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financial accounting information

Questions and Answers of Financial Accounting Information

=+4. Taxation €m— corporation tax 245— deferred taxation 45
=+3. Interest payable €m ’— on loans and overdrafts 40— on finance lease rental payments 150 190
=+2. The loss on disposal of property, plant and equipment relates to the scrapping of plant and equipment during the year with a net book value of €26 million. No proceeds were received. \
=+1. Depreciation charged in arriving at operating profit in the consolidated statement of comprehensive income of SWEET plc for the year ended 31 December 2003 amounted to €750 million.
=+646 INTERNATIONAL FINANCIAL ACCOUNTING AND REPORTING Additional Information:
=+Property, plant and equipment (note 5) 3,280 2,960 Intangible assets ___64 _-3,344 2,960 Current Assets Inventory 1220 1,280 Receivables 1,740 2,960 1,440 2,420 EQUITY AND LIABILITIES Capital and
=+33. STATEMENT OF CASH FLOWS — CONSOLIDATED 645 SWEET plc Consolidated Statement of Financial Position as at 31 December 2003 2003 2002€m €m €Em €Em ASSETS Non-current Assets
=+SWEET ple Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2003 Note €m Revenue 3,400 Cost of sales (1,560)Gross profit 1,840 Other operating expenses (790)Operating
=+Question 2 Based on ICAI, P3 Summer 1999, Question 5)SWEET ple was founded in the 1970s. During the 1980s SWEET plc relied upon external acquisition to expand. For the last 7-8 years the group has
=+5. Acquisition of Subsidiary: Star Limited Details of the acquisition are :Net Assets Acquired €'000 Property, plant and equipment 160 Inventory 40 Cash 20 Payables (50)170 Goodwill 11
=+31 October 2004 200 982 The dividends debited to retained earnings were approved by the shareholders prior to the reporting date.
=+4. Reserves Share Premium __ Retained Earnings€'000 €'000 November 2003 100 766 Received on share issue 100 -Profit for year - 415 Dividends a — (199)
=+3. Called up share capital €'000€1 shares fully paid 1 November 2003 1200 Issued for cash 200 31 October 2004 1400
=+2. Property, plant and equipment €’000 Net Book value 1 November 2003 1,480 Additions 987 Net Book value of disposals (110)Depreciation charge for year (167)Net book value 31 October 2004 2,190
=+1. Group Profit before tax The following have been included: €°000 Depreciation of property, plant and equipment 167 Profit on disposal of property, plant and equipment 10
=+vConsolidated Statement of Comprehensive Income for the Year Ended 31 October 2004€’000 €000 Group Operating Profit \ 986 Interest payable — (160)826 Share of profit of associate 130 956
=+vQuestion I Universal plc Consolidated Statement of Financial Position as at 30 October 2004 Assets Non-current assets Property, plant & equipment Goodwill Investment in associate Current assets
=+v1. Explain the terms associate and significant influence
=+2. Explain the equity method of accounting and how it differs from the consolidation approach used for subsidiaries
=+The draft consolidated statement of comprehensive income of Parker Limited and its subsidiary companies together with the draft statement of comprehensive income of Duke Limited, for the year ended
=+1. Parker Limited acquired a 30% holding in Duke Limited on 1 October 2004.
=+2. The retained earnings of the Parker Limited Group and Duke Limited at 31 September 2005 are as follows:*Parker Limited Group Duke Limited€'000 €’000 PATTG 642 300 Retained earnings at 30
=+Retained earnings at 30 September 2005 859 309 Requirement You are required to prepare the consolidated statement of comprehensive income of Parker Limited for the year ended 30 September 2005.
