Questions and Answers of Business Accounting

On 31 March 2014, D Biggs, who prepares his financial statements to 31 March, bought a lorry on hire purchase from Truck Fleet Ltd. The cash price of the lorry was £61,620. Under the terms of the
J Tocher started business on 1 April 2016 selling one model of digital cameras on hire purchase. During the year to 31 March 2017 he purchased 2,000 cameras at a uniform price of £110 and sold 1,900
RJ commenced business on 1 January 2018. He sells refrigerators, all of one standard type, on hire purchase terms. The total amount, including interest, payable for each refrigerator is £300.
Object Limited is a retail outlet selling word processing equipment both for cash and on hire purchase terms. The following information has been extracted from the books of account as at 31 August
On 1 January 2016, F Limited commenced business selling goods on hire purchase. Under the terms of the agreements, an initial deposit of 20% is payable on delivery, followed by four equal quarterly
On 1 January 2016, Carver bought a machine costing £20,000 on hire purchase. He paid a deposit of £6,000 on 1 January 2016 and he also agreed to pay two annual instalments of £5,828 on 31 December
The financial statements of Banaghan Ltd are made up to 31 March in each year. Work on Contract 32 started on 1 July 2016 and completed on 31 January 2018. The total contract price was £1,200,000
Stannard and Sykes Ltd are contractors for the construction of a pier for the Seafront Development Corporation. The value of the contract is £300,000, and payment is by engineer’s certificate
Dundas Limited purchased a machine under a hire purchase agreement on 1 January 2015. The agreement provided for an immediate payment of £2,000, followed by five equal instalments of £3,056, each
The authorised and issued share capital of Cosy Fires Ltd was £75,000 divided into 75,000 ordinary shares of £1 each, fully paid. On 2 January 2017, the authorised capital was increased by a
Jonny Ltd has a nominal share capital of £600,000 comprising 600,000 ordinary shares of £1 each. The whole of the capital was issued at par on the following terms:Applications were received for 1
Easy Heart Ltd has an authorised capital of £800,000 comprising ordinary shares of £1 each. The shares were issued at par, payments being made as follows:Applications were received for 1.08 million
Camden Lock Ltd has just finished its second year of trading to 31 December 20X7. Balances from Question 7.1 need to be brought forward into this question. Tax rates are the same as for 20X6.The
In preparing its accounts for the year to 31 May 20X7, 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
From the following balances in the books of Breaker plc you are to draw up (i) A detailed trading and profit and loss account for the year ended 31 March 20X4 for internal use, and (ii) A profit
With reference to FRS 21: Events after the balance sheet date and FRS 12: Provisions, contingent liabilities and contingent assets:(a) Define the following terms:(i) Post-balance sheet events(ii)
What are the two rules of consolidation?
The following balance sheets were drawn up immediately after Pop Ltd had acquired control of Son Ltd. You are to draw up a consolidated balance sheet. Pop Balance Sheet Investment in Son Ltd: 1,600
Draw up a consolidated balance sheet from the balance sheets of Parental Ltd and Sibling Ltd that were drafted immediately after the shares in S Ltd were acquired by P Ltd. Parental Balance
Draw up a consolidated balance sheet from the following balance sheets which were drawn up as soon as Papai Ltd had acquired control of Sonny Jim Ltd. Papai Balance Sheet Investment in Sonny Jim Ltd:
Prepare a consolidated balance sheet from the following balance sheets of Pa Ltd and Sonny Ltd which were drawn up immediately after Pa Ltd had acquired the share capital of Sonny Ltd. Pa Balance
Papi Ltd acquired all the shares in Son and Sister Ltd and then the following balance sheets were drawn up. You are to prepare a consolidated balance sheet. Papi Balance Sheet Investment in Son and
Parent Ltd acquires 60 per cent of the shares in Siblings Together Ltd. Balance sheets are then drafted immediately. You are to draw up the consolidated balance sheet. Parent Balance Sheet Investment
Parents United Ltd acquires 95 per cent of the shares of Son and Friends Ltd. The following balance sheets are then drafted. You are to draw up the consolidated balance sheet. Parents United Balance
Papa and Mamae Ltd buys 662/3 per cent of the shares in Son and Daughter Ltd. You are to draw up the consolidated balance sheet from the following balance sheets constructed immediately control had
After Pop and Mum Ltd acquired 75 per cent of the shares of Sons and Cousins Ltd the following balance sheets are drawn up. You are to draw up the consolidated balance sheet. Pop and Mum Balance
Immediately after Pai and Family Ltd had acquired control of Son One Ltd and Son Two Ltd the following balance sheets were drawn up. You are to draw up a consolidated balance sheet. Pai and Family
Immediately after Parent Acquisition’s Ltd had acquired control of Sibling One Ltd and Sibling Two Ltd the following balance sheets were drawn up. You are to draw up a consolidated balance sheet.
