preparing the financial statements Assignment B – Teacher Language

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Task 1 (LO4 and LO2)        Cresco , a limited liability company, has  an  accounting  year end  of 31  October. The accountant is preparing the financial statements as at 31 October 2021 and requires your assistance. The following trial balance has been extracted from the general ledger Account Dr Cr   $000 $000 Buildings at cost 740   Buildings accumulated depreciation, 1 November 20X6   60 Plant at cost 220   Plant accumulated depreciation, 1 November 2017   110 Bank balance   70 Revenue   1,800 Net purchases 1,140   Inventory at 1 November 2020 160   Cash 20   Trade payables   250 Trade receivables 320   Administrative expenses 325   Allowance for receivables at 1 November 2020   10 Retained earnings at 1 November 2020   130 Equity shares, $1 Share premium account                                                         415              80                   –––––– ––––––   2,925 –––––– 2,925 –––––– The following additional information is available:     –     The allowance for receivables is to be increased to 5% of trade receivables.  The allowance for receivables is treated as an administrative expense. –     Plant is depreciated at 20% per annum using the reducing balance method and buildings are depreciated at 5% per annum on their original cost. Depreciation is treated as a cost of sales expense. –     Closing inventory has been counted and is valued at $75,000. –     An invoice of $15,000 for energy costs relating to the quarter ended 30  November 2021  was  received on 2 December 2021. Energy costs are included in administrative expenses. Required: Prepare  the income statement and the statement of financial position of Cresco Ltd as at 31  October 2021.                                  (15  marks)
Task 2  (LO2, LO3 and LO4) Simple Rules Co accountant has provided the following information Statement of financial position as at 31st December 2020                                                                         Dr                                                                                                                    $000                                        Non-current assets Land and Buildings at cost                             4,680 Fixtures and Fittings at cost                           1,622 Motor Vehicles at cost                                    90                                                                         6,392 Current assets Inventory                                                         42 Receivable                                                      141 Prepayments                                                  7 Total Assets                                                   6,582 Equity and Liabilities Share Capital                                                  600 Retained earnings                                           5,208 Current Liabilities                                            Payables                                                         20 Tax                                                                  216 Accruals                                                         484 Overdraft                                                        54  Total Equity and Liabilities                           6,582   
      Additional information ·         During the year total sales were $1,800k before trade discounts of $90k. As at 31 December 2021, $300k had not been settled. This is the only receivable balance outstanding at year end; ·         6% of 2020 receivables balance b/f was written off as expected irrecoverable;   ·         purchases of goods for resale were $240k. They were originally purchased on credit but 80% of the total was settled during the year; ·         $30k of the purchased goods remained unsold at 31st December 2021; ·         The 2020 closing inventory b/f was sold during the year; ·         Total operating expenses during the period were $305k and the following were included: o   (i) rates for the 12 months to 31st March 2022 of $24k and o   (ii) insurance for the 12 months to 31st June 2022 is $12k. ·         All Opex received by the Company during the year were paid; ·         Simple Rules Co. has not yet received the following invoices: o   Office maintenance for quarter to 31st Dec 2021, estimated to be $3k per quarter o   Motor vehicles servicing for 6 months to 31st March 2022, estimated to be a total of $9k ·         Depreciation is treated as an operating expense; a full year is charged in the year of acquisition and none in the year of disposal. The following rates apply: o   Buildings 2%p.a. on reducing balance o   Fixtures and Fittings and Motor Vehicles 25% p.a. on reducing balance ·         During the period fixtures and fittings were purchased for $40k and motor vehicles were purchased for $50k ·         There were no disposals during the period ·         The net book value (NBV) of land and buildings at year end was $3,800k ·         The tax rate applied in the period was 19% ·         The 2020 accrual balance b/f relates to declared dividend for $480k which was paid on 1st January 2021 and other operating expenses paid in the year to 31st December 2021. Required Prepare Income Statement and the Statement of Financial Position for Simple Rules Co as at 31st December 2021.                                                                                         (Total:  15 Marks)
Task 3 (LO2) (a)    A firm buys and sells 2 models, J and A. The following unit costs are available:                                                                                             J                                   A Purchase cost                                                              $ 100                               $ 200 Delivery cost                                                                $20                                  $30 Delivery cost to customer                                         $22                                  $40 Coloured sales packaging cost                                 $15                                  $18 Selling price                                                                 $150                                $300 Required: Calculate the figure to be included in closing inventory for a unit of each model                                                                                                                        (4 Marks) (b)   A firm has the following transactions with its product N Year 1 Opening inventory: Nil Buys 10 units at $300/unit Buys 12 units at $260/unit Sells 8 units at $400/unit Buys 6 units at $200/unit Sells 12 units at $400/unit Year 2 Buys 10 units at $200/unit Sells 5 units at $400/unit Buys 12 units at $150/unit Sells 25 units at $400/unit   Required: Calculate on an item by item basis for both year 1 and year 2:         i.            Closing inventory        ii.            Sales revenue      iii.            Cost of sales      iv.            Gross profit Using the FIFO method of inventory valuation. Present all workings clearly                                                                                                                          (12  Marks)                                                                                                       (Total: 16 Marks)  
Task 4 (LO1)   “The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decision” Required a)    State FIVE potential users of company published financial statements, explaining (with examples) for each one their likely information needs from those statement b)    Discuss in detail whether you think that the company published financial statements prepared in accordance with International Accounting Standards, achieve the objective stated above, giving your reasons                                                                                                       (Total: 15 marks)        
  Task 5 (LO4 and LO5)   Statement of Cash Flows The statement of financial position of Apollo at 31st March 2021 and 31st March 2020                                                                                                   2021                                                       2020                                                                                                 $                                                              $ Non current Assets                                                         345,250                                                 337,470 Current Assets Inventories                                                                         4,800                                                     5,200 Receivables                                                                        37,500                                                   34,350 Cash                                                                                      66,460                                                   3100                                                                                                 454,010                                                 380,120     Equity & Liabilities Equity Ordinary Share Capital                                                   85,230                                                   83,230 Share Premium                                                                 0                                                              0 Revaluation surplus                                                         0                                                              0 Retained earnings                                                            344,630                                                 273,140   Non-current liabilities Loan                                                                             13,000                                              7,000   Current Liabilities Bank overdraft                                                                  0                                                              0 Tax                                                                                        2,750                                                     3,250 Trade payables                                                                 8,400                                                     13,500                                                                                                 454,010                                                 380,120
