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Business Accounting
Prepare a consolidated balance sheet from the following details as at 31 March 20X3.At the balance sheet date, Sibling B owed Sibling A £1,000 and Parents for Siblings owed Sibling B £1,500.During
You are presented with the following information from the Seneley group of companies for the year to 30 September 20X6:Additional information:(a) The authorised, issued and fully paid share capital
Why do you think the rules were changed upon the introduction of FRS 2?
The following summarised information relates to the Pagg group of companies.Additional information:1. Pagg acquired its shareholding in Ragg Ltd on 1 April 20X5. Ragg’s profit and loss account
You are to draw up a consolidated balance sheet as at 31 December 20X5 from the following:At the balance sheet date, Son 1 owed Pa and Mum £2,500 and Son 2 £1,100, and Pa and Mum owed Son 2
You are presented with the following summarised information relating to Block plc for the year to 30 September 20X8:Additional information:1. Block purchased 80 per cent of the share capital of Chip
Why do you think you are not allowed to calculate goodwill at each stage of acquisition?
On 31 March 20X3, Subs Ltd had issued share capital of 50,000 ordinary £1 shares and reserves of £30,000. Two years later, the reserves had risen to £45,000 but the share capital was unchanged.
On 31 October 20X4, its balance sheet date, Sons and Daughters Ltd had issued share capital of 600,000 ordinary £1 shares and reserves of £340,000. Four years later, the share capital is unchanged
Pop and Mom Ltd bought 120,000 of the 200,000 issued ordinary £1 shares of Sonny Ltd for £300,000 on 31 July 20X4. Sonny Ltd financial statements are drawn up annually to 31 December. The balance
On 1 January 20X8, Sons and Co Ltd had an issued share capital of 200,000 ordinary £1 shares. The balance on the profit and loss account was £20,000 and there was also a general reserve of
What would be the impact upon the consolidated financial statements if the dividend had been paid before the end of the subsidiary’s accounting period?
The following balance sheets were drawn up as at 31 March 20X5. The person drafting the balance sheet of Parent Ltd was not too sure of an item and has shown it as a suspense amount.*The balance of
Which of these two methods do you think is the more appropriate?
The following balance sheets of Pop Ltd and Son Ltd were drawn up as at 31 December 20X7. Draw up the consolidated balance sheet as at that date.*The profit figure for 20X7 includes the dividend of
Draw up a consolidated balance sheet as at 31 October 20X3 from the following information.The proposed dividend of Son and Daughter has not yet been brought into the financial statements of Pa and Ma
The balance sheets of Pops Ltd and Sons Ltd are as follows: Pops Ltd Balance Sheet as at 31 December 20X8 Investment in subsidiary: 195,000 shares bought 31.12.20X7 Fixed assets Current assets Share
X plc acquired 80 per cent of the ordinary share capital of Y plc on 1 January 20X6 for £300,000.The lists of balances of the two companies at 31 December 20X6 were as follows:(a) A remittance of
P plc acquired 80 per cent of the ordinary share capital of S plc for £150,000 and 50 per cent of the issued 10 per cent cumulative preference shares for £10,000, both purchases being effected on 1
Packer and Stringer were in partnership as retail traders sharing profits and losses: Packer three-quarters, Stringer one-quarter. The partners were credited annually with interest at the rate of 6
Nion is a retail stock outlet operating from a head office in London and a branch in Brighton. The following trial balances have been extracted from the books of account as at 31 October
Squid Ltd, whose head office is in Aberdeen, operates a branch in Dundee. All goods are purchased by head office and invoiced to and sold by the branch at cost plus 50 per cent.Other than a sales
LR, a trader, commenced business on 1 January 20X9, with a head office and one branch. All goods were purchased by the head office and goods sent to the branch were invoiced at a fixed selling price
D Little Ltd has a branch in Bath at which a full set of books is kept. At the end of the year the following summary is compiled of the transactions between the branch and the head office as recorded
Why should it make any difference if debtors make payment to a branch other than the one where the sale took place?
Star Stores has its head office and main store in Crewe, and a branch store in Leek. All goods are purchased by the head office. Goods are invoiced to the branch at cost price plus a profit loading
Home Ltd is incorporated in the UK and rents mobile homes to holidaymakers in this country and in Carea. The company has a head office in London and a branch in Carea where the local currency is
OTL Ltd commenced business on 1 January 20X0. The head office is in London and there is a branch in Highland. The currency unit of Highland is the crown.The following are the trial balances of the
Why do you think organisations purchase assets on hire purchase?
Why is the amount paid in Year 2 in Exhibit 2.2 different from the amount paid in Year 2 in Exhibit 2.1? Exhibit 2.1 Unequal instalments 1 A computer is bought from A King at the start of year 1.