Immediately after Pa, Ma and Co Ltd had achieved control of Sub 1 Ltd and Sub 2 Ltd the following balance sheets are drawn up. You are to draw up the consolidated balance sheet. Pa, Ma and Co Balance
The following balance sheets of Parents Forever Ltd, Sonny 1 Ltd and Sonny 2 Ltd were drawn up as soon as Parents Forever Ltd had acquired the shares in both subsidiaries. You are to draw up a
Pa Ltd buys 100 per cent of the shares of Son Ltd on 31 December 20X2. The balance sheets of the two companies on 31 December 20X3 are as shown. You are to draw up a consolidated balance sheet as at
Why do you think it would be a ‘bad’ thing to distribute as dividends the reserves acquired at the time of acquisition?
Pa and Ma Ltd bought 60 per cent of the shares of Son and Daughter Ltd on 31 March 20X4. The balance sheets of the two companies on 31 March 20X5 are as follows. You are to draw up a consolidated
Papai Ltd bought 51 per cent of the shares in Sons and Co Ltd on 31 October 20X7. From the following balance sheets you are to draw up the consolidated balance sheet as at 31 October 20X8. Papai
Parent Company Ltd buys shares in Subsidiary 1 and Subsidiary 2 on 31 December 20X7. You are to draft the consolidated balance sheet as at 31 December 20X8 from the following: Parent Company Balance
PLtd bought 40,000 shares in S1 Ltd and 27,000 shares in S2 Ltd on 31 December 20X2. The following balance sheets were drafted as at 31 December 20X3. You are to draw up a consolidated balance sheet
The following information relates to Heather Limited and its subsidiary, Thistle Limited.1. Heather LimitedRetained profits as at 31 March 20X8 £700,000.80,000 ordinary shares were purchased in
Prepare a consolidated balance sheet from the following details as at 31 March 20X6.During the year, Parent sold goods which had cost £1,100 to Subsidiary for £1,800. None of these goods had been
If the amount at which the stock is included in the balance sheet of each company is the amount the stock cost that company, why would the total derived not represent the total cost of the unsold
Why do you think this intra-group profit must be eliminated upon consolidation?
Draw up a consolidated balance sheet as at 31 December 20X7 from the following:At the balance sheet date, Sonny owes Pop and Mom £1,600.During the year Pop and Mom sold goods which had cost £3,000
What could be the benefit to a group if companies within the group were to sell goods to other companies in the group at below cost?
Prepare a consolidated balance sheet from the following details as at 31 March 20X3.At the balance sheet date, Sibling B owed Sibling A £1,000 and Parents for Siblings owed Sibling B £1,500.During
You are presented with the following information from the Seneley group of companies for the year to 30 September 20X6:Additional information:(a) The authorised, issued and fully paid share capital
Why do you think the rules were changed upon the introduction of FRS 2?
The following summarised information relates to the Pagg group of companies.Additional information:1. Pagg acquired its shareholding in Ragg Ltd on 1 April 20X5. Ragg’s profit and loss account
You are to draw up a consolidated balance sheet as at 31 December 20X5 from the following:At the balance sheet date, Son 1 owed Pa and Mum £2,500 and Son 2 £1,100, and Pa and Mum owed Son 2
You are presented with the following summarised information relating to Block plc for the year to 30 September 20X8:Additional information:1. Block purchased 80 per cent of the share capital of Chip
Why do you think you are not allowed to calculate goodwill at each stage of acquisition?
On 31 March 20X3, Subs Ltd had issued share capital of 50,000 ordinary £1 shares and reserves of £30,000. Two years later, the reserves had risen to £45,000 but the share capital was unchanged.
On 31 October 20X4, its balance sheet date, Sons and Daughters Ltd had issued share capital of 600,000 ordinary £1 shares and reserves of £340,000. Four years later, the share capital is unchanged
Pop and Mom Ltd bought 120,000 of the 200,000 issued ordinary £1 shares of Sonny Ltd for £300,000 on 31 July 20X4. Sonny Ltd financial statements are drawn up annually to 31 December. The balance
On 1 January 20X8, Sons and Co Ltd had an issued share capital of 200,000 ordinary £1 shares. The balance on the profit and loss account was £20,000 and there was also a general reserve of
What would be the impact upon the consolidated financial statements if the dividend had been paid before the end of the subsidiary’s accounting period?
The following balance sheets were drawn up as at 31 March 20X5. The person drafting the balance sheet of Parent Ltd was not too sure of an item and has shown it as a suspense amount.*The balance of
Which of these two methods do you think is the more appropriate?
