CIMA CO2 Official Learning System - Fundamentals of Financial Accounting
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PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
600
(vii) Research and development expenditure includes $396,000, which the directors feel
should be carried forward in the statement of fi nancial position; the remainder is to
be written off against profi ts during the year.
(viii) The loan carries interestat10 per cent per annum. The capital sum is due for repay-
ment in two equal instalments, on 31 December 20X9 and on 31 December 20Y0.
(ix) Depreciation is to be charged as follows:
●
on motor vehicles, at 20 per cent on cost;
●
on offi ce equipment, at 10 per cent on cost.
(x) An accrual is to be made for income tax of $900,000.
(xi) $1,000,000 is to be transferred to general reserves.
Requirements
(a) Insert the missing items into the following income statement.
Income statement of BAK plc for the year ended 30 April 20X9
$’000 $’000 $’000
Sales
Returns inwards
Cost of sales
Opening inventories
Purchases
Carriage inwards
Closing inventories
Gross profi t
Research and development expenses
Distribution costs
Administration costs
Salaries and wages
Printing, stationery and adverts
Premises costs
Loss on disposal of non-current assets
Reduction in allowance for receivables
Bonuses owing
Depreciation of vehicles
Depreciation of offi ce equipment
Auditors ’ fees
Operating profi t
Loan interest
P r o fi t before tax
Income tax
P r o fi t for the period
(8 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
601
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(b) Insert the missing items into the following statement of changes in equity.
Statement of changes in equity of BAK plc for the year ended 30 April 20X9
General
reserves
Retained
earnings
Total
$’000 $’000 $’000
Balance at the start of the period
(4 marks)
(c) Insert the missing items into the following statement of fi nancial position.
Statement of fi nancial position of BAK as at 30 April 20X9
Assets Cost Depreciation Carrying amount
$’000 $’000 $’000
Non-current assets
Tangibles
O f fi ce equipment
Vehicles
Intangibles
Goodwill
Development expenditure
Current assets
Inventories of goods
Inventories of advertising material
Receivables
Prepayments
Bank
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
602
Equity and liabilities
Ordinary share capital
Preference share capital
Share premium account
General reserves
Retained earnings
Non-current liability
Loan
Current liabilities
Payables
Loan
Accruals
Income tax
(10 marks)
(Total marks 22)
Question 18
The computerised sales and purchase ledger shows the following totals at 30 April 20X9:
$
Receivables outstanding 204,580
Credit balances on receivables accounts 12,460
Payables outstanding 134,290
At 1 April 20X9, the sales ledger control account showed a balance of $184,650, and the
purchase ledger control account showed a balance of $142,320.
At the end of April the following totals are extracted from the subsidiary books for April:
$
Sales daybook (including cash sales of $3,450) 333,895
Purchases daybook 183,800
Returns outwards daybook 27,490
Returns inwards daybook 13,240
Refunds paid to receivables 8,255
Receipts from receivables, after deducting
$2,115 cash discount 320,045
Dishonoured cheques from receivables 8,395
Bad debts written off 3,450
Payments to payables, after deducting
$1,430 cash discount 196,360
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
603
FUNDAMENTALS OF FINANCIAL ACCOUNTING
It is also discovered that
(i) the purchase daybook fi gure is net of sales tax at 17.5 per cent; the other fi gures all
include sales tax.
(ii) a receivable’s balance of $2,420 has been offset against her balance of $3,650 in the
purchase ledger.
(iii) allowance is to be made for receivables of 2.5 per cent of the net closing balance at 30
April 20X9.
(iv) a receivable has queried an invoice sent to him during the month for $1,400 plus
sales tax at 17.5 per cent. It is found to be a duplicate of a previous invoice. It has
been posted to his account in the sales ledger, but has not been included in the sales
daybook.
(v) a supplier’s account in the purchase ledger, with a debit balance of $800, has been
included on the list of payables as a credit balance.
Requirements
(a) Insert the missing items into the following sales and purchase ledger control accounts
for April 20X9.
Sales ledger control account
$ $
Balance b/f 184,650
Balance c/f
Balance b/f
Purchase ledger control account
$ $
Balance b/f 142,320
Balance c/f
Balance b/f
(11 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
604
(b) Insert the missing items below, to identify the ledger that is out of balance with its
control account.
Receivables $ Payables $
Control account total Control account total
Ledger account total
192,120
Ledger account total
134,290
Adjustment: Adjustment:
Revised ledger account total Revised ledger account total
The ledger that is out of balance with its control account is the ledger.
(3 marks)
(c) In connection with controls within the accounting system that can reduce the risk of
error and fraud, complete the missing words in these sentences.
(i) independent preparation of a _______ reconciliation statement on a regular
basis;
(ii) regular preparation of a _________ _________ to confi rm arithmetical accuracy
of the ledger accounts;
(iii) ______________ of duties so that no one person is involved in a complete
process.