Wild started business on 1 April 20X2 selling one model of digital cameras on hire purchase. During the year to 31 March 20X3 he purchased 2,000 cameras at a uniform price of £90 and sold 1,900
D Lane purchased two cars for his business under hire purchase agreements:Both agreements provided for payment to be made in 24 monthly instalments commencing on the last day of the month following
Bulwell Aggregates Ltd wish to expand their transport fleet and have purchased three heavy lorries with a list price of £18,000 each. Robert Bulwell has negotiated hire purchase finance to fund this
On 1 January 20X5 P Wriggle bought a computer (cash price £1,046) from Dowe Ltd on the following hire purchase terms. Wriggle was to make an immediate payment of £300 and three annual payments of
A printing company purchased a machine on hire purchase over a period of three years, paying £1,308 on 1 January 20X6, and further annual payments of £4,000 due on 31 December 20X6, 20X7 and
RJ commenced business on 1 January 20X8. He sells refrigerators, all of one standard type, o hire purchase terms. The total amount, including interest, payable for each refrigerator, is £300.
On 31 March 20X4, D Biggs, who prepares his financial statements to 31 March, bought a lorry on hire purchase from Truck Fleet Ltd. The cash price of the lorry was £61,620. Under the terms of the
Object Limited is a retail outlet selling word processing equipment both for cash and on hire purchase terms. The following information has been extracted from the books of account as at 31 August
On 1 January 20X6, F Limited commenced business selling goods on hire purchase. Under the terms of the agreements, an initial deposit of 20 per cent is payable on delivery, followed by four equal
Feliz Ltd has an authorised capital of £500,000 comprising 1 million ordinary shares of 50p each. The 1 million shares were issued at par, payments being made as follows:Applications were received
Pilot Ltd company has a nominal share capital of £200,000 comprising 200,000 ordinary shares of £1 each. The whole of the capital was issued at par on the following terms:Applications were received
Why is it unlikely that many large companies could have existed if limited liability did not exist?
On 1 January 20X7, Carver bought a machine costing £20,000 on hire purchase. He paid a deposit of £6,000 on 1 January 20X7 and he also agreed to pay two annual instalments of £5,828 on 31 December
Dundas Limited purchased a machine under a hire purchase agreement on 1 January 20X8. The agreement provided for an immediate payment of £2,000, followed by five equal instalments of £3,056, each
Why would it be advantageous for a company to be able to sue other business entities, rather than for the directors or an employee to do so?
Why do you think companies may wish to issue shares at a discount and how do you think companies avoid being in this position?
M Limited has an authorised share capital of £1,500,000 divided into 1,500,000 ordinary shares of £1 each. The issued share capital at 31 March 20X7 was £500,000 which was fully paid, and had been
Why do you think companies make new share issues?
During the year to 30 September 20X7, Kammer plc made a new offer of shares. The details of the offer were as follows:1. 100,000 ordinary shares of £1 each were issued payable in instalments as
The authorised and issued share capital of Cosy Fires Ltd was £75,000 divided into 75,000 ordinary shares of £1 each, fully paid. On 2 January 20X7, the authorised capital was increased by a
Why do you think companies issue debentures rather than making a new share issue?
Why do you think companies are not allowed to issue shares at no par value in the UK?
Applications were invited by the directors of Grobigg Ltd for 150,000 of its £1 ordinary shares at £1.15 per share payable as follows:Applications were received for 180,000 shares and it was
Exercises (a) to (e) are based on the following balance sheet.Note also that each of exercises (a) to (e) is independent of any other. The exercises are not cumulative.Required:(a) RSV Ltd redeems
Why do you think the rules concerning purchase and redemption were changed in 1981?
Exercises (a) to (e) are based on the following balance sheet.Note also that exercises (a) to (e) are independent of each other. They are not cumulative.Required:(a) BAR Ltd purchases £10,000 of its
Why do you think shares need to be fully paid before they can be redeemed or purchased?
Why do you think the rules are less restrictive for private companies?
A company’s balance sheet appears as follows:Required:(a) If £6,000 of the ordinary shares were purchased at par, there being no new issue of shares for the purpose, show the journal entries to
Some years ago M plc had issued £375,000 of 10 per cent debentures 20X6/20X0 at par. The terms of the issue allow the company the right to repurchase these debentures for cancellation at or below
Debentures of £30,000 are issued on 1 January 20X3. Redemption is to take place, on equal terms, four years later. The company decides to put aside an equal amount to be invested at 5 per cent which
The following information relates to White Rabbit Trading plc:On 1 February 20X7 the company closed the list of applications for 400,000 ordinary shares at a premium of 50p. The shares were to be
Alas plc has an authorised share capital of 150,000 ordinary shares of £10 each. Upon incorporation, 50,000 shares were issued and fully paid. The company has decided to issue another 50,000 shares,
During the year to 30 September 20X9, Popham plc issued 100,000 £1 ordinary shares. The terms of the offer were as follows:Applications were received for 200,000 shares. The directors decided to
On 30 June 20X4 Smith and Sons Ltd acquired all the assets, except the investments, of Firefly Ltd.The following are the summaries of the profit and loss account of Firefly Ltd for the years ending
Chess Ltd was incorporated on 1 September 20X4 and took over the business of Red and Green on 1 June 20X4. It was agreed that all profits made from 1 June should belong to the company and that the
CJK Ltd was incorporated on 15 December 20X9 with an authorised capital of 200,000 ordinary shares of £0.20 each to acquire as at 31 December 20X9 the business of CK, a sole trader, and RP Ltd, a
The following information relates to Grigg plc:1. On 1 April 20X8 the company had £100,000 10 per cent debentures in issue. The interest on these debentures is paid on 30 September and 31 March.2.
