This action might not be possible to undo. Are you sure you want to continue?
Drafting Financial Statements (International Stream)
Monday 7 June 2010
Time allowed Reading and planning: Writing:
15 minutes 3 hours
This paper is divided into two sections: Section A – ALL TEN questions are compulsory and MUST be attempted Section B – ALL THREE questions are compulsory and MUST be attempted Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall.
The Association of Chartered Certiﬁed Accountants
Paper T6 (INT)
This is a blank page. 2 . The question paper begins on page 3.
000 C 750.000. (iii) The substance over form convention is that the economic reality of a transaction should be reﬂected in the ﬁnancial statements rather than the legal form.000 D 1. (ii) and (iii) 2 At 1 June 2009.000 400. This was fully taken up.000 3 Which of the following statements about accounting concepts are correct? (i) The historical cost concept requires that non-current assets be initially recognised at their purchase cost. using the share premium account to ﬁnance the issue. A B C D (i) and (ii) only (iii) only (ii) and (iii) only (i).T.O. A B C D (i) and (ii) (iii) and (iv) (i) and (iii) (ii) and (iv) 3 [P.000 650. Jevan Co’s capital structure was as follows: Ordinary share capital (1. Each question in this section is worth 2 marks.000 shares of 50c each) Share premium account $ 500.000 Share premium account $ 525. . All shares in issue qualiﬁed for the bonus issue.000 B 750. (ii) Increasing costs of purchases not passed on to customers.000 400. (iii) An increase in the amount of inventory held. when sales are increasing? (i) A change in the product sales mix resulting in fewer sales of the more proﬁtable products.000 400. (ii) The accruals concept means that transactions are recognised when the cash is received or paid. What is the company’s capital structure at 31 May 2010? Ordinary share capital $ A 625.000 In July 2009 Jevan Co made a rights issue of 1 share for every 4 held at $1 per share.Section A – ALL TEN questions are compulsory and MUST be attempted Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question. In October 2009 Jevan Co made a bonus issue of 1 share for every 5 held.000. 1 Which of the following will reduce a company’s gross proﬁt ratio. not when they actually occur. (iv) The prudence concept means it is desirable to understate liabilities in ﬁnancial statements.
The announcement of a major restructuring. Both companies prepare accounts to 31 May each year. Eel Co appointed two of Conga Group’s directors to the board of Eel Co.000.387.585 –––––– Eel Co has not issued any new shares since Conga Group acquired its holding.080. What amount of investment in Eel Co will appear in the consolidated statement of ﬁnancial position of Conga Group at 31 May 2010? A B C D $960. a limited liability company.4 Which of the following events after the reporting period would be non-adjusting events as deﬁned by IAS 10 Events after the reporting period? (i) (ii) (iii) (iv) The destruction of a major plant by ﬁre. The resolution of a court case giving rise to a liability at the year end.500 4 . includes the following: Current assets Inventory Trade receivables Prepayments Cash and cash equivalents $000 485 286 14 25 Current Liabilities Trade payables Accrued expense Taxation $000 289 55 116 What is EJW Co’s current ratio? A B C D 1·76 70·7% 0·56 0·71 6 At 1 July 2009 Conga Group acquired 25% of the ordinary share capital of Eel Co for $960.710 –––––– 3. The discovery of a fraud showing that the ﬁnancial statements are incorrect. A B C D (i) and (ii) (iii) and (iv) (ii) and (iii) (i) and (iv) 5 The statement of ﬁnancial position for EJW Co.000 $1.117. The summarised statement of ﬁnancial position for Eel Co at 31 May 2010 is as follows: Called up share capital Share premium account Retained earnings $000 1.250 $1.200 675 1.500 $896.000 when the reserves of Eel Co were $1. None of the above affect the going concern assumption.
