Final a/c s of Sole Trader Solutions

Topic 1 Final a/c s of Sole Trader Solutions 2 Arnold 3 Brennan 4 Cullen 5 Darcy 6 Egan 7 Farrell 8 Grennan

2 Graded Accounting Questions Solutions 2 Arnold Solution (a) Trading Profit and loss a/c for year end 31/12/2012 Sales 1,344,000 Cost of Sales Opening stock 85,200 1 Purchases (W) 780,750 2 Closing Stock (W) (94,500) 771,450 Gross Profit 572,550 2 Administration Expenses Salaries 243,600 Insurance (W) 17,550 Patents Written off 21,000 Depreciation of Building (W) 19,050 301,200 Selling and Distribution Expenses Advertising 6,900 Depreciation of Vehicle (W) 45,000 Bad Debts Provision (W) 1,268 53,168 (354,368) 1 Other Operating income Profit on Disposal (W) 9,000 Discount Received 9,900 Rent Received 13,500 32,400 Operating of profit 250,582 2 Mortgage interest (W) (33,300) 1 Investment Interest (W) 14,400 Net Profit 231,682

Topic 1 Final a/c s of Sole Trader Solutions 3 (b) Balance Sheet as at 31/12/2012 Intangible Fixed Patents 84,000 Tangible Fixed Land & Buildings 1,425,00 1,425,000 Vehicles (W) 225,000 73,500 151,500 Financial Fixed 8% Investments 270,000 1,930,500 Current Assets Closing Stock 94,500 Debtors 130,350 Provision for BIOS (W) (6,518) 123,832 Investment Interest Due (W) 7,200 VAT (W) 6,000 231,532 Crs. Falling Due for less than 1 year Creditors 98,250 Mortgage Interest (W) 27,000 P.R.S.I 6,750 Bank 24,600 (156,600) 74,932 Total net Assets 2,005,432 Financed by Creditors Falling Due for More than 1 Year 6% Mortgage Capital & Reserves 600,000 Capital 703,500 1 Net Profit 231,682 2 Drawings (82,200) 1 Revaluation Reserve (W) 551,550 1,405,432 Total Capital employed 2,005,432 Notes to Accounts Stock 101,250 2 6,750 5 94,500 Patents 97,800 1 7,200 2 21,000 5 84,000 Income 7,200 1 7,200 5 14,400 Vehicles 225,000 1 90,000 2 90,000 5 225,000 Depc this year. 6000 1 12,000 1 27,000 5 45,000 Acc. Depreciation 97,500 1 45,000 2 69,000 5 73,500 Disposal 90,000 2 69,000 2 30,000 5 9,000 profit Purs. 840,750 2 60,000 5 780,750 Mortgage Interest 6,750 2 450 1 27,000 5 33,300 Insurance 15,900 1 450 1 1,200 5 17,550 Debtors 131,550 2 1,200 5 130,350 Buildings 975,000 2 22,500 1 472,500 5 1,425,000 Acc. Depc. 60,000 2 19,050 2 79,050 5 Nil VAT (Cr.) 16,500 2 22,500 (Dr.) 5 6,000 (Dr.) Revaluation Reserve 472,500 1 79,050 5 551,550 Bad Debts. Provision 5,250 2 6,518 5 1,268

4 Graded Accounting Questions Solutions 3 Brennan Solution (a) Trading, Profit and Loss Account for year end 31/12/2012 Sales 721,000 Less Cost of Sales Stock 1/1/12 26,900 1 Purchases (W) 488,400 515,300 Stock 31/12/12 (W) (27,500) (487,800) Gross Profit 233,200 Less Expenses Administration Salaries and general expenses 54,200 Patents written off (W) 12,000 Insurance (W) 12,000 Depreciation - Buildings (W) 8,100 86,300 Selling 1 Distribution Advertising 12,800 Depreciation Delivery vans (W) 20,350 33,150 (119,450) 113,750 Disposal Profit 2,400 Provision for Bad Debts (W) 112 Commission Received 12,000 Discount (W) 5,400 19,912 Operating Profit 133,662 Investment Income 7,200 140,862 Mortgage Interest (W) (6,450) Net Profit for year 134,412 (b) Balance Sheet of as at 31/12/2012 Cost Dep. NBV Tangible Fixed Assets Buildings (W) 510,000 510,000 Delivery Vans (W) 118,000 35,350 82,650 592,650 Intangible Fixed Assets Patents 48,000 Financial Assets Investments 120,000 760,650 Current Assets Stocks 31/12/2012 27,500 VAT (W) 11,800 Investment Income due (W) 4,000 Debtors 32,200 Less Provision (1,288) 30,912 74,212

Topic 1 Final a/c s of Sole Trader Solutions 5 Creditors: amount falling due within 1 year Creditors 35,400 Mortgage Interest due 4,650 P.R.S.I 2,500 Bank 36,900 (79,450) (5,238) 755,412 Financed by: Creditors: amounts falling due after 1 year 6% Fixed Mortgage 120,000 Capital and Reserves Capital 1/1/2012 370,000 Add Net Profit 134,412 Less Drawings 504,412 (22,100) 1 Revaluation Reserve (W) 153,100 635,412 Capital Employed 755,412 Notes to Accounts C/S 29,800 2 2,500 5 27,500 Veh. 112,000 2 33,000 1 39,000 5 118,000 Dept this yr. Nil 1 4,550 1 15,800 5 20,350 Acc. Depc. 48,000 1 20,350 2 33,000 5 35,350 Disposal 33,000 2 33,000 2 2,400 5 2,400 Profit Purs. 525,000 2 36,600 5 488,400 Patents 56,800 1 3,200 2 12,000 5 48,000 In. Income 3,200 1 4,000 5 7,200 Mortgage Interest 2,200 2 400 1 4,650 5 6,450 Insurance 11,400 1 400 1 200 5 12,000 Discount (Net) 5,200 1 200 5 5,400 Cr. Buildings 420,000 2 15,000 1 105,000 5 510,000 Acc. Depc. 40,000 1 8,100 2 48,100 5 Nil VAT (Cr.) 3,200 2 15,000 DR. 5 11,800 DR. Reval. Res. 105,000 1 48,100 5 153,100 B/D s Provision 1,400 2 1,288 5 112 Over/1 (c) Why do sole traders prepare final accounts? For Revenue Purposes Applications for bank loan or mortgage Comparison with Proposal years Comparison with Rivat Firns For Planning & Budgeting Purposes As a Form of analysis

6 Graded Accounting Questions Solutions 4 Cullen Solution (a) Trading, Profit and Loss Account for year ending 31/12/2012 Notes Sales 988,000 Less cost of Sales Stock 1/1/12 56,400 Purchases (W) 601,680 658,080 Stock 31/12/12 (W) (63,100) 594,980 Gross Profit 393,020 Administration Expenses Salaries and General Expenses 82,600 Insurance (W) 19,720 Depreciation on Buildings (W) 10,800 Patents written of (W) 16,000 129,120 Selling and Distribution Expenses Increase in prov. for bad debts (W) 500 Depreciation on delivery vans (W) 29,100 Loss on disposal of delivery van (W) 1,500 31,100 160,220 232,800 1 Bad Dept. Recoverable 900 Discount received 3,200 Commission received 4,800 Rent received 8,400 17,300 Operating Profit 250,100 1 Investment Income (W) 6,000 256,100 Less Mortgage interest (W) (12,960) Net Profit 243,140 (b) Balance Sheet as at 31/12/2012 Notes Cost Acc. Dep. Net Value Fixed Assets Intangible Patents 64,000 Tangible Buildings (W) 760,000 760,000 Delivery Vans (W) 204,000 66,600 137,400 964,000 66,600 897,400 897,400 Investments 200,000 4.5% Investments 1,161,400 Current Assets Stock 31/12/12 63,100 Debtors 50,500 Less Prov. for bad debts (W) (2,500) 48,000 Investment Interest due (W) 3,000 114,100

