ACCA f1 with answers 20006

Answers


Part 1 Examination – Paper 1.1(INT)
Preparing Financial Statements (International Stream)

December 2006 Answers

Section A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

23
24
25

A
A
B
A
D
D
B
C
C
D
D
D
A
A
C
B
D
B
A
A
C
B
D
A
A

Workings for computational MCQs
1

A

0/inventory
Purchases
COGS 650 – 195
Inventory
Remaining inventory
Inventory lost

380
480
––––
860
455
––––
405
220
––––
185
––––

2

A

1
2

3

+ 500
+ 500
no change
–––––
1,000
–––––

3

B

500 – (75% x 450)

6

D

180 + (40% x 500) – 30

7

B

838,000 – 72,000 = 766,000; allowance 60,000

14 A

3/

4

x 10,800 + 1/4 x 12,000 = 11,100; prepayment 3/4 x 12,000

17 D

20% x (1,000,000 + 400,000 + 5,600,000)

19


18 B

100 + 50 + 60; 80 – 50 + 30

22 B

1: (40,000 + 60,000 – 50,000) x 2 = 100,000 – 95,000 = 5,000 cash lost
3: (40,000 + 60,000 – 50,000 – 2,500 inventory loss) x 2 = 95,000

23 D

834,600 + 134,600 – 4,800 + 8,700 – 144,400

25 A

Payables ledger control account

Cash paid to suppliers
1,364,300

Purchase returns
41,200
Contras against debit
balances in receivables ledger
48,000
Discounts
8,200
Closing balance
128,200
––––––––––
1,589,900
––––––––––

Opening balance
Purchases
Refunds received from
suppliers

318,600
1,268,600
2,700

––––––––––
1,589,900
––––––––––

20


Section B

1

Golding
Balance sheet as at 30 June 2006

Non-current assets
Land and buildings
Plant and equipment

Cost or
valuation
$000

Accumulated
depreciation
$000

Net book
value
$000

9,000
6,000
–––––––
15,000
–––––––

200
4,400
––––––

4,600
––––––

8,800
1,600
–––––––
10,400

Current assets
Inventories
Receivables (3,600 – 280)
Cash

4,700
3,320
1,200
––––––
9,220
–––––––
19,620
–––––––

Capital and reserves
Called up share capital
Share premium account
Revaluation reserve (5,000 + 4,000 – 4,000 – 2,400)
Retained earnings (see working)

Non-current liabilities
8% Loan notes

Current liabilities
Payables
Accruals (500 + 250)

Working
Retained earnings balance
1 July 2005
Draft profit
less: irrecoverable debts
bonuses
depreciation

5,000
2,200
2,600
5,570
–––––––
15,370
1,000
2,500
750
–––––––

$000

$000

3,250
––––––
19,620

–––––––
$000
4,600

2,900
280
250
1,400
–––––––

21

1,930
––––––

970
–––––––
5,570
–––––––


2

(a)

Dr
$
70,000

(1) Sales

Share capital
Share premium

Cr
$
50,000
20,000

(2) Suspense
Interest payable
Interest receivable

16,000

(3) Sales
Purchases
Suspense

16,000
16,000

8,000
8,000

32,000

OR
Suspense
Sales

48,000

Purchases
Suspense

64,000

Sales

64,000

48,000
64,000

Suspense
Suspense
Purchases
(4) Suspense
Rent
(b)

64,000
48,000
48,000
36,000
36,000
–
$

Profit per draft accounts

Adjustments
(1) Sales
(2) Interest
(3) Sales/Purchases
(4) Rent

+
$
830,000

70,000
16,000
32,000
––––––––
102,000

Revised profit

22

36,000
––––––––
882,000
102,000
––––––––
780,000
––––––––


3

Joyce
Cash flow statement for the year ended 30 June 2006
$000
Cash flows from operating activities
Profit before taxation (working 1)
Adjustments for
Depreciation
Interest expense

$000

22,200
13,000
720
–––––––
35,920
(4,900)
(8,900)
(2,100)
–––––––
20,020
(720)
(6,200)
–––––––

Increase in inventories
Increase in receivables
Decrease in payables
Cash generated from operations

Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property plant and equipment (Working 3)

