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1(INT) Preparing Financial Statements (International Stream) December 2006 Answers Section A 1 A 2 A 3 B 4 A 5 D 6 D 7 B 8 C 9 C 10 D 11 D 12 D 13 A 14 A 15 C 16 B 17 D 18 B 19 A 20 A 21 C 22 B 23 D 24 A 25 A Workings for computational MCQs 1 A 0/inventory 380 Purchases 480 –––– 860 COGS 650 – 195 455 –––– Inventory 405 Remaining inventory 220 –––– Inventory lost 185 –––– 2 A 1 + 500 2 + 500 3 no change ––––– 1.000 = 11.000 – 72.000.000 + 5.800 + 1/4 x 12. allowance 60.000) 19 .000.000 = 766.000 4 17 D 20% x (1.Part 1 Examination – Paper 1.100.000 ––––– 3 B 500 – (75% x 450) 6 D 180 + (40% x 500) – 30 7 B 838. prepayment 3/4 x 12.000 + 400.600.000 14 A 3/ x 10.

200 Refunds received from Contras against debit suppliers 2.18 B 100 + 50 + 60.300 Purchases 1.600 + 134.600 Purchase returns 41.700 – 144.500 inventory loss) x 2 = 95.589.589.400 25 A Payables ledger control account Opening balance 318.000 cash lost 3: (40.000 + 60.200 Closing balance 128.900 –––––––––– –––––––––– 20 .364.700 balances in receivables ledger 48.800 + 8. 80 – 50 + 30 22 B 1: (40.000 23 D 834.000 = 5.600 – 4.000 – 50.268.000 + 60.000 – 95.900 1.000 – 2.000 Discounts 8.200 –––––––––– –––––––––– 1.000 – 50.000) x 2 = 100.600 Cash paid to suppliers 1.

000 Share premium account 2.000 Current liabilities Payables 2.400 1.620 ––––––– Capital and reserves Called up share capital 5.250 ––––––– –––––– 19.000 – 4.800 Plant and equipment 6.400 1.570 ––––––– 15.220 ––––––– 19.600 ––––––– –––––– ––––––– 15.370 Non-current liabilities 8% Loan notes 1.400 ––––––– –––––– Current assets Inventories 4.700 Receivables (3.000 4.000 200 8.200 Revaluation reserve (5.320 Cash 1.600 10.900 less: irrecoverable debts 280 bonuses 250 depreciation 1.930 970 ––––––– –––––– ––––––– 5.500 Accruals (500 + 250) 750 3.620 ––––––– Working $000 $000 $000 Retained earnings balance 1 July 2005 4.600 – 280) 3.200 –––––– 9.000 – 2.000 + 4.600 Retained earnings (see working) 5.570 ––––––– 21 .000 4.400) 2.600 Draft profit 2.Section B 1 Golding Balance sheet as at 30 June 2006 Cost or Accumulated Net book valuation depreciation value $000 $000 $000 Non-current assets Land and buildings 9.

000 Share capital 50.000 Share premium 20.000 Interest payable 8.2 (a) Dr Cr $ $ (1) Sales 70.000 Sales 48.000 (2) Suspense 16.000 OR Suspense 48.000 (4) Suspense 36.000 Purchases 48.000 Suspense 64.000 (4) Rent 36.000 (b) – + $ $ Profit per draft accounts 830.000 Interest receivable 8.000 Rent 36.000 (3) Sales 16.000 –––––––– Revised profit 780.000 Suspense 32.000 (2) Interest 16.000 Suspense 48.000 –––––––– –––––––– 102.000 Adjustments (1) Sales 70.000 882.000 102.000 Purchases 64.000 Sales 64.000 Suspense 64.000 (3) Sales/Purchases 32.000 –––––––– 22 .000 Purchases 16.

