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financial accounting and reporting

Questions and Answers of Financial Accounting And Reporting

Using the data provided for Malcolm Products in Question 8, with the exception that 2000 units are produced each period but only 1200 units are sold in the first period of operations, the reported
During the second period of operations for Malcolm Products production was again 2000 units. Sales during the second period amounted to 1500 units.Assuming all costs remained constant, the closing
The following information was extracted from the accounting records of Concordia Stores:/983£30000 19000 5000/982£25000 22000 3500/98/£Sales to customers 20 000 Purchases at cost 15000 Operating
The following information relates to the production and assembly departments of the Popcorn Manufacturing Company for 1983.Direct labour Direct materials Machine hours worked Labour hours worked
The Popcorn Manufacturing Company introduced in Problem 2 have decided to allocate overheads on the basis oflabour hours worked. During 1983 the following levels of production were achieved (in
The bank statement for Dale Traders at the end of June 1984 showed a balance on hand of £ 1650, while the business accounting records show a balance at bank of £ 1960. Further examination reveals
Securities were acquired as a short-term investment at a cost of £ 1200 on I May 1983. Investment income of £150 was received on the securities in December 1983. At the Balance Sheet date of 31
Assume that a new partner was introduced at the commencement of the 1984 accounting year with profits subsequently shared equally by all partners and no salaries or guaranteed shares payable. 1984
The Trial Balance ofT. Randolph as on 31 December 1983 was as follows:Capital on I January 1983 Capital introduced on I July 1983 Drawings Plant and machinery£3780 28420£40000 10000 Motor vehicles
J. Maxwell, the owner of a retail shop, maintain s very elementary business acco unting records. From an ana lysis of bank statements for th e year ended 30 Ap ril 1983 the following summa ry of bank
Th e following informat ion was extr acted from the accounting records of Higham Products for the three-month VAT peri od ending on 31 March 1984.(i) Balance s at:Trade debtor s Trade credito rs
Compare the relative merits to an owner of the following forms of business enterprise: (a) sole-trader; (b) partnership; (c) limited liability company.
Describe the main features of the following methods of raising equity capital: (a)Rights issue; (b) Offer for sale; (c) Tender issue; (d) Placement.
What are the advantages and disadvantages to a company of obtaining a quotation on a recognised stock exchange?
Describe the relative merits to a potential investor of investing in the following types of security: (a) ordinary shares; (b) preference shares ; (c) debentures.
Explain in which of the following types of business you would expect to find relatively high levels of gearing and in which you would expect to see relatively low levels of gearing . (a) retail
(a) Explain the functions of underwriters.(b) Does the presence of underwriters for a new issue indicate that risk averse investors should beware of the issue?Problems
Kippen Products pic made an offer for sale of I million ordinary shares during May 1984 at a price of £2.50 payable on application. Applications were subsequently received for 2.4 million shares,
Ross pic has operated since the business was founded with the following capital structure:Year I Year 2 Year 3 Year 4 2 million, 50 pence Ordinary Shares , fully paid 8 per cent Cumulative Preference
If Brown had been guaranteed a minimum share of profits of £4000 per annum, Bill's share would have fallen, in total over the three years by:(a) £300;(b) £333;(c) £120;(d) £133.
Berm's share of the total profits for the three years is:(a) £26600;(b) £32600;(c) £35600;(d) £29600.
Argyle Factors is a wholesaler of engine lubricants. On I June 1984, it had a stock of 20 000 litres of lubricant valued at 25 pence per litre. The following movements in lubricant stocks were
Using the information provided in Question I and assuming a periodic method of stock valuation and stock control,(a) calculate the value of closing stock and cost of goods sold using each of the
The Everlasting Company act as wholesale distributors of Vitrim, a raw ingredient for a variety ofrubberised compounds. Opening stock of Vitrim on I January 1983 was 25000 litres at a cost of £1.20
The following information has been extracted from the records of Aragon Products:(a) Prepare a Bank Reconciliation Statement at 31 March 1984.(b) Present in journal entry form , the required
Collingwood Enterprises operate a petty cash imprest system, with an initial advance of £ I00 being made to the petty cashier to meet incidental expenses. Petty cash expenditures are reimbursed to
Identify the accounting record s which should ideally be maintained by the sole owner and manager of a small grocery shop, operating with a turnover of around£60000 per annum.
Explain the purposes for which a sole trader may wish to prepare annual financial statements.
List the points which should ideally be included in a partnership agreement.For each of the following circle the letter of the best choice from among the possible solutions presented.
