Advanced Financial Accounting Sample Paper 3 PDF

Advanced Financial Accounting
Sample Paper 3
Questions & Suggested Solutions
Page 1 of 28

NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
be asked and both students and teachers alike are reminded to consult our published syllabus (see
www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2015 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2015.
Advanced Financial Accounting Sample Paper 3 Page 2 of 28

INSTRUCTIONS TO CANDIDATES

PLEASE READ CAREFULLY

Candidates must indicate clearly whether they are answering the paper in accordance with the law
and practice of Northern Ireland or the Republic of Ireland.
In this examination paper the €/£ symbol may be understood and used by candidates in Northern
Ireland to indicate the UK pound sterling by candidates in the Republic of Ireland to indicate the
Euro.

Answer ALL THREE questions in Section A and TWO of the THREE questions in Section B. If
more than TWO questions is answered in Section B, then only the first TWO questions, in the
order filed, will be corrected.

Candidates should allocate their time carefully.

All workings should be shown.

All figures should be labelled, as appropriate, e.g. €’s, £’s, units etc.

Answers should be illustrated with examples, where appropriate.

Question 1 begins on Page 2 overleaf.

NOTE: This sample paper and solutions have been prepared to reflect the provisions of
FRS 102


SECTION A
Answer ALL THREE Questions in this Section

(The total marks for section A will be 60, made up of a theory question of 20
marks, a multiple choice question of 15 marks and a further question of 25 marks)

QUESTION 1
(i) The Conceptual Framework for Financial Reporting provides a frame of

reference that outlines generally accepted theoretical principles for financial
accounting.
(a) Explain briefly the purpose of the Framework. 6 marks
(b)A friend who has not studied accountancy has read the Framework and
is confused by some of the terms and definitions discussed within.
Prepare a note setting out your understanding of three of the following
four terms:
i. Going concern
ii. Accruals
iii. Asset
iv. Liability
6 marks
(ii) Define “Accounting Policies” and outline the circumstances under which an
accounting policy should be changed.
4 marks
Define “Accounting Estimates” and give examples of three items which are
usually the subject of accounting estimates.
4 marks
Total 20 marks
QUESTION 2
The following multiple choice question consists of TEN parts, each of which is
followed by FOUR possible answers. There is ONLY ONE right answer in each part.
Each part carries 1½ marks.
Requirement
Indicate the right answer to each of the following TEN parts. Total 15 Marks
N.B. Candidates should answer this question by ticking the appropriate boxes on
the special green answer sheet which is supplied with the examination paper.

QUESTION 2 (cont’d)
BACKGROUND INFORMATION TO PARTS [1] – [5]
The following information relates to ROCK Ltd:

£/€
Receivables at 1st January 2014 ..................................... 60,000
Receivables at 31st December 2014................................. 80,000
Payables at 1st January 2014 ......................................... 75,000
Payables at 31st December 2014..................................... 85,000
Inventory at 1st January 2014 ........................................ 140,000
Inventory at 31st December 2014 ................................... 170,000
Sales on credit for the year ended 31st December 2014 ..... 1,800,000
Cash sales for the year ended 31st December 2014 ........... 300,000
Purchases (all on credit) for the year ended 31st December 2014
................................................................................. 1,250,000
Bank overdraft at 31st December 2014 ............................ 60,000
Taxation liability at 31st December 2014 .......................... 70,000
Accrued expenses at 31st December 2014 ........................ 25,000
Prepaid expenses at 31st December 2014......................... 30,000
[1] The receivable days outstanding at 31st December 2014 (to the nearest day)
was: -
(a) 12 days
(b) 14 days
(c) 16 days
(d) 18 days
[2] The payables days outstanding at 31st December 2014 (to the nearest day)
was: -
(a) 23 days
(b) 24 days
(c) 25 days
(d) 26 days
[3] The current ratio at 31st December 2014 (assuming no other current assets or
liabilities), to two decimal points, was: -
(a) 1.65 :1
(b) 1.17 :1
(c) 1.04 :1
(d) 0.16 :1

Question 2 cont’d
[4] The inventory turnover (to two decimal places) for the year ended 31st
December 2014 was: -
(a) 8.06 times