The balance sheet of Hubble Ltd as at 31 May 20X0 is shown below.Hubble Ltd agreed to purchase at this date the freehold premises, plant and machinery and stock of A Bubble at agreed valuations of
Why do you think the amount paid for a business may be different from the total value of its net assets as shown in its financial statements?
Rowlock Ltd was incorporated on 1 October 20X8 to acquire Rowlock’s mail order business, with effect from 1 June 20X8.The purchase consideration was agreed at £35,000 to be satisfied by the issue
From the following information you are required to prepare a statement apportioning the unappropriated profit between the pre-incorporation and post-incorporation periods, showing the basis of
The following information relates to Kemp plc for the year to 31 March 20X9:Required:Write up the following accounts for the year to 31 March 20X9, being careful to insert the appropriate date for
The following figures appeared in W Ltd’s balance sheet at 31 March 20X2:During the year ended 31 March 20X3, W Ltd made a payment of £520,000 to the Collector of Taxes in settlement of the
Camden Lock Ltd has just finished its first year of trading to 31 December 20X6. Corporation tax throughout was 40 per cent and income tax 20 per cent. You are given the following information:(i) Net
Why do you think the rules for capital allowances are different from the rules for depreciation?
In this example, taxable profits were higher than the net profit. Yet, over the life of a fixed asset, the amount of profit assessed in total for tax will always equal the total net profit for that
If a sole trader has the same net profit each year as is earned by a small company, all other things being equal, which business will show the greater accumulated profits if(a) The sole trader pays
Corporation tax for the tax years 20X7, 20X8, and 20X9 was 40 per cent and income tax for each year was 20 per cent.(A) Skim Ltd’s draft profit and loss account for the year ended 31 December 20X8
Why do you think the depreciation is £925 per year?
Joytan Ltd has a trading profit, before dealing with any of the undermentioned items, for the year ended 31 December 20X4 of £500,000. Prepare the profit and loss account for the year.(a) The
Sunset Ltd has an operating profit for the year ended 31 December 20X2, before dealing with the following items, of £150,000. Complete the profit and loss account.(a) The standard rate of income tax
An extract from the draft accounts of Either Ltd at 30 November 20X5 shows the following figures before allowing for any dividend which might be proposed:Additional information includes:(i) The
Deflation Ltd, which had experienced trading difficulties, decided to reorganise its finances. On 31 December 20X5 a final trial balance extracted from the books showed the following
The Merton Manufacturing Co Ltd has been in business for many years making fitted furniture and chairs. During 20X4 and 20X5 substantial losses have been sustained on the manufacture of chairs and
Why do you think special revenue reserves are used, rather than simply leaving everything in the profit and loss account (which is, itself, a revenue reserve)?
On 31 March 20X2, the following was the balance sheet of Quality Yarns Ltd.The following scheme of capital reduction was sanctioned by the Court and agreed by the shareholders:(a) Preference shares
Why do you think a company would wish to change its share capital?
In terms of the amount of working capital, what is the difference between doing this and leaving the amount transferred in profit and loss?
The balance sheet of Tatters Ltd on 31 December 20X8 was as follows:The dividend on the preference shares is £12,000 in arrears. A scheme of reconstruction was accepted by all parties and was
The directors are preparing the published accounts of Dorman plc for the year to 31 October 20X5. The following information is provided for certain of the items which are to be included in the final
The ledger balances of Tick Tick Ltd at 31 March 20X1 were as follows:A capital reduction scheme has been sanctioned under which the 250,000 preference shares are to be reduced to 80p each, fully
Why do you think there is such an emphasis on the ‘qualitative’ aspects of information in the Statement of Principles?
Why do you think this switch in the UK and Ireland towards international accounting standards has occurred?
In preparing the published financial statements of a company, briefly state the significant accounting/disclosure requirements you would have in mind in ensuring that the financial statements comply
Oldfield Enterprises Limited was formed on 1 January 20X5 to manufacture and sell a new type of lawn mower. The bookkeeping staff of the company have produced monthly figures for the first ten months
The chief accountant of Uncertain Ltd is not sure of the appropriate accounting treatment for a number of events occurring during the year 20X5/6.(i) A significant number of employees have been made
The accountant of Hook, Line and Sinker, a partnership of seven people, has asked your advice in dealing with the following items in the partnership accounts for the year to 31 May 20X7.(a) (i)
From the following selected balances of Filo plc as at 31 March 20X5 draw up (i) a detailed trading and profit and loss account for internal use, and (ii) a profit and loss account for
The following information has been extracted from the books of account of Rufford plc for the year to 31 March 20X6:Additional information:3. There was an overprovision for corporation tax of £3,000
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