1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
The following is an extract from the statement of financial position of Chopin Limited at 30 June 2015: During the year ended 30 June 2016, the following took place: 1 November 2015 Non-current assets were revalued to $1 000 000. 1 January 2016 A bonus issue of shares was made. The terms of the issue were 1 new share for every 10 shares in existence. Reserves were maintained in the most flexible form. 1 April 2016 Dividend of $0.02 per share was paid. Profit for the year ended 30 June 2016 was $230 809. REQUIRED Prepare a statement of changes in equity for the year ended 30 June 2016. $ Non-current assets 750 000 Ordinary shares of $0.25 each 300 000 Share premium 20 000 Retained earnings 635 210 Explain why the company should not use its revaluation reserve to pay dividends to shareholders. State two uses of a share premium account. State the difference between a bonus issue of shares and a rights issue of shares.
9706_w16_qp_21
THEORY
2016
Paper 2, Variant 1
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The directors of Rebuild Limited are preparing the financial statements for the year ended 31 December 2015. The equity section of the statement of financial position at 31 December 2014 was as follows: $ Ordinary shares of $2 each, fully paid 240 000 Share premium 8 000 General reserve 40 000 Retained earnings 75 500 363 500 During the year ended 31 December 2015, the following transactions took place: March 1 Issued 10 000 ordinary shares at $2.10 each March 31 Paid final dividend of 3% on all shares in issue at 31 December 2014 December 31 The directors revalued the company premises upwards by $20 000 The profit for the year ended 31 December 2015 was $47 100. REQUIRED Prepare the statement of changes in equity for the year ended 31 December 2015. Additional information The directors of Rebuild Limited made a bonus issue of ordinary shares on 30 June 2016. The basis of the issue was one ordinary share for every twenty-five ordinary shares held. The company policy is to leave reserves in their most flexible form. The profit for the 6 months ended 30 June 2016 was $25 000. REQUIRED Prepare the statement of changes in equity for the 6 months ended 30 June 2016. State two differences between ordinary shares and debentures. Additional information The following item appears on the statement of financial position of Rebuild Limited at 31 December 2015: 6% debentures (2018–2020) $60 000 REQUIRED State the significance of (2018–2020). State why an issue of debentures does not appear in the statement of changes in equity.
9706_w16_qp_22
THEORY
2016
Paper 2, Variant 2
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Dolphin Limited is a bakery producing goods for wholesale. The issued share capital of the company is 300 000 ordinary shares of $2 each. The directors offered a further 125 000 ordinary shares to family and friends. The terms of issue were: 1 April 2016 – Payable on application $1.00 per share 30 June 2016 – Final payment $1.10 per share Applications were received for 150 000 shares. All monies received were entered into a holding account called ‘Application for Shares’. Transfers were made from this account to the relevant ledger accounts. The applicants were issued shares and all final payments were received on the due date. Excess application monies were returned to applicants. REQUIRED Prepare the relevant ledger accounts to record the issue of shares. Explain two differences between ordinary shares and preference shares. Name one capital reserve.
9706_w16_qp_23
THEORY
2016
Paper 2, Variant 3
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P Limited was formed on 1 June 2015. The company’s share capital comprised of ordinary shares. Identify two differences between ordinary shares and cumulative preference shares. State three differences between a rights issue and a bonus issue. Additional information P Limited prepares financial statements to 31 May. The following transactions, all of which were entered in the appropriate accounts in the ledger, occurred in relation to the ordinary shares. 1 June 100 000 ordinary shares, with a nominal value of $1 each, were issued at a price of $1.45 each. Of this, $1.15 was received which included the full par value. 30 September The balance outstanding was received in full. 1 October P Limited made a 1 for 4 rights issue at a discount of 15% of the most recent share valuation of $1.40 per ordinary share. All shareholders took up their rights in full. REQUIRED Complete the following table for the two years ended 31 May 2017 to record these transactions. Date Name of account to be debited Amount $ Name of account to be credited Amount $ Additional information Shareholders have not received any dividend since the company was formed. However, the financial statements show the following: Profit for the years ended 31 May 2016 $15 000 31 May 2017 $30 000 Cash and cash equivalents at 31 May 2017 $90 000 On 1 June 2017 several major shareholders demanded that the directors pay a dividend of $0.48 per share. REQUIRED Advise the directors how they should respond to the shareholders’ demand. Support your answer with calculations.
9706_w17_qp_21
THEORY
2017
Paper 2, Variant 1
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F Limited is a large retail company. On 1 February 2016, the company invited applications for 50 000 ordinary shares of $1 each at an issue price of $1.20. The following terms applied: Payable on application $0.50 Payable on allotment $0.70 Applications were received for 65 000 shares. All monies received in respect of the share issue were posted to the bank account and a share issue holding account until the shares were allotted. At the time of allotment, transfers were made to the share capital account and the share premium account and monies were returned to the unsuccessful applicants. REQUIRED Prepare the following ledger accounts to show all transactions relating to the share issue. Dates are not required. Share issue holding account $ $ Bank account $ $ REQUIRED Prepare the statement of changes in equity for F Limited for the year ended 30 June 2016. F Limited Statement of Changes in Equity for the year ended 30 June 2016 Ordinary shares $000 Share premium $000 Revaluation reserve $000 Retained earnings $000 Total $000 Additional information The directors of F Limited wish to purchase a new retail store for $400 000. They are considering two different ways to raise the finance for this investment. Issue a further $400 000 8% debentures (2026–2028). Make a rights issue of 320 000 ordinary shares of $1 each at a price of $1.25. REQUIRED Explain one difference between debentures and ordinary shares. Advise the directors which method of raising the finance you would recommend. Give reasons for your answer. Additional information F Limited also operates a manufacturing business. In the last financial year they extended the factory premises. Expenditure included the following: $ Building contractor charges to construct extension 28 000 Structural repairs to existing roof 4 600 Wages to own employees to construct new loading bay 4 000 Materials for new loading bay 2 400 Legal fees for planning permission 2 200 REQUIRED Define the term ‘revenue expenditure’. Prepare a statement to show the total amount of capital expenditure to appear in the financial statements of the business in respect of the extension of the factory premises.
9706_w17_qp_23
THEORY
2017
Paper 2, Variant 3
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Questions Discovered
1775