(b) 7.87 times
(c) 7.35 times
(d) 1.18 times
[5] The gross profit margin for the year ended 31st December 2014, to one
decimal point was: -
(a) 32.2 %
(b) 38.6 %
(c) 41.9 %
(d) 44.3 %
[6] FRS 102 provides that a complete set of Financial Statements comprises the following:
(a) A Statement of Comprehensive Income and a Statement of Financial

Position.
(b) A Statement of Comprehensive Income, a Statement of Financial
Position and A statement of Changes in Equity.
(c) A Statement of Comprehensive Income, a Statement of Financial
Position, a statement of Changes in Equity and A Statement of Cash Flows.
(d) A Statement of Comprehensive Income, A Statement of Financial
Position, A statement of Changes in Equity and A Statement of Cash Flows,
and notes to the Financial Statements.
[7] FRS 102 states that a business should prepare its financial statements on the
basis that the business is a going concern: -
(a) if it is being liquidated

(b) if it has ceased trading
(c) if the directors have no realistic alternative but to liquidate the entity or
to cease trading
(d) only if none of the above situations exist
[8] Under the provisions of the Companies Acts there must be shown in a note to
the accounts:
(a) the average number of people employed during the year

(b) the number of people employed on the first day of the year
(c) the number of people employed on the last day of the year
(d) the number of new employees employed during the year

Question 2 cont’d
[9] Partners drawings are: -
(a) charged against the partners in their capital accounts

(b) charged against the partners in their current accounts
(c) credited to the partners in their capital accounts
(d) credited to the partners in their current accounts
[10] Payments by a lessee in an operating lease are:-
(a) charged in the lessee’s Statement of Comprehensive Income on the

reducing balance basis
(b) credited in the lessee’s Statement of Comprehensive Income on the
reducing balance basis
(c) charged in the lessee’s Statement of Comprehensive Income on the
straight line basis
(d) credited in the lessee’s Statement of Comprehensive Income on the
straight line basis

QUESTION 3

CABLE Ltd., is a furniture company with an authorized share capital of
£/€3,000,000, comprised of 6,000,000 ordinary shares of 50 pence/cent each.
The following trial balance was extracted as at 31st December 2014
£/€’000 £/€’000
Ordinary share capital .................................................................... 2,200

Share premium account ................................................................. 180
General reserve .............................................................................. 260
Retained earnings balance at 1 January 2014 ................................ 74
8% debenture stock ........................................................................ 250
Leasehold premises at cost ............................................................ 3,900
Leasehold premises – accumulated depreciation at 1 January 2014 ............ 500
Plant and machinery at cost ........................................................... 820
Plant and machinery – accumulated depreciation at 1 January 2014........... 320
Motor vehicles at cost .................................................................... 300
Motor vehicles – accumulated depreciation at 1 January 2014 .................. 80
Receivables .................................................................................... 169
Payables ......................................................................................... 95
Bank ............................................................................................... 120
Sales ............................................................................................... 4,500
Sales returns................................................................................... 79
Opening inventory ......................................................................... 180
Purchases ....................................................................................... 2,400
Purchases returns ........................................................................... 160
Administration expenses ................................................................ 450
Distribution expenses..................................................................... 340
Bank interest .................................................................................. 60
Deposit interest received................................................................ 35
Debenture interest .......................................................................... 10
Interim ordinary dividend paid ...................................................... 66
................................................................................................. ________ ______
8,774 8,774
ADDITIONAL INFORMATION
(1) Goods purchased on 28th December 2014 for £/€70,000 had not been
accounted for or included in the physical stock count at 31st December 2014.
(2) Closing inventory, as per the physical stock count at 31st December 2014 was
£/€220,000.
(3) Training grants of £/€20,000 in respect of training sales staff were due to the
company at 31st December 2014.

