THE UNIVERSITY OF THE WEST INDIES

Semester I 181 Semester II D Supplemental/Summ er School D

Examinations of December181 /April/May 0 /July □ 2023/2024

Originating Campus: Cave Hill □ Mona 181 St. Augustine D

Mode: On Campus 181 By Distance D

Weekend University

Course Code and Title: ACCT2014: Financial Accounting I

Date: December 9, 2023 Time: 9:00 am - 11 :00am

Duration : 2 hours Paper No: Final

Materials required:

Answer booklet: Normal 181 Special D Not required D

Calculator: Programmable D Non Programmable 181 (where applicable)

Multiple Choice answer sheets: Numerical 0 Alphabetical 181 1-100

Auxiliary/Other material(s) - Please specify:

Candidates are permitted to bring the following items to their desks: Pencil or pen, Ruler, ID card, Exam card

Instructions to Candidates: This paper consists of SEVEN (7) pages and THREE (3)
SECTIONS-SECTION A, SECTION B and SECTION C.

SECTION A contains Question 1 and its parts and is MANDATORY (30 marks).

SECTION B contains Question 2 and Question 3 - CHOOSE and ANSWER ONE (1) QUESTION from
SECTION B (20 marks).

SECTION C contains Question 4 & Question 5 -CHOOSE and ANSWER ONE (1) QUESTION from
SECTION C (10 marks).

ALL PARTS of EACH APPLICABLE question should be answered .

Candidates are reminded that the examiners shall take into account the proper use of the English
Language in determining the mark for each response.
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Section A
Do Question 1
Question 1

Quale Persona is a retailer in San Tropez, who started operations in the year 2016. The following
is a summary of his bank statement for the year ended December 31, 201 7.

Bank Statement Summary

Dr Cr
$ $
Balance 1/1 /2017 2,718,380
Drawings 2,760,000
Loan 3,000,000
Purchases Cash 2,460,000
Payment to creditors 6,534,100
Payment from debtors 8,236,220
Sales- Cash 4,407,500
Wages & salaries 3,250,000
Motor vehicle purchase 434,000
Rent & rates 754,000
Sundry expenses 260,000
Balance 31/12/2017 1,910,000
18,362,100 18,362,100
Additional infonnation

(1) The amount of cash received from cash sales were all paid into the bank except for
(i) $12,000 for catering expenses
(ii) $4,000 for donations
(2) Based on an evaluation of trends of repayment from debtors, it was recommended that a
provision of doubtful debt be maintained at 8% of total debtors. The provision for bad
debt as at January 1, 2017 was $220,000.
(3) Discount received from trade creditors amounted to $290,000 and those allowed to trade
debtors amounted to $530,000.
(4) Bad debts written off during the year amounted to $270,000. Cash of$7,800 has been
received on December 31, 2017 from a debtor, the amount had been previously written
off. The cash received was not yet accounted for.
(5) Purchase returns to trade creditors amounted to $360,000 and those allowed to debtors
were $720,000
(6) The business keeps a cash float of $90,000.
(7) Motor vehicles were purchased for $434,000 on July 1. 2017. The asset has an expected
life of 8 years. There was no depreciation charge on office furniture and delivery vans in
2016 because they were purchased on December 31, 2016.
(8) The business received a loan from the bank on January 1, 2017 for $3,000,000 at an
interest rate of 10% per annum. The interest is being calculated on a reducing balance
method. The interest is to be paid half-vearlv on December 31 and June 30. The
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principal is being paid equally over a 5 year period on January 1, each year commencing
in 2018.
(9) The lease stipulates a rental payment of $58,000 per month. No rental payment was
outstanding or prepaid at the beginning of the financial year on January 1, 2017. The
proprietor, Quale Persona sublets the premises to his cousin Aubrel Hand on August 1,
2017 for a monthly rental of $5,000.
(10) Capital as at January 1, 2017 was $5,189,800
( 11) The table below reflects the balances as at January 1, 2017 and December 31 , 2017

January 1, 2017 December 31 , 2017

$ $

Trade debtors (Gross) 633 ,520 4,110,000

Trade creditors 1,874,100 2,070,000
Inventory 1,970,000 3,040,000
Office furniture (Cost) 912,000 912,000
Provision for depreciation 182,400
Net book value 912,000 729,600
Delivery van (Cost) 960,000 960,000
Provision for depreciation 240,000
Net book value 960,000 720,000

Required:

(a) Prepare the Trade Debtors Control Account (6 marks)

(b) Prepare the Trade Creditors Control Account (6 marks)
(c) Prepare an Income Statement Account for the year ended December 31 , 2017 (8 marks)
(d) Prepare a Statement of Financial Position as at December 31 , 2017 (10 marks)
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Section B
Do Question 2 OR Question 3
Question 2

Black Shore Limited Balance Sheets as at December 31, 2018 and December 31 , 2019 and the
profit and loss accounts for the years ended December 31 , 2018 and December 31 , 2019 are as
follows
2019 2018
$000' $000 '
Non- Current Assets
Plant and Machinery 67,500 29,250
Less Provision for Depreciation 13,500 9,750
Net Book Value* 54,000 19,500
Motor Vehicle 71 ,250 45,000
Less Provision for Depreciation 15,000 7,875
Net Book Value* 56,250 37,125
Long Tenn Receivables* 9,000 7,500
Total non- current assets 119,250 64,125

