9 A Tomsett Co s receivables 300,000 + Frew Co receivables 130,000 less 5,000 due from Tomsett Co = 425,000

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2 ACCA Certified Accounting Technician Examination Paper T6 (SGP) Drafting Financial Statements (Singapore) June 2010 Answers and Marking Scheme Section A 1 A 2 C Share capital Asset revaluation reserve Opening balance 500, ,000 Rights issue (1,000,000 x 1/4 x $1) 250,000 Bonus issue (1,250,000 x 1/5 x 50c) 125,000 (125,000) Total 875, ,000 3 C 4 D 5 A 1 76 ( )/( ) 6 B $ Cost of investment 960,000 Share of post-acquisition profi ts 25% x (1,710 1,080) 157,500 1,117,500 7 D $ Consideration 4,000,000 Fair value of non-controlling interest (2 million x $1 10) 2,200,000 6,200,000 Less fair value of net assets at acquisition (4,750,000) Goodwill 1,450,000 8 C 9 A Tomsett Co s receivables 300,000 + Frew Co receivables 130,000 less 5,000 due from Tomsett Co = 425, D 13

3 Section B 1 (a) (i) Jonkirst Co Income Statement for the year ended 31 May 2010 Sales revenue 7,515 Less returns inward (124) 7,391 Opening inventory 455 Add purchases 4,641 5,096 Less closing inventory (357 10) (347) Cost of sales (4,749) 2,642 Discounts received* 65 Gross profi t 2,707 Property expenses 130 Other operating expenses 366 Marketing expenses (W1) Wages and salaries (W2) Loan note interest 43 Receivables expense (W3) Depreciation: Buildings (W6) Motor vehicles (W5) Furniture and equipment (W4) (2,192) Profi t before taxation 515 Tax (200) Net profi t for the period * Note: Alternative classifi cation is possible e.g., the discount received amount can be deducted directly against cost of sales. 14

4 (ii) Jonkirst Co Statement of financial position as at 31 May 2010 Assets Cost/ Accumulated Net Book Non current assets Valuation Depreciation Value $000 Land Buildings (W6) 2, ,300 Furniture and equipment (W4) 1, Motor vehicles (W5) ,134 1,014 4,120 Current assets Inventory 347 Trade receivables (W3) 1,180 Less allowance (59) 1,121 Prepayments (W1) 10 Cash 20 1,498 Total assets 5,618 Equity and liabilities Capital and reserves Ordinary shares 2,600 Revaluation reserve (W6) Retained earnings ($410 + $315) 725 4,250 Non-current liabilities 7% Loan notes 614 Current liabilities Trade payables 375 Tax 200 Accruals (W2) 55 Bank overdraft Total equity and liabilities 5, (b) (i) Gearing ratio (ii) Interest cover Total long-term debt 614 Capital and reserves + long-term debt 4, Profi t before interest and tax Interest 43 = 12 6% = 13 0 times Marking scheme mark for stating the correct formula and 1 mark for calculating the correct ratio. Working Papers W1 W2 Marketing expenses Balance as per TB 65,000 Income statement 55,000 Prepayment c/f 10,000 65,000 65,000 Wages and Salaries Balance as per TB 878,000 Income statement 933,000 Wages accrued c/f 55, , ,000 15

5 W3 W4 Receivables Expense Balance as per TB 195,000 Income statement 204,000 Allowance for receivables 9, , ,000 Allowance for receivables Balance c/f 59,000 Balance as per TB 50,000 Receivables expense 9,000 59,000 59,000 Furniture and Equipment Accumulated Depreciation Balance c/f 858,000 Balance as per TB 546,000 Inc. Statem t (20% of $1,560,000) 312, , ,000 W5 Motor Vehicles Accumulated Depreciation Balance c/f 156,000 Balance as per TB 104,000 Inc. Statem t (25% of ($312,000 $104,000)) 52, , ,000 W6 Revaluation Reserve Depreciation on buildings for the year is calculated as $1,940,000 x 5% = $97,000 Therefore the net book value of the buildings is $1,375,000 at the end of the year, i.e. $1,940,000 $468,000 $97,000. When the buildings are revalued at the end of the year a revaluation reserve is created of $925,000. i.e. $2,300,000 $1,375,000 = $925, (a) Appropriation Account for the year ended 31 May 2010 Net profi t 345,490 Less partners salaries Jean 40,000 ) Kathryn 35,000 ) Meryl 30,000 (105,000) ) Less interest on capital Jean 2,800 ) Kathryn 4,000 ) 1 5 Meryl 3,200 (10,000) ) Net profi t available for appropriation 230,490 Jean 2/6 76,830 Kathryn 3/6 115,245 Meryl 1/6 38, ,