(6 marks)
(Total marks 20)
Question 19
AJ Ltd has produced the following fi nancial statements:
Trading and income statements for the year ended 31 December
20X7 20X8
$’000 $’000 $’000 $’000
Sales 25,000 28,000
Cost of sales
Opening inventories 2,200 2,300
Purchases 18,400 16,200
20,600 (18,500)
Less : Closing inventories (2,300) (2,800)
(18,300) (15,700)
Gross profi t 6,700 12,300
Less : Expenses (4,200) (6,200)
Operating profi t 2,500 6,100
Income tax (500) (1,000)
P r o fi t for the period 2,000 5,100
Retained earnings balance b/f 5,000 7,000
Retained earnings balance c/f 7,000 12,100
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
605
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Statements of fi nancial position as at 31 December
20X7 20X8
Assets $’000 $’000 $’000 $’000
Non-current assets 18,000 23,000
Current assets
Inventories 2,300 4,800
Receivables 2,500 3,200
Bank and cash 1,300 –
6,100 8,000
24,100 31,000
Equity and liabilities
Ordinary shares of $1 each 13,200 14,200
Retained earnings 7,000 12,100
20,200 26,300
Current liabilities
Payables 3,900 3,600
Bank overdraft – 1,100
3,900 4,700
24,100 31,000
Requirements
(i) State the formulae for and calculate three profi tability ratios for each of the 2 years.
• Formula 1:
100
20X7
100
%
20X8
100 %
• Formula 2:
100
20X7
100 %
20X8
100 %
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
606
• Formula 3:
100
20X7
100 %
20X8
100 %
(ii) State the formulae for and calculate two liquidity and two effi ciency ratios for each of
the 2 years.
Liquidity ratios
• Formula 1:
:
20X7
:
20X8
:
• Formula 2:
:
20X7
:
20X8
:
(iii) Effi ciency ratios
• Formula 1:
100
20X7
:
20X8
:
• Formula 2:
100
20X7
:
20X8
:
(21 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
607
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Question 20
On 31 December 20X5 the accounting records of JB were partly destroyed by fi re. Her
accountant has provided the following list of assets, liabilities and capital at 31 December
20X4:
$
Plant and machinery 128,000
O f fi ce equipment 45,000
Inventories 30,500
Receivables and prepayments 35,000
Payables and accruals 17,600
Bank overdraft 8,850
Loan (interest 10% per annum) 95,000
Capital 117,050
A summary of her receipts and payments during 20X5 can be extracted from the bank
statements as follows:
$
Receipts
Capital paid in 22,000
Received from receivables 427,500
Payments
Cash withdrawn 22,450
Loan repayments 20,000
Paid to payables 175,600
Rent paid 22,000
Wages 90,000
General expenses paid 12,500
The following additional information is obtained:
(i) On 31 December 20X4, the receivables fi gure included $2,500 for rent paid in
advance, and the payables fi gure included $4,300 for wages accrued for the last week
of 20X4.
(ii) The plant and machinery had been purchased for $200,000 in 20X3 and was being
depreciated at 20 per cent per annum on the reducing-balance basis.
The offi ce equipment was bought during 20X4 and was being depreciated over
10 years on the straight-line basis, with a full year’s depreciation in the year of purchase.
(iii) During 20X5, JB transferred a private motor vehicle worth $5,000 to her business.
It is to be depreciated over 4 years on the straight-line basis, with a full year’s depre-
ciation in the year of acquisition.
(iv) Of the cash withdrawn from the bank during 20X5, $6,750 was for wages, $4,200 was
for cash payments to suppliers, $2,600 was for printing of advertising leafl ets (of which
half are still to be distributed), and the remainder was taken by JB for her own use.
(v) The bank balance 31 December 20X5, according to the bank statement, after adjust-
ing for unpresented cheques, was $106,700. Any difference is assumed to be cash
sales banked, after deducting $30 per week wages paid to JB’s daughter, who assists in
the offi ce.
(vi) The loan repayments from the bank account include $9,500 interest.
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
REVISION QUESTIONS C2
608
(vii) Other balances at 31 December 20X5 are
$
Inventories 27,850
Rent paid in advance 2,700
Wages owing 5,250
Payables for supplies 12,200
Receivables 22,300
(viii) It is subsequently discovered that a receivable owing $16,000 has gone into liquida-
tion, and a dividend of 20¢ in the $ is expected.
Requirements
(a) Insert the missing items into the income statement for JB for the year ended 31
December 20X5, given below.
You will need to calculate several fi gures for inclusion in the income statement
before you commence. In a computer-based assessment, this question would prob-
ably be examined in smaller sections.
Income statement of JB for the year ended 31 December 20X5
$ $ $
Credit sales
Cash sales
Less : cost of sales
Opening inventories 30,500
Credit purchases
Cash purchases
Closing inventories
(27,850)
Gross profi t
Less : expenses
Wages
Advertising expenses
Loan interest
9,500
Rent
General expenses
12,500
Bad debts written off
Depreciation
Plant and machinery
Vehicle
O f fi ce equipment
Net profi t
(15 marks)
PREPARING FOR THE COMPUTER-BASED ASSESSMENTS (CBAs)
609
FUNDAMENTALS OF FINANCIAL ACCOUNTING
(b) Insert the missing fi gures into the statement of fi nancial position for JB for 31
December 20X5, given below.
Statement of fi nancial position of JB as at 31 December 20X5
Assets Carrying amount ($)
Non-current assets
Plant and machinery
O f fi ce equipment
Vehicle
Current assets
Inventories 27,850
Receivables
Prepayments
Bank
Capital and liabilities
Capital at 1 January 20X5
Add : capital introduced
Add : profi t
Less : drawings
Non-current liabilities
Long-term loan
Current liabilities
Payables
Accruals
(10 marks)
(Total marks 25)
Question 21
You are presented with the following information relating to SH Ltd:
Income statement for the year ended 30 June 20X6
$’000
Gross profi t 980
Trading expenses (475)
Depreciation (255)
Operating profi t 250
Retained earnings start of year 1,400
Operating profi t for the year 250
Dividends declared before the year end and paid after the year end. (80)
Retained earnings at the end of the year 1,570