Topic 1 Final a/c s of Sole Trader Solutions 7 Less: Creditors amounts due within 1 year Creditors 86,400 Bank overdraft 36,500 VAT (W) 2,400 PRSI 6,400 Mortgage Interest due (W) 11,400 (143,100) Net Current Assets 29,000 Net Assets 1,132,400 Financed by Creditors: amounts due after 1 year 6% and 4% Fixed Mortgage 280,000 Capital 380,000 Add Net Profit 243,110 Less Drawings (W) (31,540) 591,600 Revaluation Reserve (W) 260,800 Capital Employed 1,132,400 Notes to Accounts Stock 67,400 2 4,300 5 63,100 Vehicles 180,000 2 36,000 1 60,000 5 204,000 Depc. this Yr/Vehs. 2,250 1 5,250 1 21,600 5 29,100 Acc. Depc. 60,000 1 29,100 2 22,500 5 66,600 Disposal 36,000 2 22,500 2 12,000 5 (1,500) Purchases 649,680 2 48,000 5 601,680 Insurance 18,820 1 500 1 400 5 19,720 Mortgage Interest* 3,500 2 500 1 11,400 2 1,440 5 12,960 Debtors 50,400 2 400 1 500 5 50,500 Patents 77,000 1 3,000 2 16,000 5 64,000 Investments Interest 3,000 1 3,000 5 6,000 Buildings 590,000 2 10,000 1180,000 5 760,000 VAT 12,400 2 10,000 5 2,400 Acc. Depc. Blgs.* 70,000 1 10,800 2 80,800 5 Nil Revaluation Reserve 180,000 1 80,800 5 260,800 Bad Debts Provision 2,000 1 500 5 2,500 Drawings 30,100 1 1,440 5 31,540 Bank o/d 36,900 2 400 5 36,500 Bad Dept Recoverable 5 900 *Blgs. Dept. 500,000 @ 2% full year 5 10,000 80,000 @ 2% 1/2 yr. 800 10,800 *Mortgage 6% 200,000 1 yr. 12,000 4% 80,000 3/4 2,400 14,400 (c) Explain what is meant by Patents and why it is customary to write them off over a number of years. Patents are a copyright or ownership of a trade mark, name, invention, procedure etc that you have discovered & wish to hold exclusive rights to. It is an intangible fixed Asset of a business & is usually written off as they are a Transient asset. They are subject to decreases in their value due to new processes being developed which would make yours obsolete & of less value.

8 Graded Accounting Questions Solutions 5 Darcy Solution (a) Trading, Profit and Loss Account for year ending 31/12/2012 Sales 774,000 Less Cost of sales Stock 1/1/2012 47,600 Add Purchases (W) 441,000 488,600 Less Stock 31/12/2012 (W) (55,400) (433,200) Gross profit 340,800 Less Expenses Administration Salaries and general expenses 81,100 Patents written off (W) 11,300 Insurance (W) 8,500 Depreciation buildings (W) 13,665 114,565 Selling and Distribution Commission 20,000 Depreciation delivery vans (W) 13,950 33,950 (148,515) Add Operating income 192,285 Profit on sale of delivery van (W) 200 Reduction in provision for bad debts (W) 384 Rent 8,800 Discount 3,100 Operating profit 204,769 Investment income 10,500 Mortgage interest (W) (12,825) Net profit for year 202,444 (b) Balance Sheet as at 31 December 2012 Cost Accumulated Depreciation Net Total Intangible Fixed Assets Patents ( 56,500 2 11,300) 45,200 Tangible Fixed Assets Buildings (W) 1,200,000 1,200,000 Delivery vans 94,000 39,750 54,250 1,294,000 39,750 1,254,250 1,254,250 Financial Assets 12% Investments 150,000 1,449,450

Topic 1 Final a/c s of Sole Trader Solutions 9 Current assets Stock 55,400 Investment income due 4,500 Debtors 45,400 43,584 Less provision Insurance Co. 1,816 35,000 Creditors: amounts falling due within 1 year 138,484 Creditors (W) 74,400 Mortgage interest due 13,500 VAT 6,700 PRSI 1,800 Bank 74,900 (171,300) (32,816) 1,416,634 Financed by Creditors falling due after more than one year 9% Fixed mortgage 200,000 Capital and reserves Capital 1/1/2012 350,000 Add Net profit 202,444 Less Drawings (37,475) Revaluation Reserve (W) 701,665 1,216,634 Capital employed 1,416,634 Notes to Accounts Closing Stock 46,900 2 1,500 1 10,000 5 55,400 Vehicles 90,000 2 16,000 1 20,000 5 94,000 Acc. Depc. 35,000 1 13,950 2 9,200 5 39,750 Depc. this yr. 600 1 2,250 1 11,100 5 13,950 Disposal 16,000 2 9,200 2 7,000 5 200 Purchases 495,000 1 10,000 2 15,000 2 32,000 213,000 24,000 5 441,000 Patents 50,500 1 6,000 2 11,300 5 45,200 Investment interest 6,000 1 4,500 5 10,500 Mortgage interest. 4,500 2 900 1 13,500 5 17,100 2 4,275 5 12,825 Insurance 7,200 1 900 1 400 5 8,500 Disc: Rec. 2,700 1 400 5 3,100 Salaries, general expenses 96,100 2 15,000 5 81,100 Acc. Depc. 171,250 1 13,665 2 184,915 5 nil Insurance Co 5 35,000 B\D. Provision 2,200 2 1,816 5 384 Crs. 64,400 1 10,000 5 74,400 Drawings 29,200 1 4,275 1 4,000 5 37,475 Revaluation Res, 516,750 1 184,915 5 701,665 Buildings 656,250 2 20,000 1 15,000 1 32,000 1 516,750 5 1,200,000 (c) What is a suspense account and why is it created? A Suspense a/c is used when you make a mistake in the accounts that prevents the Trial Balance from balancing. This difference is left in the Suspense a/c until these errors are discovered. Errors are corrected through the Suspense a/c.

10 Graded Accounting Questions Solutions 6 Egan Solution (a) Trading and Profit and loss Account for year ending 31/12/2012 Sales 980,000 Less Cost of sales Stock 1/1/2012 65,700 Add Purchases (W) 629,600 Less Stock 31/12/2012 (W) (78,100) 617,200 Gross Profit 362,800 Less Expenses Administration Patent written off (W) 12,600 Salaries and General expenses (W) 193,700 Insurance (W) 13,800 Depreciation Buildings (W) 17,500 237,600 Selling and Distribution Advertising 14,000 Loss on sale of van (W) 6,875 Depreciation Delivery Vans (W) 20,100 40,975 (278,575) 84,225 Add. Bad Debt Recovered 1,200 Discount (W) 4,300 Royalties 12,000 Reduction in Provision for bad debts (W) 1,605 Operating Profit (W) 103,330 Investment Income (W) 5,600 Less Mortgage Interest (W) (11,000) New Profit for year (W) 97,930 (b) Balance sheet as at 31/12/2012 Cost Accumulated Depreciation Net Total Intangible Fixed assets Patents (63,000 2 12,600) 50,400 Tangible Fixed Assets Buildings (W) 1,200,000 1,200,000 Delivery Vans (W) 136,000 76,475 59,525 1,336,000 76,475 1,259,525 1,259,525 Financial Assets 6% Investments 160,000 1,469,925 Current Assets Stock 78,100 Debtors 77,200 Less provision (2,295) 74,905 VAT (W) 20,700 Investment Income due 3,200 176,905

