1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
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
View
C Limited’s statement of financial position at 31 December 2020 is shown with comparative figures at 31 December 2019. At 31 December $000 $000 Assets Non-current assets Current assets Inventory Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Equity Ordinary shares Share premium - Retained earnings Revaluation reserve - Total equity Non-current liabilities 8% Debentures (2025) Current liabilities Trade and other payables Total equity and liabilities The following information is also available. The company’s issued capital consists of ordinary shares of $0.25 each. On 1 January 2020 the directors revalued the property upwards by $300 000. There were no purchases or disposals of non-current assets during the year. On 1 July 2020 the directors made a bonus issue of ordinary shares. There were no other changes in share capital during the year. REQUIRED Explain two reasons for making a bonus issue of shares. Calculate the number of bonus shares issued on 1 July 2020. Prepare the journal entry recording the bonus issue on 1 July 2020. A narrative is required. Journal Dr Cr $000 $000 Identify three factors that directors of a company should consider when deciding on the amount of a proposed dividend. Additional information The directors of C Limited wish to propose a dividend of $0.01 per share on all shares in issue at 31 December 2020. REQUIRED Calculate the amount of the proposed dividend.
9706_s21_qp_21
THEORY
2021
Paper 2, Variant 1
View
Questions Discovered
1775