Mark Scheme

June 2019

Pearson LCCI Certificate in Financial

Accounting Level 4
(ASE20101)
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June 2019
Publications Code 64197_MS
All the material in this publication is copyright
© Pearson Education Ltd 2019
General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the
first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded

for what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their
perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should

be used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners
should always award full marks if deserved, i.e. if the answer matches the
mark scheme. Examiners should also be prepared to award zero marks if
the candidate’s response is not worthy of credit according to the mark
scheme.

• Where some judgement is required, mark schemes will provide the

principles by which marks will be awarded and exemplification may be
limited.

• When examiners are in doubt regarding the application of the mark scheme
to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it
with an alternative response.

• Where marks are awarded for own figure answers, these marks can only be
awarded if evidence of how the candidate arrived at their values has been
provided (their workings).

• If candidate's fail to provide their workings when instructed in the paper, it may
not be possible to achieve all marks associated with the question, even if the final
answer is correct.

• For calculation questions full marks can be awarded where correct answer is seen
with no workings shown, unless question states that candidate must provide
workings.
Abbreviations

of Own Figure rule

Accuracy marks can be awarded where the candidates’ answer does not match
the mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidates’ answer is correct,
and in line with the mark scheme.
Question Answer (AO2) 4 Mark
1(a) Award marks as indicated.

$4 365 400 (4)

Working

$
4 180 000
75 400 (1)
40 000 (1)
70 000 (1)
4 365 400 (1of) (4)

Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

Question Answer (AO2) 10 Mark

1(b) Award marks for correct figures with labels as indicated.

Snapz plc
Statement of profit or loss for the year ended 31 March 2019

$000
Revenue 24 630.0 (1)
Cost of sales W1 (11 264.0) (2of)
Gross profit 13 366.0 (1of)
Administrative expenses (4 365.4) (1of)
Distribution costs (5 570.0) (1)
Profit from operations 3 430.6 (1of)
Finance costs (41.0) (1)
Profit before taxation 3 389.6 (1of)
Taxation (480.0)
Profit for the year 2 909.6 (1of)

W1 Cost of sales
$000
2 330
11 280 (1)
(2 556)
210 (1)
11 264
(10)
Question Answer (AO2) 5 Mark
1(c) Award marks as indicated for each correct row.

Snapz plc
Statement of changes in equity for the year ended
31 March 2019

Share Share Retained

capital premium earnings Total
$000 $000 $000 $000
Balance at 1 April 4 500.0 480.0 490.0 5 470.0
2018

Rights issue 900.0 45.0 945.0

(1)
Final dividend (540.0) (540.0)
(1)
Bonus issue 600.0 (525.0) (75.0) -
(1)
Profit for the year 2 909.6 2 909.6
(1of)
Balance at 31 March 6 000.0 - 2 784.6 8 784.6
(5)
2019 (1of)

Question Answer (AO1) 2 Mark

1(d) Award marks as indicated.

Equity dividends paid (1)

Changes in revaluation reserve (1)

Accept any other appropriate responses

(2)

Total for Question 1 = 21 marks

Question Answer (AO2) 2 Mark
number
2(a)(i) Award marks as indicated

$000
$164 (2)

Working
$000 $000
Price paid 890
Share capital 750
Share premium 40
Revaluation 150
Retained earnings 220
1 160
X (2)
60% 696
194
Less: impairment 30 (1of)
Goodwill 164 (1of)
Additional guidance
Correct answer only scores 2 marks.
No specific format required.

Question Answer (AO2) 3 Mark

2(a)(ii) Award marks as indicated

$000
$1 812 (3)

Working

$000 (3)
Par plc 1 692
Haplet Ltd post-acquisition 156
Less: goodwill impairment (30) (1of)
Less: unrealised profit (6) (1of)
1 812 (1of)
Additional guidance
Correct answer only scores 3 marks.
No specific format required.
Question Answer (AO2) 2 Mark
2(a)(iii) Award marks as indicated

$000
$568 (2) W

W
$1 420 000 (1) x 40% = $568 000 (1of)
(2)

Additional guidance
Correct answer only scores 2 marks.
No specific format required.
Question Answer (AO2) 9
Mark
2(b) Award marks for correct figures with labels as indicated.