Topic 1 Final a/c s of Sole Trader Solutions 11 Creditors: amounts falling due within one year Creditors (W) 92,700 Bank 60,300 PRSI 2,500 Mortgage interest due 11,250 166,750 10,155 1,480,080 Financed by Creditors: amounts falling due after more than one year 5% Fixed mortgage 300,000 Capital and reserves Capital 1/1/2012 735,000 Add Net Profit 97,930 Less Drawings (40,350) Revaluation Reserve (W) 387,500 1,180,080 Capital employed 1,480,080 Notes to Accounts Closing stock 72,500 1 5,600 5 78,100 Purchases 650,000 1 5,600 1 1,600 2 26,000 2 1,600 5 629,600 Crs. 85,500 1 5,600 1 1,600 5 92,700 Veh. 130,000 2 35,000 1 41,000 5 136,000 Depreciation this year 14,250 1 1,750 1 4,100 5 20,100 Acc. Depc. 69,500 1 20,100 2 13,125 5 76,475 Disposal 35,000 2 15,000 2 13,125 5 (6,875) Mortgage interest 3,000 2 500 1 11,250 5 13,750 2 2,750 5 11,000 Salaries 192,500 1 500 1 700 5 193,700 Discount(Cr.) 3,600 1 700 5 4,300 Drawings 36,000 1 2,750 1 1,600 5 40,350 B.D. Recov., 1,200 5 1,200 Debtors 76,500 1 700 5 77,200 Bank. O/D. 60,800 2 500 5 60,300 Provision 3,900 2 2,295 5 1,605 Patents 60,600 1 2,400 2 12,600 5 50,400 Investment interest 2,400 1 3,200 5 5,600 Buildings 900,000 2 25,000 1 325,000 5 1,200,000 Acc. depc. 45,000 1 17,500 2 62,500 5 nil Rev. Res. 325,000 1 62,500 5 387,500 Vat (CR) 4,300 2 25,000 5 20,700 (DR) (c) Calculate the period of Credit to debtors and assess the result. Credit to DRS 5 CR Sales/Debtors 5 980,000/77,200 5 12.69 Times Debtors are settling their accounts with the month which is within the recommended collection period so Egan has no problem with debtors collection.

12 Graded Accounting Questions Solutions 7 Farrell Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 364,500 Less Cost of Sales Stock 32,800 Purchases (W) 244,400 Less Closing Stock (W) (39,900) 237,300 Gross Profit 127,200 Administration Patents written off (W) 5,500 General administration expenses 42,500 Discount 850 Directors fees 4,500 Insurance (W) 3,050 Depreciation of Buildings 5,800 62,200 Selling and Distribution Adverting 2,100 Depreciation of Delivery Vans (W) 6,713 Loss on disposal of van (W) 4,375 13,188 (75,388) 51,812 Add Operating Income Bad Debt recovered 500 Operating Profit 52,312 Add Investment income 3,900 Less Mortgage Interest (W) (3,300) Net Profit (W) 52,912 (b) Balance Sheet as at 31/12/2012 Cost Depc. Value Intangible Fixed Assets Goodwill (W) 22,000 Tangible Fixed Buildings (W) 400,000 400,000 Delivery Vehicles (W) 45,500 7,088 38,412 Financial Assets 8% Investments 65,000 525,412 Current Assets Stock (W) 39,900 Debtors (20,200 less Provision 600) (W) 19,600 Investment Interest due 2,600 62,100 Creditors: Amounts falling due within one year Creditors (W) 59,300 Bank (W) 7,650 VAT 2,050 PRSI 1,950 Mortgage interest due (W) 3,375 74,325 (12,225) Total Net Assets 513,187

Topic 1 Final a/c s of Sole Trader Solutions 13 Financed By: Creditors: Amounts falling due for more than one year 6% Mortgage 75,000 Capital and Reserves Capital 242,500 Add Net Profit 52,912 Less Drawings (20,525) 274,887 Revaluation Reserve (W) 163,300 Total Capital Employed 513,187 (c) Notes to Accounts Purchases 256,200 1 2,400 2 13,000 1 400 2 1,600 5 244,400 Closing Stock 37,500 1 2,400 5 39,900 Patents 26,200 1 1,300 2 5,500 5 22,000 Discount 950 2 100 5 850 Delivery Vans 42,500 1 18,000 2 15,000 5 45,500 Insurance 3,075 2 125 1 100 5 3,050 Depreciation of Vans this year 563 1 2,025 1 4,125 5 6,713 Accumulated Depreciation of Vans 6,000 1 6,713 2 5,625 5 7,088 Disposal of Vehicles 15,000 2 5,625 2 5,000 5 (4,375) Investment Income 1,300 1 2,600 5 3,900 Mortgage Interest 625 1 125 1 3,375 2 825 5 3,300 Buildings 290,000 1 110,000 5 400,000 Accumulated Depreciation of Buildings 47,500 1 5,800 2 53,300 5 Nil Revaluation Reserve 110,000 1 53,300 5 163,300 Debtors 20,000 1 200 5 20,200 Creditors 56,500 1 2,400 1 400 5 59,300 Bank 7,950 2 300 5 7,650 Drawings 18,100 1 825 1 1,600 5 20,525

14 Graded Accounting Questions Solutions 8 Grennan Solution (a) Trading Profit Loss Account for year ending 31/12/2012 Sales 874,800 Less Cost Sales Stock 78,720 Purchases 584,480 Less Closing Stock (95,760) 567,440 Gross Profit 307,360 Less Expenses Administration Patents written of 13,200 Salaries and General 102,000 Discount 2,040 Rent 10,800 Insurance 7,320 Depreciation of Buildings 13,920 Loss on stolen goods 400 149,680 Selling and Distribution Advertising 630 Depreciation of Delivery Vans 16,110 Loss on disposal of van 10,500 27,240 (176,920) 130,440 Add Operating Income Bad Debt recovered 1,200 Operating Profit 131,640 Add Investment income 9,360 Less Mortgage Interest (7,920) Net Profit 133,080 (b) Balance Sheet as at 31/12/2012 Cost Depc. Value Intangible Fixed Assets Patents 52,800 Tangible Fixed Buildings 960,000 960,000 Delivery Vehicles 109,200 17,010 92,190 Financial Assets 8% Investments 156,000 1,260,990 Current Assets Stock 95,760 Debtors (48,480 less Provisionl, 440) 47,040 Investment Interest due 6,240 Advertising prepaid 4,410 Insurance claim due 3,600 157,050

Topic 1 Final a/c s of Sole Trader Solutions 15 Creditors: Amounts falling due within one year Creditors 142,320 Bank 18,360 VAT 4,920 PRSI 4,680 Mortgage interest due 8,100 178,380 (21,230) Total Net Assets 1,239,660 Financed By: Creditors: Amounts falling due for more than one year 6% Mortgage 180,000 Capital and Reserves Capital 582,000 Add Net Profit 133,080 Less Drawings (47,340) 667,740 Revaluation Reserve 391,920 Total Capital Employed 1,239,660 (c) Notes to Accounts Purchases 614,880 1 5,760 2 31,200 1 960 2 1,92024,000 5 584,480 Closing Stock 90,000 1 5,760 5 95,760 Patents 62,880 1 3,120 2 13,200 5 52,800 Discount 2,280 2 240 5 2,040 Delivery Vans 102,000 1 43,200 2 36,000 5 109,200 Insurance 7,380 2 300 1 240 5 7,320 Depreciation of Vans this year 1,350 1 4,860 1 9,900 5 16,110 Accumulated Depreciation of Vans 14,400 1 16,110 2 13,500 5 17,010 Disposal of Vehicles 36,000 2 13,500 2 12,000 5 (10,500) Investment Income 3,120 1 6,240 5 9,360 Mortgage Interest 1,500 1 300 1 8,100 21,980 5 7,920 Buildings 696,000 1 264,000 5 960,000 Accumulated Depreciation of Buildings 114,000 1 13,920 2127,920 5 Nil Revaluation Reserve 264,000 1 127,920 5 391,920 Debtors 48,000 1 480 5 48,480 Creditors 135,600 1 5,760 1 960 5 142,320 Bank 19,080 2 720 5 18,360 Drawings 43,440 1 1,980 1 1,920 5 47,340 Advertising 5,040 2 4,410 5 630 Ins. Co. Claim 5 3,600

Topic 2 Final a/c s of Company Solutions 2 Abacus 3 Bliary 4 Capri 5 Duncan 6 Echo 7 Festina 8 Conolo 9 Prudence 10 Morgan 11 Gambert

