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John Ogilvie High School
Higher Accounting
Company Accounts
Higher Accounting
Company Accounts Page 2
Question 1 The following figures were taken from the records of Ochil Industries plc as at 31 December
Year 2.
Dr Cr
£000 £000
Revenue of finished goods 1,680
Purchases of raw materials 280
Inventories at 1 January Year 2:
Raw materials 48
Work-in-progress 22
Finished goods 84
Direct wages 300
Salaries 90
Insurance 100
Factory expenses 10
Factory power 40
Office expenses 5
Factory machinery at cost 700
Provision for depreciation on factory machinery
at 1 January Year 2 100
Office equipment at cost 100
500,000 ordinary shares of £1 each 500
Unappropriated profit at 1 January Year 2 8
£000 Notes at 31 December Year 2 1 Inventories
Raw materials £40 Work-in-progress £32 Finished goods £68
2 Insurance receivable (prepaid) £20
3 Office expenses payable (due) £1
4 Provide for corporation tax £196
5 Factory machinery is depreciated at 10% per annum on cost.
6 Office equipment is depreciated at 5% per annum on cost.
7 Salaries are to be apportioned between the factory and the office in the ratio 2:1.
Higher Accounting
Company Accounts Page 3
8 Insurance, taking into account the receivable (prepayment), is to be divided 75% to the factory and 25% to the office.
9 An interim dividend of 15% has been paid on ordinary shares but has been omitted from the accounts.
(a) Prepare, for internal use, the Manufacturing Account only, for the year ended 31 December Year 2, labelling clearly the:
(i) Cost of raw materials consumed
(ii) Prime cost
(iii) Factory cost of production 10
(b) Prepare the Income Statement (Trading, Profit and Loss Account), for internal use, (including the appropriation of available profits), for the year ended 31 December Year 2. 10
Total marks (20)
Higher Accounting
Company Accounts Page 4
Question 2
The following balances were taken from the books of Gleneagles plc for the year ended 31 March Year 2.
£000 £000
Gross Profit 353
300,000 Ordinary shares of £1 each 300
50,000 12% Preference shares of £1 each 50
Retained earnings at 1 April Year 1 17
10% Debentures (Year 2 — Year 6) 80
Trade payables 40
Trade receivables 178
Rates 84
General expenses 27
Wages and salaries 75
Property at cost 259
Vehicles at cost 50
Inventory at 31 March Year 2 150
Provision for depreciation on vehicles at 1 April Year 1 20
Administration expenses 42
Distribution expenses 12
Cash and cash equivalents 13
VAT 25
Preference dividend paid 6
Ordinary dividend paid 15
898 898 Notes at 31 December Year 2 1. Rates payable at 31 March Year 2 amounted to £6,000.
2. General expenses include a prepayment of £7,000 for next year. 3. Debenture finance costs (interest) for the year has still to be paid. 4. Deprecation on vehicles is to be provided at 20% on cost. 5. Provide for corporation tax of 25% on the year’s profits. You are required to prepare: a) i) the income statement (profit and loss account) and a statement of changes in
retained earnings for the year ended 31 March Year 2 10
ii) a statement of financial position as at the above date 10 20 marks
Higher Accounting
Company Accounts Page 5
Question 3 The following balances were extracted from the books of Uryside plc:
Dr Cr £000 £000
Opening inventory — raw materials 20
Purchases of raw materials 140
Factory wages 180
Royalties 20
Depreciation of factory machinery 30
General factory expenses 60
Factory rent and rates 31
Factory insurance 35
Opening inventory: work-in-progress 12
