ACCA f1 with answers2003

Answers



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

June 2003 Answers

Section A
1

B

8 months at 90,000 per year, 4 months at 120,000 per year; accrual 1 month

2

C

(8,950 – 4,080 – 380) – (4,140 + 40) = 310

3

B

180 + 190 + 3·3 – 228 – 8 – 4·2 – 1·5 – 2·4 = 129·2

4

D

8,200 + 34,600 + 3,200 – 3,600 – 9,300 = 33,100

5

D

38,000 – (50,000 – 36,200) = 24,200

6

A

(350,000 + 9/12 x 30,000 + 9/12 x 51,000) x 20% = 82,150

7

B

8

A

284,700 – (32,000 – 28,500) = 281,200

9

A

300 @ 230 + 500 @ 220 + 50 @ 190 = 188,500

10 D
11 D
12 A

3,000 + 9,000 – 3,460 – 5,600 – 500 = 2,440

13 C
14 A
15 A
16 C
17 B

12,000 + 240 + 6,000 + 4,000 = 22,240

18 B

Share capital 50 + 25 + 30
Share premium 180 – 25 + 18

19 A
20 D

980 – 40 – 130 + 100 + 80 = 990

21 C

180 – 152 – 21 = 7

22 A

20% x 260 = 52

23 D

210 + 160 – 72 – 32 – 21 = 245

24 D
25 A

22/500 = 4·4%

21


Section B
1

(a)

Alamute and Brador
Income statement for the year ended 31 March 2003
$
Sales Revenue
Cost of sales:

Opening inventory
Purchases

Less: Closing inventory

Gross profit
Less: Expenses:

Salaries
Rent (30,000 + 11,000)
Insurance (4,000 – 1,500)
Sundry expenses
Depreciation (35,500 × 20%)
Bad and doubtful debts
(2,400 – 500)

15,600
184,600
————
200,200
21,400
————

Alamute
$

Net profit
Interest on capital

Balance of profit 60:40

1,900
————

2,500

51,000
————
53,500
————

34,000
————
36,500
————

(179,900)
————
90,000
————
Total
$
90,000
(5,000)
————
85,000
(85,000)
————
–
————

Current Accounts
Alamute
$

Balance
Drawings
Balance

Brador
$

2,500

(b)

(178,800)
————
269,900

88,000
41,000
2,500
39,400
7,100

Net profit
Division of profit

$
448,700

48,400
8,900

–––––––
57,300
–––––––

Brador
$
2,600
36,900
–––––––
39,500
–––––––

Balance
Share of profit
Balance

22

Alamute
$
3,800
53,500
–––––––
57,300
–––––––

Brador
$
36,500
3,000

–––––––
39,500
–––––––


2

Paniel
Cash flow statement for the year ended 31 March 2003
$
746,000
(72,000)
————

Net cash inflow from operating activities
Interest paid
Cash flows from investing activities
Purchase of non-current assets (W1)
Proceeds from sale of non-current assets

(1,120,000)

Cash flows from financing activities
Proceeds from issuance of share capital
Proceeds from long-term borrowings
Dividends paid (260,000 – 110,000)

200,000
400,000
(150,000)

—————

Net cash from financing activities

450,000
————
4,000
14,000
————
18,000
————

Increase in cash
Cash at 31 March 2002
Cash at 31 March 2003

Opening balance
Purchases

3

(a)
Opening capital
Capital introduced

Less: Drawings

Closing capital
Profit is therefore

(b)

Payments to suppliers
Discounts received
Balance carried forward

674,000

(1,400,000)
280,000
—————

Net cash used in investing activities

Workings
1

$

Fixed assets – cost
$
2,140,000
1,400,000
—————
3,540,000
—————

Transfer – disposal
Closing balance

$
480,000
3,060,000
—————
3,540,000
—————

$
128,000
50,000
————
178,000
48,000
————
130,000
184,000
————
54,000
————
Purchases Total Account
$
Balance brought forward
888,400
Goods taken by Senji
11,200
Refunds from suppliers
Purchases
171,250
—————
1,070,850