Topic 2 Final a/c s of Company Solutions 17 2 Abacus Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 824,000 Less Cost of Sales Stock 1/1/2012 42,500 Add Purchases (W) 600,800 643,300 Less Stock 31/12/12 (W) (34,700) (608,600) Gross Profit 215,400 Less Expenses Administration Administration 28,200 Salaries & Gen. Exp (W) 95,480 Patents written off (W) 10,250 Dep.: Land & Build. (W) 10,400 144,300 Selling and Distribution Selling 14,100 Dep.: Motor Vehicle (W) 28,200 Loss on Sale of Vehicle (W) 2,100 44,400 (188,730) 26,670 Add Operating Income Reduction in Bad Debt Prov. (W) 1,300 Operating Profit 27,970 Investment Income (W) 7,200 Debenture Interest (W) (10,000) Net Profit for year before taxation 25,170 Less Appropriations Dividends Paid 20,900 Transfer To Reserve 10,000 (30,900) Retained Profit (Loss) (5,730) Profit and Loss balance 1/1/12 1,800 Profit and Loss balance 31/12/12 (3,930) (b) Balance Sheet as at 31/12/2012 Cost Dep. NBV Tangible Fixed Assets Land and Buildings 800,000 800,000 Motor Vehicles (W) 144,000 44,300 (3) 99,700 944,000 44,300 899,700 Intangible Fixed Assets Patents (W) 30,750 Financial Assets 9% Investment 120,000 1,050,450

18 Graded Accounting Questions Solutions Current Assets Stock 31/12/2012 (W) 34,700 Debtors 38,000 Less Provision (W) (1,900) 36,100 Invest Income due (W) 2,000 72,800 Creditors: amounts falling due within 1 year VAT 18,200 Creditors (W) 41,350 Bank (W) 14,630 Debenture Int. due (W) 7,600 (81,780) (8,980) 1,041,470 Financed by: Creditors: amount falling due after 1 year 8% Debentures 150,000 Capital and Reserves Auth d Issued Ord. Shares @ 1 each 500,000 370,000 6% Pref. Share @ 1 each 280,000 180,000 780,000 550,000 Revaluation Reserve (W) 335,400 Profit & Loss a/c balance (3,930) General Reserve 10,000 891,470 1,041,470 Notes to Accounts Closing stock 36,400 2 1,700 5 34,700 Patents 38,300 1 2,700 2 10,250 5 30,750 Investment interest 2,700 1 2,500 1 2,000 5 7,200 Vehicles 135,000 2 24,000 1 33,000 5 144,000 Depc. this yr. 1,600 1 4,400 1 22,200 5 28,200 Acc. Depc. 28,500 1 28,200 2 12,400 5 44,300 Disposal 24,000 2 12,400 2 9,500 5 (2,100) loss Purchases 624,300 2 23,500 5 600,800 Bank O/D. 16,200 2 2,500 1 480 1 450 5 14,630 O/D Creditors 41,800 2 450 5 41,350 Salaries & Gen. Exps 95,000 1 480 5 95,480 land & Blgs. 520,000 1 280,000 5 800,000 Acc. Depc. 45,000 1 10,400 2 55,400 5 nil Reval. Reserve 280,000 1 55,400 5 335,400 Deb. Interest 2,400 1 7,600 5 10,000 Prov. for B/D s 3,200 2 1,900 5 1,300 over Prel. Div. (8%) 3,600 1 10,800 5 14,400 Ord. Dividend 7,300 1 18,600 5 25,900 5 Debenture 1. 60,000 3 8% 3 7m 5 2,800 Interest } 2. 90,000 3 8% 3 12m 5 7,200 5 10,000 Note: As customers adjusted bank figure of 14,630 does not equal the bank statement of 10,130 after the unpresented cheque of 4,200 is added, it is to be assumed that the difference of 4,500 between the two figures is due to errors not yet identified by the bank.

Topic 2 Final a/c s of Company Solutions 19 3 Bliary Ltd. Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 896,000 Cost of Sales Opening stock 38,000 Purchases W 569,000 607,000 Closing Stock W (37,300) (569,700) Gross Profit 326,300 Selling and Distribution Deprec. on vans W 33,800 Advertising W 7,400 Bad Debts W 400 Provision for Bad Debts W 218 41,818 Administration Salaries 130,000 Fees 20,000 Insurance 15,000 Goodwill written off W 8,500 173,500 (215,318) 1 Operating Income Discount Received 3,000 Profit on van W 3,000 6,000 Operating Profit 116,982 Investment Income W 13,500 Debenture Interest W (13,200) Net Profit 117,282 Dividends Paid (32,000) Retained Profit 85,282 1 Profit and loss 1/1/12 22,700 5 Profit and loss 31/12/12 107,982 (b) Balance Sheet as at 31/12/2012 Fixed Assets Cost Depre. Net Total Goodwill 8,500 Buildings 420,000 420,000 Vans 174,000 90,800 83,200 594,000 90,800 503,200 503,200 Investments 150,000 661,700 Current Assets Stock 37,300 Debtors, (30,300 Prov 1,818) w 28,482 Investment Income Due 2,250 68,032

20 Graded Accounting Questions Solutions Creditors amounts falling due less than one year Creditors w 40,910 Interest due 10,800 Bank w 10,040 (61,750) 6,282 Financed by: 667,982 Auth. Issued Ordinary Shares 550,000 280,000 Preference Shares 250,000 100,000 800,000 380,000 Retained profits 107,982 487,982 Crs. Falling Due for more than 1 year Debentures 8% 180,000 180,000 667,982 Notes to Accounts Closing stock 40,000 2 2,700 5 37,300 Goodwill 12,500 1 4,500 2 8,500 5 8,500 Investment Income 4,500 1 6,750 1 2,250 5 13,500 Advertising 6,800 1 400 1 200 5 7,400 Deb. Int. 2,800 2 400 1 10,800 5 13,200 Debtors 31,000 2 200 2 500 5 30,300 Vehicles 162,000 2 20,000 1 32,000 5 174,000 Depc. this year 1,667 1 3,733 1 28,400 5 33,800 Acc. Depc. 66,000 1 33,800 2 9,000 5 90,800 Disposal 20,000 2 9,000 2 14,000 5 3,000 Purs. 587,000 2 18,000 5 569,000 Bank o/d 16,800 2 6,750 1 90 2 100 5 10,040 Crs. 41,000 2 90 5 40,910 Bad Debt 400 5 400 Provision for Bad Debts 1,600 2 1,818 5 (218) (c) Are there any occasions when the Trial Balance is in balance, even though errors have occurred? Transactions totally omitted Errors of original entry e.g. 80 entered as 800 on both sides Errors of Commission e.g. posted to incorrect a/c Errors of Principle e.g. posted to Purchases instead of vehicles Compensating errors that cancel each other out Complete Reversal of entries e.g. DR Sales CR Debtors

Topic 2 Final a/c s of Company Solutions 21 4 Capri Solution (a) Trading, Profit and Loss Account for year ending 31/12/2012 Sales 880,000 Less Cost of sales Stock 1/1/12 40,000 Add Purchases W 560,000 600,000 Less Stock 31/12/12 W (44,800) (555,200) 324,800 Gross profit Less Expenses Administration Directors fees 30,000 General expenses W 114,600 Patents written off W 12,000 Depreciation-buildings W 8,000 164,600 Selling and Distribution Bad debts written off 1,350 Depreciation-delivery vans W 32,700 Loss on sale of van W 7,200 41,250 (205,850) 118,950 Add Operation income Reduction in provision for bad debts W 130 Operating profit 119,080 Investment income 8,000 127,080 Debenture interest (15,000) Net profit for year before taxation 112,080 Less Appropriation Dividends Paid 20,000 Transfer to Debenture Reserve 40,000 (60,000) 52,080 Retained profit Profit and loss balance 1/1/12 24,000 Profit and loss balance 31/12/12 76,080