=+Golf Limited is a trading company, which has recently sought to diversify its interests by purchasing shares in other companies. It has been its policy to insist on appointing a director to the
=+The draft statements of comprehensive income of the four companies for the year ended 30 June 1992 show:Golf Limited Club Limited Ball Limited Tee Limited€ € € €Revenue 2,100,000 3,900,000
=+1. Included in the inventory of Tee Limited was €24,000 for goods purchased from Golf Limited, subsequent to 1 November 1991. Golf Limited realised its usual 25% gross profit, based on selling
=+2. Retained earnings Golf Limited Club Limited Ball Limited Tee Limited€ € € €Profit after tax 206,500 230,000 125,000 75,000 Retained earnings b/f 450,000 306,000 235,000 200,000 Dividends
=+3. The dividend received from Club Limited has not yet been incorporated in the draft statement of comprehensive income of Golf Limited. All other dividends have been accounted for by Golf
=+v1. Shares acquired by Gold Limited in Silver Limited: 150,000 ordinary shares on 30 November 20X1 at a cost of €100,000.Shares acquired by Gold Limited in Bronze Limited: 20,000 ordinary shares
=+2. State of affairs relevant to the acquisition dates:Silver Limited Bronze Limited te P= r=Issued share capital 100,000 25,000 Capital reserve 195250 =Retained profits 4,300 5,000 Contingency
=+3. The current account difference arises from a cheque being in transit as on 30 November 20X3.
=+4, All the property of Silver Limited was disposed of on 31 May 20X3 and the profit on sale credited to capital reserve.
=+5. One-eighth of the inventory of Silver Limited as on 30 November 20X3 has been invoiced to that company by Gold Limited at cost plus 20%.
=+6. With respect to the measurement of non-controlling interests at the date of acquisition, the proportionate share method equates to the fair value method. The directors of Gold Limited are
=+Question 1 (Based on ICAI, P3 Summer 2004, Question 6)You are the accountant for COCKTAIL Group, which consists of three companies:COCKTAIL ple (COCKTAIL), UMBRELLA Limited (UMBRELLA), and CHERRY
=+1. On 1 January 1999, COCKTAIL purchased 96 million €1 ordinary shares in UMBRELLA for €330 million. The retained earnings of UMBRELLA stood at €120 million on this date and property, plant
=+measurement of non-controlling interests at the date of acquisition, the proportionate share method equates to the fair value method. - On 1 January 2003, COCKTAIL purchased 30 million €1
=+- During 2003 UMBRELLA sold raw materials to COCKTAIL for €2 million, making a profit of 25% on cost. COCKTAIL paid for the raw materials on delivery, and had€500,000 of these in inventory at
=+. On 30 December 2003, UMBRELLA sent a cheque for €20,000,000 to COCKTAIL that was not received until 2 January 2004.
=+. Dividends proposed at 31 December 2003, which are included in other payables, are as follows:€ million COCKTAIL 30 UMBRELLA fe 20
=+Dividends receivable by COCKTAIL from UMBRELLA are included in receivables.
=+. The directors of COCKTAIL estimate that the goodwill arising on the acquisition of UMBRELLA was impaired for the first time during the year ended 31 December 2003 by €61,000,000. It is group
=+The answer does NOT require a consolidated statement of comprehensive income and statement of financial position in a form suitable for publication. These statements may be presented by way of a
=+Notes to the accounts are NOT required, nor is a statement indicating the amount of profit dealt with in the holding company’s statement of comprehensive income.All workings should be clearly
=+Question 2 (Based on ICAI, P3 Summer 2000, Question 1)You are the accountant for EARTH plc group, reporting directly to the Finance Director.EARTH ple group consists of three companies: EARTH plc,
=+E On 1 January 1999 EARTH plc purchased 160 million €1 ordinary shares in WIND Limited for €550 million. The statement of comprehensive income of WIND Limited stood at €210 million on this
=+for the first time during the year ended 31 December 2003 by €95 million.