QUESTION 3(Cont’d.)
(4) Depreciation is to be charged as follows:
Leasehold premises ........... 2% on cost

Plant and machinery .......... 10% on cost
Motor vehicles ................... 20% on cost
Depreciation on leasehold premises and plant and machinery should be

included as part of administration expenses and depreciation of motor
vehicles should be included as part of distribution expenses.
(5) The charge for corporation tax for the year ended 31st December 2014 is
estimated at 50% of the profit before tax.
(6) A final dividend of 5 pence/cent per share was paid to the ordinary
shareholders on 31 December 2014 however this payment has not yet been
recorded in the accounts.
(7) Half year debenture interest to be provided for.
Requirement
(a) Prepare, in accordance with FRS 102, the Statement of Comprehensive Income
of CABLE Ltd., for the year ended 31st December 2014 in as far as the
information provided permits.
N.B. You are NOT required to prepare a Statement of Financial Position or
notes to the accounts. You are required to submit workings to show the
make-up of the figures in the Statement of Comprehensive Income.
20 Marks
(b) Prepare a Statement of Changes in Equity for the year ended 31 December
2014
3 Marks
Presentation: 2 marks
Total: 25 Marks

SECTION B
Answer TWO of the THREE questions in this Section
QUESTION 4
Geoff, Henry and Ian are in partnership sharing profits and losses in the ratio
4:2:2. The partners receive a salary of £/€5,000, £/€6,000 and £/€7,000 each and
are entitled to interest on the balance on their capital accounts at 5% per annum.
Ian is entitled to a guaranteed share of profits, in addition to his salary and interest
on capital, of £/€6,000 any deficiency to be borne by Geoff and Henry equally.
The following is the draft balance sheet of the partnership as at 31 December 2014
(before the profit for the year has been divided between the partners).
DRAFT Statement of Financial Position as at 31st DECEMBER 2014
Cost Accumulated Net Book

Depreciation Amount
£/€ £/€ £/€
Non-current Assets
Premises ..................................................... 250,000 50,000 200,000
Plant and machinery .................................. 130,000 65,000 65,000
Furniture and fittings ................................. 25,000 5,000 20,000
405,000 120,000 285,000
Current Assets
Inventory .................................................. 30,000
Trade receivables ...................................... 26,000
Bank.......................................................... 12,000
68,000
................................................................... 353,000
Partners Capital Accounts

Geoff ......................................................... 80,000
Henry ........................................................ 70,000
Ian ............................................................. 70,000
220,000
Partners Current Accounts
Geoff ......................................................... 16,000
Henry ........................................................ (20,000)
Ian ............................................................. 10,000
6,000
Profit for the year (not yet divided between the partners) 88,000
Current liabilities
Payables .................................................... 26,000
Loan from Simon ...................................... 13,000
39,000
Total capital and liabilities 353,000

QUESTION 4 (Cont’d.)
Adjustment is required in respect of the following items:
(1) Depreciation for the year has not been provided. It should be provided for as
follows:
Premises ..................... £/€5,000

Plant and machinery ..... £/€26,000
Furniture and fittings..... £/€5,000
(2) Wages and salaries of £/€14,000 have not been provided for at the year end.
(3) Rent amounting to £/€7,000 has been prepaid at the year end.
Requirement
You are required to prepare:
(a) a statement setting out the adjustments required to the profit for the year
arising out of items
(1) to (3) above;
3 Marks
(b) a statement setting out the appropriation of the adjusted profit between the
partners;
3 Marks
(c) the current accounts of the partners;

4 Marks
(d) the revised balance sheet after dealing with parts (a) to (c) above.
8 Marks
Total: 20 Marks


QUESTION 5

JEWEL Limited, a car rental company, had revenue of £/€4,500,000 and made a
net profit before taxation of £/€350,000 for the year ended 31st December 2014, as
per the draft accounts.
During a review of the draft accounts you ascertain the following:
(1) A customer who owed the company £/€80,000 at 31st December 2014 has
gone into receivership in January 2015 and is unlikely to be able to pay any
part of the debt.
(2) A government grant of £/€50,000 to help meet the cost of wages and salaries
to train staff was treated as deferred income at 31st December 2014.
(3) Inventory which cost £/€175,000 was found to be damaged and it is

estimated that it has a net realisable value of £/€125,000.
(4) On 6th January 2015 goods costing £/€60,000 were received which had been
ordered from a supplier on 20th December 2014.
(5) A customer of the company is suing the company for £/€600,000 damages on
the basis that a car which the customer rented from the company in
December 2014 was mechanically deficient and was the cause of the
customer being involved in an accident which resulted in the customer being
badly injured. The company’s lawyers are unsure as to the company liability.
The court case will not take place until after the accounts are approved by the
directors.
(6) Wages due to casual workers, who were recruited for the busy Christmas
period, of £/€17,000, were due at 31st December 2014 and not yet accounted
for.
Requirement
(a) Prepare the journal entries to show how each of the above items should be
dealt with in the final accounts for the year ended 31st December 2014. You
should use your understanding of FRS 102 in dealing with each item.
14 marks
(b) Compute the adjusted net profit before taxation for the year ended 31
December 2014 taking into account the adjustments made at [a] above.
4 marks
Total: 20 Marks


