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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 25,750 (25,750) Interest on capital (200,000 x 5%) 10,000 (10,000) (100,000 x 5% x ½) 2,500 (125,000 x 5% x ½) 3,125 (5,625) Profit share 112,125 112,125 224,250 Total profit share 147,875 117,750 3 D 4 B 5 A $ Consideration 8,000,000 Fair value of non-controlling interest 3,000,000 11,000,000 Less fair value of net assets at acquisition (8,750,000) Goodwill 2,250,000 6 A 7 C 8 C $ Profit after tax 21,800 Preferred dividend 1,800 (6% of $1 x 30,000) Profit after tax and preferred dividend 20,000 Ordinary dividend 12,000 (60%) Retained Profit 8,000 (40%) 12,000/100,000 = 12 cents 9 D 10 C 13
Section B Marks Workings $000 1 (a) (i) Bayzell Co Statement of Comprehensive Income for the year ended 31 May 2011 $000 Revenue 11,483 (11,700 217) Cost of sales (W1) (7,910) 6 5 Gross profit 3,573 Distribution costs (W1) (578) 3 5 Administrative expenses (W1) (1,518) 5 5 Finance cost (30) Profit before tax 1,447 Income tax expense (310) Profit for the year 1,137 Other comprehensive income: Gains on land revaluation 90 (1,550 1,460) Total comprehensive income for the year 1,227 20 0 (ii) Bayzell Co Statement of Financial Position as at 31 May 2011 Assets Non-current assets Property, plant and equipment (W2) 6,092 4 0 Intangible asset (W3) 336 6,428 Current assets Inventory 465 Trade receivables and prepayments 1,819 1 5 (1,900 95 + 14) Cash and cash equivalents 232 2,516 Total assets 8,944 Equity and liabilities Equity and reserves Share capital 4,886 Other components of equity 90 Retained earnings 1,782 1 5 (800 + 1,137 155) 6,758 Non-current liabilities Long-term borrowing 300 Current liabilities Trade and other payables 1,886 1 5 (1,488 + 310 + 88) Total equity and liabilities 8,944 14 0 14
Marks Workings W1 Cost of Distribution Administrative Sales Costs Expenses $000 Opening inventory 990 Purchases 6,850 Wages and salaries (40:30:30) 448 336 336 1 5 Insurance ($108 $14) (50:50) 47 47 2 0 Electricity expenses ($542 + $88) (60:20:20) 378 126 126 3 0 Administrative expenses 500 Increase in allowance for receivables 33 Discounts received (590) Director s remuneration 430 Depreciation plant 136 Depreciation buildings (50:30:20) 115 69 46 3 0 Amortisation of intangible asset 48 Closing inventory (465) 7,910 578 1,518 (6 5 marks) (3 5 marks) (5 5 marks) 15 5 W2 Non-current assets Total Property, Plant Land Buildings Plant & Equipment Cost 1,460 4,600 1,362 7,422 Accumulated depreciation b/f (372) (682) (1,054) Current year s depreciation: Plant ($1,362 $682) x 20% (136) (136) Buildings $4,600 x 5% (230) (230) Revaluation of land 90 90 1,550 3,998 544 6,092 (1 mark) (1 5 marks) (1 5 marks) (4 marks) W3 Intangible Assets $ 000 Cost 384 Amortisation (384/4)*6/12 (48) Amount as at 31 May 2011 336 (b) Accounting ratios Earnings per share Profit after tax = 1,137 = 25 8 cents No. of ordinary shares 4,400 Interest cover Profit before int and tax = 1,477 = 49 2 times Interest charges 30 Acid test (quick) ratio Current assets inventory = 2,051 = 1 1:1 Current liabilities 1,886 Payments collection period Trade accounts payable x 365 = 1,488 x 365 = 79 3 days Purchases 6,850 Alternative calculation: Payments collection period Trade accounts payable x 365 = 1,488 x 365 = 68 7 days Cost of sales 7,910 Marking scheme: 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 Taxation 20 Bal. at 1 June 2010 50 Dividends 35 Profit before tax (Bal. fig) 125 + Bal. at 31 May 2011 120 175 175 4 0 (b) Prepared in accordance with FRS 7 Erley Co Statement of cash flows for the year ended 31 May 2011 Cash flows from operating activities Profit before tax 125 Adjustments for: Depreciation 96 Loss on sale of tangible non-current assets 5 Interest 2 Operating profit before working capital changes 228 Decrease in inventory 10 Increase in receivables (50) Decrease in payables (5) Cash generated from operations 183 Interest paid (2) Tax paid (25) 2 0 Net cash from operating activities 156 Cash flow from investing activities Purchase of tangible non-current assets (316) 2 5 Receipts from sales of tangible non-current assets 30 Net cash used in investing activities (286) Cash flows from financing activities Dividends paid (35) Proceeds from issue of share capital 150 1 5 Repayment of long term borrowing (10) Net cash from financing activities 105 Net decrease in cash and cash equivalents (25) Cash and cash equivalents at beginning of period 15 Cash and cash equivalents at end of period (10) 16 0 Note FRS 7 allows interest paid and dividends paid to be shown in either financing cash flow or as operating cash flow. Workings Non-current assets Balance b/f 565 Depreciation 96 New non-current assets (bal) 316 Disposals 35 Balance c/f 750 881 881 16
Marks 3 (a) C Mars accounts (i) Revaluation account Plant and machinery loss 10,500 Goodwill 50,000 + Capital account 60,125 Property profit 20,625 0 + 70,625 70,625 (ii) Capital account Balance c/f to new business 186,700 Balance b/f 132,075 + 0 Motor vehicle 5,500 Profit on revaluation 60,125 + 192,200 192,200 J Neptune s accounts (i) Revaluation account Inventory loss 2,750 Goodwill 40,000 + Capital account 37,250 40,000 40,000 (ii) Capital account Balance c/f to new business 120,550 Balance b/f 83,300 + 0 Profit on revaluation 37,250 120,550 120,550 8 0 (b) Marks Workings Planets Statement of Financial Position as at 31 May 2011 Assets Non-current assets Property 110,000 Plant and machinery 91,200 1 ($34,000 + $57,200) Motor vehicle 25,025 226,225 Current assets Inventory 25,300 1 ($11,550 + $13,750) Trade receivables 8,775 Cash at bank 13,475 47,550 Total assets 273,775 Capital and liabilities Capital accounts C Mars 126,700 1 5 W1 J Neptune 90,550 1 5 W1 217,250 Current liabilities Trade payables 46,625 Loan from M Pluto 9,900 Total capital and liabilities 273,775 8 0 17
Working 1 Marks Partners Capital accounts Mars Neptune Mars Neptune Goodwill written off Balance b/f from 2:1 x $90,000 60,000 30,000 old business 186,700 120,550 + + + Balance c/f 126,700 90,550 + 186,700 120,550 186,700 120,550 (c) 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