=+. On 1 January 2003 EARTH plc purchased 48 million €1 ordinary shares in WATER Limited for €200 million. The statement of comprehensive income of WATER Limited stood at €310 million on this
=+. During 2003 WIND Limited sold raw materials to EARTH ple for €2 million, making a profit of 25% on cost. EARTH plc paid for the raw materials on delivery, and had €500,000 of these in
=+. The profits of EARTH plc, WIND Limited, and WATER Limited accrue evenly throughout the year. It is group policy to charge a full year’s depreciation in the year of acquisition. Depreciation
=+EARTH plc’s investment income, which is included in receivables, represents dividends receivable from WIND Limited and WATER Limited. Dividends proposed are included in current liabilities at 31
=+(a) Prepare the consolidated statement of comprehensive income of EARTH plc group for the year ended 31 December 2003.
=+(b) Prepare the consolidated statement of financial position for EARTH plc group as at 31 December 2003.Note:ig The answer does NOT require a consolidated statement of comprehensive income and
=+2. Notes to the accounts are NOT required, nor is a statement indicating the amount of profit dealt with in the holding company’s statement of comprehensive income.3. All workings should be
=+OPUS Limited (OPUS), a company which prepares its financial statements to 31 December each year, carries on business as a distributor of musical instruments. On 1 January 2003, OPUS acquired 90% of
=+1. The net assets of SONATA on 1 January 2003 were as follows:Carrying value Property, plant and equipment Inventory Other net assets€'000 600 PRELUDE€'000 1,500(1,000)500(90)(10) 400(20) > 10
=+The difference between the carrying value and the fair value of property, plant and equipment is due to a revaluation of property, while the reduction in inventory relates to a change in the
=+. The fair value of the net assets of PRELUDE was the same as their book value on 1 January 2003. The statement of financial position of PRELUDE showed the following on this date:€’000 Share
=+. Following the acquisition of shares in SONATA and PRELUDE, the directors of OPUS decided to run down certain parts of OPUS’s business activities. These were finally discontinued in December
=+. It is Group policy to charge any impairment of goodwill to cost of sales._ OPUS, SONATA and PRELUDE each follow a policy of depreciating all fixed assets at 10% per annum on their carrying value.
=+OPUS Group for the year ended 31 December 2003 in a form suitable for publication.Note pt iA statement detailing the amount of the consolidated profit dealt with in OPUS's financial statements is
=+1. Explain the term joint venture.
=+2. Distinguish between jointly controlled operations, jointly controlled assets and jointly controlled entities.
=+Question 1 (Based on ICAI, P3"Autumn 1998, Question 2)TRUE plc acquired 675,000 shares in FAIR Limited on 1 January 2001. The reserves of FAIR Limited at the date of acquisition comprised revenue
=+1. TRUE ple has not yet accounted for its share of the proposed dividend by FAIR Limited.
=+2. On 30 December 2003 FAIR Limited sent a cheque for €20,000 to TRUE ple which was not received until 2 January 2004.
=+3. TRUE plc sold goods to FAIR Limited during the year at an invoice price of €225,000.The goods were invoiced at cost plus 25%. One half of these goods was still in FAIR Limited’s inventory at
=+4. On 7 January 2004 a power failure at one of the refrigerated storage units owned by FAIR Limited destroyed inventory with a book value at the year end of €42,000. The company has negotiated a
=+5. On 13 January 2004 SHAKEY Limited, a customer of TRUE plc, went into receivership.There had been no movement on this customer's account since the year end, at which time SHAKEY Limited owed
=+6. The directors of TRUE estimate that the goodwill arising on the acquisition of FAIR was impaired for the first time during the year ended 31 December 2003 by €84,000.Requirement Prepare the
=+Question 2 (Based on ICAI, P3 Summer 1999, Question 4)Archer PLC owns a number of subsidiaries, and prepares its consolidated financial statements to 31 December each year. During 2003 ARCHER plc
=+30. JOINT VENTURES 587 Additional Information
=+1. On 1 January 2003 ARCHER ple purchased 100% of the ordinary share capital of BOW Limited. The details were as follows:€m Cost of investment 200 Fair value of net assets acquired: aes—
=+Property, plant and equipment are to be depreciated over five years. During 2003, 50% of the inventory was sold outside the group on normal trading terms, with the remaining inventory expected to
=+2. On 1 January 2003 ARCHER plc purchased 30% of ARROW Limited. ARCHER plc contributes to ARROW ples activities and is actively involved in ARROW Limited’s financial and operating policy
=+The acquisition of ARROW Limited has not yet been incorporated into the ARCHER Group’ financial statements shown above.Requirement
=+(a) Explain, in the context of IAS 28 Interests in Associates and IAS 31 Interests in Joint Ventures, the difference between an associate and a joint venture.