QUESTION 6

The Statement of Comprehensive Income of OLIVE Ltd., for the year ended 31st
December 2014 and the Statement of Financial Position as at 31st December 2014
(with comparative figures as at 31st December 2007) are as follows:

Statement of Comprehensive Income for the year ended 31st December 2014

£/€’000 £/€’000

Revenue .................................................................................. 5,100
Less: Cost of goods sold ................................................... 3,300
Gross Profit ........................................................................... 1,800

Government grant .............................................................. 10

Less: Expenses
Loss on disposal of Property
Plant and Equipment ........................................... 10
Depreciation ................................................................ 120
Other administration expenses ........................... 440
Distribution expenses .............................................. 390
(960)
Profit from Operations ..................................................... 850

Debenture interest paid .................................................. (60)
Deposit interest received ................................................ 20
(40)
Profit before tax .................................................................. 810

Taxation
On profits for the year ............................................. (320)
Underprovided in previous years ...................... (80)
(400)
Total comprehensive income for the year 410


Question 6 cont’d

Statement of Financial Position as at 31ST DECEMBER

2014 2013

£/€’000 £/€’000 £/€’000 £/€’000

Assets
Non current assets
Property, plant and equipment .............. 1,880 1,480

Current assets
Inventories ...................................................... 160 304
Receivables ...................................................... 692 520
Bank .................................................................... 596 480
1,448 1,304

Total assets 3,328 2,784

Equity and Liabilities
Capital and reserves
Ordinary share capital ................................ 1,100 1,000
Share premium account 100 ‐
Retained profits 970 720
2,170 1,720

Non current liabilities
Debenture stock .............................................. 350 200

Current liabilities
Payables ............................................................ 448 384
Taxation ............................................................ 320 480
Deferred income (govt grant) ................. 40 ‐
808 864

Total equity and liabilities 3,328 2,784

NOTES to the accounts:
(1) The profit on ordinary activities before taxation has been arrived at after
charging:
Auditors remuneration ............. 24

Directors remuneration ............ 80
Depreciation .......................... 120


(2) Property plant and equipment:
During the year ended 31st December 2014, OLIVE Ltd., sold for £/€40,000 an
asset which cost it £/€120,000 in 2011 and which had been depreciated by
£/€70,000 at the date of sale. There were no other sales of property plant
and equipment during the year.
(3) A government grant of £/€50,000 relating to plant and equipment purchased

during the year was received.
(4) Dividends paid during the year amounted to £/€160,000.
Requirement
Prepare a Statement of Cash Flow for OLIVE Ltd., for the year ended 31st December
2014, in accordance with FRS 102.
18 marks
Total: 20 Marks


Accounting Financial Accounting

Sample Paper 3 – Suggested Solutions

NOTE: This sample paper and solutions have been prepared to reflect the provisions of
FRS 100 – FRS 102


Solution to question 1

(i)

(a)

The FRC developed the Conceptual Framework to provide guidance for the application
of generally accepted accounting principles to financial transactions. The principles of
the framework form the basis for the development of new accounting standards and
the assessment and revision where necessary of existing ones. The Framework is not
an accounting standard however new standards issued following the publication of the
Framework must be in line with the principles of the Framework. Going forward the
incidents of conflict between the Framework and accounting standards will reduce
thus leading to increased harmonisation in financial accounting regulations. However
as the Framework is not an accounting standard it cannot override the principles of an
existing accounting standard, where a conflict exists the principles as laid out in the
standard must be complied with.

The framework also provides very important definitions which were not previously
defined, including the definitions of such frequently used terms such as asset and
liability. This eliminates the need to provide such definitions in each standard thereby
decreasing the time it takes to develop and publish new standards.

Overall, the Framework promotes a more consistent regulatory environment which
should help not only standard setting bodies but also preparers of financial statements
and users of such financial information.