The following balance sheets of Pop Ltd and Son Ltd were drawn up as at 31 December 20X7. Draw up the consolidated balance sheet as at that date.*The profit figure for 20X7 includes the dividend of
Draw up a consolidated balance sheet as at 31 October 20X3 from the following information.The proposed dividend of Son and Daughter has not yet been brought into the financial statements of Pa and Ma
The balance sheets of Pops Ltd and Sons Ltd are as follows: Pops Ltd Balance Sheet as at 31 December 20X8 Investment in subsidiary: 195,000 shares bought 31.12.20X7 Fixed assets Current assets Share
X plc acquired 80 per cent of the ordinary share capital of Y plc on 1 January 20X6 for £300,000.The lists of balances of the two companies at 31 December 20X6 were as follows:(a) A remittance of
P plc acquired 80 per cent of the ordinary share capital of S plc for £150,000 and 50 per cent of the issued 10 per cent cumulative preference shares for £10,000, both purchases being effected on 1
Packer and Stringer were in partnership as retail traders sharing profits and losses: Packer three-quarters, Stringer one-quarter. The partners were credited annually with interest at the rate of 6
Nion is a retail stock outlet operating from a head office in London and a branch in Brighton. The following trial balances have been extracted from the books of account as at 31 October
Squid Ltd, whose head office is in Aberdeen, operates a branch in Dundee. All goods are purchased by head office and invoiced to and sold by the branch at cost plus 50 per cent.Other than a sales
LR, a trader, commenced business on 1 January 20X9, with a head office and one branch. All goods were purchased by the head office and goods sent to the branch were invoiced at a fixed selling price
D Little Ltd has a branch in Bath 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 the head office as recorded
Why should it make any difference if debtors make payment to a branch other than the one where the sale took place?
Star Stores has its head office and main store in Crewe, and a branch store in Leek. All goods are purchased by the head office. Goods are invoiced to the branch at cost price plus a profit loading
Home Ltd is incorporated in the UK and rents mobile homes to holidaymakers in this country and in Carea. The company has a head office in London and a branch in Carea where the local currency is
OTL Ltd commenced business on 1 January 20X0. The head office is in London and there is a branch in Highland. The currency unit of Highland is the crown.The following are the trial balances of the
Why do you think organisations purchase assets on hire purchase?
Why is the amount paid in Year 2 in Exhibit 2.2 different from the amount paid in Year 2 in Exhibit 2.1? Exhibit 2.1 Unequal instalments 1 A computer is bought from A King at the start of year 1.
Wild started business on 1 April 20X2 selling one model of digital cameras on hire purchase. During the year to 31 March 20X3 he purchased 2,000 cameras at a uniform price of £90 and sold 1,900
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
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
On 1 January 20X5 P Wriggle bought a computer (cash price £1,046) from Dowe Ltd on the following hire purchase terms. Wriggle was to make an immediate payment of £300 and three annual payments of
A printing company purchased a machine on hire purchase over a period of three years, paying £1,308 on 1 January 20X6, and further annual payments of £4,000 due on 31 December 20X6, 20X7 and
RJ commenced business on 1 January 20X8. He sells refrigerators, all of one standard type, o hire purchase terms. The total amount, including interest, payable for each refrigerator, is £300.
On 31 March 20X4, D Biggs, who prepares his financial statements to 31 March, bought a lorry on hire purchase from Truck Fleet Ltd. The cash price of the lorry was £61,620. Under the terms of the
Object Limited is a retail outlet selling word processing equipment both for cash and on hire purchase terms. The following information has been extracted from the books of account as at 31 August
On 1 January 20X6, F Limited commenced business selling goods on hire purchase. Under the terms of the agreements, an initial deposit of 20 per cent is payable on delivery, followed by four equal
Feliz Ltd has an authorised capital of £500,000 comprising 1 million ordinary shares of 50p each. The 1 million shares were issued at par, payments being made as follows:Applications were received
Pilot Ltd company has a nominal share capital of £200,000 comprising 200,000 ordinary shares of £1 each. The whole of the capital was issued at par on the following terms:Applications were received
Why is it unlikely that many large companies could have existed if limited liability did not exist?
On 1 January 20X7, Carver bought a machine costing £20,000 on hire purchase. He paid a deposit of £6,000 on 1 January 20X7 and he also agreed to pay two annual instalments of £5,828 on 31 December
Dundas Limited purchased a machine under a hire purchase agreement on 1 January 20X8. The agreement provided for an immediate payment of £2,000, followed by five equal instalments of £3,056, each
Why would it be advantageous for a company to be able to sue other business entities, rather than for the directors or an employee to do so?
Why do you think companies may wish to issue shares at a discount and how do you think companies avoid being in this position?
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 20X7 was £500,000 which was fully paid, and had been
Why do you think companies make new share issues?
During the year to 30 September 20X7, Kammer plc made a new offer of shares. The details of the offer were as follows:1. 100,000 ordinary shares of £1 each were issued payable in instalments as
The authorised and issued share capital of Cosy Fires Ltd was £75,000 divided into 75,000 ordinary shares of £1 each, fully paid. On 2 January 20X7, the authorised capital was increased by a
Why do you think companies issue debentures rather than making a new share issue?
Why do you think companies are not allowed to issue shares at no par value in the UK?
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
Exercises (a) to (e) are based on the following balance sheet.Note also that each of exercises (a) to (e) is independent of any other. The exercises are not cumulative.Required:(a) RSV Ltd redeems
Why do you think the rules concerning purchase and redemption were changed in 1981?
Exercises (a) to (e) are based on the following balance sheet.Note also that exercises (a) to (e) are independent of each other. They are not cumulative.Required:(a) BAR Ltd purchases £10,000 of its
Why do you think shares need to be fully paid before they can be redeemed or purchased?
Why do you think the rules are less restrictive for private companies?

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