Question 1

The following information has been extracted from the records of N Patel:

Bank account

$ Chq no $

1 Dec Balance b/f 16,491 1 Dec Alexander 782 857

2 Dec Able 962 6 Dec Burgess 783 221

Baker 1,103 14 Dec Barry 784 511

10 Dec Charlie 2,312 17 Dec Cook 785 97

14 Dec Delta 419 24 Dec Hay 786 343

21 Dec Echo 327 29 Dec Rent 787 260

23 Dec Cash sales 529

30 Dec Fred 119 31 Dec Balance c/f 19,973

––––– –––––

22,262 22,262

––––– –––––

High Street Bank Bank Statement – N. Patel

Date Details Withdrawals Deposits Balance

$ $ $

1 December Balance b/f 17,478

2 December 780 426

2 December 781 737 16,315

2 December Deposit 176 16,491

5 December 782 857

5 December Bank charges 47 15,587

6 December Deposit 2,065 17,652

10 December Standing order (rates) 137 17,515

11 December 783 212 17,303

13 December Deposit 2,312 19,615

17 December 784 511 19,104

17 December Deposit 419 19,523

23 December Deposit 327 19,850

24 December Deposit 528 20,378

28 December 786 343 20,035

30 December 310923 297 19,738

31 December Balance c/f 19,738

REQUIRED

(a) Prepare a bank reconciliation statement at 1 December.

(b) Update the cash book for December.

(c) Prepare a bank reconciliation statement at 31 December.

Question 2 CARBON

Carbon is a limited liability entity. A trial balance for the year ended 31 December 2015 is presented
below.

Dr Cr

$ $

Revenue 450,000

Purchases 180,000

Administrative expenses 140,000

Distribution expenses 56,000

Plant and machinery – cost 150,000

Plant and machinery – accum depre at 1 Jan 2015 30,000

Trade receivables 36,000

Allowance for receivables – 1 January 2015 2,500

Inventory – 1 January 2015 33,000

Equity share capital 10,000

Trade payables 32,000

Retained earnings – 1 January 2015 25,500

8% Loan – repayable 31 December 2019 50,000

Cash 5,000

––––––– –––––––

600,000 600,000

––––––– –––––––
The following notes are relevant to the preparation of the financial statements for the year ended 31
December 2015:

I. The current year tax charge has been estimated at $5,000.

II. It has been determined that trade receivables of $1,500 are irrecoverable. In addition, it was
decided that the allowance for receivables should be increased by $1,000.
III. Depreciation on plant and machinery is charged at 20% per annum on a reducing balance
basis. Depreciation is charged to cost of sales.
IV. The loan was taken out on 1 October 2015. No interest has been accrued.
V. Closing inventory has been correctly valued at $27,000.
VI. A customer bought goods on credit from Carbon for $1,000 on 5 December 2015. The
customer returned these goods on 28 December 2015. No entries have been posted for this
return.
VII. Carbon is being sued by a customer regarding the sale of goods that the customer believes
to be defective. Legal advisers think that it is probable that Carbon will lose the case and that
they will have to pay damages of $20,000 in 2016. Legal expenses are charged to
administrative expenses.

Required:

Prepare a statement of profit or loss of Carbon the year ended 31 December 20X5 and a statement
of financial position as at 31 December 2015. (Total: 15 marks)

Question 3 MARKUS

Markus has prepared a trial balance for his business at 30 April 2013 which is presented below.

Dr Cr

$ $

Capital account – 1 May 2012 30,000

Finance costs 300

Bank 7,400

Administrative expenses 65,800

Distribution expenses 31,200

Plant and machinery – cost 72,000

Plant and machinery – accumulated depreciation at 1 May 2012 25,000

Trade receivables 20,000

Allowance for receivables – 1 May 2012 3,150

Revenue 230,000

Inventory – 1 May 2012 18,750

Drawings 18,000
Trade payables 17,500

Purchases 90,000

6% Loan – repayable 31 July 2015 3,000

––––––– –––––––

316,050 316,050

––––––– –––––––

The following notes are relevant to the preparation of the financial statements for the year ended 30
April 2013:

I. Markus took goods which cost $5,000 for personal use during the year, but this has not been
recorded.
II. It has been determined that trade receivables of $600 are irrecoverable. In addition, it was
decided that the allowance for receivables should be reduced by $500.
III. Depreciation on plant and machinery is charged at 15% per annum on a reducing balance
basis. Depreciation is charged to cost of sales.
IV. The loan was taken out on 1 August 2012 and interest has not yet been paid or accrued.
V. Closing inventory had been valued at $17,500. It was subsequently discovered that some
items of inventory which had cost $5,000 had a net realisable value of $3,750.
VI. At 30 April 20X3, a prepayment for insurance paid in advance of $400 had not yet been
accounted for. Insurance is classified as an administrative expense.
VII. At 30 April 20X3, an accrual for freight and delivery expenses amounting to $350 had not yet
been accounted for. Freight and delivery expenses are classified as distribution expenses.

Required:

Prepare a statement of profit or loss of Markus the year ended 30 April 2013 and a statement of
financial position as at 30 April 20X3. (Total: 15 marks

Question 4 FIREWORK CO

The following financial statements and supporting information relate to Firework Co, a limited
liability entity:

Statement of profit or loss and other comprehensive income for the year ended 30 June 2015

$000

Revenue 113,250

Cost of sales (77,500)

–––––––

Gross profit 35,750

Distribution costs (3,000)

Administration expenses (1,000)

Interest payable (750)

–––––––

Profit before tax 31,000

Income tax expense (6,000)

–––––––

Profit for the year 25,000

Other comprehensive income:

Revaluation of property, plant and equipment 2,000

–––––––

Total comprehensive income for the year 27,000

–––––––

Statement of financial position at 30 June:

2015 2014

$000 $000

ASSETS

Non‐current assets

Property, plant and equipment 110,000 93,000

Current assets

Inventories 36,000 30,000

Trade receivables 40,000 35,000

Cash and equivalents Nil 10,000

––––––– –––––––

Total assets 186,000 168,000

––––––– –––––––

EQUITY AND LIABILITIES

Equity share capital 20,000 15,000

Share premium 8,000 3,000

Revaluation surplus 10,000 8,000

Retained earnings 96,000 85,000

Total equity 134,000 111,000

Non‐current liabilities
Bank loan 7,000 17,000

Current liabilities

Trade payables 36,500 30,000

Income tax 6,500 10,000

Bank overdraft 2,000 Nil

––––––– –––––––

Total equity and liabilities 186,000 168,000

––––––– –––––––

Notes:

The following information is relevant to the financial statements of Firework:

(i) During the year ended 30 June 2015, Firework Co disposed of several items of plant and
equipment for sale proceeds of $8,000,000. The loss on disposal of $2,000,000 is
included within cost of sales. The depreciation charge for the year was $15,000,000.
(ii) Firework Co estimated that the income tax liability arising on the profit for the year
ended 30 June 2015 was $6,500,000.

Required:

Based upon the information available, complete the statement of cash flows for Firework Co for
the year ended 30 June 2015 in accordance with the requirements of IAS 7 Statement of cash
flows. (Total: 15 marks)

Question 5 OUTFLOW CO

The following financial statements and supporting information relate to Outflow Co, a limited
liability entity:

Statement of profit or loss and other comprehensive income for the year ended 30 April 2012

$000

Revenue 34,760

Less: Cost of sales (33,560)

––––––

Gross profit 1,200

Less: Distribution and administration expenses (4,500)

Less: interest payable (1,000)

––––––

Loss before tax (4,300)

Income tax 500

––––––

Loss for the year (3,800)

Other comprehensive income:

Revaluation surplus on property, plant and equipment 2,000

––––––

Total comprehensive income for the year (1,800)

––––––

Statement of financial position at 30 April 2012:

2012 2011

$000 $000

ASSETS

Non‐current assets

Property, plant and equipment – carrying amount 110,000 100,000

Current assets

Inventories 30,000 33,000

Trade receivables 48,750 52,000

Income tax recoverable 500 Nil

––––––– –––––––

Total assets 189,250 185,000

EQUITY AND LIABILITIES

Equity shares, $1 44,000 40,000

Share premium 5,000 4,000

Revaluation surplus 22,000 20,000

Retained earnings 72,450 77,250

––––––– –––––––

Total equity 143,450 141,250

Non‐current liabilities

Long‐term bank loan 15,500 8,000

Current liabilities

Bank overdraft 4,000 3,250

 Trade payables 26,300 27,500

Income tax Nil 5,000

––––––– –––––––

Total equity and liabilities 189,250 185,000

––––––– –––––––

The following information is relevant to the financial statements of Outflow Co for the year ended 30
April 2012:

(a) Outflow Co scrapped numerous items of plant and equipment during the year for nil proceeds.
The items scrapped were originally purchased for $7,000,000 and they had a carrying amount of
$1,000,000 at the date of disposal. The gain or loss on scrapping is included within cost of sales.