It will increase if and when new shares are issued at a price above nominal value. (i) and (ii) only (iii) and (iv) only (i).000 8 Which of the following statements is true regarding the share premium account? (i) (ii) (iii) (iv) A B C D It constitutes part of the equity of the company. CB Co.O. Frew Co owes Tomsett Co $5.000. At 1 May 2010 Peak Co purchased 60% of Kinder Co’s $1 ordinary shares for $4.200.000 and a share price of $1·10.000. It can be used to ﬁnance the issue of bonus shares. JN Co and SOB Co have the same trading practices and accounting policies. It can be paid out as dividend.150.750.000 and Frew Co has receivables of $130. a limited liability company. What is the total goodwill on acquisition at 1 May 2010? A B C D $1.000 $750.000 $1.450. At that date Kinder Co had net assets with a fair value of $4.000 10 Four companies JME Co. . Peak Co valued the non-controlling interest in Kinder Co at acquisition as $2.7 Kinder Co has 5 million $1 issued ordinary shares. What are the consolidated receivables for Tomsett Co? A B C D $425. (ii). (iii) and (iv) 9 Tomsett Co.000.000. (iii) and (iv) only (i).T.000 $381. owns 65% of the shares in Frew Co. Tomsett Co has receivables of $300.250 $379.000.750.500 $435.000 $1. The following information has been extracted from their ﬁnancial accounts: Company JME Co CB Co JN Co SOB Co Equity shares in issue 5 million ordinary shares of $1 each 15 million ordinary shares 50 cents each 100 million ordinary shares of 25 cents each 500 million ordinary shares of 10 cents each EPS 20 cents 10 cents 5 cents 3 cents Which company makes the most total proﬁt for its equity shareholders? A B C D JME Co CB Co JN Co SOB Co (20 marks) 5 [P.
000 for the year ended 31 May 2010. Dr $000 Discounts received Share premium account Property expenses Trade payables Loan note interest $1 Ordinary shares Retained earnings at 1 June 2009 Allowance for receivables at 1 June 2009 Sales revenue Cash Inventory at 1 June 2009 Other operating expenses Marketing expenses Wages and salaries Bank Returns inward Trade receivables Purchases 7% Loan notes Receivables expense Land at cost Buildings at cost Motor vehicles at cost Furniture and equipment at cost Accumulated depreciation at 1 June 2009 Buildings Motor vehicles Furniture and equipment Cr $000 65 260 375 43 2. as at 31 May 2010. No dividends have been paid or declared. a limited liability company.000 which relates to June 2010. 7 8 6 .000 of this inventory is now obsolete and the directors have agreed to sell it in June 2010 for a cash price of $25.515 20 455 366 65 878 124 124 1. Based on past experience the allowance for receivables is to be increased to 5% of trade receivables. Other depreciation is to be charged for as follows: (i) Motor vehicles at 25% of written down value.000.300.940 312 1.000 based on its original cost. Tax of $200. However.000 and the directors wish this valuation to be incorporated into the accounts.871 ––––––– ––––––– 130 ––––––– 12. The marketing expenses include $10.560 468 104 546 ––––––– 12. $35.000 is to be provided for the year. Buildings are depreciated at 5% of cost. At 31 May 2010 the buildings were professionally valued at $2.180 4.340 410 50 7.871 ––––––– ––––––– You have also been provided with the following information: 1 2 3 4 5 6 Inventory at 31 May 2010 was valued at $357. (ii) Furniture and equipment at 20% of cost. There are wages and salaries outstanding of $55.Section B – ALL THREE questions are compulsory and MUST be attempted 1 The following information has been taken from the books of Jonkirst Co.641 614 195 962 1.
Required: (a) Prepare the following statements. .O. for internal use: (i) the income statement for the year ended 31 May 2010. (ii) Interest cover Note: show ratio formulas and workings. and (ii) the statement of ﬁnancial position as at 31 May 2010 The following mark allocation is provided as guidance for this requirement: (i) 17 marks (ii) 15 marks (32 marks) (b) Calculate the following accounting ratios for Jonkirst Co: (i) Gearing ratio.T. (3 marks) (35 marks) 7 [P.
