ACCA F3 (INT) Financial Accounting - 2010 - Study text - Emile Woolf Publishing
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Answers to practice questions
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Depreciation:
Plantandmachinery 84
Deliveryvans48
Officefurniture 17
Directors’salaries 163
Sellingexpenses95
Rentofplantandmachinery 21
Factoryexpenses 109
Legalexpenses 25
1,260255489
BlotCompany
Incomestatementfortheyearended30JuneYear6
$000
Salesrevenue 2,216
Costofsales 1,260
956
Otherincome 20
Distributioncosts (255)
Administrativeexpenses (489)
232
Interestcost (70)
162
Profitbeforetax
Tax (46)
Profitfortheyear 116
16 SAW Company
SAWCompany
Statementoffinancialpositionasat31DecemberYear5
$000 $000
Assets
Non‐currentassets
Property,plantandequipment1,121
Currentassets
Inventory 31
Tradereceivables 98
Cashandcashequivalents 14
143
Totalassets
1,264
Equityandliabilities
Equity
Sharecapital200
Sharepremium250
Retainedearnings428
Totalequity878
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Non‐currentliabilities
Loannotes 150
Bankloan 120
Totalnon‐currentliabilities270
Currentliabilities
Tradeandotherpayables 34
Loannotes 50
Currenttaxpayable 32
Totalcurrentliabilities116
Totalequityandliabilities
1,264
Notes to the solution
(1) A single figure is presented here in the statement of financial position for
property, plant and equipment. Details of non-current assets (categories of
assets, cost or valuation at the beginning and end of the year, accumulated
depreciation and so on) must be disclosed in a note to the financial statements.
Landand
buildings
Plantand
machinery
Total
$000$000$000
Costorvaluation 810527
Accumulateddepreciation (60)(156)
Carryingamount 7503711,121
(2) The liability for loan notes has been divided into non-current and current
liabilities. One quarter of the total liability of $200,000 is repayable within the
next 12 months.
(3) Retained earnings are calculated as follows:
$
Retainedearningsat1JanuaryYear5 405,000
Profitfortheyearbeforetax 107,000
Tax (32,000)
480,000
Dividendspaidintheyear (52,000)
Retainedearningsat31DecemberYear5 428,000
The proposed final dividend is not included in the statement of financial
position. It must be disclosed in a note to the financial statements.
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17 PAL Partnership
(a) Income statement for the year ended 31 December Year 6
PALPartnership
Incomestatementfortheyearended31DecemberYear6
$ $
Sales 282,500
Openinginventoryat1JanuaryYear6 26,000
Purchases 85,000
111,000
Less:Closinginventoryat31DecemberYear6 (21,000)
Costofsales(90,000)
Grossprofit192,500
Sundryexpenses(43,000+3,500accrual) 46,500
Depreciation(10%x$325,000) 32,500
Baddebt 3,000
Increaseinallowanceforirrecoverabledebts(7,000–5,000) 2,000
Interestonloan 2,000
(86,000)
Netprofit106,500
(b) Partners’ profit share
Profits are shared as follows:
Residual profit: 2 + 2 + 3 = 7
Total P A L
$ $ $ $
Salary 35,000 25,000 10,000
Interestat5% 8,500 2,500 2,000 4,000
Residualprofit
(balance)
63,000
Pshare $63,000x2/718,000
Ashare $63,000x2/718,000
Lshare $63,000x3/7 27,000
106,500 20,500 45,000 41,000
Current accounts
P A L
$ $ $
Balanceat1January 8,000 25,000 16,000
Shareofprofitfortheyear 20,500 45,000 41,000
Drawings (18,000) (27,000) (31,000)
Balanceat31December 10,500 43,000 26,000
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(c) Statement of financial position as at 31 December Year 6
PALPartnership
Statementoffinancialpositionasat31DecemberYear6
$ $
Non‐currentassets:
Atcost325,000
Lessaccumulateddepreciation(71,500+32,500)(104,000)
Netbookvalue(carryingamount)221,000
