ACCA

FA and FFA

Financial Accounting
September 2020 to August 2021

Consolidation Test – Answers

To gain maximum benefit, do not refer to these answers

until you have completed the consolidation test
questions and submitted them for marking.
F A AN D F FA: F INAN C IAL A C COUN T IN G

© Kaplan Financial Limited, 2020

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2 K A P LA N P UB L I S H I N G
 CONSOLIDATION TEST ANSWERS

SECTION A

1 C

2 C
All statements within options A, B and D are correct. Within option C, the final statement ‘A
debit entry increases profit’ is incorrect.

3 B
Profit/loss on disposal = Proceeds – Carrying amount
= $6,000 – $7,000
= $1,000 loss

4 A

5 $900
Cost of inventory $1,000
Net realisable value $1,200 – $300 = $900
The lower value, and therefore the answer, is $900

6 D

7 D

8 $9,810
Product X $5,500
Product Y $1,350
Product Z $2,960
––––––
Total value $9,810
––––––

9 B

10 $3,955
Irrecoverable amounts $3,455
Increase in allowance $500
––––––––
$3,955
––––––––

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F A AN D F FA: F INAN C IAL A C COUN T IN G

11 $1,950
Light and heat
Bal b/d 450
Bank 1,900
Profit or loss (β) 1,950
Bal c/d 500
––––– –––––
2,400 2,400
––––– –––––
Bal b/d 500

12 D
$
Closing unadjusted bank balance 50,000
Less: Dishonoured cheques (400)
Bank charges (250)
––––––
Adjusted closing bank balance 49,350
Add: Unpresented cheques 5,000
Less: Lodgements (4,850)
––––––
Closing bank statement balance 49,500
––––––

13 $26,375
Receivables
Bal b/d 15,000 Receipts 85,900
Credit sales 96,700
Refunds 575
Bal c/d 26,375
––––––– –––––––
112,275 112,275
––––––– –––––––
Bal b/d 26,375

Note that discounts received are not relevant in this reconciliation. Discounts received
relate to accounting for trade payables.

14 B

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 CONSOLIDATION TEST ANSWERS

15 B
Balance per bank statement $1,500
Less outstanding cheques ($450)
Add outstanding lodgements $200
–––––––
Balance per updated cashbook $1,250
–––––––

16 C

17 $1,350.00
List price $1,500.00
Early settlement discount @ 10% ($150.00)
–––––––––
Revenue = amount expected to be receivable $1,350.00
–––––––––
Note that the early settlement discount is deducted as the customer is expected to pay
early.

18 D

19 D

20 B

21 $1,050
$18,000 × 10% × 7/12 = $1,050

22 $7,800
Rent receivable
Bal b/d 1,000
Profit or loss 6,000
Bank (β) 7,800
Bal c/d 800
––––– –––––
7,800 7,800
––––– –––––
Bal b/d 800

23 D
Sales tax can be a debit balance, or it may be a credit balance, in the trial balance.

KAPLAN P UBLI S H I N G 5
F A AN D F FA: F INAN C IAL A C COUN T IN G

24 $9,125 (a credit balance)

Sales tax
Bal b/d 6,500
Sales (45,000 × 0.175) 7,875
Purchases
(35,250 × 17.5/117.5) 5,250
Bal c/d 9,125
–––––– ––––––
14,375 14,375
–––––– ––––––

25 $146,000
Opening inventory $15,000
Purchases less purchase returns ($145,000 – $2,500) $142,500
Carriage inwards $500
Closing inventory ($12,000)
––––––––
Cost of sales $146,000

26 D
Carriage inwards is an expense that will increase cost of sales and therefore reduce gross
profit. Carriage outwards is an expense accounted for after arriving at gross profit which
will reduce net profit for the year.