100 units of merchandise were acquired during 1983 by Douglas Traders at a total cost of £3910 (including VAT at 15 per cent). 50 units were subsequently sold at a price of £57.50 each, including
The totals of input and output taxes of Mordred Products for their first three months of trading were £11 600 and £12400 respectively. As a result the VAT account will show:(a) a debit balance of
Goods bought for resale at the end of the 1983 accounting year cost £2300 including VAT. The invoice for these goods remained outstanding at the Balance Sheet date and the goods were included in
James and Andrew trade in partnership and share profits in the proportion 3 to 2 after deducting salaries of £6000 for James and £8000 for Andrew. Net profit for the year to 31 May 1984 was £30
Ewen and Stephen Watt are in partnership sharing profits equally . The latest Balance Sheet, in summarised form, is as follows:Balance Sheet at 30 June 1984 Fixed assets Current assets Less current
11..Quickbuild Ltd entered into a two-year contract on 1 Januar y 20X7 at a contract price of 250,000.The estimated cost of the contract was 150,000. At the end of the first year the following
11.. Explain how negative goodwill may arise and its accounting treatment.
11.. Explain how the fair value is calculated for:● tangible non-current assets ● inventories ● monetary assets.
11..Good Progress SpA entered into a contract on 1.1.20X0 at a contract price of 1,000,000 and an estimated total profit of 250,000. The contract was due for completion on 31.12.20X4.The following
International Accounting Standards IFRS 3 and IAS 38 address the accounting for goodwill and intangible assets.Required:(a) Describe the requirements of IFRS 3 regarding the initial recognition and
11..X Ltd entered into a lease agreement on the following terms:Cost of leased asset £100,000 Lease term 5 years Rentals six-monthly in advance £12,000 Anticipated residual on disposal of the
4 Here is an extract from the Reckitt Benckiser 2005 Annual Repor t:2004 2005 Non-current assets £m £m Intangible assets Brands 1,521 1,623 Goodwill 62 66 Tangible assets 473 485 2,056 2,174 Total
11..(a) A concession company, WaterAway, has completed the construction of a wastewater plant. The public sector (the grantor) makes payments related to the volume of wastewater processed.Discuss how
Newbild SA commenced work on the construction of a block of flats on 1 July 20X0.During the period ended 31 March 20X1 contract expenditure was as follows:€Materials issued from stores 13,407
11.. Explain the criteria to be applied when selecting the method to be used for allocating costs.
11.. Discuss the acceptability of the following methods of inventor y valuation: LIFO; replacement cost.
11.. Discuss why some form of theoretical pricing model is required for inventor y valuation purposes.
IAS 38 – Intangible Assets – was primarily issued in order to identify the criteria that need to be present before expenditure on intangible items can be recognised as an asset. The standard also
Oxlag plc, a manufacturer of pharmaceutical products, has the following research and development projects on hand at 31 January 20X2:(A) A general sur vey into the long-term effects of its sleeping
As chief accountant at Italin NV, you have been given the following information by the director of research:The board of directors considers that this project is similar to the other projects that
11.. Critically evaluate the basis of the following asser tion: ‘I am sceptical that it [the impairment test]will work reliably in practice, given the complexity and subjectivity that lie within
The brands debate Under IAS 22, the depletion of equity reser ves caused by the accounting treatment for purchased goodwill resulted in some companies capitalising brands on their balance sheets.
During its financial year ended 30 June 20X7 Beavers, an engineering company, has worked on several contracts. Information relating to one of them is given below:Contract X201 Date commenced 1 July
At 31 October 20X0, Lytax Ltd was engaged in various contracts including five long-term contracts, details of which are given below:1 2 3 4 5£000 £000 £000 £000 £000 Contract price 1,100 950
MACTAR have a series of contracts to resur face sections of motor ways. The scale of the contract means several years’ work and each motor way section is regarded as a separate
11.. ‘There should be one specified method for calculating attributable profit.’ Discuss.
11.. ‘Profit on a contract that is not completed is an unrealised holding gain.’ Discuss.
11.. ‘Profit on a contract is not realised until completion of the contract.’ Discuss.
Agriculture is a key business activity in many par ts of the world, par ticularly in developing countries.Following extensive discussions with, and funding from, the World Bank, the International
The income statement of Bottom, a manufacturing company, for the year ending 31 Januar y 20X2 is as follows:Bottom $000 Revenue 75,000 Cost of sales (38,000)Gross profit 37,000 Other operating
Beta Ltd commenced business on 1 Januar y and is making up its first year’s accounts. The company uses standard costs. The company own a variety of raw materials and components for use in its
Alpha Ltd makes one standard ar ticle. You have been given the following information:1 The inventor y sheets at the year-end show the following items:Raw materials:100 tons of steel:Cost £140 per
Purchases of a cer tain product during July were:July 1 100 units @ £10.00 12 100 units @ £9.80 15 50 units @ £9.60 20 100 units @ £9.40 Units sold during the month were:July 10 80 units 14 100
11.. How is ‘value in use’ calculated for an impairment review? What are the areas of subjectivity?