(b)Definitions

Going concern
Financial statements are normally prepared on the assumption that an entity is a going
concern and will continue in operation for the foreseeable future. Foreseeable future is
considered to be twelve months from the date the financial statements are signed. In the
event that management decide that it is no longer appropriate to prepare the financial
statements on a going concern basis this must be disclosed.

Accruals
Financial statements, with the exception of the cash flow statement, are prepared on the
accruals basis of accounting where transactions are recognised in the period in which they
occur (are earned or accrued) irrespective of when the cash flow arising from these
transactions occurs.

Asset
An asset is a resource controlled by an entity as a result of past events and from which
future economic benefits are expected to flow to the entity. Future economic benefits
represent the potential to contribute to the cash flow of the entity. Examples of assets
include premises, equipment, receivables.

Liability

A liability is a present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow of resources from the entity. Examples of
liabilities include payables, finance lease obligations, accruals.
(ii)
Accounting Policies

FRS 102 defines Accounting Policies as “the specific principles, bases, conventions, rules
and practices applied by an entity in preparing financial statements.”

An entity should change an accounting policy only if the change:
 is required by a Standard or an Interpretation, or
 results in the financial statements providing reliable and more relevant
information about the effects of transactions, other events or conditions
on the entity’s financial position, financial performance or cash flows.

Accounting Estimates

Accounting estimates involve judgements on the uncertainties inherent in business
activities which cannot be measured with precision but only estimated.

Examples of items may which require accounting estimates are:

 Provision for bad and doubtful debts
 Inventory obsolescence
 Useful life of depreciable assets



(1) C (80,000 *365 / 1,800,0000)

(2) C (85,000 * 365 / 1,250,000)

(3) B (170,000 +80,000+30,000)/(85,000+60,000+70,000+25,000)

(4) B (140,000 + 1,250,000 – 170,000) / ((140,000 + 170,000) /2)

(5) C (2,100,000 – (140,000 + 1250,000 – 170,000) = 880,000 *100/210,000

(6) D

(7) D

(8) A

(9) B

(10) C



Cable Ltd.

Statement of Comprehensive Income for the year ended 31 December 2014

£/€’000

Sales Revenue (W.1) 4,421

Cost of sales (W.2) 2,200

Gross profit 2,221

Other Income 20

Distribution costs (W.3) (400)
Administrative expenses (W.4) (610)
1,231

Interest received 35
Interest paid (W.5) (80)

Profit before tax 1,186

Tax expense (593)

Profit on ordinary activities after tax 593

CABLE Limited
Statement of Changes in Equity for the year ended 31 December 2014
Share Share Retained General

Capital Premium earnings Reserve Total
£/€'000 £/€'000 £/€'000 £/€'000 £/€'000
As at 1 January 2014 2,200 180 74 260 2,714

Profit for the year 593 593
Ordinary dividends (w.6) (286) (286)
2,200 180 381 260 3,021


Solution to question 3(cont’d)

Workings

£/€’000 £/€’000
(1) Sales revenue

Sales per T/B 4,500
Less: sales returns 79
4,421

(2) Cost of sales

Opening inventory 180
Purchases 2,400
Less : purchases returns (160)
2,240
Add : goods purchased on 28/12 70 2,310
2,490

Less : Closing Inventory
Per physical count (220)
Add : not accounted for (70)
(290)
2,200

(3) Distribution expenses

Per T/B 340
Depreciation : Motor Veh. 60
400

(4) Administrative expenses

Per T/B 450
Add : Depreciation : Premises 78
Plant and Mach. 82

610
(5) Interest paid

Bank overdraft interest 60
Debenture interest Paid 10
Due 10
20
80

Solution to question 3(cont’d)

£/€’000
(6) Dividend

Interim dividend per trial balance 66
Final dividend paid 220

Total dividend 286

(7) Other Income

Training Grant receivable 20



(a) Statement of adjusted profit for the year ended 31 December 2014

€/£ €/£
Net profit as per draft accounts 88,000

(1) Depreciation:

Leasehold Premises 5,000
Plant and Machinery 26,000
Furniture & Fittings 5,000

(36,000)
(2) Wages owing (14,000)

(3) Rent prepaid 7,000
______
Adjusted net profit 45,000

(b) Appropriation account for the year ended 31 December 2014

Net profit 45,000

Less:
Partner’s salaries
Geoff 5,000
Henry 6,000
Ian 7,000 (18,000)