27 C

28 $900
Rent
Bal b/d 250
Bank 1,275
Profit or loss (β) 900
Bal c/d 125
–––––– ––––––
1,275 1,275
–––––– ––––––
Bal b/d (375/3) 125

29 A

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 CONSOLIDATION TEST ANSWERS

30 $3,000 LOSS
Annual depreciation = ($44,000 − $2,000)/7 years = $6,000
Depreciation y.e. 31.12.20X2 $6,000 × 4/12 = $2,000
Depreciation y.e. 20X3, 20X4, 20X5 $6,000 × 3 = $18,000
Depreciation y.e. 31.12.X6 $6,000 × 6/12 = $3,000
–––––––
Total depreciation $23,000
–––––––
Profit/(loss) on disposal = $18,000 − ($44,000 − $23,000) = ($3,000)

31 $95,000
Interest paid is accounted for on an accruals basis in the statement of profit or loss – the
amount of interest paid in during the accounting period is not relevant. The finance cost is
therefore:
($1,000,000 × 6% × 9/12) + ($2,500,000 × 8% × 3/12)
$45,000 + $50,000 = $95,000

32 A

33 D
Revenue and finance costs must be disclosed on the face of the statement of profit or loss.
Dividends paid will be disclosed in the statement of changes in equity.The remaining items
may be disclosed in the notes to the financial statements.

34 A

35 $14,940
Cost $14,000 + $1,100 + $1,500 = $16,600
Depreciation at 10% = $1,660
Carrying amount = $16,600 − $1,660 = $14,940
Note that the repair cost is not capitalised – it is charged to profit or loss as an expense.

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F A AN D F FA: F INAN C IAL A C COUN T IN G

SECTION B

1 TANKARD CO
(a) Statement of profit or loss and other comprehensive income for the year ended
30 June 20X5
$ Marks
Revenue ($480,742 – $5,500 PPE disposal) 475,242 1.0
Cost of sales (W1) (168,866) 2.0
–––––––
Gross profit 306,376
Distribution costs (W2) (26,832) 1.0
Administrative expenses (W3) (37,540) 1.0
Loss on disposal of property, plant and equipment (W4) (750) 1.0
–––––––
Profit from operations 241,254
Finance costs (W5) (455) 0.5
–––––––
Profit before tax 240,799
Tax (31,830) 0.5
––––––– ––––
Profit for the period from continuing operations 208,969 7.0
––––––– ––––

There were no items of other comprehensive income in the year

Workings
(W1) Cost of sales
$
Opening inventory 84,220
Purchases 153,444
Dep’n – bld ((281,450 – $80,000) × 2%) 4,029
Dep’n P&M (($94,400 – $12,500) × 25%) 20,475
Less closing inventory (93,302)
($94,302 – ($5,000 – $4,000)
–––––––
Total 168,866
–––––––

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 CONSOLIDATION TEST ANSWERS

(W2) Distribution costs

$
Distribution costs 23,587
Accrual 3,245
––––––
Total 26,832
––––––
(W3) Administrative expenses
$
Administrative expenses 37,666
Irrecoverable debt written off 631
Reduction in allowance for (157)
receivables (W6)
Insurance prepaid (3/15 × $3,000) (600)
––––––
Total 37,540
––––––
(W4) Loss on disposal of property, plant and equipment
$
Disposal proceeds 5,500
Less: carrying amount at disposal date 6,250
($12,500 – $6,250)
––––––
Loss on disposal 750
––––––
(W5) Finance costs
$
Accrual ($26,000 × 7% × 3/12) 455
–––––
(W6) Change in allowance for receivables
$
Trade receivables per TB 13,731
Less: irrecoverable debt (631)
––––––
13,100
––––––
Allowance required 393
Less allowance brought forward (550)
––––––
Reduction in allowance required (157)
––––––

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(b) Tankard Co – Statement of financial position as at 30 June 20X5

$ Marks
ASSETS
Non-current assets
Property, plant and equipment (W1) 255,264 2.0
Current assets
Inventory ($94,302 – ($5,000 – $4,000)) 93,302 1.0
Trade receivables (W2) 12,707 1.0
Prepayments (3/15 × $3,000) 600 0.5
–––––––
Total assets 361,873
–––––––
EQUITY AND LIABILITIES
Equity
Equity share capital @ $1 shares 40,000 0.5
Share premium 12,500 0.5
Retained earnings (W3) 220,436 0.5
–––––––
Total equity 272,936
Non-current liabilities
7 % Bank loan 20X9 26,000 0.5
Current liabilities
Trade and other payables (W4) 30,259 0.5
Overdraft 848 0.5
Income tax liability 31,830 0.5
––––––– ––––
Equity and liabilities 361,873 8.0
––––––– ––––