200 Adjustments for Depreciation 13. unless it is subject to depletion in some way – a quarry for example. 23 .900) Increase in receivables (8.000 161.900) Decrease in payables (2.200 14.000 Closing balance 8.200 40.000) ––––––– Net cash used in investing activities (19.920 Increase in inventories (4.000 Depreciation 13.200) ––––––– Net cash from operating activities 13.200 Opening balance 6.000 Income statement 8. to reflect in operating profit the cost of use of tangible non-current assets (the amount of economic benefits consumed).020 Interest paid (720) Income taxes paid (6.100 Cash flows from investing activities Purchase of property plant and equipment (Working 3) (19. Buildings should be depreciated like any other non-current asset so as to allocate their depreciable amount (cost or valuation) over their useful economic life.000 –––––––– –––––––– 161.000 Dividends paid (4.000 Revaluation reserve 12.000 –––––––– –––––––– 4 (a) Following the matching concept.200 ––––––– ––––––– 2 Income taxes $000 $000 Cash 6.000 Proceeds of issue of loan notes 2.200 ––––––– ––––––– 14.200 Closing balance 28.000 Closing balance 148.000 Interest expense 720 ––––––– 35.000 ) ––––––– Net cash from financing activities – ––––––– Net decrease in cash (5. (b) It is not normally necessary to depreciate land.000 ––––––– ––––––– 40.200 Profit for year 22.900) Cash at 1 July 2005 4.600 ––––––– Cash at 30 June 2006 (1.200 ––––––– ––––––– 3 Non-current assets $000 $000 Opening balance 130.000) Cash flows from financing activities Proceeds of issue of share capital 2.000 Tax 8.300) ––––––– WORKINGS 1 Calculation of profit for year $000 $000 Dividends 4.000 Purchases 19.100) ––––––– Cash generated from operations 20.000 0pening balance 18.3 Joyce Cash flow statement for the year ended 30 June 2006 $000 $000 Cash flows from operating activities Profit before taxation (working 1) 22.

Depreciation is calculated as a percentage of the net book value of the asset at the end of each period. (c) (i) Straight line. is written off in equal instalments over its estimated useful economic life. if material. 24 . (iii) Loan notes. (b) (i) Non-current assets are normally valued at cost or valuation less depreciation. The depreciable amount of an asset. net realisable value on the basis of a short-term sale would have to be substituted. (ii) Reducing balance. would have to be reclassified as current liabilities. net realisable value on the basis of a short-term sale would have to be adopted instead. if shown as non-current liabilities. If the going concern basis was no longer appropriate. adjustment must be made. Adjustment is also required if an event after the balance sheet date indicates that the going concern basis of accounting is no longer appropriate. (ii) Inventory is normally valued at the lower of cost and net realisable value. Other answers to (c) considered on their merits. 5 (a) If the event provides evidence of conditions that existed at the balance sheet date. If the going concern basis no longer applied. less any residual value. and the assets would be included in current assets.

Part 1 Examination – Paper 1.1(INT) Preparing Financial Statements (International Stream) December 2006 Marking Scheme 1 Heading 1 Land and building valuation 1 accumulated depreciation 1/ 11/2 2 –––– Plant and equipment cost 1/ 2 accumulated depreciation 1/ 1 2 –––– Inventory 1/ 2 Receivables 1/ + 1/2 1 2 Cash 1/ 2 Share capital 1/ 2 Share premium account 1/ 2 Revaluation reserve 1 Retained earnings 4 x 1/2 2 Loan notes 1/ 2 Accruals 1/ + 1/2 1 2 Payables 1/ 2 Format 2 ––––– 131/ max 11 –––––2 2 (a) 1 11/2 2 11/2 3 3 x 1 (or 4 x 1 max 3) 3 4 1 (b) 4x1 4 –––– 11 11 –––– 3 Heading 1/ + 1/ 1 2 2 Operating profit 4 x 1/2 + tax 1 3 Depreciation 1/ 2 Interest expense 1/ 2 Increase in inventory 1/ 2 Increase in receivables 1/ 2 Decrease in payables 1/ 2 Net cash inflow from operating activities 1/ 2 All other items in statement 6 x 1/2 3 Calculation of non-current asset payment Balances 1/ + 1/ 1 2 2 Revaluation reserve 1 Depreciation 1/ 21/2 ––––2 Cash movement 1 Layout 1 ––––– 1 14 / max 12 –––––2 4 (a) 1 (b) Land – not depreciated 1/ 2 Land – mention of depletion 1/ 2 Buildings – cost or valuation 1 Spread over useful economic life 1 3 –––– (c) 2x2 4 –––– 8 8 –––– 25 .

5 (a) Conditions at b/s date 11/2 Materiality 1 Going concern 1/ 3 ––––2 (b) 2+2+1 5 –––– 8 8 –––– 26 .