Interest on capital
Geoff 4,000
Henry 3,500
Ian 3,500 (11,000)

16,000
Appropriated as follows:

Geoff 8,000
Less: to meet guarantee (1,000)
7,000
Henry 4,000
Less: to meet guarantee (1,000)
3,000
Ian 4,000
Add: to meet guarantee 2,000
6,000
16,000

Partners Current Accounts

Geoff Henry Ian Geoff Henry Ian

Balance b/d 20,000 Bal b/d 16,000 10,000
Salaries 5,000 6,000 7,000
Interest on capital 4,000 3,500 3,500
Share of profits 7,000 3,000 6,000
Balance c/d 32,000 26,500 Balance c/d 7,500
32,000 20,000 26,500 32,000 20,000 26,500
Balance b/d 7,500 Balance b/d 32,000 26,500

Solution to Q4 continued overleaf

(d)
Statement of Financial Position as at 31 December 2014

Cost Accumulated NBV
Depreciation
€/£ €/£ €/£
Non-current assets
Leasehold Premises 250,000 55,000 195,000
Plant and machinery 130,000 91,000 39,000
Furniture & Fittings 25,000 10,000 15,000
405,000 156,000 249,000
Current Assets
Inventory 30,000
Receivables 26,000
Prepaid rent 7,000
Bank 12,000
75,000
324,000

Partners capital accounts
Geoff 80,000
Henry 70,000
Ian 70,000

220,000
Partners current accounts

Geoff 32,000
Henry (7,500)
Ian 26,500 51,000

Current liabilities
Payables 26,000
Loan from Simon 13,000
Accrued wages and salaries 14,000
53,000
324,000



(a) Journal
Dr. Cr.
£/€ £/€

(1) Irrecoverable Receivable a/c (SOCI) 80,000
Receivable(SOFP) 80,000

Being write off of an irrecoverable receivable

(2) Deferred Income (SOFP) 50,000
Other Income (SOCI) 50,000

Being correction of mis‐posting;‐ Revenue grant posted in error to Deferred Grants

(3) Inventory (SOCI) 50,000
Inventory ( SOFP ) 50,000
Being reduction of inventory from cost to NRV

(4) No adjustment ; a non adjusting event as per FRS 102

(5) Contingent liability, a possible but uncertain obligation, no provision required as per
FRS102. Show as a note to the accounts.

(6) Wages expense (SOCI) 17,000
Accrued expense (SOFP) 17,000
(Accounting for wages accrued due at year end not provided for)

(b) Adjusted net profit before tax

£/€ £/€
Profit before taxation per draft accounts 350,000

Adjustments :

(1) Irrecoverable Receivable (80,000)
(2) Training grant 50,000
(3) Inventory write off (50,000)
(6) Wages expense (17,000)
(97,000)
Adjusted net profit 253,000



OLIVE Ltd., Statement of Cash Flow for the year ended 31st December 2014

£/€’000 £/€’000
Cash flow from operating activities:

Profit on ordinary activities before interest 850

Adjustment for:
Government grant .......................................................................... (10)
Depreciation ..................................................................................... 120
Loss on disposal of property plant and equipment ....... 10
120
970
Operating profit from working capital changes:
Decrease in inventories ............................................................... 144
Increase in receivables ................................................................ (172)
Increase in payables ...................................................................... 64
36
Cash generated from operations .......................................................... 1,006
Interest paid ................................................................................................... (60)
Income tax paid (w.1) ................................................................................ (560)

Net cash flow from operating activities ............................................. 386
Cash flow from investing activities:

Purchases of property plant and equipment (w.2) ....... (570)
Proceeds of sale of property, plant and equipment ....... 40
Interest received ........................................................................... 20

Net cash used in investing activities ................................................... (510)
(124)
Cash flow from financing activities:
Proceeds from issue of shares (100+100) .......................... 200
Government grant received ....................................................... 50
Proceeds from long term borrowing ..................................... 150
Dividends paid ................................................................................ (160)
240
Net increase in cash and cash equivalents ....................................... 116
Cash and cash equivalents at beginning of year ............................ 480
Cash and cash equivalents at end of year ......................................... 596