Workings
(W1) PPE
$
Land and buildings at cost 281,450
Disposal at carrying amount (6,250)
Accumulated depreciation (65,332)
Depreciation charge (4,029)
Plant and equipment cost 94,400
Accumulated depreciation (24,500)
Depreciation charge (20,475)
–––––––
Total 255,264
–––––––

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 CONSOLIDATION TEST ANSWERS

(W2) Trade and other receivables

$
Trade receivables per TB 13,731
Irrecoverable debts w/off (631)
Allowance for receivables (393)
––––––
Total 12,707
––––––
(W3) Retained earnings
$
Retained earnings 11,467
Profit for the year 208,969
–––––––
Total 220,436
–––––––
(W4) Trade and other payables
$
Trade and other payables 25,342
Distribution accrual 3,245
Loan Interest accrual 455
Accruals 1,217
––––––
Total 30,259
––––––

Marking scheme
Marks
Statement of profit or loss 7
Statement of financial position 8
–––
Total 15
–––

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F A AN D F FA: F INAN C IAL A C COUN T IN G

2 BOSTON
(a) Statement of profit or loss for the year ended 30 June 20X1
$ Marks

Revenue 100,092 0.5

Cost of sales (W1) (82,035) 3.0
––––––
Gross profit 28,057
Distribution costs (2,832) 1.0
Administrative expenses (W2) (3,324) 1.5
––––––
Profit before interest 21,901
Finance costs (W3) (1,100) 1.0
–––––– ––––
Profit for year 20,801 7.0
–––––– ––––
Workings
(W1) Cost of sales
$
Opening inventory 17,728
Purchases 76,723
Less closing inventory (17,842)
Depreciation:
Building (2% × 77,300) 1,546
P & E (20 % × (30,200 – 10,800) 3,880
––––––
Total 82,035
––––––
(W2) Administrative expenses
$
Administrative expenses per TB 2,774
Irrecoverable debt w/off 550
–––––
Total 3,324
–––––
(W3) Finance costs
$
Finance costs per TB 0
Accrual (5% × 722,000) 1,100
–––––
Total 1,100
–––––

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 CONSOLIDATION TEST ANSWERS

(b) Boston – Statement of financial position as at 30 June 20X1

$ Marks
ASSETS
Non-current assets
Property, plant and equipment (W1) 91,024 2.5
Current assets
Inventory 17,842 0.5
Trade and other receivables (W2) 19,478 1.0
Cash and cash equivalents 1,221 0.5
–––––––
129,565
–––––––
CAPITAL AND LIABILITIES
Capital at 1 July 20X0 106,792 0.5
Profit for the year 20,801 1.0
Less: drawings for the year (23,000) 0.5
–––––––
Capital at 30 June 20X1 104,593

Non-current liabilities
5% bank loan 22,000 0.5

Current liabilities
Trade and other payables (W3) 2,972 1.0
––––––– ––––
Capital and liabilities 129,565 8.0
––––––– ––––
Workings
(W1) PPE
$
Land and buildings cost 97,300
Accumulated depreciation (20,250)
Depreciation charge (1,546)
Plant and equipment cost 30,200
Accumulated depreciation (10,800)
Depreciation charge (3,880)
–––––––
Total 91,024
–––––––

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(W2) Trade and other receivables

$
Trade and other receivables 20,028
Irrecoverable debt w/off (550)
––––––
Total 19,478
––––––
(W3) Trade and other payables
$
Trade and other payables 1,872
Finance costs accrual 1,100
––––––
Total 2,972
––––––

Marking scheme
Marks
Statement of profit or loss 7
Statement of financial position 8
–––
Total 15
–––

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