Speedster Ltd commenced trading in 1986 as a wholesaler of lightweight travel accessories. The company was efficient and traded successfully until 2000 when new competitors entered the market selling
A summar y of the balance sheet of Doxin plc, as at 31 December 20X0, is given below;During 20XI, the company:(i) Issued 200,000 ordinar y shares of £I each at a premium of I0p per share (a specific
The following note appeared in the Eesti Telekom 2003 Annual Repor t:Factoring of receivables The factoring of receivables is the sale of receivables. Depending on the type of factoring contract, the
(a) Post balance sheet events are those events, both favourable and unfavourable, which occur between the balance sheet date and the date on which the financial statements are approved by the board
11.. Following from, if the debt instrument was included in the balance sheet at fair value through profit or loss this would mean that a profit would be recognised in the income statement.This
11.. Discuss the implications for businesses of a substance approach being used for the presentation of liabilities and equity. Indicate how the terms of an instrument could present problems in
On 20 December 20X6 one of Incident plc’s lorries was involved in an accident with a car. The lorr y driver was responsible for the accident and the company agreed to pay for the repair to the car.
The directors of Apple Pie plc at the September 20X5 board meeting were expressing concern about falling sales and the lack of cash to meet a dividend for the current year ending 31 December at the
(a) Provisions are par ticular kinds of liabilities. It therefore follows that provisions should be recognised when the definition of a liability has been met. The key requirement of a liability is a
The following is the balance sheet of Alpha Ltd as on 30 June 20X8:The following information is relevant:I There are contingent liabilities in respect of (i) a guarantee given to bankers to cover a
The draft balance sheet of Telin plc at 30 September 20X5 was as follows:Preference shares of the company were originally issued at a premium of 2p per share.The directors of the company decided to
11.. What factors would a loan creditor take into account if asked to bear some of the accumulated loss?
11.. When preparing accounts under Format 1, how would a bad debt that was materially larger than normal be disclosed?
Phoenix plc trial balance at 30 June 20X7 was as follows:The following information is available:1 Freehold premises acquired for £1.8 million were revalued in 20X4, recognising a gain of £600,000.
Raffles Ltd trades as a wine wholesaler with a large warehouse in Asia. The trainee accountant at Raffles Ltd has produced the following draft accounts for the year ended 31 December 20X6.The
Basalt plc is a wholesaler. The following is its trial balance as at 31 December 20X0.The following additional information is supplied:(i) Depreciate plant and machiner y 20% on straight-line
HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown opposite.The authorised share capital is 4,000,000 9% preference shares of $1 each and 18,000,000 ordinar y shares of 50c
The following trial balance was extracted from the books of Old NV on 31 December 20X1.Note of information not taken into the trial balance data:(a) Provide for:(i) An audit fee of €38,000.(ii)
11.. Why do companies reorganise their capital structure when they have accumulated losses?
11.. How can distributable profits become non-distributable?
11.. What is the relevance of dividend cover if dividends are paid out of distributable profits?
The following is an extract from the trial balance of Imecet at 31 October 2005:$000 $000 Proper ty valuation 8,000 Factor y at cost 2,700 Administration building at cost 1,200 Deliver y vehicles at
Related party scenarios(a) In 20X3 Arthur is a large loan creditor of X Ltd and receives interest at 20% p.a. on this loan.He also has a 24% shareholding in X Ltd. Until 20X1 he was a director of the
The following is the draft trading and income statement of Parnell Ltd for the year ending 31 December 2003:You are given the following additional information, which is reflected in the above income
The IASC/IASB has issued accounting standards that concentrate on the issue of repor ting financial per formance. The main standards that repor t this are:IAS 1 Presentation of Financial Statements
Cryptic plc extracted its trial balance on 30 June 20X5 as follows:The following information is relevant:(i) The company discontinued a major activity during the year and replaced it with another.
Olive A/S, incorporated with an authorised capital consisting of one million ordinar y shares of €1 each, employs 646 persons, of whom 428 work at the factor y and the rest at the head office. The
Springtime Ltd is a UK trading company buying and selling as wholesalers fashionable summer clothes.The following balances have been extracted from the books as at 31 March 20X4:Notes:1 Depreciation
Mercury You have been given the task, by one of the par tners of the firm of accountants for which you work, of assisting in the preparation of a trend statement for a client.Mercur y has been in
711..
11.. How should grants received towards expenditure on PPE be treated?
11.. What effect does revaluing assets have on gearing (or leverage)?
11.. Define ‘cost’ in connection with PPE.
11.. What is meant by the phrases ‘useful life’ and ‘residual value’?
11.. Define PPE and explain how materiality affects the concept of PPE.
11..Discuss the arguments for and against discounting the deferred tax charge.
The finance director of the Small Machine Par ts Ltd company is considering the acquisition of a lease of a small workshop in a warehouse complex that is being redeveloped by City Redevelopers Ltd at

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