MGT6153 FINANCIAL ACCOUNTING & FINANCIAL STATEMENTS ANALYSIS 2021-22
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MGT6153
Autumn Semester 2021-2022
MOCK EXAM PAPER
FINANCIAL ACCOUNTING & FINANCIAL STATEMENTS ANALYSIS
SECTION A (Compulsory Question)
Question A
The following trial balance was taken from the books of Aberdeen Ltd, as at 31
December 2021:
|
Dr £ |
Cr £ |
Revenue |
|
2,347,000 |
Inventory at 1 January 2021 |
542,000 |
|
Purchases |
1,932,000 |
|
Land at cost |
750,000 |
|
Buildings at cost |
3,500,000 |
|
Vehicles at cost |
42,000 |
|
Accumulated depreciation as at 1 January 2021: |
|
|
Buildings |
|
420,000 |
Vehicles |
|
10,000 |
Trade receivables |
230,000 |
|
Trade payables |
|
235,000 |
Bank |
22,000 |
|
Ordinary shares (at par value £0.50) |
|
550,000 |
6% long term loan |
|
250,000 |
Share premium |
|
800,000 |
Retained profits as at 1 January 2021 |
|
2,710,000 |
Distribution costs |
87,000 |
|
Administrative expenses |
120,000 |
|
Discounts allowed |
32,000 |
|
Directors' salary |
65,000 |
|
|
7,322,000 |
7,322,000 |
The following additional information relates to financial year ended 31 December 2021 and should be taken into consideration in preparing the financial statements of the company:
(i) The cost of inventory at 31 December 2021 is £500,000. It was found that part of the inventory that has a cost of £23,000 was estimated to have a net realisable value of £20,000 at 31 December 2021.
(ii) Buildings are depreciated using straight line method over 50 years with no residual value. Vehicles are depreciated at rate of 25% based on reducing balance. Buildings are used for distribution and administration functions equally and vehicles are used for transportations between warehouses.
(iii) Land was revalued at the end of the financial year with a new value of £1,000,000. The directors decided to apply the revaluation model for land.
(iv) Loan interest has not yet been paid.
(v) In December 2021 the company made a 2 for 11 rights issue at £1.20 per share . All of them have been excised by the end of the accounting period but the transaction has not been recorded in the above trial balance.
(vi) On the date of the financial statements it was decided that receivables amounting to £10,000 are irrecoverable due to a customer going bankrupt and should be
written off as bad debts. It was also decided that a provision for doubtful debts of 5% of the remaining receivables needs to be created and treated as administrative expenses.
(vii) Assume no taxation.
Required:
For Aberdeen Ltd, prepare the following financial statements for the year ended 31 December 2021 in accordance with IAS 1:
a) Statement of comprehensive income;
b) Statement of financial position;
c) Statement of changes in equity.
(Total 40 Marks)
END OF SECTION A
SECTION B
(ANSWER ONLY TWO FROM FOUR QUESTIONS)
Question B1
The following information is relating to Bristol plc:
Extract of Bristol plc statement of financial position at 31 December
|
2021 |
2020 |
|
£000 |
£000 |
Non-current assets |
|
|
Land at cost |
7,000 |
3,600 |
Plant and machinery at cost |
12,200 |
11,600 |
Accumulated depreciation |
(7,800) |
(7,700) |
|
11,400 |
7,500 |
Current assets |
|
|
Inventory |
6,870 |
6,300 |
Trade and other receivables |
4,400 |
3,800 |
Bank |
320 |
1,000 |
|
11,590 |
11,100 |
Total assets |
22,990 |
18,600 |
Current liabilities |
|
|
Bank overdraft |
3,500 |
3,000 |
Trade and other payables |
2,900 |
3,100 |
Taxation |
1,640 |
2,300 |
|
8,040 |
8,400 |
Non-current liabilities |
|
|
8% Debentures |
4,000 |
-- |
|
|
|
Equity |
|
|
Ordinary share capital £1 |
2,300 |
2,000 |
Share premium |
1,200 |
1,200 |
Retained earnings |
7,450 |
7,000 |
|
10,950 |
10,200 |
Total equity and liabilities |
22,990 |
18,600 |
Extract of Bristol plc statement of comprehensive income for the year ending
31 December 2021
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Finance cost (interest)
Profit before tax
Taxation
Profit for the period
Additional information:
£000
9,700
(1,200)
8,500
(5,750)
2,750
(600)
2,150
(1,340)
810
i. Finance costs include overdraft interest of £280,000, which has been fully paid by the end of the year; and debenture interest of £320,000 , with half of which accrued.
ii. During the year, plant and equipment that had a cost of £2,400,000 and accumulated depreciation of £1,180,000 was sold for £1,130,000.
iii. During the year, Bristol purchased land for £3,400,000 and plant and machinery for £3,000,000, funded by issuing of debentures and ordinary shares (at £1).
iv. Dividends of £360,000 were paid during the year.
Required:
a) Using the Indirect method, prepare the statement of cash flows of Bristol plc as at 31 December 2021 in consistent with the requirements of International Accounting Standards (IAS 7).
(22 Marks)
b) Explain the difference between the direct and indirect methods used for preparing the operating activities section of the statement of cash flows and discuss the relative benefits and limitations of each method.
(8 Marks)
(Total 30 Marks)
2022-01-19