Answers

ACCA Certified Accounting Technician Examination Paper T6 (INT)

Drafting Financial Statements (International Stream)

June 2011 Answers

and Marking Scheme

Section A
1

Phil
$
Profit
Salary
Interest on capital
(200,000 x 5%)
(100,000 x 5% x )
(125,000 x 5% x )
Profit share
Total profit share

James
$

25,750

(10,000)
10,000

2,500
3,125

112,125

147,875

112,125

117,750

$
8,000,000
3,000,000

11,000,000
(8,750,000)

2,250,000

Consideration
Fair value of non-controlling interest
Less fair value of net assets at acquisition
Goodwill

C
Profit after tax
Preferred dividend
Profit after tax and preferred dividend
Ordinary dividend
Retained Profit

$
21,800
1,800 (6% of $1 x 30,000)

20,000
12,000 (60%)

8,000 (40%)

12,000/100,000 = 12 cents

$
265,625
(25,750)

10 C

13

(5,625)

224,250

Section B
Marks Workings $000
1

(a)

(i)

Bayzell Co
Statement of comprehensive income for the year ended 31 May 2011
$000
11,483
(7,910)

3,573
(578)
(1,518)
(30)

1,447
(310)

1,137

Revenue
Cost of sales (W1)
Gross profit
Distribution costs (W1)
Administrative expenses (W1)
Finance cost
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income:
Gains on land revaluation

90

1,227

Total comprehensive income for the year

(ii)

05

Bayzell Co
Statement of financial position as at 31 May 2011
$000
Assets
Non-current assets
Property, plant and equipment (W2)
Intangible asset (W3)

465
1,819
232

Total assets
Equity and liabilities
Equity and reserves
Share capital
Share premium
Other components of equity
Retained earnings
Non-current liabilities
Long-term borrowing
Current liabilities
Trade and other payables
Total equity and liabilities

14

(11,700 217)

35
55
10
05

10

(1,550 1,460)

05

200

05

$000

6,092
336

6,428

Current assets
Inventory
Trade receivables
Cash and cash equivalents

10
65

2,516

8,944

40
10

05
15
05

4,400
486
90
1,782

6,758

05
05
10
15

300

10

1,886

8,944

15

140

(1,900 95 + 14)

(800 + 1,137 155)

(1,488 + 310 + 88)

Marks
Workings
W1

Opening inventory
Purchases
Wages and salaries (40:30:30)
Insurance ($108 $14) (50:50)
Electricity expenses ($542 + $88) (60:20:20)
Administrative expenses
Increase in allowance for receivables
Discounts received
Directors remuneration
Depreciation plant
Depreciation buildings (50:30:20)
Amortisation of intangible asset
Closing inventory

Cost of
Sales
$000
990
6,850
448

Distribution Administrative
Costs
Expenses
$000
$000

336
47
126

378

Cost
Depreciation b/f
Current years depreciation:
Plant ($1,362 $682) x 20%
Buildings $4,600 x 5%
Revaluation of land

430
136
115
48
(465)

7,910

(65 marks) (35

69

46

578

marks)

1,518

(55 marks)

Plant
$000
1,362
(682)

Total
Property, Plant
& Equipment
$000
7,422
(1,054)

Buildings
$000
4,600
(372)

(136)
(230)
90

1,550

(1 mark)

336
47
126
500
33

(590)

W2 Non-current assets
Land
$000
1,460

05
05
15
20
30
05
10
10
05
05
30
05
10

3,998

(15 marks)

544

(15 marks)

155

(136)
(230)
90

6,092

(4 marks)

W3 Intangible Assets
$000
384
(48)

336

Cost
Amortisation (384/4)*6/12
Value as at 31 May 2011
(b)

Accounting ratios
Earnings per share

Profit after tax

No. of ordinary shares

1,137

4,400

258 cents

Interest cover

Profit before int and tax

Interest charges

1,477

30

492 times

Current assets inventory

Current liabilities

2,051

1,886

11:1

Acid test (quick) ratio

Payments collection period

Trade accounts payable

Purchases

x 365

1,488

6,850

x 365

793 days

Trade accounts payable

Cost of sales

x 365

1,488

7,910

x 365

687 days

Alternative calculation:
Payments collection period

Marking scheme: 05 mark for stating the correct formula and 1 mark for calculating the correct ratio.