13,100
(19,000)
–––––––

Net cash used in investing activities
Cash flows from financing activities
Proceeds of issue of share capital
Proceeds of issue of loan notes
Dividends paid

(19,000)
2,000
2,000
(4,000 )
–––––––

Net cash from financing activities

–
–––––––
(5,900)
4,600
–––––––
(1,300)

–––––––

Net decrease in cash
Cash at 1 July 2005
Cash at 30 June 2006
WORKINGS
1

Calculation of profit for year

Dividends
Tax
Closing balance

$000
4,000
8,200
28,000
–––––––
40,200
–––––––

2

$000
18,000
22,200
–––––––
40,200
–––––––

Income taxes

Cash
Closing balance

3

$000
6,200
8,000
–––––––
14,200
–––––––

Opening balance
Income statement

$000
6,000
8,200
–––––––
14,200
–––––––

Non-current assets

Opening balance
Revaluation reserve
Purchases

$000
130,000
12,000
19,000
––––––––
161,000
––––––––

4

0pening balance
Profit for year

$000
Depreciation

13,000

Closing balance

148,000
––––––––
161,000
––––––––

(a)

Following the matching concept, to reflect in operating profit the cost of use of tangible non-current assets (the amount of
economic benefits consumed).

(b)

It is not normally necessary to depreciate land, unless it is subject to depletion in some way – a quarry for example. Buildings
should be depreciated like any other non-current asset so as to allocate their depreciable amount (cost or valuation) over their
useful economic life.

23


(c)

(i)

Straight line. The depreciable amount of an asset, less any residual value, is written off in equal instalments over its
estimated useful economic life.

(ii)

Reducing balance. Depreciation is calculated as a percentage of the net book value of the asset at the end of each period.

Other answers to (c) considered on their merits.

5

(a)

If the event provides evidence of conditions that existed at the balance sheet date, adjustment must be made, if material.
Adjustment is also required if an event after the balance sheet date indicates that the going concern basis of accounting is
no longer appropriate.

(b)

(i)

Non-current assets are normally valued at cost or valuation less depreciation. If the going concern basis was no longer
appropriate, net realisable value on the basis of a short-term sale would have to be adopted instead, and the assets
would be included in current assets.

(ii)

Inventory is normally valued at the lower of cost and net realisable value. If the going concern basis no longer applied,
net realisable value on the basis of a short-term sale would have to be substituted.

(iii) Loan notes, if shown as non-current liabilities, would have to be reclassified as current liabilities.

24


Part 1 Examination – Paper 1.1(INT)
Preparing Financial Statements (International Stream)
1

December 2006 Marking Scheme

Heading
Land and building
valuation
accumulated depreciation

1
1
1/
2

––––

Plant and equipment
cost
accumulated depreciation
Inventory
Receivables
Cash
Share capital
Share premium account
Revaluation reserve
Retained earnings
Loan notes
Accruals
Payables
Format

2

(a)

1
2
3
4

(b)

3

1/
2
1/
2

––––
1/
2

+ 1/2

1

1
2
1/
2
1
1/
2
2
–––––
131/
–––––2

+ 1/2

3 x 1 (or 4 x 1 max 3)

4x1

4
––––
11
––––

1/ + 1/
Heading
2
2
Operating profit
4 x 1/2 + tax 1
Depreciation
Interest expense
Increase in inventory
Increase in receivables
Decrease in payables
Net cash inflow from operating activities
All other items in statement
6 x 1/2
Calculation of non-current asset payment
1/ + 1/
Balances
2
2

Revaluation reserve
Depreciation

(c)

11

1
3
1/
2
1/
2
1/
2
1/
2
1/
2
1/
2
3
1
1
1/
––––2

21/2
1
1

–––––
1
14 /
–––––2

(a)
(b)

max 11

11/2
11/2
3
1

Cash movement
Layout

4

1
1/
2
1/
2
1/
2
1/
2

4 x 1/2
1/
2

11/2

max 12

1
1/
2
1/
2

Land – not depreciated
Land – mention of depletion
Buildings – cost or valuation
Spread over useful economic life

1
1
––––

2x2

3
4
––––
8
––––

25

8


5

(a)

(b)

11/2
1
1/
––––2

Conditions at b/s date
Materiality
Going concern
2+2+1

3
5
––––
8
––––

26

8