SECTION A Question 1: this question MUST be answered by ALL students Axel Limited, which is a wholesaler of wooden fencing, prepares its financial statements to October 31 each year. At October 31, 2019 the company's Trial Balance was as follows: 1,606,327 898,627 83,620 162,850 123,780 550,000 Revenue Purchases Inventory at Nov 1,2018 Selling and Distribution expenses Administration expenses Property at valuation (included Land at valuation of 250,000) at 1st Nov 2018) Buildings: Accumulated Depreciation at Nov 1,2018 Plant and Equipment: Cost Plant and Equipment: Accumulated Depreciation at Nov 1, 2018 Investment Property - Fair Value Nov 1, 2018 Trade receivables and payables Cash at bank Taxation Ordinary shares of 1 each : at Nov 1,2018 Share premium account at Nov 1,2018 Revaluation surplus at Nov 1, 2018 Retained earnings at Nov 1,2018 10% Loan Notes due October 31,2023 60,000 433,520 346,500 420,000 70,725 96,585 345,690 8,400 410,400 160,400 27,000 247,000 143,000 3,097,212 3,097,212 The following additional information is available: 1. During the year Axel Limited acquired a Patent for 50,000. This expenditure has been included within administration expenses. It has a useful life of 5 years and any amortisation should be included within administration expenses. This Patent is an Intangible Asset as defined by IAS 38 Intangible Assets. The company amortises acquired intangible assets for a full year in the year of acquisition. 2. Axel Limited has a revaluation policy for its Property. The Property is revalued to 454,000 at 31, October 2019 X-BUU33530-1 X-BUU33530-1 8. In September 2019, the company had paid 25,000 which related to a deposit on a Trade Stand at an Industry Fair scheduled to take place in March 2019. This 25,000 is currently included within selling and distribution costs. Question 1 contd. Question 1 contd. 3. During the year, the company disposed of plant and equipment which had been acquired in the year ended October 31 2016 at a cost of 50,000. The disposal proceeds of 30,000 had been recorded in sales and in the bank. No other adjustments had been made in respect of this disposal. 9. Auditor's fees of 15,000 should be accrued for at the end of the year. Auditors fees are an administration fee. 4. The company charges depreciation on the following basis: 10. No interest has been paid on the 10% Loan Note during the year. Provision should be made for interest on the loan notes in respect of the full year. Depreciation on buildings Depreciation on plant and equipment 2% per annum straight line 2 20% per annum reducing balance 11. The company's tax liability in respect of the year ended October 31 2018 had been underestimated by 8,400. Tax in respect of the year ended October 31 2019 should be provided for in the amount of 54,000 Depreciation of buildings should be allocated to administration expenses. Depreciation of plant and equipment should be allocated to selling and distribution expenses. Required: : The company charges a full year's depreciation in the year of acquisition and none in the year of disposal. . Prepare the following for Axel Limited in accordance with the requirements of international standards: 5. The Investment property has a Fair Value of 425,000 at 31 October 2019, a) A Statement of Profit or Loss and Other Comprehensive Income for the year ended October 31 2019; 12 marks 6. Closing Inventory: On 1 October 2019 Axel held 200 units of finished goods valued at 365 each. b) A Statement of Financial Position as at October 31 2019. 8 marks Purchases during October were as follows: Date Units purchased Cost per unit 10 October 300 361 20 October 350 350 25 October 250 320 Please show all workings clearly in steps. Sales during October were as follows: Date Units sold 14 October 280 21 October 400 28 October 130 c) Choose any two Accounting Standards and link to the qualitative characteristics of the Conceptual Framework Do not duplicate the qualitative characteristics. Axel uses (First In First Out) FIFO to value closing inventories (200 words max) 5 marks 7. A review of the trade receivables at the year end revealed the need to write off bad debts of 5,725 and also the need to set up an allowance for doubtful debts of 5% of the remaining net figure. Any necessary adjustments should be taken to administration expenses. Total: 25 marks