(b) Outflow Co made a depreciation charge for the year of $11,000,000 and several buildings had
been revalued during the year.

(c) Outflow Co estimated that it would receive a tax refund of $500,000 as a result of making a loss
before tax for the year ended 30 April 2012.

Required:

Using the information available, complete the statement of cash flows using the indirect method for
Outflow Co for the year ended 30 April 2012 in accordance with the requirements of IAS 7 Statement
of cash flows. (Total: 15 marks
QUESTION 6

Neville is an entity that manufactures and retails office products. Its summarised financial
statements for the years ended 30 June 2014 and 2015 are given below:

Statements of profit or loss for the year ended 30 June

2014 2015

$000 $000

Revenue 1,159,850 1,391,820

Cost of sales (753,450) (1,050,825)

–––––––– ––––––––

Gross profit 406,400 340,995

Operating expenses (170,950) (161,450)

–––––––– ––––––––

Profit from operations 235,450 179,545

Finance costs (14,000) (10,000)

–––––––– ––––––––

Profits before tax 221,450 169,545

Tax (66,300) (50,800)

–––––––– ––––––––

Net profit 155,150 118,745

Statements of financial position as at 30 June

2014 2015

$000 $000 $000 $000

Non-current assets 341,400 509,590

Current Assets Inventory 88,760 109,400

Receivables 206,550 419,455

Bank 95,400 –

––––––– –––––––

390,710 528,855

––––––– ––––––––

732,110 1,038,445
 ––––––– ––––––––

2014 2015

$000 $000

Equity and reserves

Share capital 100,000 100,000

Share premium 20,000 20,000

Revaluation reserve – 50,000

Retained earnings 287,420 376,165

––––––– –––––––

407,420 546,165

Non-current liabilities

Loans 83,100 61,600

Current liabilities

Payables 179,590 345,480

Overdraft – 30,200

Tax 62,000 55,000

––––––– –––––––

241,590 430,680

––––––– ––––––––

732,110 1,038,445

––––––– ––––––––

The directors concluded that the revenue for the year ended 30 June 2014 fell below budget and
introduced measures during the year ended 30 June 2015 to improve the situation.

These included:

• cutting selling prices

• extending credit facilities to customers

• leasing additional machinery in order to be able to manufacture more products. The directors’ are
now reviewing the results for the year ended 30 June 2015.

Calculate the ratios for and comment upon the profitability, liquidity/efficiency and financial
position of Neville for 2014 and 2015.
QUESTION 7

Colby Co's statement of profit or loss for the year ended 31 December 2012 and statements of
financial position at 31 December 2011 and 31 December 2012 were as follows.

COLBY CO

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2012

$'000 $'000

Revenue 720

Raw materials consumed 70

Staff costs 94

Depreciation 118

Loss on disposal of non-current asset 18

(300)

420

Interest payable (28)

Profit before tax 392

Taxation (124)

Profit for the year 268

COLBY CO

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER

2012 2011

$'000 $'000 $'000 $'000

Assets
Property, plant and equipment Cost 1,596 1,560
Depreciation 318 224
1,278 1, 336
Current assets
Inventory 24 20
Trade receivables 76 58
Bank 48 56
148 134
Total assets 1,426 1,470
Equity and liabilities
Capital and reserves
Share capital 360 340
Share premium 36 24
Retained earnings 716 514
1,112 878
Non-current liabilities
Non-current loans 200 500
Current liabilities
Trade payables 12 6
Taxation 102 86
114 92
1,426 1,470
During the year, the company paid $90,000 for a new piece of machinery.
Dividends paid during 2012 totalled $66,000 and interest paid was $28,000.
Required
Prepare a statement of cash flows for Colby Co for the year ended 31 December 2012 in accordance
with the requirements of IAS 7, using the indirect method.
QUESTION 8