Current Assets
Inventory 60,000 26,250
Trade Debtors 66,000 35,250
Foreign Receivables 48,750 54,750
Current portion of long tenn receivables 73 ,500 71 ,250
Cash and bank 71,250 74,918
Total current assets 319,500 262,418
Less Current Liabilities
Trade Creditors 54,450 52,763
Dividends Payable 54,750 54,000
Accruals 21,000 15,000
Corporation tax payable 24,750 21 ,375
Current portion of long term loan 14,250 12,938
Total current liabilities 169,200 156,076
Net Current Assets 1502300 1062342
Total non-current assets and net current assets 269,550 170,467

Financed by
Share Capital 45,000 7,500
Capital reserves 13,500
General Reserves 33,750 16,500
Profit and loss account 40,425 5,925
119,175 43 ,425
Non - current liabilities
Long term loan 109,925 33 ,742
Debenture 40,450 93,300
269,550 170,467
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Black Shore Limited Income Statement for the years ended December 31, 2018 and 2019

2019 2018
$000' $000'
Profit before taxation 123,750 82,500
Taxation 40,500 26,250
Profit after taxation 83,250 56,250
Dividends 31,500 28,500
51,750 27,750
General Reserves 17,250 21,000
Retained profits for the year 34,500 6,750
Retained profits (losses) for the year brought forward 5,925 ( 825}
Retained profits carried forward 40,425 5,925

Additional infonnation:
1. During the year ended December 31 , 2019 plant and machinery originally costing $6,750,000
with accumulated depreciation of $3,000,000 was disposed of for $4,125,000.
2. During the year ended December 31, 2019 plant and machinery and motor vehicles were
purchased amounting to $45,000,000 and $39,750,000 respectively.
3. During the year ended December 31 , 2019 motor vehicles originally costing $13,500,000 with
accumulated depreciation of $4,500,000 was disposed of for $6,750,000.
4. The depreciation charge for the year ended December 31 , 2019 was $6,750,000 for plant and
machinery and $11,625,000 for motor vehicles.
5. Bonus issue of ordinary shares out of capital reserves amounted to $13,500,000.

Required:

(a) Prepare the Cash Flow Statement for the year ended December 31, 2019. (20 marks)
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Question 3

Kent Limited list of balances on June 30, 2020.

$"000"

Ordinary Share Capital ($1.00 par value) 250,000

30% Cumulative Preference Share Capital 20,000
General reserves 20,000
Retained profits July 1, 2019 35,000
30% Long Term Loan 100,000
Cost of sales 750,700
Sales 1,350,000
Other operating income 9,000
Distribution costs 120,100
Administrative costs 290,200
Other operating costs 51 ,600
Property, plant and equipment 110,000
Long term receivables 50,000
Cash and bank 106,500
Closing stock 28,400
Trade debtors 257,500
Trade creditors 6,000
Preference dividends paid 3,000
Ordinary dividends paid 22,000

Additional information:

(1) Transfer $5 ,000,000 to General reserves.

(2) 250,000,000 ordinary shares were in issue on June 30, 2020.
(3) Bonus issue out of General reserves on July 1, 2019 amounted to $5 ,000,000.
(4) Equipment with a net book value of $10,000,000 was sold for $12,000,000 on June 30, 2020.
The buyer made a direct transfer in full to Kent Limited's bank account. This transaction is
not yet reflected in the accounts.
(5) Corporation tax is estimated at $13,800,000 for the financial year ended June 30, 2020. This
information is not yet reflected in the accounts.
(6) Audit fees for the financial year ended June 30, 2020 amounted to $10,000,000. This amount
is unpaid and is not yet reflected in the accounts. Audit fees should be classified under
administrative costs.
(7) On June 30 each year $50,000,000 is paid on the 30% long term loan. No loan payment was
outstanding on June 30, 2020. No interest payment was outstanding on July 1, 2019.
(8) Distribution costs prepaid on June 30, 2020 amounted to $100,000. The prepayment
is not yet reflected in the accounts.
(9) The current portion of the long term receivable amounted to $20,000,000 on June 30, 2020.
(10) Insect spraying costs unpaid on June 30, 2020 amounted to $4,000.This transaction is not
yet reflected in the accounts. Spraying costs should be classified under other operating costs.
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Required:

(a) Prepare the Statement of Comprehensive Income for the year ended June
30, 2020. (6 marks)
(b) Prepare the Statement of Changes in Equity for the year ended June 30,
2020
(5 marks)
(c) Prepare the Statement of Financial Position as at June 30, 2020. The
format should reflect total assets (9 marks)

Section C
Do Question 4 OR Question 5

Question 4

(a) What is an accounting policy? (2 marks)

(b) When is an entity pennitted to change an accounting policy? (3 marks)
(c) What is the objective ofIAS 2? (2 marks)
(d) What are the different types of inventory? and address the nature of each type
of inventory (3 marks)

Question 5

(a) What is the objective ofIAS 16? (2 marks)

(b) What are the principal issues to be addressed in IAS 16? (3 marks)
(c) Mara Fountain incurs the following costs in relation to the construction of a
new factory and the introduction of its products to the local market. Using the
principles of IAS 16, how much of the cost should be capitalized?

Site preparation costs $1,200,000

Materials used $3,000,000
*Labour costs $3,190,000
Testing of various processes in factory $1,500,000
Consultancy fees re installation of equipment $2,200,000
Relocation of staff to new factory $1,000,000
Cost to dismantle the factory at the end of its
useful life $1,000,000
General overheads $1,000,000

The labour costs include $90,000 which was incurred during a labour dispute. No
construction occurred during the period of the dispute (5 marks)

END OF QUESTION PAPER