—————

23

$
130,400
1,000
2,400
937,050
—————
1,070,850
—————


(c)

$
Cost of sales:
Opening inventory
Purchases
Less: Returns

$
243,000

595,400
41,200
————

554,200

————
797,200
Less: Closing inventory
261,700
————
535,500
————
Sales figure is therefore $535,500 × 3/2 = $803,250
4

(a)
(i)

Current ratio 990,000/430,000
1,420,000/860,000

Year ended 31 March
2002
2003
2.3:1
1·65:1

(ii)

Quick ratio

1·05:1
0·81:1

(iii) Inventory turnover

540,000/1,900,000 × 365
720,000/2,400,000 × 365

104 days

(iv) Average period of credit allowed to customers
450,000/2,800,000 × 365
700,000/3,700,000 × 365

59 days

(v)

(b)

450,000/430,000
700,000/860,000

109 days

69 days

Average period of credit allowed by suppliers
410,000/2,080,000 × 365
690,000/2,580,000 × 365

72 days
98 days

Comments

(i)

The current ratio and quick ratio are both down by over 20%.
The drop in the quick ratio to below 1:1 could indicate liquidity problems.

(ii)

The increase in sales, and hence in receivables, purchases and payables, is placing strain on the working capital,
evidenced by the increase in the receivables and payables payment periods.

(iii) The business is one requiring large holdings of inventory, but inventory control appears to have deteriorated slightly
between the two years
(iv) Cash sales have decreased considerably in 2003. Making more sales for cash could contribute to an improvement in
the current and quick ratios because this would reduce the overdraft.
Other comments considered on their merits.

5

(a)

(i)

Reserves are balances in a company’s balance sheet forming part of the equity interest and representing surpluses or
gains, whether realised or not.

(ii)

Share premium account
The surplus arising when shares are issued at a price in excess of their par value.
Revaluation reserve

The unrealised gain when the amount at which non-current assets are carried is increased above cost.
(Other examples given credit on their merits)

(b)

A bonus issue is the conversion of reserves into share capital, with shares being issued to existing members in proportion to
their shareholdings, without any consideration being given by the shareholders.
A rights issue is again an issue of shares to existing members in proportion to their shareholdings, but with payment being
made by the shareholders for the shares allotted to them.
The fundamental difference between them is that the rights issue raises funds for the company whereas the bonus issue does
not.

24


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

June 2003 Marking Scheme
Marks

1

Gross profit (4 × 1/2)
Rent
Insurance
Depreciation
Bad and doubtful debts

2

1
1
1
1

Division of profit

2
——
8

Layout and style

1
——

Current accounts
Share of profit
Drawings
Balances 2 × 1/2

2

1
1
1
——

Interest paid

1

Capital expenditure
Purchases of non-current assets
Proceeds of sale of non-current assets

2
1

Financing
Issue of shares
Issue of loan notes
Dividends paid
Increase in cash and cash movement

(a)

3
——
12
——

1
1
2
11/2

Format and style

3

9

1
——

101/2 max 9

1/
2

Opening capital
Capital introduced
Drawings
Closing capital

1
1
1/
2
——

3

(Marks awarded for having figures the correct way round)

4

mark per item 6 × 1/2

(b)

1/
2

(c)

Opening inventory
Purchases
Purchases returns
Closing inventory

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

Sale figure correct

1
——

(a)

1 mark per pair of ratios 5 × 1

(b)

1 mark per valid comment 4 × 1

3

3
——

9

5
4
——

25

9


Marks
5

(a)

(b)

(i)

Definition

Examples 2 × 1
Origins 2 × 1

2
2
2
——

Bonus issue
Rights issue
Difference

2
2
1
——

26

6

5
——

11