  Income statement for the year ended 31st March 2019                                                                                                                                                                 $ PBT                                                                                                                                                        75,030 Tax                                                                                                                                                         (3,540) Profit                                                                                                                                                     71,490   Notes 1)      Depreciation expense for the year was $3,625 2)      Assets with a carrying value of $2,420 were disposed off at a profit of $700 Prepare Cash Flow Statement using indirect method.                                                                                                              (Total: 15 Marks)
Task 6 (LO5)   The directors of Q Read Co. wish to compare the company’s most recent financial statement with those of the previous year. The company’s financial statements are given below: Statement of profit and loss                                                                                                 Year ended 31st March                                                                                                 2021                            2020                                                                                                 £000                            £000 Sales revenue                                                                         2,500                           1,800 Cost of Sales                                                                           (1,800)                         (1,200)                                                                                                 700                              600 Distribution costs                                                                    (250)                            (200) Administrative expenses                                                         (200)                            (160) Profit from operations                                                             250                              240 Finance costs                                                                          (50)                              (50) Profit before tax                                                                      200                              190 Income tax                                                                              (46)                              (44) Profit for the year                                                                    154                              146   Note: cost of sales figures are made up as follows: Opening inventory                                                                  200                              180 Purchases                                                                              1,960                            1,220 Less Closing inventory                                                           (360)                            (200) Cost of sales                                                                           1,800                           1,200
  Statement of financial position                                                             31/3/21                                                31/3/20                                                 £000                £000                            £000                £000 Assets Non-current assets                  3,674                                                   3,100 Acc Depn                                (1,422)             2,252                           (1,214)             1,886 Current Assets Inventory                                 360                                                      200 Trade receivable                     750                                                      400 Cash at bank                          120                  1,230                           100                  700 Current liabilities Trade payables                       380                                                      210 Sundry payables                     430                                                      260 Income tax                              50                    (860)                            48                    (518) Non-current assets 10% Loan notes                                              (500)                                                    (500)                                                                         2,122                                                   1,568 Equity Issued ordinary SC                                         1,200                                                   1,000 Share premium                                               600                                                      400 Retained earnings                                           322                                                      168                                                                              2,122                                                   1,568 Notes: additional share capital was issued on 1st April 2021 Required (a)  Calculate, for each of the 2 years, eight accounting ratios which should assist the directors in their comparison, using closing figures for items in the statement of financial position                                                                   (8 marks) (b)  Suggest possible reasons for the changes in the ratios between the 2 years                                                                                                          (8 marks)                                                                                                                (Total: 16 marks)                       Task 7 (LO4 and LO1) Multiple Choice Questions 1)    At November 2020 the non-current asset of Sassoferato had carrying amount of $2,758,940. During the year to 31st October 2021, assets with a carrying amount of $273,790 were sold at a loss of $15,850 and new assets costing $568,900 were purchased What figure should appear for the net cash used in investing cash flows in that statement of cash flows for the year to 31st October 2021? a. $257,940 b. $295,110 c. $310,960 d. $568,900                                                                                                     (2 marks) 2) If Heavier Co has sold goods to Slim Co during the year but none of these remained in inventory at the year end, which of the following would be true? a. There would be no impact on the Income Statement b. An adjustment would be required to reflect the unrealised profit and this adjustment would be shown in the Statement of financial position c. The value of sales made by Heavier to Slim would be deducted from Heavier’s revenue figure and the same amount would be deducted from Slims cost of sales d. The adjustment required can only be calculated by understanding whether profit has been calculated based on margin or mark-up.                                                                                                                                  (2 marks)                 3) Which TWO of the following will be classified as non-current assets for a dealer in computer equipment? a. Computer for resale b. Vehicles for delivering computers c. Business capital d. Office furniture   A.    1 and 2 B.    2 and 3 C.   2 and 4 D.   3 and 4 (2    marks)   4 Which TWO of the following statements regarding the accruals basis are correct?   a)    Income and expenses are recorded in the financial statements in the periods to which they relate b)    All expenses but not income are recognised and accrued for c)    The effects of transactions and other events are recognised when they occur d)    Revenue is recognised when it can be matched with expenditure incurred   A.    1 and 3 B.    1 and 4 C.   2 and 3 D.   2 and 4                                                                                                                  (2 Marks)                                                                                                                        (Total: 8 marks)

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