SECTION A: COMPULSORY QUESTIONS
Instructions: The questions are COMPULSORY and MUST be attempted
QUESTION 1
The following is the trial balance of Walt Disney as at 31 May 2020:
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Issued and called-up capital: 80,000 ordinary shares 50,000 5% preference shares
Land and buildings at valuation
Motor vehicles (costs £35,000) Fixtures and fittings (costs £40,000) Development costs (costs £10,000) Interim dividend on preference shares Purchases / Sales revenues Allowance for receivables
Wages and Salaries Irrecoverable receivables Discount allowed / received Goodwill
Listed investment
Capital redemption reserve Revaluation reserve
Formation expenses
Director’s remuneration
Return inwards / outwards
Trade receivables/ trade payables Rent and rates
Dividends received
Retained earnings
Utility bills
Audit fee
Revenue reserve
Share premium
10% debentures
Inventories at 1 May 2019
Bank overdraft
Dr Cr ££
80,000
50,000 137,000
Updated on 01/02/2019
29,400 32,950 6,600 1,250 78,493
5,948 656 492 10,000 4,873
250 13,000 1,629 11,600 596
1,028 764
9,436
3,643
130,846 860
396
9,000 13,500
1,834 8,450
310 3,126
8,400
5,600 30,000
Assessment Brief Pro Forma & Moderation Of Task
Additional Information:
1) Inventory at 31 May 2020 was £12,456.
2) Rent and rates paid £100 on 31 May 2020.
3) Utility bills owing at £220.
4) Depreciation given as follows:
Motor vehicles Fixtures & Fittings Development cost
£7,350 £6,590 £660
5) The value of goodwill did not fall below the value recorded on the trial balance. The company does not depreciate its building.
6) Commission received of £560 and maintenance fees of £310 has not recorded on the trial balance.
7) Formation expenses are to be written off against the share premium.
8) The provision for irrecoverable receivables is to be adjusted to 5% of the trade
receivables at the end of the year.
9) The debentures were issued on 1 May 2019. The interest on debentures is
payable annually and the amount due to be provided for.
10)The directors have decided to transfer £4,000 to the revenue reserve this year. 11)The debenture interest for the year and the final dividend on the preference
shares are outstanding at the end of the year. 12)Corporation tax of £2,544.
You are required to prepare the following statements in accordance with IAS 1 Presentation of Financial Statements:
(a) Statement of Comprehensive Income for the year ended 31 May 2020.
(b) Statement of Changes in Equity for the Year ended 31 May 2020. (c) Statement of Financial Position as at 31 May 2020.
[12 marks] [2.5 marks] [11.5 marks]
(d) Explain the purpose and structure of the financial statements in part (a), (b) and (c). [10 marks] [Total: 40 marks]
Updated on 01/02/2019
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Assessment Brief Pro Forma & Moderation Of Task SECTION B: SHORT STRUCTURED QUESTIONS
Instructions: Answer only TWO (2) questions.
QUESTION 1
Wayback, the bookkeeper of Wayback Botanic, a wholesaler distributor of garden equipment prepares accounts without the aid of a computerized accounting system. Given the summary of his cash book for May 2020:
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Cash book $$
Opening balance b/d
Receipts
4,120 45,320 49,440
Payments
Closing balance c/d
46,560 2,880 49,440
On his investigation, he discover that 31 May 2020:
Two cheques paid to supplier for $642 and $1200 has not yet been presented to
the bank.
Dividends received of $189 are shown on the bank statement but not entered in
the cash book.
A cheque for $54 has been returned by the bank marked ‘refer to drawer’, but it
has not been written back in the cash book.
A cheque drawn for $141 has been entered in error as a receipt in the cash
book.
The bank has debited a cheque for $216 in error to the company’s account.
Bank charges of $105 shown on the bank statement have not been entered in
the cash book.
The last page of the paying-in book shows a deposit of $1904 that has not yet
been credited by the bank.
Updated on 01/02/2019
Assessment Brief Pro Forma & Moderation Of Task Required:
a) Show the adjustments that should be made in the cash book. [6 marks]
b) Prepare a bank reconciliation statement at 31 May 2020. [4 marks]
c) Based on your answer in part (a) and part (b), explain the purpose of preparing
bank reconciliation and why there is a difference in preparing of the bank reconciliation. [20 marks]
[Total: 30 marks]
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Updated on 01/02/2019
Assessment Brief Pro Forma & Moderation Of Task QUESTION 2
When Burk failed the finals of his Business Administration degree, he opened a shop near the university selling second-hand books. The bookkeeper who maintained his ledger resigned shortly after the year end. Burk felt that he had sufficient knowledge to extract a Trial Balance from his books of account and is surprised when the Trial Balance as shown below failed to balance.
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Trial Balance as at 31 May 2020 Dr Cr
‘000 ‘000
Furniture
Cash
Bank
Sales
Rent
Purchases Advertising Stationery
Salaries and Wages Capital
|
-
20
13 299 12 - 14 6
- 80
|
120 -
-
-
- 148 -
- 46 -
|
444 314
Required:
(a) Prepare a short report why the trial balance fails to balance and redraft a new trial balance.
[9 marks]
(b) “Relevance and reliability are accorded equal primary status as principal characteristics of information to be included in financial statements.”
Discuss the possibility of conflict between the two qualities and how such conflict should be resolved.
(c) Explain the purpose and causes of depreciation.
[11 marks]
[10 marks]
[Total: 30 marks]