ACCA F3 (INT) Financial Accounting - 2010 - Study text - Emile Woolf Publishing
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Practice questions
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12 Herbert
The following trial balance has been extracted from the ledger of Herbert, a sole
trader, as at 31 May Year 6, the end of his most recent financial year.
Herbert
Trialbalanceasat31MayYear6
DR CR
$ $
Landandbuildingsatcost 90,000
Equipmentatcost 57,500
Accumulateddepreciation(asat1JuneYear5)
Onlandandbuildings12,500
Onequipment32,500
Inventoryasat1JuneYear5 27,400
Sales405,000
Purchases 259,600
Discountsallowed 3,370
Discountsreceived4,420
Wagesandsalaries 52,360
Baddebts 1,720
Loaninterest 1,560
Otheroperatingexpenses 38,800
Tradereceivables 46,200
Tradepayables33,600
Allowanceforirrecoverabledebts280
Cashinhand 151
Bankoverdraft14,500
Drawings 28,930
10%loan15,600
Capitalasat1JuneYear594,501
612,901 612,901
The following additional information as at 31 May Year 6 is available:
(a) Inventory as at 31 May Year 6 was valued at $25,900.
(b) Depreciation for the year ended 31 May Year 6 has yet to be provided as follows:
− Property – 1% using the straight-line method;
− Equipment – 15% using the straight-line method.
(c) There are accrued wages and salaries of $140.
(d) Other operating expenses include some prepaid expenses of $500 and some
accrued expenses of $200.
(e) The allowance for irrecoverable debts should be adjusted to 5% of trade
receivables as at 31 May Year 6.
(f) The amount for purchases includes goods valued at $1,040 which were
withdrawn by Herbert for his own personal use.
Required
Prepare Herbert’s income statement for the year ended 31 May Year 6 and his
statement of financial position as at that date.
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13 Bell
Bell is a sole trader making up his accounts to 31 July each year.
At 31 July Year 6 the balance on the allowance for irrecoverable debts account was
$1,420. During the following financial period ending 31 July Year 7, Bell suffered a
number of bad debts amounting to $723, which he wrote off to the bad debts
account.
At 31 July Year 7 Bell listed out all his receivables balances, which totalled $32,456.
After reviewing the list Bell decided that three balances - namely Lee $230, Bee $562
and Yee $56 - were all doubtful and had to be allowed for as irrecoverable debts. In
addition, he considered that 2% of all the remaining balances were likely to be
irrecoverable and had to be provided for.
Required
Show the ledger accounts reflecting the necessary adjustments, and the relevant
extracts from the financial statements.
14 Team Company financial statements
The following trial balance has been extracted from the ledger of Team Company, as
at 31 December Year 5, the end of its most recent financial year.
TeamCompany
Trialbalanceasat31DecemberYear5
DR CR
$ $
Plantandmachineryatcost 920,000
Allowancefordepreciation(asat1JanuaryYear5)215,000
Inventoryasat1JuneYear5 39,000
Sales1,292,000
Purchases 550,000
Sharecapital:Ordinarysharesof$0.50each120,000
Sharepremium55,000
Retainedearnings103,000
Distributionexpenses 116,000
Administrativeexpenses 241,000
Baddebts 23,500
6%bonds(redeemableinYear15)400,000
Tradereceivables 200,000
Tradepayables73,500
Allowanceforirrecoverabledebts6,000
Interestpaidonbonds 12,000
Bank 58,000
Dividendspaid 105,000
2,264,500 2,264,500
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The following additional information as at 31 December Year 5 is available:
(a) Inventory as at 31 December Year 5 was valued at $35,000.
(b) Depreciation on plant and machinery for the year ended 31 December Year 5 is to
be provided at the rate of 10% of cost.
(c) There are accrued distribution expenses of $7,500 and prepaid administrative
expenses of $4,000.
(d) The allowance for irrecoverable debts should be adjusted to 2% of trade
receivables as at 31 December Year 5
(e) Tax on profits for the year to 31 December Year 5 will be estimated as 30% of the
profit before tax.
Required
Prepare the income statement of Team Company for the year ended 31 December
Year 5 and its statement of financial position as at that date.
You are not required to present these statements in a format suitable for publication.
15 Blot Company
The following income statement has been prepared for Blot Company for the year
ended 30 June Year 6. The statement has been prepared as internal information for
management.
$000 $000
Openinginventory 78 Sales 2,282
Purchases 1,055 Salesreturns (66)
Purchasereturns (25)
Grossprofitc/d 1,170 Closinginventory 62
2,278 2,278
Wagesandsalaries 160 Grossprofitb/d 1,170
Officeexpenses 236 Dividendsreceived 20
Depreciation:
Plantandmachinery 84
Deliveryvans 48
Officefurniture 17
Directors’salaries 163
Sellingexpenses 95
Rentofplantandmachinery 21
Factoryexpenses 109
Legalexpenses 25
Interestcharges 70
Netprofitc/d
162
1,190 1,190
Taxationonprofits 54 Netprofitb/d 162
Netprofitaftertax 116 Taxover‐providedinthepreviousyear 8
170 170
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Additional information:
(1) Directors salaries are all classified as administrative expenses.