Solution to question 6 (Cont’d.)
WORKINGS

(1) Income tax paid
£/€’000

Due at 1st January 2014 ............................................ 480
Charge for year ............................................................. 400
880

Due at 31st December 2014 .................................... 320
Income tax paid ............................................................ 560

(2) Purchase of property plant and equipment

£/€’000

Net book amount at 1st January 2014 ................ 1,480
Less: net book amount of sale
During year (£/€120,000 ‐ £/€70,000) ........... (50)
1430
Depreciation charge for year ................................. (120)
1310
Net book amount at 31st December 2014 ........ 1880
Purchases during year .............................................. 570


Advanced Financial Accounting Sample Paper 3 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Advanced Financial Accounting Sample Paper 3 PDF

Uploaded by

Copyright:

Available Formats

Advanced Financial Accounting

NOTES TO USERS ABOUT SAMPLE PAPERS

© Accounting Technicians Ireland, 2015.

Advanced Financial Accounting Sample Paper 3 Page 2 of 28

Advanced Financial Accounting Sample Paper 3 Page 3 of 28

Answer ALL THREE Questions in this Section

(i) The Conceptual Framework for Financial Reporting provides a frame of

(a) Explain briefly the purpose of the Framework. 6 marks

Each part carries 1½ marks.

Advanced Financial Accounting Sample Paper 3 Page 4 of 28

BACKGROUND INFORMATION TO PARTS [1] – [5]

The following information relates to ROCK Ltd:

Advanced Financial Accounting Sample Paper 3 Page 5 of 28

(a) 8.06 times

(a) A Statement of Comprehensive Income and a Statement of Financial

(a) if it is being liquidated

(a) the average number of people employed during the year

Advanced Financial Accounting Sample Paper 3 Page 6 of 28

[9] Partners drawings are: -

(a) charged against the partners in their capital accounts

[10] Payments by a lessee in an operating lease are:-

(a) charged in the lessee’s Statement of Comprehensive Income on the

Advanced Financial Accounting Sample Paper 3 Page 7 of 28

The following trial balance was extracted as at 31st December 2014

Ordinary share capital .................................................................... 2,200

Advanced Financial Accounting Sample Paper 3 Page 8 of 28

(4) Depreciation is to be charged as follows:

Leasehold premises ........... 2% on cost

Depreciation on leasehold premises and plant and machinery should be

(7) Half year debenture interest to be provided for.

Advanced Financial Accounting Sample Paper 3 Page 9 of 28

DRAFT Statement of Financial Position as at 31st DECEMBER 2014

Cost Accumulated Net Book

Partners Capital Accounts

Advanced Financial Accounting Sample Paper 3 Page 10 of 28

Adjustment is required in respect of the following items:

Premises ..................... £/€5,000

You are required to prepare:

(c) the current accounts of the partners;

Advanced Financial Accounting Sample Paper 3 Page 11 of 28

During a review of the draft accounts you ascertain the following:

(3) Inventory which cost £/€175,000 was found to be damaged and it is

Advanced Financial Accounting Sample Paper 3 Page 12 of 28

Advanced Financial Accounting Sample Paper 3 Page 13 of 28

Auditors remuneration ............. 24

Advanced Financial Accounting Sample Paper 3 Page 14 of 28

(3) A government grant of £/€50,000 relating to plant and equipment purchased

(4) Dividends paid during the year amounted to £/€160,000.

Advanced Financial Accounting Sample Paper 3 Page 15 of 28

Advanced Financial Accounting Sample Paper 3 Page 16 of 28

Advanced Financial Accounting Sample Paper 3 Page 17 of 28

Advanced Financial Accounting Sample Paper 3 Page 18 of 28

Advanced Financial Accounting Sample Paper 3 Page 19 of 28

Share Share Retained General

As at 1 January 2014 2,200 180 74 260 2,714

2,200 180 381 260 3,021

Advanced Financial Accounting Sample Paper 3 Page 20 of 28

Advanced Financial Accounting Sample Paper 3 Page 21 of 28

Advanced Financial Accounting Sample Paper 3 Page 22 of 28

Advanced Financial Accounting Sample Paper 3 Page 23 of 28

Partners Current Accounts

Advanced Financial Accounting Sample Paper 3 Page 24 of 28

Partners current accounts