ACCOUNTING SAMPLE PAPER 1 – DECEMBER 2014 AUGUST 2013

Transcription

ACCOUNTING SAMPLE PAPER 1 – DECEMBER 2014 AUGUST 2013
ACCOUNTING
SAMPLE PAPER 1
AUGUST 2013 – DECEMBER 2014
ANSWERS
1 Hexham plc
Each question is worth a total of 16 marks (scaled to 40%); partial marking is awarded depending
on the complexity and calculation required to complete any entry.
Prepare the income statement for Hexham plc for the year ended 31 March 20X8 and the
statement of financial position at that date.
Income statement for the year ended 31 March 20X8
Revenue
Cost of sales
Gross Profit
Distribution costs
Administrative expenses
Other operating expenses
Profit/(loss) from operations
Finance costs
Profit/(loss) before tax
Income tax
Profit/(loss) for year
£
1,150,000
(483,000)
667,000
(220,000)
(341,000)
(38,560)
67,440
(12,000)
55,440
(10,000)
45,440
Statement of financial position at 31 March 20X8
£
Non-current assets
Land and buildings
Plant and equipment
Current assets
Inventories
Trade receivables
Prepayments
Cash and cash equivalents
Total assets
496,000
243,000
91,000
52,440
7,000
0
889,440
Equity
Equity share capital
Preference share capital
Share premium
Retained earnings
400,000
0
100,000
91,440
Non-current liabilities
Borrowings
200,000
Current liabilities
Borrowings
Bank overdraft
Trade payables
Accruals
Deferred income
0
23,100
54,900
4,000
6,000
© ICAEW 2013
Tax payable
Total equity and liabilities
2
£
10,000
889,440
A,C Both tax and national statistics will apply to the needs of government and its agencies. Whether the
business will continue as a going concern (B) is an issue for the sole trader, its suppliers, customers and
employees. Probably only the sole trader is interested in their own stewardship (D) of the business's
resources; this is really only an issue for company owners, as is (E).
LO1A
3
A
According to IAS 1 paragraph 25, going concern relates to whether the entity will continue in operational
existence without liquidating, ceasing trading or being unable to avoid these things (A).
LO3B
4
D
IAS 1 paragraph 15
LO1D, 3B
5
A, F Note that the question is asking about Johan plc's books of original entry, not Marius plc's. When Marius
plc buys goods on credit, Johan plc sells them to it so only the sales day book (A) can be at issue.
Contra entries are made in ledger accounts, not books of original entry, so only the payables ledger (F)
can be at issue here.
LO1C
6
C
£
Revenue
Purchases (69,600 × 5/6)
Gross profit
89,400
(58,000)
31,400 (C)
Option A uses the cash paid figure, which includes VAT, as the cost of purchases. Option B assumes
that the revenue figure is the gross one, whereas revenue in the income statement (and turnover in the
profit and loss account, if this were a UK GAAP question) should be shown exclusive of VAT; it also
uses the cash paid figure as the cost of purchases. Option D uses the correct VAT exclusive purchases
figure, but again assumes the revenue figure includes VAT.
LO3C
7
B
Start by posting the adjustment in full:
Discount allowed
Discount received
Suspense account
Debit
£
3,840
3,840
Credit
£
2,960
2,960
1,760
LO2D
8
B,C As some items have been drawn out by the owner rather than sold or carried forward as inventory, the
purchases figure in cost of sales should be reduced or credited (B). A lower cost of sales figure means
an increased reported profit (C).
LO2A, 2D
9
D
This question is not asking for the balance on the suspense account, but for the adjustment made to the
suspense account by the correcting journal.
A single journal to correct all these errors would be:
£
CR Receivables (90 + 66)
DR Sales
DR Suspense (9,980 – 9,890) + (2 × 33) – 110
The debit entry in the suspense account is £46 (D)
© ICAEW 2013
110
46
156
£
156
156
LO2B, 2D
10
A
Employer’s NIC is an expense to the business in addition to gross pay, so it should be debited to the
salaries expense account from the control account (A). B is incorrect as it suggests that the debit
balance on the control account should be credited to the liability account. Employees’ NIC and PAYE are
not additional expenses, so the remaining debit balance after gross pay has been charged cannot be
these (C and D).
