Questions and Answers of Business Accounting

Plant and equipment was purchased on 1 January 2016 for £64,000, when the relevant specific price index was 80. What is the current cost value of the asset at 31 December 2017 if the index at that
The plant and equipment, details of which are given in Question 32.4, is depreciated on a straight line basis at 12% per annum. The depreciation charge is based on year-end values. What is the
Calculate backlog depreciation at 31 December 2018 for the plant and equipment, the details of which are given in Question 32.5A.Data From Question 32.5The plant and equipment, details of which are
The statement of financial position of Aberdeen Ltd at 31 December shows the following balances:The relevant price indices for trade accounts receivable and trade accounts payable are:Required:Using
The historical cost of sales figure for Lemon Ltd for the year ended 31 December 2016 is calculated as follows:Price indices for inventory are as follows:Required:Assuming that purchases occur evenly
If the relevant price indices for trade accounts receivable and trade accounts payable are as follows, calculate the monetary working capital adjustment for Aberdeen Ltd, using the details given in
The statement of financial position for Glencoe Ltd at 31 December is given below (£000):Required:Using the above information, calculate the gearing adjustment percentage: Non-current assets Plant
The information given below has been extracted from the accounting records of Beechgrove Ltd for the year ending 30 June 2017. Prepare a statement showing the current cost operating profit to 30 June
The following information has been extracted from the accounting records of Barry Bucknell Ltd for the year ended 30 June 2016.Required:Prepare a current cost statement of profit or loss for Barry
During a period of inflation, many accountants believe that financial reports prepared under the historical cost convention are subject to the following major limitations:1 Inventories are
You are presented with the following information relating to Messiter plc:Required:(a) Using the historical cost financial statements and stating the formulae you use, calculate the following
Using the following statement of financial position and statement of profit or loss, calculate ten accounting ratios (each to 2 decimal places). Comment on each ratio calculated (ignore taxation).The
In respect of each of the following events, select all the effects resulting from that event that are shown in the list of effects:(i) A bad debt written off;(ii) An increase in the bank
A company has capital of 5 million ordinary shares of £1 each. It pays a dividend of 5% of its profits after tax of £800,000 on sales of £8 million. The market price of the shares is £2.50. What
If you wished to assess the efficiency of a company, which of these ratios would you use:(a) Inventory turnover(b) Interest cover(c) Return on capital employed(d) Acid test ratio(e) Dividend yield?
Study the following financial statements for two very similar privately owned department stores that each have one store in the city centre of the same large city and then answer the questions which
Study the following financial statements of two companies and then answer the questions which follow. Both companies are stores selling carpets and other floor coverings; each company has a single
The directors of L Ltd appointed a new sales manager towards the end of 2015. This manager devised a plan to increase revenue and profit by means of a reduction in selling price and extended credit
What effect would these types of differences have on the ratios of the two businesses?
Adrian Frampton was considering the purchase of one of two businesses. However, Frampton had only been provided with limited information about the businesses, as follows:Additional information:1
What two key things does an inward-looking analysis of this type NOT tell you?
Limedrop plc had the following selected transactions during the past year:1. Sold (issued) 3,600 ordinary shares at £10 par for £35 per share.2. Received £270,000 from various trade debtors.3.
The following information has been extracted from the draft financial information of V Ltd:Dividend paid = £52,000(a) You are required to prepare a statement of cash flows for V Ltd for the year
You are presented with the following forecast information relating to Baker Limited for the nine months to 30 September 2017.Forecast statements of profit or loss (abridged) for the three quarters
The accountant of a private company has been able to get the use of a computer to produce the spreadsheets shown below but as yet the computer lacks a program to print out final accounts. The
List the three headings in the statement of cash flows, as required by IAS 7.
Give an example of the information to be included under each of the headings in an IAS 7-based statement of cash flows and indicate why this information might be useful.