Currentassets:
Inventory 21,000
Receivables(49,000–allowance7,000) 42,000
Cash(bank) 7,000
70,000
Totalassets291,000
Capital
PartnerPcapitalaccount 50,000
PartnerPcurrentaccount 10,500
60,500
PartnerAcapitalaccount 40,000
PartnerAcurrentaccount 43,000
83,000
PartnerLcapitalaccount 80,000
PartnerLcurrentaccount 26,000
106,000
Totalcapital249,500
Long‐termliability:
PartnerLloan20,000
Currentliabilities
Payables 18,000
Accruals 3,500
21,500
Totalcapitalandliabilities291,000
18 King Company
Workings: direct method
Cashfromsales
$
Tradereceivablesat1JanuaryYear6 157,000
Salesintheyear 905,000
1,062,000
Tradereceivablesat31DecemberYear6 (173,000)
Cashfromsalesduringtheyear 889,000
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Cashpaidforwagesandsalaries
$
Accruedwagesandsalariesat1JanuaryYear6 4,000
Wagesandsalariesexpensesintheyear 266,000
270,000
Accruedwagesandsalariesat31DecemberYear6 (4,600)
Cashpaidforwagesandsalaries 265,400
Purchases
$
Closinginventoryat31DecemberYear6 38,000
Costofsales 311,000
349,000
Openinginventoryat1JanuaryYear6 (42,000)
Purchasesintheyear 307,000
Cashpaidformaterialssupplies
$
Tradepayablesat1JanuaryYear6 43,600
Purchasesintheyear(asabove) 307,000
350,600
Tradepayablesat31DecemberYear6 (35,700)
Cashpaidformaterials 314,900
Cash paid for other expenses is the amount for expenses in the income statement
after deducting the depreciation charge: $193,000 - $46,000 = $147,000.
Interestandtaxpayments Tax Interest
$ $
Liabilityat1JanuaryYear6 45,000 11,200
Taxationcharge/interestchargefortheyear 38,000 24,000
83,000 35,200
Liabilityat31DecemberYear6 (41,000) (10,000)
Taxpaid/interestpaidduringtheyear 42,000 25,200
Statementofcashflows:directmethod
$
Cashflowsfromoperatingactivities
Cashreceiptsfromcustomers 889,000
Cashpaymentstosuppliers (314,900)
Cashpaymentstoemployees (265,400)
Cashpaidforotheroperatingexpenses (147,000)
Cashgeneratedfromoperations 161,700
Taxationpaid (42,000)
Interestchargespaid (25,200)
Netcashflowfromoperatingactivities 94,500
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Statementofcashflows:indirectmethod
$
Cashflowsfromoperatingactivities
Profitbeforetaxation 102,000
Adjustmentsfor:
Depreciationandamortisationcharges 46,000
Lossondisposalofnon‐currentasset 9,000
Interestchargesintheincomestatement 24,000
181,000
Increaseinreceivables(173,000–157,000) (16,000)
Decreaseininventories(42,000–38,000) 4,000
Decreaseintradepayables(43,600+4,000)–(35,700+4,600) (7,300)
Cashgeneratedfromoperations 161,700
Taxationpaid (42,000)
Interestchargespaid (25,200)
Netcashflowfromoperatingactivities 94,500
19 Dove statement of cash flows
Dove
Statementofcashflowsfortheyearended31DecemberYear5
$000 $000
Cashflowsfromoperatingactivities
Profitbeforetaxation 303
Adjustmentsfor:
Depreciation 74
Interestchargesintheincomestatement 23
Lossesondisposalofnon‐currentassets 4
404
Increaseinreceivables(38–29) (9)
Increaseininventories(19–16) (3)
Decreaseintradepayables(17–12) (5)
Cashgeneratedfromoperations 387
Taxationpaid–working1 (70)
Interestchargespaid (23)
Netcashflowfromoperatingactivities
294
Cashflowsfrominvestingactivities
Purchaseofnon‐currentassets (98)
Proceedsfromsaleofnon‐currentassets(seeworking2) 2
Netcashusedin(orreceivedfrom)investingactivities
(96)
Cashflowsfromfinancingactivities
Proceedsfromissueofshares(323–232) 91
Repaymentofloans(320–70) (250)
Dividendspaidtoshareholders (52)
Netcashusedin(orreceivedfrom)financingactivities
(211)
Netincrease/(decrease)incashandcashequivalents (13)
Cashandcashequivalentsatbeginningoftheyear32
Cashandcashequivalentsattheendoftheyear19