LO2B
11
C
The difference in the amount at which the purchase of stamps was recorded is £120 – £12 = £108. As
only £12 was recorded expenses have clearly been understated. Petty cash should have been topped
up with (£36 + £60 + £120) = £216, so the £108 top-up is £216 – £108 = £108 too little (C).
LO2A
12
D
£
42,510
(2,470)
40,040
2,990
(10,270)
32,760
Uncorrected cash book balance
Dishonoured cheque
Corrected cash book balance
Unpresented cheques
Uncleared lodgements
Bank statement balance
LO2B
13
C, F Unpaid sales commission of £1,755 is an accrued expense which should be credited to accruals (F). As
sales commission is a distribution cost it should be debited to this account ©.
LO1D, 2C
14
A
RENT
Advances
Income statement (bal fig)
£
7,720
19,620
27,340
Receipts received
Arrears
£
22,850
4,490
27,340
LO2C, 3C
© ICAEW 2013
15
A
Units
Value
£
8/X4
b/f
11/X4
Sell
1/X5
Buy
5/X5
Sell
7/X5
c/f
£
2,400
10.00
24,000
(900)
10.00
(9,000)
1,500
10.00
15,000
1,200
16.75
20,100
2,700
13.00
35,100
(1,800)
13.00
(23,400)
900
13.00
11,700
LO1D
16
C
£
83,600
18,000
(4,500)
97,100
Draft net profit
Add: purchase price
Less: additional depreciation (18,000 × 25%)
Adjusted profit
LO2A
17
C
DISPOSAL
Cost
£
23,500
23,500
Accumulated depreciation
£23,500 - (£23,500 x 0.7 × 0.7)
Part exchange value
(£28,200 – £19,350)
Loss on disposal (bal fig)
£
11,985
8,850
2,665
23,500
LO1D
18
C
Cash raised is 250,000  £3.55 = £887,500, which is debited to cash at bank. The credit to share capital
is 250,000  £2 = £500,000, while the credit to share premium is 250,000  £1.55 = £387,500.
LO1D, 1E, 2D
19
A, C, E
Share premium (B) and dividends paid (D) are found only in company financial statements. Fixed assets
(A) is a UK GAAP term which can be seen in the financial statements of sole traders, partnerships or
some limited companies. Partners take drawings (C) rather than dividends. Profit for the year (E) can be
found in any financial statements.
LO3C
20
A, D In the absence of a drawings account on the ETB the debit for drawings should be to capital, since it
reduces the amount of the owner’s interest in the business (A). To remove the incorrect entry from other
expenses the account needs to be credited (D).
LO2C
21
B
John is credited with £50,000 × 3/10 = £15,000, then debited with £50,000 × 5/8 = £31,250, a net debit
of £16,250.
LO1E
© ICAEW 2013
22
B
The suspense account is increased by the imbalance in the adjustments processed (173 – 144) = 29:
Suspense
Adjustments
Total
Initial TB
DR
CR
£
£
78
Adjustments
DR
CR
£
£
29
144
173
173
173
Revised TB
DR
CR
£
£
107
LO2B, 2C
23
C
£
Payables ledger balances at 31/12/X4
Debit balance listed as credit balance (£153 × 2)
Corrected balance
Miscast of cash book (£2,950 – £2,590)
Original control account balance
29,800
(306)
29,494
(360)
29,134
LO2B
24
C
The direct and indirect methods will give the same figure. A rights issue of shares is a cash flow.
The profit on sale of a non-current asset appears as an adjustment to profit before taxation in order to
reach net cash flow from operating activities.
LO3C
25
B
Depreciation should be added back as it is not a cash flow. Proceeds from the sale of non-current assets
appear under the heading ‘Cash flows from investing activities’ and are not included as an adjustment to
profit in order to reach net cash flows from operating activities
LO3C
© ICAEW 2013