Professional Documents
Culture Documents
Section A
1 B 8 months at 90,000 per year, 4 months at 120,000 per year; accrual 1 month
7 B
10 D
11 D
13 C
14 A
15 A
16 C
18 B Share capital 50 + 25 + 30
Share premium 180 – 25 + 18
19 A
21 C 180 – 152 – 21 = 7
22 A 20% x 260 = 52
24 D
25 A 22/500 = 4·4%
21
Section B
1 (a) Alamute and Brador
Income statement for the year ended 31 March 2003
$ $
Sales Revenue 448,700
Cost of sales: Opening inventory 15,600
Purchases 184,600
————
200,200
Less: Closing inventory 21,400
———— (178,800)
————
Gross profit 269,900
Less: Expenses: Salaries 88,000
Rent (30,000 + 11,000) 41,000
Insurance (4,000 – 1,500) 2,500
Sundry expenses 39,400
Depreciation (35,500 × 20%) 7,100
Bad and doubtful debts
(2,400 – 500) 1,900
———— (179,900)
————
Net profit 90,000
————
Division of profit Alamute Brador Total
$ $ $
Net profit 90,000
Interest on capital 2,500 2,500 (5,000)
————
85,000
Balance of profit 60:40 51,000 34,000 (85,000)
———— ———— ————
53,500 36,500 –
———— ———— ————
22
2 Paniel
Cash flow statement for the year ended 31 March 2003
$ $
Net cash inflow from operating activities 746,000
Interest paid (72,000)
———— 674,000
Cash flows from investing activities
Purchase of non-current assets (W1) (1,400,000)
Proceeds from sale of non-current assets 280,000
—————
Net cash used in investing activities (1,120,000)
Cash flows from financing activities
Proceeds from issuance of share capital 200,000
Proceeds from long-term borrowings 400,000
Dividends paid (260,000 – 110,000) (150,000)
—————
Net cash from financing activities 450,000
————
Increase in cash 4,000
Cash at 31 March 2002 14,000
————
Cash at 31 March 2003 18,000
————
Workings
1 Fixed assets – cost
$ $
Opening balance 2,140,000 Transfer – disposal 480,000
Purchases 1,400,000 Closing balance 3,060,000
————— —————
3,540,000 3,540,000
————— —————
3 (a) $
Opening capital 128,000
Capital introduced 50,000
————
178,000
Less: Drawings 48,000
————
130,000
Closing capital 184,000
————
Profit is therefore 54,000
————
23
(c) $ $
Cost of sales:
Opening inventory 243,000
Purchases 595,400
Less: Returns 41,200 554,200
———— ————
797,200
Less: Closing inventory 261,700
————
535,500
————
Sales figure is therefore $535,500 × 3/2 = $803,250
(b) Comments
(i) The current ratio and quick ratio are both down by over 20%.
The drop in the quick ratio to below 1:1 could indicate liquidity problems.
(ii) The increase in sales, and hence in receivables, purchases and payables, is placing strain on the working capital,
evidenced by the increase in the receivables and payables payment periods.
(iii) The business is one requiring large holdings of inventory, but inventory control appears to have deteriorated slightly
between the two years
(iv) Cash sales have decreased considerably in 2003. Making more sales for cash could contribute to an improvement in
the current and quick ratios because this would reduce the overdraft.
Other comments considered on their merits.
5 (a) (i) Reserves are balances in a company’s balance sheet forming part of the equity interest and representing surpluses or
gains, whether realised or not.
(b) A bonus issue is the conversion of reserves into share capital, with shares being issued to existing members in proportion to
their shareholdings, without any consideration being given by the shareholders.
A rights issue is again an issue of shares to existing members in proportion to their shareholdings, but with payment being
made by the shareholders for the shares allotted to them.
The fundamental difference between them is that the rights issue raises funds for the company whereas the bonus issue does
not.
24
Part 1 Examination – Paper 1.1(INT)
Preparing Financial Statements (International Stream) June 2003 Marking Scheme
Marks
1 Gross profit (4 × 1/2) 2
Rent 1
Insurance 1
Depreciation 1
Bad and doubtful debts 1
Division of profit 2
——
8
Layout and style 1
—— 9
Current accounts
Share of profit 1
Drawings 1
Balances 2 × 1/2 1
—— 3
——
12
——
2 Interest paid 1
Capital expenditure
Purchases of non-current assets 2
Proceeds of sale of non-current assets 1
Financing
Issue of shares 1
Issue of loan notes 1
Dividends paid 2
Increase in cash and cash movement 11/2
Format and style 1
—— 101/2 max 9
(b) 1/
2 mark per item 6 × 1/2 3
25
Marks
5 (a) (i) Definition 2
Examples 2 × 1 2
Origins 2 × 1 2
—— 6
26