the company carried out the following: On 1 January made a rights issue of one ordinary share for every five ordinary shares held. The share issue price was $1.50 per ordinary share and the issue was fully subscribed. On 1 July made a bonus issue of one ordinary share for every four ordinary shares held at that date. What was the amount of cash received by the company in respect of these transactions?
9706_w24_qp_12
MCQ
2024
Paper 1, Variant 2
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