Sales revenue 800
Sales returns 20
Opening inventory: finished goods 40
Carriage on purchases of raw materials 20
Purchases returns on raw materials 5
Provision for bad debts 11
Office expenses 36
Selling expenses 40
Bad debts 6
Unappropriated profit 14
Ordinary dividend 6
Property 215
Equipment 100
Provision for depreciation equipment 6
Factory machinery 80
Preliminary expenses 9 Share premium 110 Investments 100 Goodwill 30 Trade receivables 80 VAT 11 Trade payables 50 Cash and cash equivalents 5 10% Debentures 60 100,000 7% Preference shares of £1·00 each 100 100,000 Ordinary shares of £1·00 each 100
1,291 1,291
Higher Accounting
Company Accounts Page 6
NOTES AT 31 DECEMBER YEAR 5 1 Closing inventory: Raw materials £18,000 Work-in-progress £16,000 Finished goods £55,000 2 Factory wages are to be split 80% direct factory wages, 20% indirect factory wages. 3 Market value of production is £500,000 4 Office expenses prepaid — £4,000 5 Selling expenses due — £10,000 6 The provision for doubtful debts is to be adjusted to 10% of closing trade receivables. 7 Preliminary expenses are to be written down by transfer from the share premium
account. 8 Non-current assets are to be depreciated as follows: Factory machinery 10% of the reduced balance Equipment — 5% on cost 9 Property was professionally revalued at £250,000 10 Dividends of £5,000 were owing on the quoted investments. 11 Provide for corporation tax at 25% of profit for the year. 12 Goodwill is to be written down by £20,000 13 The preference dividend was paid in full by cheque, but omitted from the accounts in
error. You are required to prepare (for internal use), from the trial balance and notes: (a) Manufacturing account for the year ended 31 December Year 5 10 (b) Income statement for the year ended 31 December Year 5 16 (c) Statement of financial position as at 31 December Year 5 14
(40)
Higher Accounting
Company Accounts Page 7
Question 4 The following is the trial balance of Alexander plc as at 31 December Year 2.
£0 £0
Sales Revenue 4,000
Purchases 3,200
Inventory at 1 January Year 2 300
Bad debts 5
Discounts (net) 7
Selling expenses 380
Office expenses 160
Debenture finance costs (interest) 16
Dividend - preference shares 60
1,000,000 Ordinary shares of £1 each 1,000
600,000 10% Preference shares 600
8 % Debentures Year 8 400
Investment property (investments) 170
Property (premises) 1,700
Fittings (at cost) 100
Vehicles (at cost) 160
Provisions for depreciation at 1 January Year 2
Fittings 60
Vehicles 40
Provision for doubtful debts at 1 January Year 2 4
Unappropriated profit at 1 January Year 2 192
Trade payables 50
Trade receivables 120
VAT 16
Cash and cash equivalents 2
6,371 6,371
Notes: 6. Inventory (Inventory) at 31 December Year 2 was valued at £280,000.
7. Selling expenses receivable (prepaid) are £4,000 and office expenses payable (accrued)
are £8,000. 8. Provide for depreciation for the year as follows:
i. Fittings — 20% on cost ii. Vehicles — 10% on the reduced balance
9. Provision for doubtful debts is to be adjusted to 5% of trade receivables.
10. Provide for corporation tax at 25% of profit for the Year (net profit).
Higher Accounting
Company Accounts Page 8
You are required to prepare: b) the income statement (trading, profit and loss account) for the year ended
31 December Year 2 15
c) a statement of financial position as at the above date 13 Total marks (28)
Question 5
The following is the trial balance of Carluke plc as at 31 December Year 3 after the
preparation of the trading account:
£000 £000
200,000 8% preference shares of £1 each 200
300,000 ordinary shares of 50p each 150
10% debentures 100
Gross profit 142
Inventory (Inventory) at 31 December Year 3 13
Office expenses 60
Discounts 6
Advertising 10
Provision for doubtful debts at 1 January Year 3 1
Trade payables (Trade Payables) 21
Trade receivables (Trade Receivables) 22
Cash and Cash equivalents 51
Preference dividend paid 16
Ordinary dividend paid 12
Long-term investments 150
VAT 14
Unappropriated profits at 1 January Year 3 70
Property (at cost) 280
Fixtures and equipment (at cost) 150
Vehicles (at cost) 90
Provisions for depreciation at 1 January Year 3
fixtures and equipment 70
vehicles 18
823 823
Higher Accounting
Company Accounts Page 9
Notes at 31 December Year 3
1. The market value of the closing inventory is £15,000.
2. Office salaries payable (accrued) are £2,000.
3. The figure for advertising includes the payment for the first quarter of Year 4.
4. The provision for doubtful debts is to be increased by £2,000.
5. Provide for depreciation per annum as follows:
fixtures and fittings — 20% of the reduced balance vehicles — 10% on cost
6. Provide for corporation tax at 25%.
7. Dividends of 10% are receivable (due) on the long-term investments. You are required to prepare:
a) The Income Statement (Trading, Profit and Loss Account) and a statement of changes in retained earnings for the year ended 31 December Year 3. 13
b) A Statement of Financial Position (Statement of Financial Position) as at the above
date. 16 Total marks (29)
Higher Accounting
Company Accounts Page 10
Question 6
Kwik-Instalments plc fits bathroom units. The following is the trial balance as at
31 December Year 3.
£000 £000
Sales Revenue 341
Purchases 126
Inventory at 1 January Year 3 24
Selling Expenses 20
Office Expenses 35
Warehouse Expenses 50
Wages 71
VAT 40
Provision for Doubtful Debts at 1 January Year 3 4
Trade Receivables 60
Trade Payables 43
Interim Dividend on Ordinary Shares 10
Investment Property 70
Cash and Cash Equivalents 8
Goodwill 24
100,000 Ordinary Shares of £1 each 100
10% Debentures (Year 20) 80
Property (at cost) 50
Showroom Fittings (at cost) 70
Vehicles (at cost) 50
Provisions for Depreciation at 1 January Year 3:
Showroom Fittings 20
Vehicles 10
Share Premium 30
Profit and Loss Account balance at 1 January Year 3 6
Preliminary Expenses 6
£674
£674
Higher Accounting
Company Accounts Page 11
Notes at 31 December Year 3:
1. The inventory is valued at £22,000.
2. Accrued charges are:
3. carriage inwards — £1,000
4. Selling expenses include a payment of £6,000 for a television advertisement, which
will be shown in the next financial year.
5. Provide for depreciation for the year as follows:
(i) showroom fittings — 10% on cost
(ii) vehicles — 20% of the reduced balance
6. The provision for doubtful debts is to be adjusted to 5% of trade receivables (Trade
Receivables).
7. Dividends of £4,000 are due from investments.
8. Corporation tax is to be provided for at 25% of profit for the year (net profit).
9. During Year 3, a bonus issue of ordinary shares was made on the basis of one share
for every five held. This issue was financed by a transfer from the share premium
account and is still to be recorded.
10. Property is revalued at £60,000.
11. Write-off the preliminary expenses by transfer from the share premium account.
12. Goodwill is to be written down by £6,000.
Prepare:
(a) an income statement, including the appropriation of available profits (trading, profit and loss and appropriation account), for the year ended 31 December Year 3 17
(b) a statement of financial position at that date 23
Total marks (40)
Higher Accounting
Company Accounts Page 12
Question 7
The following is the Trial Balance of Glencairn plc at 31 December Year 4.
£000 £000
Sales revenue 430
Purchases 246
Inventory at 1 January Year 4 30
Administration expenses 36
Selling and distribution expenses 33
Warehouse expenses 16
Discounts (net) 4
VAT 16
Wages 40
Provision for doubtful debts at 1 January Year 4 5
Trade receivables 60
Trade payables 35
Quoted investments 70
Cash and cash equivalents 6
Goodwill 20
Preliminary expenses 10
150,000 £1 ordinary shares 150
10% debentures 80
Property (Buildings) (at cost) 100
Office equipment (at cost) 30
Motor vehicles (at cost) 50
Provisions for depreciation at 1 January Year 4:
office equipment 8
motor vehicles 10
Share premium 30
Interim dividend-ordinary shares 6
Rent and rates 5
Unappropriated profit at 1 January Year 4 10
£768 £768
Higher Accounting
Company Accounts Page 13
Notes at 31 December Year 4
(1) Inventory, valued at £20,000 (cost) has a value of £24,000 (market value).
(2) Administration expenses receivable (prepaid) — £2,000.
(3) The provision for doubtful debts is to be adjusted to 10% of trade receivables.
(4) Dividends of £3,000 are due from investments.
(5) Provide for depreciation for the year as follows:
(i) office equipment — 10% on cost
(ii) motor vehicles — 20% on the diminished balance
(6) Provide for corporation tax at 25% of profit for the year (Net profit).
(7) Property (Buildings) has been revalued at £110,000 — the surplus on revaluation
is to be transferred directly to a revaluation reserve.
(8) Preliminary expenses are to be written down by transfer from share premium.