22 Graded Accounting Questions Solutions (b) Balance Sheet at on 31/12/2012 Cost Accumulated Depreciation Net Total Intangible Fixed Assets 36,000 Patents ( 48,000 2 12,000) Tangible Fixed Assets Land and buildings W 750,000 750,000 Delivery vans W 166,000 85,900 80,100 916,000 85,900 830,100 830,100 6% Investments 200,000 1,066,100 Current assets Stock 44,800 Investment income due 2,000 Debtors W 34,500 Less provision (2,070) 32,430 79,230 Creditors: amounts falling due within one year Creditors W 42,730 Debenture interest due 12,000 VAT 11,000 Bank W 25,520 (91,250) (12,020) 1,054,080 Financed by Creditors: amounts falling due after more than one year 8% Debentures 200,000 Capital and reserves Authorised Issued Ordinary shares at 1 each 600,000 300,000 6% Preference shares at 1 each 300,000 150,000 900,000 450,000 Revaluation reserve W 288,000 Profit and loss Balance 76,080 Debenture Redemption Reserve 40,000 854,080 1,054,080

Topic 2 Final a/c s of Company Solutions 23 Workings 1. Purchases 590,000 Less payment for delivery van 30,000 560,000 2. Closing stock 48,000 Less Valueless stock (3,200) 44,800 3. Salaries and general expenses 114,000 Add ESB direct debit 600 114,600 4. Patents ( 44,000 1 4,000) 4 4 12,000 5. Depreciation buildings 2% of 500,0002100,000) 8,000 6. Depreciation - delivery vans 20% of [( 160,000 for 5 months) 1 32,700 ( 166,000 for 7 months)] 7. Loss on sale of van cost 42,000 Less Depreciation to date (16,800) Less Trade-in (18,000) 7,200 8. Decrease in Provision for bad debts ( 2,200 2 2,070) 130 9. Land and Buildings at cost 500,000 Add Revaluation 250,000 750,000 10. Delivery vans at cost 160,000 Add Purchases 48,000 Less Disposal (42,000) 166,000 11. Debtors 36,000 Less Bank and bad debt (1,500) 34,500 12. Creditors 43,000 Less Error (270) 42,730 13. Bank overdraft as per Trial Balance 26,800 Less Investment income (2,000) Less Credit transfer credited (150) Add Bank under credited (270) Add Direct debit-esb 600 25,520 14. Revaluation reserve Land and buildings 250,000 288,000 Provision for depreciation (30,000) 1 8,000 38,000 (c) Explain what is meant by the Accrual Concept in accounting. All expenses that belong to a particular period must be included in the accounts of that period whether paid or not. Similarly all Revenue income must be included whether Received or not. i.e. Due added, prepaid subtracted to ascertain the correct figure for period.

24 Graded Accounting Questions Solutions 5 Duncan Solution (a) Trading, Profit and Loss Account for year ending 31/12/2012 Sales 814,000 Less Cost of Sales Stock 1/1/2012 32,200 Add Purchases (W) 465,000 Less Stock 31/12/2012 (W) (35,640) (461,560) Gross Profit 352,440 Less Expenses Administration Directors Fees 34,400 Salaries & Gen. Exp. 130,200 Parents w/o (W) 6,600 Dep.: Land & Build (W) 8,800 180,000 Selling and Distribution Bad Debts w/o 1,400 Dep: Delivery van (W) 30,900 Inc. in Bad Debt Prov. (W) 600 Loss on sale of van (W) 1,800 34,700 (214,700) Operating Profit 137,740 Investment Income (W) 9,000 Debenture Interest (W) (12,000) Net Profit for year before taxation 134,740 Less Appropriations Pref. dividend paid (W) 8,800 Ord. dividend paid (W) 13,600 Pref. dividend proposed (W) 8,800 Ord. dividend proposed (W) 15,800 (47,000) Retained Profit 87,740 Profit and Loss balance 1/1/2012 (1,800) Profit and Loss balance 31/12/2012 85,940

Topic 2 Final a/c s of Company Solutions 25 (b) Balance Sheet as at 31/12/2012 Cost Dep. N.B.V. Tangible Fixed Assets Land and Buildings 660,000 660,000 Delivery Vans (W) 156,000 69,700 86,300 816,000 69,700 746,300 Intangible Fixed Assets Patents (W) 59,400 Financial Assets 6% Investments 200,000 Current Assets 1,005,700 Ins. Co., 35,000 Stock 31/12/2012 (W) 35,640 VAT 25,100 Invest Income due (W) 4,000 Debtors (W) 44,000 Less Provision (W) (2,200) 41,800 141,540 Creditors: amounts falling due within 1 year Creditors (W) 38,370 Pref. Dividends due (W) 8,800 Ord. Dividends due (W) 15,800 Debenture Int. due (W) 9,600 Bank 3,930 (76,500) 65,040 1,070,740 Financed by: Creditors: amounts falling due after 1 year 8% Debentures 160,000 Capital and Reserves Auth d. Issued Ord. Shares @ 1 each 580,000 420,000 8% Pref. Share @ 1 each 250,000 220,000 830,000 640,000 Revaluation Reserve (W) 184,800 Profit & Loss a/c balance 85,940 910,740 Shareholder s Funds Capital Employed 1,070,740

26 Graded Accounting Questions Solutions Notes to Accounts Closing stock 38,200 2 2,560 5 35,640 Patents. 63,000 1 3,000 5 66,000 2 6,600 5 59,400 Investment Income. 3,000 1 2,000 1 4,000 5 9,000 Bank O/D. 6,800 2 2,000 2 600 2 270 5 3,930 Debtors 46,000 2 2,000 5 44,000 Bad Debts. 1,400 5 1,400 Vehicles. 150,000 2 48,000 1 54,000 5 156,000 Depc. this yr. 2,400 1 8,100 1 20,400 5 30,900 Acc. Depc. 54,000 1 30,900 2 15,200 5 69,700 Disposal. 48,000 2 15,200 2 31,000 5 (1,800) loss Purs. 545,000 2 15,000 2 42,000 2 23,000 5 465,000 L & Blgs. 480,000 2 20,000 1 60,000 1 140,000 5 660,000 Acc. Depc. 36,000 1 8,800 2 44,800 5 nil Reval. Reserve 140,000 1 44,800 5 184,800 Pref. Div. 8,800 1 8,800 5 17,600 Ord. Div. 13,600 1 15,800 5 29,400 Debenture Interest 2,400 1 9,600 5 12,000 Prov. for B/Debts. 1,600 2 2,200 5 (600) loss Creditors 38,100 1 270 5 38,370 Salaries & General 148,200 2 18,000 5 130,200 Ins. Co. 5 35,000 (c) What are the main Objectives of Financial Accounting? To Process, Collect & Record information on most Transactions To classify & summarise this information in accounts To show performance of organization over a period To prepare financial statements at year end such as Trial Balance, Final accounts, Cash flow statements.

Topic 2 Final a/c s of Company Solutions 27 6 Echo Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 1,386,000 Less Cost of Sales Stock 107,240 Purchases 781,200 Less Closing Stock (114,520) (773,920) Gross Profit 612,080 Less Expenses Administration Patents written off 17,052 Salaries and General 246,400 Directors fees 112,000 Depreciation of Buildings 18,200 393,652 Selling and Distribution Bad Debts 2,450 Depreciation of Delivery Vans 49,840 Loss on disposal of van 14,000 66,290 (459,942) 152,138 Add Operating Income Overprovision for bad debts 1,042 Operating Profit 153,180 Add Investment income 10,080 Less Debenture Interest (26,460) Net Profit 136,800 Less Appropriation Dividend paid 56,000 Transferred to Staff Pension 32,900 (88,900) 47,900 Profit and Loss balance 1/1/2012 94,640 Profit and Loss balance 31/12/2012 142,540 (b) Balance Sheet as at 31/12/2012 Cost Depc. Value Intangible Fixed Assets Patents 68,208 Tangible Fixed Buildings 1,232,000 1,232,000 Delivery Vehicles 274,400 119,840 154,560 Financial Assets 8% Investments 252,000 1,706,768 Current Assets Stock 114,520 Debtors ( 99,960 less Provision 3,998) 95,962 Investment Interest due 2,520 213,002 Creditors : Amounts falling due within one year Creditors 113,526 Bank 2,744 VAT 23,100 Debenture interest due 20,160 (159,530) 53,472 Total Net Assets 1,760,240

