Accounting Exam attached
2022/23 POSTGRADUATE EXAMINATION PAPER BFM234 – ACCOUNTING FOR NON-FINANCIAL MANAGERS TAKEAWAY EXAM – 12 HOUR ACCESS Start Date and Time: Wednesday 14th December 2022 @ 12:00 midday/noon UK TIME PLEASE READ CAREFULLY THERE WILL BE NO EXTENSIONS TO THIS TIME CONSIDER THIS AS AN OPEN BOOK EXAM, AND NOT COURSEWORK, YOU ARE NOT EXPECTED TO SPEND THE EXTENDED TIME ON YOUR WORK Instructions to Candidates: · Please type your answers on a WORD DOCUMENT. · Insert your Candidate Number on the WORD DOCUMENT in the HEADING SECTION of the DOCUMENT. · If you have any hand-written calculations or answers, scan or take a photo, and insert into the word file · You can only submit ONE DOCUMENT. You must combine all answers, figures, tables, and calculations into ONE DOCUMENT. · Save your FILE as: “Module Code – Candidate Number”. · For example: BM1155-123456 · This will also be your TITLE when you submit via TURNITIN. · Please carefully read the instructions before your submit via TURNITN on Blackboard. · NOTE SPOT CHECKS VIA ORAL VERIFICATON MAY APPLY TO THIS MODULE Examination Paper Instructions to Candidate: · Answer all questions. · Section A: Answer Both questions. · Section B: Answer Both questions. · All questions carry equal marks. · Each question/section will be weighted as follows: · Section A = 50% · Section B = 50% Additional Instructions - Please read VERY CAREFULLY · Citations and References: You should cite sources though this is not to be considered as coursework, and as such it is not expected for you to include lengthy quotes, and no formal referencing is required Plagiarism: All submissions will be put through Turnitin and tested for plagiarism. Therefore, please do not copy contents from web and/or any other source. · DIAGRAMS, FIGURES or TABLES - If you are including any diagrams, figures or tables in your answer, these MUST NOT be copied from the internet or any other source. Please include your own figures/diagrams, i.e. drawn using a suitable editor or drawn and inserted by you. Figures should be cited in the main text and appropriately explained. · You MUST not contact the module leader, teaching team or ABS Programme Office (Exams & Assessment or Student Support) through email during the 24-hr period, when the exam is taking place, with any queries related to the exam questions to ensure fairness to all students. Please answer the questions to the best of your abilities and your own understanding. Do not mark your answers on this examination paper. Submit your answers on a Microsoft WORD DOCUMENT. SECTION A ANSWER BOTH QUESTIONS QUESTION A1 GFC plc has produced the following trial balance as at 31 January 2022: £ £ Revenue 760,000 Inventories at 1 Feb 2021 37,500 Purchases 250,000 Distribution costs 110,000 Administrative expenses 170,000 Dividends paid 62,000 Buildings at cost 750,000 Accumulated depreciation at 1 Feb 2021 48,000 Plant and machinery at Cost 325,000 Accumulated depreciation at 1 Feb 2021 80,000 Motor vehicles at Cost 125,000 Accumulated depreciation at 1 Feb 2021 45,000 Trade receivables 345,000 Trade payables 190,000 Prepayments 175,000 Accruals 85,000 Bank balance 110,000 Bank overdraft 55,000 Bank loan 121,500 Share capital – ordinary shares of £1 390,000 Retained earnings at 1 Feb 2021 660,000 Share premium account 25,000 2,459,500 2,459,500 The following information has not yet been taken account of: (i) The closing inventory is determined to be £260,000. (ii) Buildings - Straight line method over 50 years - Allocated to cost of sales. Plant and machinery - 10% straight line method - Split 50/50 between cost of sales and administrative expenses. Motor vehicles - 20% reducing balance method - allocated entirely to distribution costs. (iii) The trade receivables balance includes £5,000 due from James Collins who has now been declared bankrupt. In the circumstances, it has been decided to write the debt off as in irrecoverable / bad debt which will be allocated to administrative expenses. (iv) GFC Plc has now decided to create an allowance for doubtful debts and allocate it to administrative expenses. So, the allowance for doubtful debts at 31 January 2022 is to be 10% of trade receivables at that date (after writing off irrecoverable debts). (v) During the year GFC plc issued 20,000 £1 ordinary shares at an issue price of £2.60 per share. (vi) Management have decided to transfer £20,000 of retained earnings to a general reserve account. (vii) Distribution costs prepaid at 31 January amounted to £660. (viii) Administrative costs