SHABNUM CO

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2012

$'000

Revenue 2,553

Cost of sales (1,814)

Gross profit 739

Distribution costs (125)

Administrative expenses (264)

350

Interest received 25

Interest paid (75)

Profit before taxation 300

Taxation (140)

Profit for the year 160

SHABNUM CO
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER
2012 2011
$'000 $'000
Assets
Non-current assets
Property, plant and equipment 380 305
Intangible assets 250 200
Investments – 25
Current assets
Inventories 150 102
Receivables 390 315
Short-term investments 50 –
Cash in hand 2 1
Total assets 1,222 948
.
 $'000 $'000
Equity and liabilities
Equity
Share capital ($1 ordinary shares) 200 150
Share premium account 160 150
Revaluation surplus 100 91
Retained earnings 260 180
Non-current liabilities
Loan 170 50
Current liabilities
Trade payables 127 119
Bank overdraft 85 98
Taxation 120 110
Total equity and liabilities 1,222 948
The following information is available.
(a) The proceeds of the sale of non-current asset investments amounted to $30,000.
(b) Fixtures and fittings, with an original cost of $85,000 and a carrying amount of $45,000, were sold
for $32,000 during the year.
(c) The following information relates to property, plant and equipment. 31.12.2012 31.12.2011
$'000 $'000
Cost 720 595
Accumulated depreciation 340 290
Carrying amount 380 305
(d) 50,000 $1 ordinary shares were issued during the year at a premium of 20c per share.
(e) Dividends totalling $80,000 were paid during the year.
Required
(a) Prepare the net cash flows from operating activities for the year to 31 December 2012 using the
format laid out in IAS 7. (6 marks)
(b) Prepare the net cash flows from investing activities for the year to 31 December 2012 using the
format laid out in IAS 7. (4 marks)
(c) Which one of the following options gives the net cash flows from financing activities for the year?
A $180k inflow
B $189k outflow
C $350k outflow
D $360k inflow (2marks)
(d) Prepare the note to the statement of cash flows for the year to 31 December 20X2 using the
format laid out in IAS 7. (3 marks)
Total marks for the question (15 marks)

QUESTION 9
ABC LTD had the following :
Statement of Financial Position as at 31 December 2009
2009 2008
$ $
Assets
Non-current assets
PPE @ cost 135000 90000
Accum Dep -30000 -20000
105000 70000
Current Assets
Inventories 20000 25000
Trade receivables 30000 20000
Bank 35000 15000
85000 60000
Total Assets 190000 130000
Equity and Liability
Ordinary shares capital @1.00 60000 50000
Preference share capital @$1 30000 25000
Retained earnings 57500 20000
147500 95000
Current Liabilities
Trade payables 10000 15000
Dividend payables 7500 5000
Tax payables 25000 15000
42500 35000
Total equity and liabilities 190000 130000
Statement of Profit or loss for the year ended 31 December 2009
$
Revenue 200000
Cost of sales -65000
Gross profit 135000
Other expenses -55000
Profit before tax 80000
Income tax for the period -25000
Profit for the period 55000
Total comprehensive income ____
Total 55000
Additional information
1. Other expenses include depreciation and loss on sale of property, plant and equipment
amounting to $25000 and $5000 respectively
2. During the year an item of PPE was sold for $5000 and this had cost $25000 and had been
depreciated by $15000
3. There was a bonus issue of ordinary shares to the ordinary shareholders during the year on a
one-for-five basis.
4. Dividend declared amounted to $7500
Required
Prepare a statement of Cashflows for the year ended 31 December 2009 in compliance with IAS7
using
a) Indirect method
b) The direct method

QUESTION 10
On 1 July 2016 an entity, Pinto, had 10 items of inventory at a unit cost of
$8.50. Pinto then made the following purchases and sales during a six
month period to 31 December 2016:
Purchases:
Date Quantity Unit Cost Total Cost
$ $
14 Oct 2016 15 9.00 135.00
22 Nov 2016 25 9.20 230.00
13 Dec 2016 20 9.50 190.00
 60 555.00
Sales:
Date Quantity Unit selling price Total Cost
$ $
23 Aug 2016 7 12.00
84.00
20 Oct 2016 10 12.25 122.50
30 Nov 2016 15 12.50 187.50
24 Dec 2016 18 13.00 234.00
Required:
Based upon the available information, calculate the closing inventory
valuation at 31 December 2016 using:
(a) periodic weighted average cost
(b) continuous weighted average cost