Prepare a statement of cash flows for Chipsea Ltd for the year ended 31 December 2017 as required under IAS 7 using the direct method. The statement of profit or loss, statement of financial position
The statements of financial position and additional information relating to Pennylane Ltd are given below. Prepare a statement of cash flows for Pennylane Ltd for the year ending 31 December 2016 as
The following information has been extracted from the books of Hayes Limited for the year to 31 December 2016:Additional information:1 The directors are extremely concerned about the large bank
The following summarised statements of financial position relate to Track Limited:Additional information:1 During the year to 30 June 2018, some non-current assets originally costing £25,000 had
The Club Ltd was incorporated on 15 May 2017 and took over the business of Poker Ltd on 1 June 2017. It was agreed that all profits made from 1 June should belong to The Club Ltd and that the vendors
Frank Jon Ltd has just finished its second year of trading to 31 December 2017. Balances from Question 8.1 need to be brought forward into this question. Tax rates are the same as for 2016.Data From
The following trial balance of X Limited, a non-listed company, has been extracted from the books after the preparation of the statement of profit or loss and statement of changes in equity for the
The following information has been extracted from the books of account of Billinge plc as at 30 June 2016:Additional information:1 The company was incorporated in 2010.2 The inventory at 30 June 2016
Cosnett Ltd is a company principally involved in the manufacture of aluminium accessories for camping enthusiasts. Its trial balance at 30 September 2018 was:You are provided with the following
The following trial balance has been extracted from the books of Arran plc as at 31 March 2017:Additional information:1 Inventory at 31 March 2017 was valued at £150,000.2 Depreciation for the year
The following trial balance has been extracted from the books of account of Greet plc as at 31 March 2018:Additional information:1 Inventory at 31 March 2018 was valued at £150,000.2 The following
The accountant of Scampion plc, a retailing company listed on the London Stock Exchange, has produced the following draft financial statements for the company for the year to 31 May 2016.You discover
The following scenarios each contain a different share redemption situation.Prepare the appropriate journal entries and explain what you have done in each case:Scenario 1A company redeemed its
Exercises (a) to (e) are based on the following statement of financial position.Note also that exercises (a) to (e) are independent of each other. They are not cumulative.Required:(a) A Rooney Ltd
Exercises (a) to (e) are based on the following statement of financial position.Note also that each of exercises (a) to (e) is independent of any other. The exercises are not cumulative.Required:(a)
Applications were invited by the directors of Grobigg Ltd for 150,000 of its £1 ordinary shares at £1.15 per share payable as follows:Applications were received for 180,000 shares and it was
M Limited has an authorised share capital of £1,500,000 divided into 1,500,000 ordinary shares of £1 each. The issued share capital at 31 March 2017 was £500,000 which was fully paid, and had been
During the year to 30 September 2017, Kammer plc made a new offer of shares. The details of the offer were as follows:1100,000 ordinary shares of £1 each were issued payable in instalments as
Why do you think companies issue loan notes rather than making a new share issue?
A company’s statement of financial position appears as follows:Required:(a) If £19,200 of the ordinary shares were purchased at par, there being no new issue of shares for the purpose, show the
Loan notes of £48,000 are issued on 1 January 2017. Redemption is to take place, on equal terms, four years later. The company decides to put aside an equal amount to be invested at 6% which will
Some years ago M plc had issued £375,000 of 10% loan notes 2016/2020 at par. The terms of the issue allow the company the right to repurchase these loan notes for cancellation at or below par, with
The following information relates to White Rabbit Trading plc:On 1 February 2017 the company closed the list of applications for 400,000 ordinary shares at a premium of 50p. The shares were to be
During the year to 30 September 2016, Popham plc issued 100,000 £1 ordinary shares. The terms of the offer were as follows:Applications were received for 200,000 shares. The directors decided to
On 30 June 2017 Jones and Sons Ltd acquired all the assets, except the investments, of Spade Ltd. The following are the summaries of the statements of profit or loss of Spade Ltd for the years ending
CJK Ltd was incorporated on 15 December 2016 with an authorised capital of 200,000 ordinary shares of £0.20 each to acquire as at 31 December 2016 the business of CK, a sole proprietor, and RP Ltd,
The statement of financial position of Hubble Ltd as at 31 May 2017 is shown below.Hubble Ltd agreed to purchase at this date the freehold premises, plant and machinery and inventory of A Bubble at
From the following information you are required to prepare a statement apportioning the retained profit between the pre-incorporation and post incorporation periods, showing the basis of
Have a look at Exhibit 11.1: why do you think there is such an emphasis on the qualitative aspects of information in the Framework for the Preparation and Presentation of Financial Statements?
In preparing its accounts for the year to 31 May 2017, Whiting plc had been faced with a number of accounting problems, the details of which were as follows:(i) The company had closed down its entire
Why do you think many UK and Irish companies are switching voluntarily to international accounting standards?
The ledger balances of Timely Ltd at 31 March 2018 were as follows:A capital reduction scheme has been sanctioned under which the 450,000 preference shares are to be reduced to 60p each, fully paid;
The statement of financial position of Tatters Ltd on 31 December 2015 was as follows:The dividend on the preference shares is £12,000 in arrears. A scheme of reconstruction was accepted by all
On 31 March 2016, the following was the statement of financial position of Greenmantle Ltd:The following scheme of capital reduction was sanctioned by the Court and agreed by the shareholders:(a)
Deflation Ltd, which had experienced trading difficulties, decided to reorganise its finances. On 31 December 2016 a final trial balance extracted from the books showed the following
The Merton Manufacturing Co Ltd has been in business for many years making fitted furniture and chairs. During 2017 and 2018 substantial losses have been sustained on the manufacture of chairs and
An extract from the draft financial statements of Either Ltd at 30 November 2018 shows the following figures before allowing for any dividend which might be proposed:Additional information:(i) The
The following figures appeared in W Ltd’s statement of financial position at 31 March 2017:During the year ended 31 March 2018, W Ltd made a payment of £520,000 to Revenue and Customs in
Rowlock Ltd was incorporated on 1 October 2015 to acquire Rowlock’s mail order business, with effect from 1 June 2015.The purchase consideration was agreed at £35,000 to be satisfied by the issue
Joytan Ltd has a trading profit, before dealing with any of the undermentioned items, for the year ended 31 December 2017 of £500,000. Prepare the statement of profit or loss for the year.(a) The
Sunset Ltd has an operating profit for the year ended 31 December 2016, before dealing with the following items, of £150,000. Complete the statement of profit or loss.(a) The standard rate of income
The following information relates to Kemp plc for the year to 31 March 2016:Required:Write up the following accounts for the year to 31 March 2016, being careful to insert the appropriate date for
Corporation tax for the tax years 2014, 2015, and 2016 was 40% and income tax for each year was 20%.(A) Tilt Ltd’s draft statement of profit or loss for the year ending 31 December 2015 shows a net
Frank Jon Ltd has just finished its first year of trading to 31 December 2016. Corporation tax throughout was 40% and income tax 20%. You are given the following information:(i) Net trading profit,
(a) When would it be appropriate for an entity to adopt a financial concept of capital?(b) When would it be appropriate for an entity to adopt a physical concept of capital?
