CIMA CO2 Official Learning System - Fundamentals of Financial Accounting
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PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
590
Question 14
The computerised accounting system used by FLS Ltd developed a program error during
the production of the trial balance at 30 September 20X8. The accountant presented you
with the following balances and supporting information:
Authorised share capital comprised 10 million ordinary shares with a par value of 50¢
each, of which 6 million had been issued at a premium of 5¢ per share, and 1 million 5
per cent irredeemable preference shares issued at par, at $1 each.
The statement of fi nacial position at 30 September 20X7 included the following balances:
$’000
Retained earnings 600
Revaluation reserve 1,250
Inventories 1,250
Land at valuation 5,800
Buildings at cost 3,800
Plant at cost 2,800
Accumulated depreciation on buildings 800
Accumulated depreciation on plant 600
Goodwill 2,000
Long-term loan 8,000
Administration costs prepaid 100
Ordinary dividends owing 300
Receivables 1,850
Allowance for receivables 80
Payables 1,050
Bank overdraft 520
Income tax owing 100
During the year to 30 September 20X8, the following transactions had been recorded:
$’000
Sales 14,000
Purchases 7,400
Returns outwards 75
Selling and distribution costs paid 2,750
Administration costs paid 2,400
Bad debts written off 200
Preference dividend paid 50
Ordinary interim dividend paid 150
Final dividend from previous year paid 300
Half-year’s loan interest paid 400
Income tax paid 100
Receipts from receivables 13,300
Payments to payables 7,525
At 30 September 20X8, the following additional fi gures were extracted:
$’000
Trade receivables 2,350
Trade payables 850
Inventories 1,450
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
591
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Requirements
(a) Insert the missing items in the bank account for the year ended 30 September 20X8.
Bank account of FLS Ltd for the year ended 30 September 20X8
$’000 $’000
Balance b/fwd
Balance c/fwd
(3 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
592
(b) Insert the missing items in a trial balance at 30 September 20X8.
Trial balance of FLS as at 30 September 20X8
Debit ($’000) Credit ($’000)
Retained earnings
Revaluation reserve
Inventories at 30 September 20X7
Land at valuation
Buildings at cost
Plant at cost
Accumulated depreciation on buildings
at 30 September 20X7
Accumulated depreciation on plant at
30 September 20X7
Goodwill
Long-term loan
Allowance for receivables at
30 September 20X7
Sales
Purchases
Returns outwards
Selling and distribution costs
Administration costs
Bad debts written off
Dividends paid – preference
Dividends paid – ordinary
Loan interest (half year)
Receivables
Payables
Bank account
Share capital – ordinary
Share premium account
Share capital – preference
(10 marks)
(c) Insert the missing items in an income statement, and statement of changes in equity,
for the year ended 30 September 20X8, to include the following adjustments:
●
the sales fi gure above includes $100,000 cash received with an order on 28
September 20X8; the goods were not despatched until 14 October 20X8;
●
selling and distribution costs prepaid were $50,000 and administration costs
accrued were $25,000;
●
the allowance for receivables fi gure is to be amended to 2 per cent of trade
receivables;
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
593
FUNDAMENTALS OF FINANCIAL ACCOUNTING
●
calculation for depreciation is to be 2 per cent on cost for buildings, and 5 per cent
on the reducing balance for plant;
●
an accrual of $140,000 is to be made for income tax on the year’s profi ts;
●
a fi nal dividend of 10c per ordinary share was declared before the year end and
paid after the year end.
Income statement of FLS Ltd for year ended 30 September 20X8
$’000 $’000 $’000
Gross profi t
Operating profi t
Loan interest
P r o fi t before tax
P r o fi t for the period
Statement of changes in equity of FLS Ltd for year ended 30 September 20X8
Retained earnings
Balance at start of period
(10 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
594
(d) Calculate the gearing ratio at 30 September 20X8.
Analysis of total capital employed
$
Equity
(7 marks)
(Total 30 marks)
Gearing ratio %
100
Question 15
You are responsible for maintaining the journals and ledger accounts for your organisation.
Sales are currently all for cash, but the managers plan to offer credit to customers in the
future, in order to increase business activity.
At 1 October 20X8, there are the following balances on payables accounts:
Ibrahim $1,250
J Hall $150
During the month of October 20X8, you compile the following journals:
Purchases daybook
Date Name Net ($) Sales tax ($) Gross ($)
20X8
4 Oct. Ibrahim 6,000 1,050 7,050
11 Oct. J Bolton 30,000 5,250 35,250
13 Oct. Z Rhawandala 5,000 875 5,875
15 Oct. Ibrahim 12,000 2,100 14,100
31 Oct. Totals 53,000 9,275 62,275
Returns outwards daybook
Date Name Net ($) Sales tax ($) Gross ($)
20X8
3 Oct. J Bolton 2,000 350 2,350
28 Oct. Ibrahim 600 105 705
31 Oct. Totals 2,600 455 3,055
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
595
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Petty cash book
Date Debit ($) Details Total ($) Postage ($) Travel ($) Pur. Ledger ($)
1 Oct. 600 Balance b/f
6 Oct. Parcel post 65 65
10 Oct. Bus fares 20 20
12 Oct. G Hall (train ticket) 125 125
14 Oct. Parcel post 24 24
16 Oct. Travel reimbursed 85 85
18 Oct. Parcel post 27 27
21 Oct. J Hall 150 150
496 116 230 150
31 Oct. 496 Bank
Balance c/f 600
1,096 1,096
You have extracted the following details from the cash book for October:
●
Cash sales in the month were $61,100, including sales tax at 17.5 per cent.