28 Graded Accounting Questions Solutions Financed By: Creditors : Amounts falling due for more than one year 8% Debenture 322,000 Capital and Reserves Authorised Issued Ordinary Share Capital at 1 each 966,000 770,000 6% Preference Share Capital 420,000 280,000 1,386,000 1,050,000 Profit and Loss Balance 31/12/2012 142,540 Staff Pension Fund 32,900 Revaluation Reserve 212,800 1,438,240 Total Capital Employed 1,760,240 Notes to Accounts Purchases 868,000 2 86,800 5 781,200 Closing Stock 119,000 2 4,480 5 114,520 Patents 81,480 1 3,780 2 17,052 5 68,208 Provision for Bad Debts 5,040 2 3,998 5 1,042 Delivery Vans 240,800 1 117,600 2 84,000 5 274,400 Depreciation of Vans this year 5,880 1 12,600 1 31,360 5 49,840 Accumulated Depreciation of Vans 109,200 1 49,840 2 39,200 5 119,840 Disposal of Vehicles 84,000 2 30,800 2 39,200 5 14,000 Investment Income 3,780 1 3,780 1 2,520 5 10,080 Debenture Interest 6,300 1 20,160 5 26,460 Buildings 1,092,000 1 140,000 5 1,232,000 Accumulated Depreciation on Buildings 54,600 1 18,200 2 72,800 5 Nil Revaluation Reserve 140,000 1 72,800 5 212,800 Debtors 103,460 2 1,050 2 2,450 5 99,960 Creditors 113,400 1 126 5 113,526 Bank 7,700 2 3,780 2 1,050 2 126 5 2,744 (c) Explain with an example the difference between capital and current expenditure Capital expenditure Capital expenditure is entered in the balance sheet. It is expenditure incurred in the purchase or improvement of a fixed asset which increases the earning capacity of the asset, e.g. purchase of buildings including professional fees improvement or extension to buildings. Revenue expenditure Revenue expenditure is entered in the profit and loss account. It refers to the day to day running costs of a business. It represents costs incurred in the running of the business during the accounting period, e.g. wages, rent, insurance.

Topic 2 Final a/c s of Company Solutions 29 7 Festina Solution (a) Trading Profit & Loss Account for year ending 31/12/2012 Sales 967,000 Less Cost of Sales Stock 1/1/12 47,500 Purchases 621,425 Stock 31/12/12 (62,800) (606,125) Gross Profit 360,875 Administration Expenses Salaries & General Expenses 187,800 Patents written off 12,000 Audit Fees 8,900 Directors Fees 12,600 Depreciation Buildings 10,400 231,700 Selling and Distribution Expenses Depreciation Delivery Vans 41,400 Bad Debts 1,500 Increase Bad Debts Provision 2,035 44,935 (276,635) 84,240 Bad Debt Recoverable 700 Discount Received 215 Disposal Profit 5,625 6,540 Operating Profit 90,780 Add Investment Income 5,250 Less Debenture Interest (14,400) Profit available for distribution 81,630 Less Appropriation Dividends paid (24,000) Retained Profit 57,630 Profit & Loss Balance 1/1/12 (45,000) Profit & Loss Balance 31/12/12 12,630

30 Graded Accounting Questions Solutions (b) Balance Sheet as at 31/12/12 Acc. Net. Cost Dep. Value Fixed Assets Intangible: Patents 48,000 Tangible: Land & Buildings 970,000 970,000 Delivery Vans 222,000 85,700 136,300 1,192,000 85,700 1,106,300 1,106,300 Financial 180,000 5% Investments 1,334,300 Current Assets Stock 31/12/2012 62,800 Debtors 63,400 Less Provision for Bad Debts (3,135) 60,265 Investment Income Due 1,500 VAT 3,990 128,555 Less Creditors: amounts due within 1 year Creditors 88,260 Debenture Interest Due 11,925 Bank 5,840 (106,025) Net Current Assets 22,530 Net Assets 1,356,830 Financed by Creditors falling due for more than 1 year 7.5% Debentures 212,000 Capital & Reserves Authorised Issued Ordinary Shares @ 1 each 580,000 480,000 5% Preference Shares 400,000 300,000 980,000 780,000 Revaluation Reserve 352,200 Profit & Loss 31/12/12 12,630 1,144,830 1,356,830

Topic 2 Final a/c s of Company Solutions 31 Notes to Accounts Closing Stock 66,000 2 3,200 5 62,800 Patents 57,750 1 2,250 2 12,000 5 48,000 Investment income 2,250 1 1,500 1 1,500 5 5,250 Vehicles 208,500 2 22,500 1 36,000 5 222,000 Depc. this yr Nil 1 4,200 1 37,200 5 41,400 Acc. Depc. 66,800 1 41,400 2 22,500 5 85,700 Disposal 22,500 2 22,500 2 5,626 5 5,625 profit Purchases 651,000 1 800 2 30,375 5 621,425 Land & Building 700,000 1 270,000 5 970,000 Acc. Depc. 71,800 1 10,400 2 82,200 5 nil Revaluation Reserve 270,000 1 82,200 5 352,200 Bank o/d 8,100 1 40 2 1,500 2 800 5 5,840 Debtors 65,000 1 700 2 300 2 2,000 5 63,400 Bad Debts 1,200 1 300 5 1,500 Creditors 87,500 1 800 2 40 5 88,260 * Prov. for Bad Debts 1,100 2 3,135 5 (2,035) Bad Debt Recoverable 700 * Provision 5% of (65,000 2 300 2 2,000) 5 3,135 Note: Old vehicle Depreciated in full (c) Would you, as a bank manager, recommend that a 100,000 loan at 10% annual interest be given to Festina for expansion? Support your answer with 3 relevant points. Yes, based on following: Turned around deficit of 45,000 last YR to profit 12,630 this year Land & Building more than sufficient security for loan even after using Debentures. Working capital/current Ratio 1.2 shows it hasn t got cash flow problems 5% Investments can be sold if all else fails.

32 Graded Accounting Questions Solutions 8 Conolo Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 933,000 2 Cost of Sales Opening stock 83,600 1 Purchases (w) 600,400 2 Closing stock (w) (71,400) (612,600) 5 Gross Profit 320,400 Less Administration Expenses Salaries & General (w) 81,250 Depreciation of Buildings (w) 6,800 Patents written off (w) 10,000 Audit fees 2,890 (100,940) Less Selling and Distribution Bad Debts 300 Depreciation of vans (w) 45,100 Advertising 12,600 Provision for bad debts (w) 1,235 (59,235) (160,175) 1 Bad debt Recoverable 700 Discount 950 Disposal profit (w) 4,800 6,450 5 Operating Profit 166,675 1 Investment interest (w) 6,750 2 Debenture interest (w) (14,850) 5 Net Profit 158,575 2 Dividends (12,600) 5 Retained Profit 145,975 1 Profit and Loss 1/1 (45,000) 5 Profit and Loss 31/12 100,775 (b) Balance Sheet as at 31/12/2012 Intangible Fixed Patents (W) 40,000 Tangible Fixed Land and Buildings (W) 600,000 600,000 Delivery Vans (W) 234.000 74,100 159,900 834,000 74,100 Financial 5% Investments 180,000 Current Assets 979,900 Stock (W) 71,400 Debtors (W) 60,400 Provision (2985) 57,415 Insurance Claim due 25,600 Investment interest due 750 VAT 1,110 156,275

