John Ogilvie High School Higher Accounting Company Accounts
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 Notes at 31 December Year 2 000 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. Company Accounts Page 2
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) Company Accounts Page 3
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 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. 898 898 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 Company Accounts Page 4
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 Company Accounts Page 5
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) Company Accounts Page 6
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). Company Accounts Page 7
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 Company Accounts Page 8
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) Company Accounts Page 9
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 Company Accounts Page 10
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) (ii) showroom fittings 10% on cost 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) Company Accounts Page 11
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 Company Accounts Page 12
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) (ii) office equipment 10% on cost 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) Company Accounts Page 13
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: Company Accounts Page 14
(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) (ii) write off the Goodwill; 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. Company Accounts Page 15
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. Company Accounts Page 16
(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) Company Accounts Page 17