●
Paid to Ibrahim on 4 October, his opening balance less cash discount of 2 per cent.
Requirements
(a) Insert the missing items into the following ledger accounts.
Note : in the ‘ Transactions ’ columns only one of the debit or credit columns is to be
completed for each transaction. All other boxes must be completed.
Transactions
Date Description Debit ($) Credit ($) Balance ($) Debit or credit?
Ibrahim
1 Oct. Balance b/f 1,250 Cr
J Hall
1 Oct. Balance b/f 150 Cr
J Bolton
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
596
Z Rhawandala
Sales Tax
Sales
Purchases
Returns outwards
Post
Discounts received
Travel
(11 marks)
(b) You later realise that the purchase from Z Rhawandala is for offi ce equipment. Insert
the missing words in these sentences
(i) Offi ce equipment should have been debited to a ______________________.
(ii) The profi t will have been ______________________ by $5,000 less any depre-
ciation charge.
(3 marks)
(Total marks 14)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
597
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Question 16
AMS Ltd made a gross profi t of $239,000 in the year to 31 August 20X8. Expenses
amounted to $159,000, which included interest of $30,000 payable on a long-term loan,
depreciation on plant of $50,000, and depreciation on premises of $25,000. Income tax in
the income statement was $10,000 and dividends declared before the year-end, but paid
after the year-end, were $45,000.
The statements of fi nancial position of AMS Ltd at 31 August 20X8 and 20X7 were as
follows:
20X8 20X7
Assets $’000 $’000 $’000 $’000
Non-current assets
Premises 1,200 1,170
Plant and machinery 800 700
2,000 1,870
Current assets
Inventories 450 550
Receivables 700 680
Bank and cash 300 –
1,450 1,230
3,450 3,100
Equity and liabilities
Ordinary shares of $1 each 1,800 1,300
Share premium 400 300
Retained earnings 392 367
2,592 1,967
Long-term liabilities
Loan 200 400
Current liabilities
Payables 600 670
Taxation 10 12
Dividends 45 11
Bank overdraft 40
658 733
3,450 3,100
During the year ended 31 August 20X8, plant that had cost $85,000 was sold at a loss of
$10,000. The sale proceeds were $50,000. The loss was deducted in the income statement.
Requirements
(a) Insert the missing items into the cash-fl ow statement, and supporting workings, given
below.
Calculation of operating profi t
$’000
Gross profi t
Operating profi t
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
598
Cash generated from operations
$’000
Operating profi t
Purchase cost of non-current assets
Premises Plant
$’000 $’000
Cash-fl ow statement of AMS Ltd for the year ended 31 August 20X8
$
’
000
$
’
000
Cash fl ows from operating activities
Cash fl ow from investing activities
Cash fl ow from fi nancing activities
Net increase in bank and cash
Bank and cash at the beginning of the period
Bank and cash at the end of the period
(14 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
599
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(b) In connection with a statement of cash fl ows complete the missing words in the fol-
lowing sentences.
(i) A statement of cash fl ows shows _____________ and ____________ of cash during
the period. It reconciles opening and closing _____________ balances.
(ii) The income statement includes _________ items and excludes cash involved in
__________ transactions.
(3 marks)
(Total marks 17)
Question 17
BAK plc has the following trial balance at 30 April 20X9:
Debit ($’000) Credit ($’000)
Ordinary shares, 50¢ 3,200
5% preference shares, $1 800
Share premium 640
General reserves 700
Retained earnings 1 May 20X8 420
Motor vehicles – cost 6,000
Motor vehicles – acc. depreciation at 1 May 20X8 1,000
O f fi ce equipment – cost 1,200
O f fi ce equipment – acc. depreciation at 1 May 20X8 360
Goodwill 1,000
Research and development expenditure 846
Inventories at 1 May 20X8 1,420
Receivables 3,100
Payables 1,770
Allowance for receivables at 1 May 20X8 102
Bank balance 2,476
Ordinary dividends paid 80
Preference dividends paid 40
Purchases 7,390
Sales 19,620
Returns inwards 320
Carriage inwards 240
Distribution costs 2,860
Administration costs 970
Salaries and wages 1,310
Printing, stationery and advertising 900
Premises costs 310
Loan 2,000
Loan interest 100
Loss on disposal of non-current assets 50
30,612 30,612
You are given the following information at 30 April 20X9:
(i) Closing inventories were $1,280,000.
(ii) Allowance for receivables is to be amended to 2 per cent of receivables.
(iii) Sales representatives are to receive a bonus of 2 per cent of net sales.
(iv) Auditors ’ fees accrued amount to $115,000.
(v) Printing, stationery and advertising costs include the purchase of inventories of adver-
tising literature that cost $200,000. Twenty-fi ve per cent of this is unusable, but the
remainder is to be distributed during May 20X9.
(vi) Premises costs includes insurance prepaid of $80,000.