Topic 2 Final a/c s of Company Solutions 33 Less: Creditors falling due for less than 1 year Creditors 72,500 Bank 41,750 Debenture interest due 12,350 (126,600) 29,675 1,009,575 Financed by: Creditors falling due for more than 1 year 7% Debentures 180,000 Capital and Reserves Authorised Issued Ordinary shares of 1 each 500,000 400,000 5% Preference shares 300,000 150,000 550,000 Revaluation Reserve (W) 178,800 Profit and Loss a/c 31/12 100,775 829,575 1,009,575 Notes to Accounts Closing stock 63,600 2 2,200 1 10,000 5 71,400 Land& Buildings 420,000 2 20,000 1 60,000 1140,000 5 600,000 Purchases 634,000 2 5,600 2 38,000 1 10,000 5 600,400 Insurance claim 25,600 5 25,600 Creditors 62,500 1 10,000 5 72,500 Patents 47,000 1 3,000 2 10,000 5 40,000 Investment Interest 3,000 1 3,000 1 750 5 6,750 Vehicles 220,000 1 30,000 2 16,000 5 234,000 Debtors 60,000 2 300 1 700 5 60,400 Acc. Depc. Vehicles 45,000 1 45,100 2 16,000 5 74,100 Depc. This year 800 1 3,500 1 40,800 5 45,100 Disposal 16,000 2 6,400 2 4,800 5 4,800 General Expenses 102,400 2 22,000 1 850 5 81,250 Acc. Depc. Buildings 32,000 1 6,800 2 38,800 5 Nil Revaluation Reserve 140,000 1 38,800 5 178,800 Bad Debt. Recoverable 700 5 700 Bad Debt. 300 5 300 Provision for Bad Debt 1,750 2 2,985 (5% of 60,000 2 300) 5 1,235 Debenture Interest 2,700 1 12,150 5 14,850 Bank overdraft 18,700 2 3,000 1 850 1 25,200 5 41,750 (c) Explain what is meant by term solvency and how it can be measured? Solvency is the ability of an organisation to pay its debts from available current assets. It shows if a firm has cash flow problems and can avoid the possibility of creditors forcing the business into liquidation. Solvency is measured by using the Current Ratio (Current Assets: Current Liabilities) which has to have a min. answer of 1, and a further more severe test of liquidity using the Acid Test (Current Assets less Closing stock: Current liabilities) to show ability to meet debts in the short term.

34 Graded Accounting Questions Solutions 9 Prudence Solution (a) Trading Profit and Loss Account for year ending 31/12/2012 Sales 895,950 2 Cost Opening Stock 83,400 1 Purchases (w) 638,100 2 Closing Stock (w) (84,300) (637,200) Gross Profit 258,750 Administration Salaries & General (w) 121,450 Patents w/o (w) 8,000 Debt. of Blgs. (w) 9,000 Dir fees 6,800 145,250 Selling and Distribution Advertising (w) 33,000 Bad Debts 2,000 Debt of Veh. 57,500 92,500 (237,750) Operating Income - Disc Received 1,450 Provision for B.D 495 Disposal 1,000 2,945 Operating Profit 23,945 1 Investment Income 9,000 2 Debenture Interest (15,000) Net Profit 17,945 2 Appropriations Dividends paid 19,500 Transfer to Deb. Reduction Res. 20,000 (39,500) Profit/loss for year (21,555) P&L 1/1/12 14,400 5 P&L 31/12/12 (7,155) (b) Balance Sheet at 31/12/2012 Intangible Fixed Patents 32,000 Tangible land & Buildings 900,000 900,000 Vehicles 295,000 85,500 209,500 1,195,000 85,500 1,141,500 Financial 4% Investments 300,000 1,441,500 Current Assets Stock 84,300 Debtors 46,100 2 Provision (2,305) 43,795 VAT. 1,300 Crs. Falling Due less than 1 YR 129,395 Creditors 70,750 Debenture Interest Due 12,200 Bank 18,100 (101,050) Net Current Assets (28,345) 1,469,845

Topic 2 Final a/c s of Company Solutions 35 Financed by: Crs. Falling Due More than 1 yr 8% Debentures 200,000 Capital & Reserves Auth. Issued 1 Ordinary stores 900,000 700,000 6% Preference Shares 400,000 250,000 950,000 P&L a/c. (7,155) Revaluation Reserve 307,000 Debenture Redemption Resource 20,000 1,269,845 1,469,845 Notes to Accounts Closing Stock 68,600 2 4,300 1 20,000 5 84,300 Purs. 644,100 1 20,000 2 26,000 5 638,100 Crs. 51,200 2 450 1 20,000 5 70,750 Patents 36,000 1 4,000 2 8,000 5 32,000 Investment Int. 4,000 1 5,000 5 9,000 Vehicles 280,000 2 20,000 1 35,000 5 295,000 This years Depc. 2,000 1 3,500 1 52,000 5 57,500 Acc Depc. 40,000 1 57,500 2 12,000 5 85,500 Disposal 20,000 2 12,000 2 9,000 5 1,000 Profit Advertising 32,000 1 1,000 5 33,000 Disc. Rec. 450 1 1,000 5 1,450 Bank O/D 21,900 2 5,000 1 1,250 2 500 1 450 5 18,100 Salaries & Gen. 120,200 1 1,250 5 121,450 Debtors 48,600 2 2,500 5 46,100 Bad Debts 2,000 5 2,000 Debt. interest 2,800 1 12,200 5 15,000 Prov. for B/Ds 2,800 2 2,305 5 495 (over) Acc. Debt Blgs. 48,000 1 9,000 2 57,000 5 Nil Blgs. 650,000 1250,000 5 900,000 Reval. Res. 250,000 1 57,000 5 307,000 Deb Red. Res. 20,000 5 20,000 Prel. Dividend 3,750 1 11,250 5 15,000 Ord. Dividend 5,750 1 43,250 5 49,000

36 Graded Accounting Questions Solutions 10 Morgan Plc Solution (a) Trading Profit and Loss account for year ending 31/12/12 Grocery Hardware Total Sales 780,000 390,000 1170,000 2 Cost opening Stock 62,400 31,350 93,750 1 Purchases (112,600) 360,600 186,600 547,200 1 Carriage 6,150 3,600 9,750 2 Closing Stock (112,600) (85,800) (31,500) (117,300) 5 Cost of Sales 343,350 190,050 533,400 5 Gross Profit 436,650 199,950 636,600 less Selling & Distribution Expenses (Sales) Advertising (30-6-6) 12,000 6,000 18,000 Bad Debts 600 300 900 Provision for Bad Debts (2,280 2 1,830) 300 150 450 12,900 6,450 19,350 Administration (Floor space) Directors fees 29,700 19,800 49,500 Wages 78,300 52,200 130,500 Healing 16,740 11,160 27,900 Cleaning 16,200 10,800 27,000 Insurance 13,500 9,000 22,500 Depreciation of Buildings 5,400 3,600 9,000 Depreciation of Furniture 27,000 18,000 45,000 186,840 124,560 311,400 Operating Profit 236,910 68,940 305,850 2 Debenture Interest (26,400) 5 Net Profit 279,450 2 Dividends Preference (9,000) Ordinary (45,000) (54,000) 1 P & L 1/1/12 7,620 5 P & L 1/1/12 233,070

Topic 2 Final a/c s of Company Solutions 37 (b) Balance Sheet as on 31/12/12 Fixed Assets Goodwill 255,000 Tangible Fixed land & Buildings 750,000 Furniture 420,000 165,000 255,000 1,260,000 Current Assets Stocks (85,800 1 31,500) 117,300 Debtors 57,000 2Provision 2,280 54,720 Advertising prepaid 6,000 Insurance prepaid 2,700 180,720 Creditors Falling Due for less than 1 yr Creditors (12,600 2 270) 111,930 Bank (270 2 300) 13,320 Interest Due (26,400 2 8,250) 18,150 Dividends Due (6,750 1 28,500) 35,250 178,650 2,070 1,262,070 Financed by: Auth. Issued. Ordinary Shares 1 750,000 300,000 6% Preference Shares 300,000 150,000 1,050,000 450,000 450,000 Reserves Revaluation Reserve 249,000 P&L 31/12/12 233,070 482,070 932,070 Crs. falling Due For More than 1yr 8% Debentures 330,000 1,262,070 Report Grocery dept. is making a profit of 236,910 which represents a 30% return on sales (Gross profit margin 56%) Hardware dept. returns a 17.6% net profit % on sales with a gross margin of 51% While both are profit making and performing well in a difficult economic climate it would not be inclined to close either dept. If however pressurised through cash flow problems or credit restrictions, Hardware would be the most likely to close down as a 17.6% return is over 40% less a return that the Grocery dept. of 30%.