(2) Other wages and salaries are apportioned 70% to distribution costs and 30% to
administrative expenses.
Required
Using this information, prepare an income statement for Blot Company for the year
to 30 June Year 6 in a form suitable for publication, in conformity with International
Accounting Standard IAS 1. Use the function of expenditure method.
16 SAW Company
SAW Company is a limited liability company with authorised share capital of
$300,000, consisting of ordinary shares of $0.50 each. The company’s financial year
end is on 31 December, and a trial balance has been extracted as at 31 December
Year 5, as follows, after the profit for the year has been established:
Debit Credit
$000 $000
Ordinarysharecapital,issuedandfullypaid200
Sharepremium250
Inventoryat31DecemberYear5 31
Tradereceivablesandprepayments 98
Tradepayablesandaccruals34
Bank 14
Landandbuildingsatcost 810
Accumulateddepreciationonbuildings(31DecemberYear5)60
Plantandmachineryatcost 527
Accumulateddepreciationonplantandmachinery(31
DecemberYear5)
156
7%Loannotes 200
Dividendspaid 52
Bankloan(repayablein3years)120
Retainedearningsat1JanuaryYear5405
Profitbeforetaxfortheyear107
1,532 1,532
Additional information:
(1) The loan notes are repayable in four equal annual amounts, between 30
November Year 6 and 30 November Year 9.
(2) The tax payable on profits for the year is $32,000. This has not yet been
included in the accounts.
(3) The directors of the company have proposed a final dividend for the year of
$40,000. The dividend was proposed after 31 December Year 5.
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Required
Prepare the statement of financial position of the company as at 31 December Year
5, in a form suitable for publication in accordance with International Accounting
Standard IAS 1.
17 PAL Partnership
The following trial balance was extracted from the main ledger of the PAL
Partnership at 31 December Year 6.
Debit Credit
$ $
PartnerP:capitalaccount50,000
PartnerP:currentaccount8,000
PartnerA:capitalaccount40,000
PartnerA:currentaccount25,000
PartnerL:capitalaccount80,000
PartnerL:currentaccount16,000
Sales282,500
Purchases 85,000
Inventoryat1JanuaryYear6 26,000
Sundryexpenses 43,000
Drawings:PartnerP 18,000
Drawings:PartnerA
27,000
Drawings:PartnerL 31,000
Allowanceforirrecoverabledebts5,000
Baddebts 3,000
Cash 7,000
Receivables 49,000
Payables18,000
LoanfromPartnerLat10%20,000
Interestonloan 2,000
Non‐currentassetsatcost 325,000
Non‐currentassets:accumulateddepreciation71,500
616,000 616,000
Additional information:
(1) At 31 December Year 6 there were accrued sundry expenses of $3,500.
(2) At 31 December Year 6, inventory was $21,000.
(3) Depreciation is charged on non-current assets at the rate of 10% each year on
cost.
(4) The allowance for irrecoverable debts will be increased to $7,000.
(5) Under the terms of the partnership agreement, Partner A receives a salary of
$25,000 and Partner L has a salary of $10,000. The partners also receive interest
at 5% on their capital in the business. Residual profit is shared between P, A
and L in the ratio 2:2:3.
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Required
(a) Prepare an income statement for the partnership for the year to 31 December Year
6.
(b) Calculate how the profits will be divided between the partners.
(c) Prepare a statement of financial position as at 31 December Year 6.
18 King Company
The following information has been extracted from the financial statements of King
Company for the year ended 31 December Year 6.
$
Sales 905,000
Costofsales (311,000)
Grossprofit 594,000
Lossondisposalofnon‐currentasset (9,000)
Wagesandsalaries (266,000)
Otherexpenses(includingdepreciation$46,000) (193,000)
126,000
Interestcharges (24,000)
Profitbeforetax 102,000
Taxonprofit (38,000)
Profitaftertax 64,000
The asset disposed of had a net book value of $31,000 at the time of the sale.
Extracts from the statements of financial position:
At
1January
Year6
At
31December
Year6
$ $
Tradereceivables 157,000 173,000
Inventory 42,000 38,000
Tradepayables 43,600 35,700
Accruedwagesandsalaries 4,000 4,600
Accruedinterestcharges 11,200 10,000
Taxpayable 45,000 41,000
Required
Present the cash flows from operating activities as they would be presented in a
statement of cash flows:
(a) using the direct method
(b) using the indirect method.
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19 Dove statement of cash flows
The following information has been extracted from the draft financial information of
Dove.