Par plc
Consolidated statement of financial position at 30 April 2019

$000
Assets
Non-current assets
Property plant and equipment 8 350 (1)
Goodwill 164 (1of)
8 514
Current assets
Inventory 4 214 (1)
Trade and other receivables 2 096 (1)
Cash and cash equivalents 639 (1)
6 949
Total assets 15 463

Equity and liabilities

Equity
Share capital
(ordinary shares at $1 each) 9 000
Share premium 590 (1of)
Revaluation reserve 680
Retained earnings 1 812
Equity attributable to
12 082
shareholders of parent
Non-controlling interest 568 (1of)
Total equity 12 650
Non-current liabilities
6% debenture (2025-27) 950
Current liabilities
Trade and other payables 1 133 (1)
Taxation payable 730
1 863
Total liabilities 2 813 (9)
Total equity and liabilities 15 463 (1of)
Additional Guidance
Award total equity and liabilities own figure mark only if it matches the total assets.
Question Answer (AO3) 3 Mark
2(c) Award 1 mark for identification plus up to 2 marks for relevant
development

The group’s share of an associate must be shown in the consolidated

statement of financial position (1) as it represents the parent
company’s share of the investment in the associate (1) over which it
holds significant influence (1).

Accept any other appropriate responses

(3)

Total for Question 2 = 19 marks

Question Answer (AO2) 4 Mark
3(a) Award marks as indicated.

$000
$285 (4)

Working

$000
3 510
820 (1)
25 (1)
(150) (1)
(3920) (4)
285 (1of)
Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

Question Answer (AO2) 10 Mark

3(b) Award marks for correct figures with appropriate label as
indicated.
Dalsay Ltd
Reconciliation of profit from operations to net cash flow
from operating activities for the year ended 31 March 2019

$000
Profit from operations 405
Depreciation plant and machinery 285 (1)
Loss on disposal 15 (1)
Amortisation development expenditure 18 (1)
Impairment of goodwill 50 (1)
Increase in inventories (35)
Decrease in trade receivables 5 (1)
Increase in trade payables 66
Cash generated from operating activities 809
Taxation paid W1 (90) (2of)
Interest paid W2 (34) (2of)
Net cash flow from operating activities 685 (1of)
(10)
W1 W2
$000 $000
(90) (2) (34) (2)

(85) (6)
(105) (1) (48) (1)
100 20
(90) (1of) (34) (1of)
Question Answer AO2 (7) Mark
3(c) Award marks for correct figures with labels as indicated.

Dalsay plc
Statement of cash flows for the year ended 31 March 2019

$000 $000
Net cash flow from operating 685
activities
Investing activities
Purchase of property, plant and
equipment (820)
Disposal of property, plant and 135
equipment
Development expenditure (48)
Net cash used in investing activities (733) (1of)
Financing activities
Share capital issued 165 (1)
8% debentures repaid
(300) (1)
10% debentures issued 500
Equity dividend paid (145) (1)
Net cash from financing activities 220 (1of)
Net increase in cash and cash 172 (1of)
equivalents
Cash and cash equivalents at start of
year 73 (1 for
Cash and cash equivalents at end of 245 both)
year (7)

Total for Question 3 = 21 marks

Question Answer (AO2) 7 Mark
4(a) Award marks for each correct figure as indicated.
Award 1 mark for all correct dates and details.

Share Capital Account

Date Details $000 Date Details $000
2018 2018
Aug 31 Balance c/d 1 100 June 1 Balance b/d 720
Jul 31 Bank 180
(1)
Aug 31 Share 186
premium (1)
Retained 14
earnings (1)
1 100 1 100
2018
Sept 1 Balance b/d 1 100
(1of)

Share Premium Account

Date Details $ Date Details $
2018 Share 2018
Aug 31 capital 186 June 1 Balance b/d 150
(1of)
Jul 31 Bank 36
(1)
186 186

(7)

Question Answer (AO1) 2 Mark

4(b) Award marks as indicated. Max 2 marks.

Do not carry voting rights (1)

Carry a fixed rate of dividend (1)
Dividends paid in preference to ordinary shares (1)

Accept any other appropriate responses

(2)
Question Answer (AO3) 2 Mark
4(c) Award 1 mark for identification plus 1 mark for relevant
development.

