Answers

ACCA Certified Accounting Technician Examination Paper T6 (UK)

Drafting Financial Statements (UK Stream)

June 2011 Answers

and Marking Scheme

Section A
1

Phil

Profit
Salary
Interest on capital
(200,000 x 5%)
(100,000 x 5% x )
(125,000 x 5% x )
Profit share
Total profit share

A
Consideration
Less
Fair value of net assets at acquisition
Group share

James

25,750

(10,000)
10,000

2,500
3,125

112,125

147,875

112,125

117,750

8,000,000
8,750,000

x 75%
6,562,500

1,437,500

Goodwill

C
Profit after tax
Preferred dividend
Profit after tax and preferred dividend
Ordinary dividend
Retained Profit

21,800
1,800 (6% of 1 x 30,000)

20,000
12,000 (60%)

8,000 (40%)

12,000/100,000 = 12 pence

265,625
(25,750)

10 C

13

(5,625)

224,250

Section B
Marks Workings 000
1

(a)

(i)

Bayzell Ltd
Profit and loss account for the year ended 31 May 2011

000
11,483
10
(7,910) 65

3,573
(578) 35
(1,518) 55

1,477
(30) 05

1,447
(310) 05

1,137

180

Turnover
Cost of sales (W1)
Gross profit
Distribution costs (W1)
Administrative expenses (W1)
Operating profit
Interest
Profit on ordinary activities before tax
Tax on profit on ordinary activities
Profit on ordinary activities after taxation

(ii)

Statement of total recognised gains and losses

Profit for financial year
Unrealised surplus on revaluation of property

1,137
90

1,227

Total recognised gains and losses relating to the year

(iii)

05

Bayzell Ltd
Balance sheet as at 31 May 2011
000
Fixed assets
Tangible assets (W2)
Intangible asset (W3)

Creditors: amounts falling due within one year

Trade and other creditors

14

05

20

000
40
10

465
1,819
232

2,516

05
15
05

(1,900 95 + 14)

1,886

15

(1,488 + 310 + 88)

Net current assets

Creditors: amounts falling due after more than one year
Debentures

Capital and reserves

Share capital
Share premium
Revaluation reserve
Profit and loss account

(1,550 1,460)

05

6,092
336

6,428

Current assets
Stock
Trade debtors
Cash at bank

05
10

(11,700 217)

630
(300)

6,758

10

4,400
486
90
1,782

6,758

05
05
10
15

140

(800 + 1,137 155)

Marks
Workings
W1

Opening stock
Purchases
Wages and salaries (40:30:30)
Insurance (108 14) (50:50)
Electricity expenses (542 + 88) (60:20:20)
Administrative expenses
Increase in allowance for debtors
Discounts received
Directors remuneration
Depreciation plant
Depreciation buildings (50:30:20)
Amortisation of intangible asset
Closing stock

Cost of
Sales
000
990
6,850
448

Distribution Administrative
Costs
Expenses
000
000

336
47
126

378

Cost
Depreciation b/f
Current years depreciation:
Plant (1,362 682) x 20%
Buildings 4,600 x 5%
Revaluation of land

430
136
115
48
(465)

7,910

(65 marks) (35

69

46

578

marks)

1,518

(55 marks)

Plant
000
1,362
(682)

Total
Property, Plant
& Equipment
000
7,422
(1,054)

Buildings
000
4,600
(372)

(136)
(230)
90

1,550

(1 mark)

336
47
126
500
33

(590)

W2 Fixed assets
Land
000
1,460

05
05
15
20
30
05
10
10
05
05
30
05
10

3,998

(15 marks)

544

(15 marks)

155

(136)
(230)
90

6,092

(4 marks)

W3 Intangible Assets
000
384
(48)

336

Cost
Amortisation (384/4)*6/12
Value as at 31 May 2011
(b)

Accounting ratios
Earnings per share

Profit after tax

No. of ordinary shares

1,137

4,400

258 pence

Interest cover

Profit before int and tax

Interest charges

1,477

30

492 times

Acid test (quick) ratio

Current assets stock

Current liabilities

2,051

1,886

11:1

Payments collection period

Trade accounts payable

Purchases

x 365

1,488

6,850

x 365

793 days

Trade accounts payable

Cost of sales

x 365

1,488

7,910

x 365

687 days

Alternative calculation:
Payments collection period

Marking scheme: 05 mark for stating the correct formula and 1 mark for calculating the correct ratio.

15

Marks
2

(a)

Calculation of the profit before tax

Accumulated profit and loss account
000
20
35
2
120

177

Taxation
Dividends
Interest
Bal. at 31 May 2011

(b)

Bal. at 1 June 2010

Profit before tax (Bal. fig)

000
50
127

177

10
20
10
10

50

Prepared in accordance with FRS 1

Erley Ltd
Cash flow statement for the year ended 31 May 2011
000
Net cash inflow from operating activities (Note 1)
Returns on investments and servicing of finance
Interest paid
Taxation
Tax paid
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (W1)
Receipts from sale of tangible fixed assets

05
000
183
(2)

05

(25)

20

(316)
30

25
10
(286)

(130)

Net cash inflow before financing

Financing
Issues of ordinary share capital
Redemption of debentures
Dividends paid

150
(10)
(35)

Net cash outflow from financing

15
10
10
105

(25)

Increase in cash for the period

05

Notes to the cash flow statement:

1

Reconciliation of operating profit to cash flow from operating activities

Operating profit
Depreciation
Loss on sale of tangible fixed assets
Decrease in stocks
Increase in debtors
Decrease in creditors
Net cash inflow from operating activities

000
127
96
5
10
(50)
(5)

183

Workings
Non-current assets
Balance b/f
New fixed assets (bal)

000
565
316

Depreciation
Disposals
Balance c/f

881

16

000
96
35
750

881

05
05
05
10
10
10

150

Marks
3

(a)

C Mars accounts
(i)

Revaluation account
Plant and machinery loss
Capital account

10,500
60,125

70,625

(ii)

50,000
20,625

70,625

Goodwill
Property profit

10 + 05
0 + 10

Capital account
Balance c/f to new business
Motor vehicle

186,700
5,500

192,200

132,075
60,125

192,200

Balance b/f
Profit on revaluation

05 + 0
10 + 10

J Neptunes accounts
(i)

Revaluation account

2,750
37,250

40,000

Stock loss
Capital account

(ii)

40,000

Goodwill

10 + 05

40,000

Capital account
Balance c/f to new business

120,550

83,300
37,250

120,550

Balance b/f
Profit on revaluation

120,550

05 + 0
10

80

Marks Workings
(b)

Planets
Balance sheet as at 31 May 2011
Fixed assets
Property
Plant and machinery
Motor vehicle

Current assets
Stock
Trade debtors
Cash at bank
Creditors: amounts falling due within one year
Trade creditors
Net current assets
Creditors: amounts falling due after more than one year
Loan from M Pluto
Net assets
Capital accounts
C Mars
J Neptune

17

110,000
91,200
25,025

226,225

05
1
05

25,300
8,775
13,475

47,550

1
05
05

46,625

05

(34,000 + 57,200)

(11,550 + 13,750)

925
(9,900)

217,250

05

126,700
90,550

217,250

15
15

80

W1
W1

Marks
Working 1
Partners Capital accounts
Mars

Goodwill written off

2:1 x 90,000
60,000
Balance c/f
126,700

186,700

(c)

Neptune

30,000
90,550

120,550

Balance b/f from

old business

Mars

Neptune

186,700

120,550

186,700

120,550

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

05 + 05 + 05 + 05
05 + 05