2 2a) Explain the differences between the terms "dividend" and "drawings" as used in financial accounting and reporting (80 WORDS) (4 marks) 2b) Jonny Ltd prepares financial statements on 30" April each year. The company's capital balances on 1" May 2019 were as follows: 50p Ordinary shares, fully paid Share premium Retained profits 5% Debentures 3% Redeemable preference shares, 1 E'm 18126 12 16 The following events took place during the year ended 30 April 2020: On 31 July 2019 the company received full payment from the issue of an additional 2 million shares at an issue price of 3 each. The following dividend payments were made: o 30 June 2019: The final ordinary dividend of 5p per share for the year ended 30 April 2019 and the unpaid half of the preference dividends for the year ended 30 April 2019. o 15" December 2019: An interim ordinary dividend of 2p per share, payable in full for each fully paid-up share on this date and half of the preference dividends for the year At the year-end the directors of Jonny Ltd propose to pay a final ordinary dividend of 4p per share. REQUIRED: L Use the information above to prepare the journal entries to show how the transactions involving dividends paid during the year ended 30 April 2020 should be recorded in the books of accounts. Note: Narratives are not required. (13 marks) Explain, with reasons, the correct treatment of the final dividends for all the classes of shares above when preparing the financial statements for Jonny Ltd for the year ended 30 April 2020. [160 WORDS] (8 marks) TOTAL 25 MARKS] Continued 101ACC-R Information for questions 3 and 4 Golden Pen plc is a wholesaler and retailer of stationary. The company does most of its business online, largely with other businesses on 30-day credit terms although a negligible proportion of its online sales are made directly to the end customer. On 1 November 2019 3,000 was received from the sale of one of the company's vehicles which had cost 20,000 on 1 November 2011 and been depreciated at 10% per annum. This was the only non-current asset disposed of during this financial year. Annual depreciation charges and disposal profits or losses are included in operating expenses. On 20th June 2020 the company acquired a new storage warehouse at a cost of 200,000. There were no other purchases of non-current assets during the year to 31 October 2020. Golden Pen plc's directors also sold the company's equity investments in August 2020 and in September 2020 issued some additional ordinary shares at a premium. The directors also paid 107,000 in ordinary dividends during the year ended 31" October 2020 (2019: 42,000). Extracts from the company's financial statements for the years ended 31" October 2019 and 2020 are provided below. Golden Pen plc: Income statement extract for the year ended 31st October 2020 '000 Revenue 1,031 Cost of sales Gross profit (560) 471 Operating expenses Profit before interest and tax Finance costs Investment income (260) 211 (14) 5 Profit before tax 202 Tax charge (38) Profit for the year 164 Continued 101ACC-R Golden Pen ple: Statement of financial position at: Non-current Assets. Land and buildings Vehicles 31/10/2020 000 000 '000 31/10/2019 2000 E000 1000 1,420 190 1,230 280 160 120 1,350 1,220 165 1,055 300 150 150 1,205 Current Assets Inventory 58 65 Trade receivables 49 36 Equity investments 50 Cash and bank 78 185 4 155 1,535 1,360 Equity Ordinary share capital 650 520 Share premium 460 350 Retained earnings 265 208 1,375 1.078 Non-current Liabilities Long-term loan 70 70 180 Current Liabilities Trade payables 48 63 Corporation tax 42 90 39 102 1.535 1,380 Question 3 The financial statement extracts and additional information for Golden Pen pic are given on pages 7 and 8 above. Use this information to prepare the statement of cash flows for Golden Pen pic for the year ended 31 October 2020 in the prescribed format for publication under IAS 7 [25 MARKS] Page 9 of 10 101ACC-R Question 4 The financial statement extracts and additional information for Golden Pen plc are given on pages 7 and 8 above. The company's directors wish to evaluate their competitiveness relative to the industry. A number of industry average ratios for the current period have been extracted and can be seen below. Acid test ratio 1.2 Capital gearing 20% Current ratio 1.6 Customer collection period 15 days Inventory holding period 20 days 28% Operating profit margin Return on capital employed Supplier payment period. 18% 28 days You are employed as part of the team conducting this assessment and have been tasked with the assessment of working capital efficiency and liquidity. Required: 4a Calculate the above 8 ratios for Golden Pen pic using the company's information given on pages 5 and 6 above (8 marks) 4b Use the ratios you have calculated above for Golden Pen plc together with any other relevant information to: Assess the company's working capital efficiency and liquidity in comparison with its competition (260 WORDS) (13 marks) Make recommendations as to how they can improve their competitiveness in these 2 areas (80 WORDS) (4 marks) [TOTAL 25 MARKS) You are employed as part of the team conducting this assessment and have be tasked with the assessment of working capital efficiency and liquidity. Required: 4a Calculate the above 8 ratios for Golden Pen plc using the company's information given on pages 5 and 6 above. (8 marks) 4b Use the ratios you have calculated above for Golden Pen plc together with any other relevant information to: i. ii. Assess the company's working capital efficiency and liquidity in comparison with its competition. [260 WORDS] (13 marks) Make recommendations as to how they can improve their competitiveness in these 2 areas [80 WORDS] (4 marks)