A contingent asset should be disclosed as a note to the accounts when

economic benefit is probable (1) as the event will be partly out of the
control of the company (1).
(2)

Question Answer (AO3) 2 Mark

4(d) Award 1 mark for identification plus 1 mark for relevant
development.

A non-adjusting event after the reporting period should not be

adjusted in the financial statements but should be disclosed as a note
to the accounts (1) as the conditions arose after the end of the
reporting period (1). (2)

Question Answer (AO4) 3 Mark

4(e)(i) Award 1 marks for a valid assessment of profitability

Gross profit margin has worsened which may be due to selling at a

lower price relative to its cost of sales (1).

Operating profit margin has improved indicating better control over

operating expenses (1).

Despite the decrease in gross margin, overall profitability has

improved due to the improvement in controlling operating expenses
(1).

Accept any other appropriate responses.

(3)
Question Answer (AO4) 3 Mark
4(e)(ii) Award 1 marks for a valid assessment of capital structure

Despite the improved profitability, return on equity has worsened as a

result of the increased equity funding (1).

Gearing has improved as a result of an increased proportion of equity

investment compared to external borrowing (1).

Overall, the capital structure of the business is much improved (1).

Accept any other appropriate responses.

(3)

Total for Question 4 = 19 marks

Question Answer (AO1) 3 Mark
5(a) Award marks as indicated.

Function Directors Shareholders Auditors

To approve major business
decisions of the company.  (1)

Setting the overall strategy

for the business.  (1)

Evaluate the
appropriateness of  (1)
accounting policies.

(3)

Question Answer (AO1) 3 Mark

5(b) Award marks as indicated.

Accounting Title
standard
IAS 38 Intangible Assets (1)

IAS 8 (1) Accounting Policies, Changes in Accounting

Estimates and Errors

IAS 16 Property, Plant and Equipment (1)

(3)

Question Answer (AO1) 2 Mark

5(c) Award marks as indicated. Maximum 2 marks.

Does not take account of inflation (1)

Only of value if there is a basis for comparison (1)
Does not take account of changes in accounting policies (1)
Based on historical data (1)

Accept any other appropriate responses. (2)

Question Answer (AO3) 3 Mark
5(d) Award 1 mark for identification plus up to 2 marks for relevant
development

The price/earnings ratio demonstrates that investors are prepared to

pay a higher price for a share in relation to its current earning
capability (1). It does this by relating the market value of a share to
the earnings per share (1). It measures market confidence in the
future earning power of the business (1).
(3)
Accept any other appropriate responses.
Question Answer AO4 (4) AO5 (5) Mark
Number
5(e) Award 1 mark for any valid points of analysis up to
maximum 4 marks.
Award 1 mark for any valid points of evaluation up to
maximum 4 marks.
Award 1 mark for any recommendation that is justified
using the outcome of the analysis and evaluation.

Indicator Analysis Evaluation

Return on Tee plc return on Tee plc is making better
capital capital employed / more profitable use of
employed (18%) is better available capital
(ROCE) than Ewe plc (15%) employed than Ewe plc
(1) (1)

Quick Ewe plc has better This indicates that Ewe

ratio (acid quick ratio (1.3:1) plc is better able to meet
test) than Tee plc (0.8:1) current liabilities without
(1) liquidating inventory (1)

Dividend Tee plc dividend This indicates that Tee

cover cover cover (3.5 plc is more likely to
times) is better than maintain current
Eff plc (1.8 times) dividends at a similar
(1) level (1)

Earnings Tee plc has a better This suggests that Tee

per share earnings per share plc will be better able to
($1.63) than Ewe invest higher sums into
plc (1.49) (1) future development than
Ewe plc (1).

Sample recommendation:

Despite the higher liquidity of Ewe plc, all other ratios

suggest that Tee plc is a more secure investment for
Binti’s savings offering better income and growth
potential(1).

Award 1 mark for any valid analysis or

evaluation statement that focuses on the
opposite company from the examples given. (9)
Total for Question 5 = 20 marks

TOTAL FOR PAPER = 100 MARKS