Final AssessmentKAPLAN PUBLISHING Page 1 of 11

ACCA FINAL ASSESSMENT

FinancialReporting

JUNE 2009QUESTION PAPER

Time allowed Reading time:

15 minutes

Writing time:

3 hours All FIVE questions are compulsory and MUST be attemptedDo not open this paper until instructed by the supervisor This question paper must not be removed from the examinationhall

Kaplan Publishing/Kaplan Financial

ACCA F7 (INT) Financial Reporting© Kaplan Financial Limited, 2008All rights reserved. No part of this examination may be reproduced or transmitted in any formor by any means, electronic or mechanical, including photocopying, recording, or by anyinformation storage and retrieval system, without prior permission from Kaplan Publishing.Page 2 of 11 KAPLAN PUBLISHING

Final Assessment

All FIVE questions are compulsory and MUST be attempted

QUESTION 1

During the year Air, a public listed company acquired share capital in Blade Ltd and RipsawLtd. The financial statements at 31 March 2008 are as follows:

Air Blade Ripsaw

$000 $000 $000

Non-current assets

PPE 51,25043,500 47,120Investments 18,7503,750 –70,00047,250 47,120

Current assets

Inventory 12,3806,000 9,880Receivables 17,00010,750 18,000Bank 1,5004,750 –30,88021,500 27,880100,88068,750 75,000

Equity

Ordinary $1 shares 25,00037,500 25,000Share premium 10,0002,500 –Retained earnings 13,25010,630 10,00048,25050,630 35,000

NCL

8% Loan note 20,0005,250 15,000

Current liabilities

Trade payables 20,6308,620 17,000Bank overdraft –– 5,620Tax payable 12,0004,250 2,38032,63012,870 25,000100,88068,750 75,000

The following information is relevant:

(i) Air purchased 30,000,000 shares in Blade on 1 April 2007. The purchase was agreedby way of a share exchange of two shares in Air for every three shares in Blade pluspayment of cash at $1 per share purchased, payable in three years from the date of acquisition. The terms of the agreement were such that this cash would only be paidif Blade makes profits of $3 million during that payment period. The directors are notconfident that the profit will be made during that time. The cost of capital of Air is 10%and its share price at the acquisition date was $2. The acquisition of Blade has notyet been recorded in the financial statements of Air.(ii) On 1 October 2007 Air purchased 7,500,000 shares in Ripsaw paying cash of $2.50per share on that date. The acquisition of Ripsaw has already been accounted for byAir.KAPLAN PUBLISHING Page 3 of 11