The directors are preparing the published accounts of Dorman plc for the year to 31 October 2018. The following information is provided for certain of the items which are to be included in the final
Oldfield Enterprises Limited was formed on 1 January 2018 to manufacture and sell a new type of lawn mower. The bookkeeping staff of the company have produced monthly figures for the first 10 months
F Gibb Ltd has a branch in Stirling at which a full set of books is kept. At the end of the year the following summary is compiled of the transactions between the branch and headquarters as recorded
A large bakery scrapped all its equipment and replaced it with new equipment purchased on hire purchase over a period of three years, paying £9,980 on 1 January 2016, and further annual payments of
On 1 January 2015 J McFarlane bought a computer (cash price £2,092) from Pear Ltd on the following hire purchase terms. McFarlane was to make an immediate payment of £600 and three annual payments
The following trial balance has been extracted from the books of Patt plc as at 31 March 2017:Additional information:1 Following the preparation of the above trial balance, the following additional
The following information has been extracted from the books of Quire plc as at 30 September 2018.The following additional information is to be taken into account:1 Inventory at 30 September 2018 was
You are presented with the following information relating to Plott plc for the year to 31 March 2018:Additional information:1 The above information has been obtained after the compilation of the
The trial balance of Jeremina plc as at 31 March 2016 is as follows:(i) Inventory of finished goods on 31 March 2016 £163,000.(ii) Motor expenses and depreciation on motors to be apportioned:
The following trial balance has been extracted from the books of Baganza plc as at 30 September 2017:Additional information:1 The inventory at 30 September 2017 was valued at £3,600,000.2
After the statement of profit or loss and statement of changes in equity have been prepared for the year ending 30 April 2017, the following balances remain in the books of Tree plc. Prepare a
Why do you think companies might ignore the requirements of International GAAP in this case?
The following balances remained in the books of AK Ltd on 31 March 2017, after the statement of profit or loss had been drawn up. You are to draft the statement of financial position as at 31 March
Why does the above list not split the liabilities into non-current and current?
Bunker plc is a trading company; it does not carry out any manufacturing operations. The following information has been extracted from the books of account for the year to 31 March 2017:Additional
The following balances have been extracted from the books of Mitchell plc on 31 July 2016. From them draw up (i) a detailed statement of profit or loss for internal use, for the year ending 31 July
From the following balances in the books of Breaker plc you are to draw up (i) a detailed statement of profit or loss for the year ending 31 March 2017 for internal use, and (ii) a statement of
From the following selected balances of Royal Oak plc as at 31 March 2018 draw up (i) a detailed statement of profit or loss for internal use, and (ii) a statement of profit or loss for
What do you think the advantages of companies having to follow set rules in this case may be?
With reference to IAS 10 Events after the reporting period and IAS 37 Provisions, contingent liabilities and contingent assets:(a) Define the following terms:(i) Events after the reporting period(ii)
The chief accountant of Uncertain Ltd is not sure of the appropriate accounting treatment for a number of events occurring during the year 2016/17.(i) A significant number of employees have been made
The accountant of Hook, Line and Sinker, a partnership of seven people, has asked your advice in dealing with the following items in the partnership accounts for the year to 31 May 2017.(a) (i)
Do you think that such a system of self-regulation is appropriate?
General information on the Lytax group of companies: Lytax Ltd is a company in the building construction industry.It has three regional offices, North Borders, Midlands and South Downs, which are
You are required to prepare the contract account for the year ended 31 December 2017, and show the calculation of the sum to be credited to profit and loss for that year.On 1 April 2017 MN Ltd
Cantilever Ltd was awarded a contract to build an office block in London and work commenced at the site on 1 May 2017.During the period to 28 February 2018, the expenditure on the contract was as
Bulwell Aggregates Ltd wish to expand their transport fleet and have purchased three heavy lorries with a list price of £18,000 each. Robert Bulwell has negotiated hire purchase finance to fund this
D Lane purchased two cars for his business under hire purchase agreements:Both agreements provided for payment to be made in 24 monthly instalments commencing on the last day of the month following

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