=+(b) Prepare the statement of comprehensive income for the year ended 31 December 2003 and the statement of financial position as at that date for ARCHER Group.Challenging Questions
=+Question 1 (Based on ICAI, P3 Summer 2006, Question 1 er 2)You are the Finance Director of THOMPSON Group plc (THOMPSON), a group of companies that imports, blends and packs high quality tea for
=+1. On 1 January 2005, THOMPSON purchased 60,000 €1 ordinary shares in ROSS Limited (ROSS), a company that is involved in the tea trade but whose focus is on the price of the product rather than
=+30. JOINT VENTURES 589 Statement of Comprehensive Income for the Year Ended 31 December 2005€'000 Revenue 500 Cost of sales (200)Gross profit 300.Administrative expenses (100)Profit before tax
=+Only the cost of the investment in ROSS is included in THOMPSON ’s trial balance as at 31 December 2005. The directors of THOMPSON estimate that the goodwill arising on the acquisition of ROSS
=+590 INTERNATIONAL FINANCIAL ACCOUNTING AND REPORTING
=+2. During the year ended 31 December 2005, THOMPSON became involved in a joint venture arrangement with GRAEME Incorporated (GRAEME) with a view to expanding their operations to other countries.
=+30. JOINT VENTURES 591 Only the cost of the investment in DAVID is included in THOMPSON’ trial balance as at 31 December 2005. The directors of THOMPSON are confident that any goodwill arising on
=+v3. The property shown in the trial balance was acquired a number of years ago and the estimated useful economic life was 50 years at the time of purchase. As at 31 December 2005, the property is
=+v4. It is group policy to provide a full year’s depreciation in the year of acquisition and none in the year of disposal. All depreciation is charged to administrative expenses and is calculated
=+5. THOMPSON ’s inventory at 31 December 2005 is valued by the directors at 275,000. Included in this figure is speciality tea valued at its original cost of€60,000. The replacement,cost of the
=+v6. The 10% debentures were issued on 1 January 2005 and are redeemable on 31 December 2009. Interest is paid quarterly in arrears and the first payment was due on 1 April 2005.
=+7. In February 2006, THOMPSON teceived a claim from a former employee for€25,000 alleging discrimination at work and unfair dismissal in October 2005.While the directors refute the claim, they
=+8. There is no trading between THOMPSON, ROSS, GRAEME and DAVID, and there was no change in the share capital of the companies during 2005.
=+9. THOMPSON’ tax charge for 2005, which takes into account all relevant items, 1s 325,250.
=+10. It is group policy to account for associates using the equity method and for joint venture entities using either of the proportionate consolidation formats.Requirement
=+(a) Prepare the consolidated statement of comprehensive income for THOMPSON for the year ended 31 December 2005 and the consolidated statement of financial position as at that date.
=+(b) Describe the three broad types of joint ventures identified by IAS 31 Interests in Joint Ventures;
=+(c) Describe how an interest in a jointly controlled entity should be accounted for in:
=+(i) The separate financial statements of a venturer;
=+(ii) The consolidated financial statements of a venturer.
=+(d) Justify the method adopted to account for DAVID in the consolidated financial statements of THOMPSON.
=+IAS 21 The Effects of Changes in Foreign Exchange Rates defines the functional currency as the currency:(a) in which the foreign operation measures and records its transactions.

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