accrued and due at 31 January 2022 amounted to £5,500. (ix) The bank loan was taken out on 1 February 2020 and is repayable in 8 years. No adjustments have been made for the interest charge of 10% per annum. (x) Corporation tax of £60,780 has been estimated in respect of the profit for the year. Required: (a) Prepare a statement of profit or loss for GFC plc for the year ended 31 January 2022. [15 marks] (b) Prepare a statement of financial position for GFC plc as at 31 January 2022. [10 marks] Total mark………………………………………………………………………[25 marks] QUESTION A2 “The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling, or holding equity and debt instruments and providing or settling loans and other forms of credit.” International Accounting Standards Board (2010) Required: (a) Identify the information these users are likely to need from accounting statements and reports. [15 marks] (b) Do you think it is possible to produce a single set of financial reports that will meet the needs of all primary users? [10 marks] Total…………………………………………………………….………………..[25 marks] SECTION B ANSWER BOTH QUESTIONS QUESTION B1 Stourbridge plc is considering purchasing an interest in its competitor Bromsgrove plc. The Managing Director of Stourbridge plc has obtained the two most recent statements of profit or loss and statements of financial position for Bromsgrove plc as shown below: Statement of Profit or Loss for Bromsgrove plc for the years ending 31/12/2021 31/12/2020 £ £ Revenue 1,600,047 1,705,047 Cost of sales (963,351) (1,086,701) Gross profit 636,696 618,346 Other operating income 39,045 40,045 Distribution costs (33,891) (32,987) Administrative expenses (156,256) (146,566) Profit / (loss) from operations 485,594 478,838 Investment income 11,000 11,000 Finance costs (6,260) (6,590) Profit / (loss) before tax 490,334 483,248 Income tax expense (22,500) (22,500) Profit / (loss) for year 467,834 460,748 Statement of Financial Position for Bromsgrove plc as at 31/12/2021 31/12/2020 £ £ Non-current assets Land and buildings 362,300 365,200 Property, plant and equipment 55,800 60,200 Intangible assets 12,000 12,500 430,100 437,900 Current assets Inventories 65,000 62,500 Trade receivables 161,079 145,678 Prepayments 15,000 17,000 Cash and cash equivalents 112,270 84,106 353,349 309,284 Total assets 783,449 747,184 Current liabilities Trade payables 12,000 13,500 Tax payable 22,500 22,500 Provision 5,000 6,000 Preference dividend 2,500 2,500 42,000 44,500 Non-current liabilities Borrowings 62,600 62,600 Total liabilities 104,600 107,100 Net assets 678,849 640,084 Equity Ordinary share capital 110,000 110,000 Preference shares 50,000 50,000 Retained earnings 518,849 480,084 Total equity 678,849 640,084 Required: (a) Explain the purpose of ratio analysis, what type of information it reveals and the limitations of its use. [8marks] (b) Calculate: 1) Gross profit margin 2) Operating profit margin 3) Return on capital employed 4) Inventory holding period 5) Settlement period for trade receivables 6) Settlement period for trade payables 7) Current Ratio 8) Acid Test Ratio 9) Interest cover 10) Gearing Ratio You should include the formula for the ratio itself and a calculation for both years using the data above. [10 marks] (c) Using the information provided by these ratios, comment on the financial performance of Bromsgrove plc advising whether Stourbridge plc should invest in Bromsgrove plc or not? [7 marks] Total mark…………………………………………………………………… [25 marks] QUESTION B2 Kidderminster Ltd is an electronic waste recycling company established by Mustafa, in 2015. Kidderminster Ltd is the first company offering green recycling of electronic waste and safe data destruction services in Birmingham area. Kidderminster Ltd has grown rapidly in number of its employees and income. Due to the rapid growth and uncertain business environment, Mustafa was advised to introduce budgeting into his company to have a better planning and control in the business and particularly to have better cash forecast. Required: As a management accountant, Mustafa has asked you to briefly explain to him: (a) What is meant by ‘control’ and how it differs from ‘planning’? [5 marks] (b) What is a budget and budgetary control? [5 marks] (c) Why a cash budget is important and how it is prepared? [8 marks] (d) Besides planning and control, what other benefits to be gained from budgeting? [7 marks] Total mark……………………………………………………………………... [25 marks] END OF PAPER Page 4 of 4 This examination is subject to the Fixed -time Assessments Regulations for Candidates