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Workings
W1:Taxationpaid
$000
Taxationpayableatthebeginningoftheyear 76
Taxchargefortheyear(incomestatement) 87
163
Taxationpayableattheendoftheyear (93)
Thereforetaxpaidduringtheyear 70
W2:disposalofmachinery
$000
Costofmachinerydisposedof 18
Accumulateddepreciationonmachinerydisposedof (12)
Netbookvalueatdisposal 6
Lossondisposal 4
Thereforecashreceivedfromthedisposal 2
20 Hart statement of cash flows
Hart
Statementofcashflowsfortheyearended31DecemberYear6
$000 $000
Cashflowsfromoperatingactivities
Profitbeforetaxation 1,195
Adjustmentsfor:
Depreciation 401
Lossonsaleofplant(W1) 4
Interestchargesintheincomestatement 156
1,756
Increaseinreceivables(184–147) (37)
Increaseininventories(843–203) (640)
Decreaseintradepayables(W2) (41)
Cashgeneratedfromoperations 1,038
Taxationpaid(W3) (470)
Interestchargespaid(W4) (126)
Netcashflowfromoperatingactivities
442
Cashflowsfrominvestingactivities
Purchaseofnon‐currentassets(W1) (1,200)
Proceedsfromsaleofnon‐currentassets(seeworking2) 41
Netcashusedin(orreceivedfrom)investingactivities
(1,159)
Cashflowsfromfinancingactivities
Proceedsfromissueofshares(W5) 300
Bankloanraised 65
Repaymentofloans(W6) (235)
Dividendspaidtoshareholders (230)
Netcashusedin(orreceivedfrom)financingactivities
(100)
Netincrease/(decrease)incashandcashequivalents (817)
Cashandcashequivalentsatbeginningoftheyear51
Cashandcashequivalentsattheendoftheyear(766)
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Workings
W1:Gainorlossondisposal $
Costofassetdisposedof 69
Accumulateddepreciationonassetdisposedof 24
Carryingamountatdateofdisposal 45
Disposalproceeds 41
Thereforelossondisposal 4
W2:Increaseordecreaseintradepayables
$ $
Tradepayablesandaccrualsat31DecemberYear6141
Lessaccruedinterest(54)
87
Tradepayablesandaccrualsat31DecemberYear5 152
Lessaccruedinterest (24)
128
Decreaseintradepayablesandaccruals41
Tutorial note
The accrued interest is removed from the figures because accrued interest is relevant
to the amount of interest paid in the year. This is a separate item in the statement of
cash flows.
W3:Taxationpaid
$
Currenttaxationliabilityat31DecemberYear5 470
Taxationchargeintheyear 602
1,072
Currenttaxationliabilityat31DecemberYear6 (602)
Thereforetaxationpaidintheyear 470
W4:Interestpaid
$
Accruedinterestliabilityat31DecemberYear5 24
Interestchargeintheyear 156
180
Accruedinterestliabilityat31DecemberYear6 (54)
Thereforeinterestpaidintheyear 126
W5:Proceedsfromtheissueofshares
$ $
Ordinarysharecapitalat31DecemberYear6940
Sharepremiumat31DecemberYear6100
1,040
Ordinarysharecapitalat31DecemberYear5 740
Sharepremiumat31DecemberYear5 0
740
Proceedsfromtheissueofshares300
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W6:Loansrepaid
$
Loansat31DecemberYear5 320
Newloanduringtheyear 65
385
Loansat31DecemberYear6 (150)
Thereforeloansrepaidduringtheyear 235
21 Miss Ringer
(a)
Cashaccount
$
$
Openingbalance 100 Bankings 65,400
Wages(50×$50) 2,500
Drawings(50×$30) 1,500
Cashtakings(balancingfigure) 69,400 Closingbalance 100
69,500 69,500
Totalreceivablesaccount
$
$
Balanceb/d 5,500 Cashtakings 69,400
Sales(balancingfigure) 70,000 Closingbalance 6,100
75,500 75,500
(b)
Sales (part a) = $70,000
Cost of sales = $70,000 × 100/140
= $50,000
Totalpayablesaccount
$
$
Paymentstosuppliers 42,800 Openingbalance 2,800
Closingbalance 3,500 Purchases(balancingfigure) 43,500
46,300 46,300
Costofsales
$
Openinginventory 10,400
Purchases 43,500
53,900
Less:closinginventory(balancingfigure) (3,900)
Cost of sales (see workings above)
50,000
Value of closing inventory = $3,900
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