Incomestatementfortheyearended31DecemberYear5
$000$000
Salesrevenue490
Administrationcosts (86)
Distributioncosts (78)
(164)
Operatingprofit326
Interestpayable(23)
Profitbeforetax303
Taxation(87)
Profitaftertax216
Otherinformation
Dividendspaid52
Retainedprofitfortheyear164
Statementsoffinancialposition
31DecemberYear
5
31DecemberYear
4
$000 $000$000 $000
Non‐currentassets(seebelow)1,145 957
Currentassets:
Inventory 19 16
Receivables 38 29
Bank 19 32
76 77
Totalassets1,221 1,034
Sharecapital323 232
Revaluationreserve170 0
Retainedearnings 553 389
1,046 621
Non‐currentliabilities:
Long‐termloans70 320
Currentliabilities:
Tradepayables 12 17
Taxpayable 93 76
105 93
Totalequityandliabilities1,221 1,034
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Note on non-current assets
Landand
buildings Machinery
Fixturesand
fittings
Total
$000 $000 $000 $000
Costorvaluation
At31DecemberYear4 830 470 197 1,497
Additions‐43 55 98
Disposals‐(18) ‐ (18)
Adjustmentonrevaluation 70 ‐ ‐ 70
At31DecemberYear5 900 495 252 1,647
Depreciation
At31DecemberYear4 (90) (270) (180) (540)
Chargefortheyear (10) (56) (8) (74)
Disposals‐12 ‐ 12
Adjustmentonrevaluation 100 ‐ ‐ 100
At31DecemberYear5 0 (314) (188) (502)
Netbookvalue:
At31DecemberYear4 740 200 17 957
At31DecemberYear5 900 181 64 1,145
You have been informed that included within distribution costs is $4,000 relating to
the loss on a disposal of a non-current asset.
Required
Prepare a statement of cash flows for Dove for the year ended 31 December Year 5
in accordance with IAS 7.
20 Hart statement of cash flows
The directors of Hart have presented you with the following summarised final accounts:
Statementsoffinancialposition
31DecemberYear5 31DecemberYear6
$000 $000 $000 $000
Non‐currentassets:
Plantandmachineryatcost2,700 3,831
Accumulateddepreciation(748) (1,125)
Carryingamount1,952 2,706
Currentassets:
Inventory 203 843
Receivables 147 184
Bank 51 ‐
401 1,027
Totalassets2,353 3,733
Ordinarysharecapital($1shares)740 940
Sharepremiumaccount0 100
Retainedearnings671 1,034
1,411 2,074
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Non‐currentliabilities:
Loans320 150
Currentliabilities:
Bankoverdraft 0 766
Tradepayablesandaccruals 152 141
Currenttaxation 470 602
622 1,509
Totalequityandliabilities2,353 3,733
Incomestatementforyearended31DecemberYear6
$000
Profitbeforetax1,195
Taxation(602)
Profitaftertax593
Dividend payments during the year were $230,000.
The following information is also available:
(1) The only new loan raised during the year was a five-year bank loan
amounting to $65,000.
(2) Interest charged during the year was $156,000. Interest accrued was $24,000
last year and $54,000 this year.
(3) Depreciation charged during the year amounted to $401,000. This does not
include any profit or loss on disposal of non-current assets.
(4) During the year plant which originally cost $69,000 was disposed of for
$41,000.
(5) During the year the company issued 200,000 new shares.
Required
Prepare a statement of cash flows for Hart.
21 Miss Ringer
Miss Ringer is a sole trader. She does not keep a full set of accounting records but
does keep some records of transactions and documents. She has asked you to
prepare her accounts for the year ended 31 December Year 3.
You have been given a list of the assets and liabilities of the business at the start and
end of the year.
Assetsandliabilities
At1Jan Year3 At31DecYear3
$ $
Tradereceivables5,500 6,100
Tradepayables2,800 3,500
Inventory 10,400 ?
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Miss Ringer has no idea what her inventory value was at 31 December as that she
did not count or value her inventory at the year end.
She has also been given you a summary of her bank statements for the year.
Summary of bank statements
Receipts Payments
$ $
1Jan Balanceb/d 1,620 Tosuppliers 42,800
Bankings 65,400 Forexpenses9,300
Livingexpenses 10,400
31DecBalancec/d4,520
YouhavealsobeenabletogatherthefollowinginformationfromMissRinger:
(i) MissRingerbankshertakingsfromthetilleachweekbutbeforedoingso
pays$50toherparttimeassistantandtakes$30herselfforlivingexpenses.
Thebusinessoperatesfor50weekseachyear.
(ii) Thetillalwayshasacashfloatof$100.
(iii) Thesalesofthebusinessarebothcashandcreditsalesandareallmadeata
markupof40%.
Required:
(a) Calculatesalesfortheyear.
(b) Calculatethevalueoftheclosinginventoryat31December
Year3.