SECTION A Question 1: this question MUST be answered by ALL students Axel Limited, which is a wholesaler of wooden fencing, prepares its financial statements to October 31 each year. At October 31, 2019 the company's Trial Balance was as follows: 1,606,327 898,627 83,620 162,850 123,780 550,000 Revenue Purchases Inventory at Nov 1,2018 Selling and Distribution expenses Administration expenses Property at valuation (included Land at valuation of 250,000) at 1st Nov 2018) Buildings: Accumulated Depreciation at Nov 1,2018 Plant and Equipment: Cost Plant and Equipment: Accumulated Depreciation at Nov 1, 2018 Investment Property - Fair Value Nov 1, 2018 Trade receivables and payables Cash at bank Taxation Ordinary shares of 1 each : at Nov 1,2018 Share premium account at Nov 1,2018 Revaluation surplus at Nov 1, 2018 Retained earnings at Nov 1,2018 10% Loan Notes due October 31,2023 60,000 433,520 346,500 420,000 70,725 96,585 345,690 8,400 410,400 160,400 27,000 247,000 143,000 3,097,212 3,097,212 The following additional information is available: 1. During the year Axel Limited acquired a Patent for 50,000. This expenditure has been included within administration expenses. It has a useful life of 5 years and any amortisation should be included within administration expenses. This Patent is an Intangible Asset as defined by IAS 38 Intangible Assets. The company amortises acquired intangible assets for a full year in the year of acquisition. 2. Axel Limited has a revaluation policy for its Property. The Property is revalued to 454,000 at 31, October 2019 X-BUU33530-1 X-BUU33530-1 8. In September 2019, the company had paid 25,000 which related to a deposit on a Trade Stand at an Industry Fair scheduled to take place in March 2019. This 25,000 is currently included within selling and distribution costs. Question 1 contd. Question 1 contd. 3. During the year, the company disposed of plant and equipment which had been acquired in the year ended October 31 2016 at a cost of 50,000. The disposal proceeds of 30,000 had been recorded in sales and in the bank. No other adjustments had been made in respect of this disposal. 9. Auditor's fees of 15,000 should be accrued for at the end of the year. Auditors fees are an administration fee. 4. The company charges depreciation on the following basis: 10. No interest has been paid on the 10% Loan Note during the year. Provision should be made for interest on the loan notes in respect of the full year. Depreciation on buildings Depreciation on plant and equipment 2% per annum straight line 2 20% per annum reducing balance 11. The company's tax liability in respect of the year ended October 31 2018 had been underestimated by 8,400. Tax in respect of the year ended October 31 2019 should be provided for in the amount of 54,000 Depreciation of buildings should be allocated to administration expenses. Depreciation of plant and equipment should be allocated to selling and distribution expenses. Required: : The company charges a full year's depreciation in the year of acquisition and none in the year of disposal. . Prepare the following for Axel Limited in accordance with the requirements of international standards: 5. The Investment property has a Fair Value of 425,000 at 31 October 2019, a) A Statement of Profit or Loss and Other Comprehensive Income for the year ended October 31 2019; 12 marks 6. Closing Inventory: On 1 October 2019 Axel held 200 units of finished goods valued at 365 each. b) A Statement of Financial Position as at October 31 2019. 8 marks Purchases during October were as follows: Date Units purchased Cost per unit 10 October 300 361 20 October 350 350 25 October 250 320 Please show all workings clearly in steps. Sales during October were as follows: Date Units sold 14 October 280 21 October 400 28 October 130 c) Choose any two Accounting Standards and link to the qualitative characteristics of the Conceptual Framework Do not duplicate the qualitative characteristics. Axel uses (First In First Out) FIFO to value closing inventories (200 words max) 5 marks 7. A review of the trade receivables at the year end revealed the need to write off bad debts of 5,725 and also the need to set up an allowance for doubtful debts of 5% of the remaining net figure. Any necessary adjustments should be taken to administration expenses. Total: 25 marks