38 Graded Accounting Questions Solutions 11 Gambert Solution (a) Trading Profit & loss a/c for a/c 31/12/2012 Sales 1,752,250 2 Cost opening stock 75,200 1 Purchases 1,243,200 2 Closing stock (100,000) (1,218,400) Gross Profit 533,850 Administration Patents w/o 6,400 Salaries 177,600 Dir fees 48,000 Depc. of Blgs. 15,790 Rent 19,600 267,390 Selling & Distribution Advertising 15,700 Vehicle Depc. 38,000 Bad Debts. 2,050 Provision for B/Ds 394 56,144 (323,534) 210,316 Other operating income B.D. Recoverable 700 Discount Rec. 11,500 Profit on Sale of veh. 3,250 15,450 Operating profit 225,766 2 Debenture interest (14,400) 1 Investment Income 28,800 Net Profit 240,166 2 Dividend Preference 40,000 Dividend Ordinary 88,000 (128,000) 5 Profit for YR 112,166 2 P&L 1/1/12 (17,200) 5 P&L 31/12/12 94,966

Topic 2 Final a/c s of Company Solutions 39 (b) Balance Sheet as at 31/12/2012 Fixed Intangible Patents 25,600 Tangible Buildings 1,000,000 Vehicles 312,000 110,750 201,250 Financial 9% Investment 320,000 1,546,850 Current Assets Closing stock 100,000 Debtors 90,550 2 Provision (3,594) 86,956 Ins Co. 25,600 VAT. 22,500 Investment interest due. 18,900 253,956 Crs. falling Due less than 1 yr Creditors 99,490 Deb. interest Due. 9,600 Bank O/D 40,460 (149,550) 104,406 1,651,256 Financed by: 180,000 Creditors more than 1 yr 8% Debentures Capital 1 Reserves. Auth. Issued. Ordinary shares of 1 each 1,200,000 800,000 10% Preference shares 600,000 400,000 1,200,000 Revaluation Res. 96,290 P&L a/c 174,966 1,651,256 Notes to Accounts Closing stock 85,000 2 3,200 1 12,000 1 6,200 5 100,000 Purs. 1,320,000 1 12,000 2 5,600 2 38,000 1 800 2 46,000 5 1,243,200 Crs. 86,600 1 12,000 1 800 1 90 5 99,490 Sales 1,760,000 2 7,750 5 1,752,250 Drs. 100,400 2 7,750 2 2,500 1 700 2 300 5 90,550 Blgs. 902,000 2 20,000 1 60,000 2 22,500 1 80,500 5 1,000,000 Ins. Co 25,600 5 25,600 Salaries 199,600 2 22,000 5 177,600 Patents 24,800 1 7,200 2 6,400 5 25,600 Inv. Income 7,200 1 2,700 1 18,900 5 28,800 Vehicle 280,000 2 24,000 1 56,000 5 312,000 Acc. Depc. 90,000 1 38,000 2 17,250 5 110,750 Depc. this yr 750 1 5,250 1 32,000 5 38,000 Disposal 24,000 2 10,000 2 17,250 5 3,250 PR. Advertising 14,800 1 200 1 700 5 15,700 Deb. Int. 5,000 2 200 1 9,600 5 14,400 (CR) Discount 10,800 1 700 5 11,500 Bank O/D 44,000 2 90 2 750 2 2,700 5 40,460 Bad Debts 1,750 1 300 5 2,050 VAT 22,500 5 22,500 DR Acc. Depc. Blgs. 15,790 2 15,790 5 nil Reval. Res. 15,790 1 80,500 5 96,290 Bad Debt Recovered 700 5 700 B/D Provision 3,200 2 3,594 5 (394)

Topic 3 Final a/c s of Manufacturing Solutions 2 Astroid 3 Betamax 4 Celestial 5 Ducato 6 Sheridan 7 Flotilla

Topic 3 Final a/c s of Manufacturing Solutions 41 2 Asteroid Solution (a) Manufacturing Account of Asteroid for year ended 31/12/2012 D. Mats. Opening Stock of raw materials 1/1/2012 41,500 Purchases of raw material W 440,900 482,400 Less Closing Stock of raw materials W (52,400) Cost of raw materials consumed 430,000 D. labour Manufacturing Wages W 92,000 Prime Cost 522,000 Factory Overheads General Factory overheads W 53,500 Deprec: Plant & Machinery W 63,000 Buildings W 14,300 130,800 W.I.P. Factory Cost 652,800 Add Work in Progress 1/1/2012 24,200 677,000 Less Work in Progress 31/12/2012 (29,900) 647,100 less Less Sale of Scrap Materials (5,400) Less Profit on Sale of Machinery W (600) (6,000) Cost of Manufacture 641,100 Trading, Profit & Loss Account for year ending 31/12/2012 Sales W 925,850 Less Cost of Sales Stock of finished goods 1/1/2012 32,800 Cost of goods produced 641,100 Total available for sale 673,900 Less Stock of fin. goods 31/12/2012 W (42,300) Cost of Goods Sold (631,600) Gross Profit 294,250 less Administration Administration Expenses 42,900 Selling & Distribution Bad Debts 700 Provision for Bad Debts. 1,648 Selling & Distribution Exp. 36,400 38,748 (81,648) Operating Profit 212,602 Debenture Interest due W (16,200) Net Profit before Taxation 196,402 Taxation on profit (32,000) Profit after Taxation 164,402 Dividends Paid (18,000) Retained Profit 146,402 Profit and Loss balance 1/1/2012 32,500 Profit and Loss balance 1/1/2012 178,902

42 Graded Accounting Questions Solutions (b) Balance Sheet as at 31/12/2012 Cost Dep. N.B.V. Fixed Assets Land & Buildings 950,000 950,000 Plant & Mach. W 312,000 102,400 209,600 1,262,000 102,400 1,159,600 Current Assets Stocks: Raw Materials 52,400 Work in Progress 29,900 Finished Goods 42,300 124,600 Debtors W 32,950 2 Provision (1,648) 31,302 155,902 Creditors: amounts falling due within 1 year Trade Creditors W 61,800 P.R.S.I 12,100 Debenture Interest due 16,200 Taxation 32,000 Bank 11,200 133,300 Net Current Assets 22,602 Total Assets less Current Liabilities 1,182,202 Financed by: Creditors: amounts falling due after 1 year 8% Debentures 240,000 Capital and Reserves Auth d. Issued Ordinary Shares @ 1 850,000 300,000 4 % Pref. Shares @ 50 400,000 250,000 1,250,000 550,000 Reval. Reserve a/c. W 213,300 Profit & Loss Balance 178,902 942,202 Capital Employed 1,182,202 Notes to Accounts Sales 936,600 2 3,000 2 7,750 5 925,850 Machinery 330,000 2 18,000 5 312,000 Acc. Dehc. Mach. 55,000 1 63,000 2 15,600 5 102,400 Depc. this yr. 600 1 62,400 5 63,000 Disposal 18,000 2 15,600 2 3,000 5 600 Purs. of Raw Mats. 453,900 1 12,000 2 25,000 5 440,900 Creditors 49,800 1 12,000 5 61,800 C/s of Raw Mats. 40,400 1 12,000 5 52,400 Debtors 42,300 2 900 2 7,750 2 700 5 32,950 Gen. Factory O/Hs 52,600 1 900 5 53,500 C/s of fin goods 36,100 1 6,200 5 42,300 Buildings 740,000 1 40,000 1 25,000 1 145,000 5 950,000 Factory Wages 132,000 2 40,000 5 92,000 Acc. Depc. Blgs. 54,000 1 14,300 2 68,300 5 nil Revaluation Res. 145,000 1 68,300 5 213,300 Bad Debts. 700 5 700 Provision for Bad Debts. 1,648 5 1,648 Debenture Interest 16,200 5 16,200 Corporations Tax 32,000 5 32,000