QUESTION 11

TRANSACTIONS DURING MAY 2017

Qty Unit Total Market value

Units cost cost per unit on date of transactions
$ $ $

Opening bal 1 May 100 2.00 200

Receipts 3 May 400 2.10 840 2.11
Issues 4 May 200 2.11
Receipts 9 May 300 2.12 636 2.15
Issues 11 May 400 2.20
Receipts 18 May 100 2.40 240 2.35
Issues 20 May 100 2.35
Closing bal 31 May 200 2.38
1,916

Receipts mean goods are received into store and issues represent the issue of goods from store.

(a) The issues of materials

(b) The closing inventory

How would issues and closing inventory be valued using FIFO and AVCO?
QUESTION 12

The trial balance of Crown Co as at 31 December 2015 was as follows:

Dr Cr
$ $
Ordinary share capital 100,000
Sales and purchases 266,800 365,200
Inventory at 1 January 2015 23,340
Returns 1,200 1,600
Wages 46,160
Rent 13,000
Motor expenses 3,720
Insurance 760
Irrecoverable debts 984
Allowance for receivables 1 January 2015 588
Sundry income 1,622
Light and heat 3,074
Bank overdraft interest 74
Motor vehicles at cost 24,000
– accumulated depreciation 1 Jan 2015 12,240
Fixtures and fittings at cost 28,000
– accumulated depreciation 1 Jan 2015 16,800
Land 100,000
Receivables and payables 17,330 23,004
Bank 3,312
Income tax under provision 100
Buildings at cost 100,000
– aggregate depreciation: 1 Jan 2015 6,000
Retained earnings at 1 Jan 2015 104,800
–––––––– ––––––––
631,854 631,854
–––––––– ––––––––
You are given the following additional information:

1 Inventory at 31 December 2015 was $25,680.

2 Rent was prepaid by $1,000 and light and heat owed was $460 at 31 December 2015.

3 Land is to be revalued to $250,000 at 31 December 2015.

4 Following a final review of the receivables at 31 December 2015, Crown Co decided to write off
another debt of $130. The entity also adjusted the allowance for receivables to $516 at 31 December
2015.
5 Crown Co estimated that the income tax charge on profit for the year was $7,300.
6 Depreciation is to be provided as follows:
(a) building – 2% annually, straight-line
(b) fixtures & fittings – straight line method, assuming a useful economic life of five years
with no residual value
 (c) motor vehicles – 30% annually on a reducing balance basis. A full year’s depreciation is
charged in the year of acquisition and none in the year of disposal.

Prepare a statement of profit or loss and other comprehensive income for the year ended 31
December 2015 and a statement of financial position as at that date for Crown Co.

QUESTION 13

The trial balance of Penguin Co, a limited liability entity, as at 31 December 2020 was as follows:
Dr Cr
$ $
Sales and purchases 20,000 50,000
Inventory 8,000
Distribution costs 8,000
Administration expenses 15,550
Receivables and payables 10,000 20,000
Fundamental reorganisation costs 2,400
Cash at bank 7,250
Ordinary shares 50c 8,000
10% irredeemable preference shares $1 9,000
10% loan notes 8,000
Non-current assets at carrying amount 35,000
Share premium 3,000
Accumulated profits at 1 January 2020 3,000
Loan note Interest paid 800
Preference dividend paid 900
Interim ordinary dividend paid 1,600
Tax 500
Suspense 8,000
––––––– –––––––

109,500 109,500

––––––– –––––––
The following is to be taken into account.

1 A building whose carrying amount is currently $5,000 is to be revalued to $11,000.

2 A final ordinary dividend of 10c per share is to be proposed.

3 The balance on the income tax account represents an overprovision of tax for the previous year.
Tax for the current year is estimated at $3,000.

4 Closing inventory is $12,000.

5 The balance on the suspense account represents the proceeds from the issue of 4,000 ordinary
shares.

Prepare the following financial statements of Penguin Co for the year ended 31 December 2020:
1 statement of profit or loss and other comprehensive income
2 statement of financial position
3 statement of changes in equity