490. Kathryn $50.000. At 1 June 2009. the partners had credit capital account balances as follows: Jean: $35.000 20.000 and Meryl a further $25.000 25. at 31 May 2010 the goodwill in the partnership was valued at $90.000 22. (3 marks) (25 marks) 8 . (ix) On the retirement of Jean.600 respectively. Kathryn and Meryl shared proﬁts in the ratio 2:3:1.000 Property Equipment and machinery Inventory Receivables The revaluations are to be recorded in the books of the new partnership. The following mark allocation is provided as guidance for this requirement: (i) 8 marks (ii) 10 marks (18 marks) (c) Identify three advantages of operating as a limited liability company rather than a partnership. The book value and the revaluations are as follows: Book Value $ 130. (vii) Jean has agreed that if there was a credit balance on her capital account at 31 May 2010.000. Kathryn and Meryl. The partnership agreement allows for the following salaries per annum: Jean $40. Required: (a) Prepare the appropriation account for the partnership for the year ended 31 May 2010. Kathryn $35. Kathryn $22.400 and $1.000 50. Interest on capital is to be paid at a rate of 8% on the balance at 1 June 2009 on capital accounts. it can be transferred into a loan to the partnership.000 40. It has been successfully trading for several years. You have been provided with the following information: (i) (ii) (iii) (iv) (v) (vi) JKM’s proﬁt for the year ended 31 May 2010 was $345.000.2 JKM is a partnership owned by Jean.000 and Meryl $20. At 1 June 2009 Jean and Kathryn had credit balances on their current accounts of $2. (ii) capital accounts as at 31 May 2010.000 into the partnership and the following new proﬁt-sharing ratio was agreed: Kathryn Meryl (x) 3/5 2/5 Goodwill is not carried in the statement of ﬁnancial position.000.000 19. No interest is charged on drawings. Meryl had a debit balance of $1.000.000 and Meryl $40. (viii) The assets of the partnership were revalued at 31 May 2010. (4 marks) (b) Prepare the following partnership accounts incorporating the adjustments that need to be made on the retirement of Jean from the partnership: (i) current accounts for the year ended 31 May 2010. Jean.000. During the year cash drawings were as follows: Jean $25. Kathryn agreed to invest a further $20. Jean retired from the partnership at 31 May 2010. Any adjustments for goodwill are to be made through the partners’ capital accounts. However.000 Revaluation $ 156.000 and Meryl $30.800.000.
000 were paid.000. a limited liability company.000 were sold at a proﬁt of $6. (4 marks) (b) Prepare a statement of cash ﬂows for AGD Co for the year ended 31 May 2010 in accordance with IAS 7 – Statement of cash ﬂows. There was no over or under provision of tax. Depreciation was $94. AGD Co Statements of ﬁnancial position as at 31 May 2010 2009 $000 $000 $000 $000 Assets Non-current assets Current assets Inventory Trade receivables Bank Total assets Equity and liabilities Capital and reserves Ordinary share capital (shares of $1) Share premium Retained earnings Non-current liabilities 10% Loan note Current liabilities Trade payables Taxation Total equity and liabilities Additional information for the year ended 31 May 2010 (i) (ii) (iii) (iv) (v) Interest paid was $2.000. 625 106 85 2 –––– 72 47 22 –––– 470 193 –––– 818 –––– –––– 141 –––– 611 –––– –––– 625 32 98 –––– 755 0 38 25 –––– 47 19 –––– 469 16 40 –––– 525 20 63 –––– 818 –––– –––– 66 –––– 611 –––– –––– Required: (a) Calculate the proﬁt before tax of AGD Co for the year ended 31 May 2010. using the indirect method.000. (16 marks) (20 marks) End of Question Paper 9 . Non-current assets with a carrying amount of $25. Dividends of $31. as at 31 May 2010 is provided below together with comparative ﬁgures for the previous year.3 The statement of ﬁnancial position for AGD Co.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.