15

Marks
2

(a)

Calculation of profit before tax

Retained Earnings
$000
20
35
120

175

Taxation
Dividends
Bal. at 31 May 2011

(b)

Bal. at 1 June 2010

Profit before tax (Bal. fig)

$000
50
125

175

10
10 + 10
10

40

Prepared in accordance with IAS 7

Erley Co
Statement of cash flows for the year ended 31 May 2011
$000
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation
Loss on sale of tangible non-current assets
Interest
Operating profit before working capital changes
Decrease in inventory
Increase in receivables
Decrease in payables
Cash generated from operations
Interest paid
Tax paid
Net cash from operating activities
Cash flow from investing activities
Purchase of tangible non-current assets
Receipts from sales of tangible non-current assets

05
$000

125

05

96
5
2

228
10
(50)
(5)

183
(2)
(25)

05
05
05
10
10
10
05
20
156

(316)
30

Net cash used in investing activities

Cash flows from financing activities
Dividends paid
Proceeds from issue of share capital
Repayment of long term borrowing

25
10
(286)

(35)
150
(10)

Net cash from financing activities

10
15
10
105

(25)
15

(10)

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Note
IAS 7 allows interest paid to be shown in either financing cash flow or as operating cash flow.
Workings
Non-current assets
Balance b/f
New non-current assets (bal)

$000
565
316

Depreciation
Disposals
Balance c/f

881

16

$000
96
35
750

881

05
05

160

Marks
3

(a)

C Mars accounts
(i)

Revaluation account
Plant and machinery loss
Capital account

(ii)

$
10,500
60,125

70,625

$
50,000
20,625

70,625

Goodwill
Property profit

10 + 05
0 + 10

Capital account
Balance c/f to new business
Motor vehicle

$
186,700
5,500

192,200

$
132,075
60,125

192,200

Balance b/f
Profit on revaluation

05 + 0
10 + 10

J Neptunes accounts
(i)

Revaluation account
Inventory loss
Capital account

(ii)

$
2,750
37,250

40,000

$
40,000

Goodwill

10 + 05

40,000

Capital account
Balance c/f to new business

$
120,550

$
83,300
37,250

120,550

Balance b/f
Profit on revaluation

120,550

05 + 0
10

80

Marks Workings
(b)

Planets
Statement of financial position as at 31 May 2011
Assets
Non-current assets
Property
Plant and machinery
Motor vehicle

$
110,000
91,200
25,025

226,225

Current assets
Inventory
Trade receivables
Cash at bank

25,300
8,775
13,475

Total assets
Capital and liabilities
Capital accounts
C Mars
J Neptune
Current liabilities
Trade payables
Loan from M Pluto
Total capital and liabilities

17

05
1
05

($34,000 + $57,200)

1
05
05

($11,550 + $13,750)

126,700
90,550

217,250

15
15

W1
W1

46,625
9,900

273,775

05
05

47,550

273,775

80

Marks
Working 1
Partners Capital accounts
Mars
$
Goodwill written off
2:1 x $90,000
60,000
Balance c/f
126,700

186,700

(c)

Neptune
$
30,000
90,550

120,550

Balance b/f from

old business

Mars
$

Neptune
$

186,700

120,550

186,700

120,550

Advantages
Within a partnership the business risk is shared with others.
A partnership may find it easier to raise finance from the bank.
A partnership should have a wider pool of business skills and talents.
Marking scheme: 1 mark for each statement up to a max of 2 marks.
Disadvantages
The profits are shared with more people.
A loss of autonomy over business decisions.
There may be disputes between the partners.
Marking scheme: 1 mark for each statement up to a max of 2 marks.

18

05 + 05 + 05 + 05
05 + 05