(9) A cheque for payment of rent for £1,000 for this year has been completely
omitted from the books and has still to be recorded.
(10) Goodwill is to be written down by £12,000.
(a) You are required to prepare from the Trial Balance and Notes:
Income Statement for the year ended 31 December Year 4 and a Statement of
Financial Position. 38
Total marks (38)
Higher Accounting
Company Accounts Page 14
8. The following is the Trial Balance of Gibshill Enterprises plc as at 30 April Year 2.
£000 £000
Sales Revenue 250
Purchases 170
Inventory at 1 May Year 1 15
Selling Expenses 16
Office Expenses 18
Provision for Doubtful Debts at 1 May Year 1 1
Bad Debts 4
Discounts (net) 1
Debenture Interest Paid (half year) 2
Preference Dividend Paid 2
Trade Receivables 60
Trade Payables 10
VAT 4
Cash equivalent 6
Goodwill 13
20,000 10% Preference Shares of £1 each 20
40,000 Ordinary Shares of £1 each 40
8% Debentures 50
Fittings (at cost) 55
Vehicles (at cost) 85
Provisions for Depreciation at 1 May Year 1
Fittings 12
Vehicles 15
Equity Reserve 16
Share Premium 15
Profit and Loss Account Balance at 1 May Year 1 6
________________
£449 £449
================
NOTES
(1) Inventory at 30 April Year 2 - £18,000.
(2) Selling Expenses payable - £4,000.
(3) Office Expenses receivable - £5,000.
(4) Provide for depreciation for the year as follows:
Higher Accounting
Company Accounts Page 15
(i) Fittings—20% on cost;
(ii) Vehicles—10% of the reduced balance.
(5) The Provision for Doubtful Debts at 30 April Year 2 is to be adjusted to 5% of
Trade Receivables.
(6) Interest of £1,000 is due on the cash equivalent overdraft.
(7) Provide for Corporation Tax at 25% of Profit for the Year.
(8) Provide for Debenture Interest for the full year.
(9) During January Year 2 a bonus issue of Ordinary Shares was made on the basis of
one share for every four held. This issue is to be financed by a transfer from the
Share Premium Account and is still to be recorded.
(10) The Directors propose to:
(i) write off the Goodwill;
(ii) pay a final dividend for the year of 8% on the Ordinary Shares, including
the bonus shares.
You are required to prepare, from the Trial Balance and Notes:
Income Statement (including appropriation of the available profits) for the year
ended 30 April Year 2, and a Statement of Financial Position as at that date.
Higher Accounting
Company Accounts Page 16
9. The following is the Trial Balance of Lylehill plc as at 30 April Year 3.
£000 £000
Sales Revenue 200
Purchases 51
Inventory at 1 May Year 2 10
Selling and Advertising Expenses 15
Office and Administration Expenses 14
Salaries 58
Provision for Doubtful Debts at 1 May Year 2 6
Bad Debts 1
Discounts (net) 5
Dividend paid on Ordinary Shares 7
60,000 Ordinary Shares of £1 each 60
10% Debentures 30
Premises 100
Fittings (at cost) 40
Vehicles (at Cost) 25
Provisions for Depreciation at 1 May Year 2
Fittings 10
Vehicles 5
Equity Reserve 2
Share Premium 26
Profit and Loss Account Balance at 1 May Year 2 4
Trade Receivables 40
Trade Payables 35
VAT 6
Cash equivalent 15
________________
£378 £378
================
NOTES
(1) Inventory at 30 April Year 3 - £12,000.
(2) Office and Administration Expenses payable - £2,000.
(3) Selling and Advertising Expenses receivable - £3,000.
(4) Provide for depreciation for the year as follows:
(i) Fittings—l0% of the reduced balance;
(ii) Vehicles—20% on cost.
Higher Accounting
Company Accounts Page 17
(5) The Provision for Doubtful Debts at 30 April Year 3 is to be adjusted to 5% of
Trade Receivables.
(6) Provide for Corporation Tax at 25% of Profit for the Year.
(7) Premises have been revalued at £150,000 and the surplus is to be transferred
directly to the Equity Reserve.
You are required to prepare, from the Trial Balance and Notes:
Income Statement (including appropriation of the available profits) for the year
ended 30 April Year 3, and a Statement of Financial Position as at that date. (50)