6 (b) (i) Partners Current Accounts Jean Kathryn Meryl Jean Kathryn Meryl Bal b/f 1,800 Bal b/f 2,400 1, Drawings 25,000 22,000 20,000 Int on cap 2,800 4,000 3, Capital a/c 97,030 Salaries 40,000 35,000 30, Bal c/f 133,845 49,815 Profi t 76, ,245 38, , ,845 71, , ,845 71,615 8 (ii) Partners Capital Accounts Jean Kathryn Meryl Jean Kathryn Meryl Goodwill (3:2) 54,000 36,000 Bal b/f 35,000 50,000 40, Loan a/c 166,030 Cash 20,000 25, Bal c/f 67,000 46,000 Revaluation a/c 4,000 6,000 2, Goodwill: 2:3:1 30,000 45,000 15, Current a/c 97, , ,000 82, , ,000 82, Working for Revaluations Book Value Revaluation Change $ Property 130, ,000 26,000 Equipment and machinery 50,000 40,000 (10,000) Inventory 25,000 22,000 (3,000) Receivables 20,000 19,000 (1,000) Net Change 12,000 New valuations apportioned to each partner Jean 2/6 4,000 Kathryn 3/6 6,000 Meryl 1/6 2,000 12,000 (c) Advantages of operating as a limited liability company (i) The maximum amount the owners stand to lose is limited to the amount of capital invested. (ii) It may be easier to attract external investment, for example by issuing shares. (iii) The retirement or death of an owner does not necessitate the dissolution and reformation of the business. Marking scheme: 1 mark for each relevant point up to a maximum of 3 marks 3 (a) Calculation of profit before tax Retained Earnings Taxation 25 Bal. at 1 June Dividends 31 Profi t before tax (Bal. fi g) Bal. at 31 May

7 (b) Prepared in accordance with FRS 7 AGD Co Statement of cash flows for the year ended 31 May 2010 Cash flows from operating activities Net profi t before tax 114 Adjustments for: Depreciation 94 Profi t on sale of tangible non-current assets (6) Interest 2 Operating profi t before working capital changes 204 Increase in inventory (34) Increase in receivables (38) Decrease in payables (9) Cash generated from operations 123 Interest paid (2) Tax paid (19) 2 0 Net cash from operating activities 102 Cash flow from investing activities Purchase of non-current assets (274) 2 5 Receipts from sales of tangible non-current assets 31 Net cash used in investing activities (243) Cash flows from financing activities Proceeds from issue of share capital Dividends paid (31) Repayment of long-term borrowing (20) Net cash from fi nancing activities 121 Net decrease in cash and cash equivalents (20) Cash and cash equivalents at the beginning of period 22 Cash and cash equivalents at end of period 2 16 Note FRS 7 allows dividends paid and interest paid to be shown as either a fi nancing cash fl ow or an operating cash fl ow. Workings Non current assets Balance b/f 470 Depreciation 94 New non-current assets (bal) 274 Disposals 25 Balance c/f

ACCA Certified Accounting Technician Examination Paper T6 (SGP) Drafting Financial Statements (Singapore)

Answers ACCA Certified Accounting Technician Examination Paper T6 (SGP) Drafting Financial Statements (Singapore) June 2011 Answers and Marking Scheme Section A 1 C 2 C Phil James $ Profit 265,625 Salary