john ogilvie high school higher accounting...higher accounting company accounts page 3 8 insurance,...

John Ogilvie High School

Higher Accounting

Company Accounts

Higher Accounting

Company Accounts

Question 1 The following figures were taken from the records of Ochil Industries plc as at 31 December

Year 2.

Dr Cr

£000 £000

Revenue of finished goods 1,680

Purchases of raw materials 280

Inventories at 1 January Year 2:

Raw materials 48

Work-in-progress 22

Finished goods 84

Direct wages 300

Salaries 90

Insurance 100

Factory expenses 10

Factory power 40

Office expenses 5

Factory machinery at cost 700

Provision for depreciation on factory machinery

at 1 January Year 2 100

Office equipment at cost 100

500,000 ordinary shares of £1 each 500

Unappropriated profit at 1 January Year 2 8

£000 Notes at 31 December Year 2 1 Inventories

Raw materials £40 Work-in-progress £32 Finished goods £68

2 Insurance receivable (prepaid) £20

3 Office expenses payable (due) £1

4 Provide for corporation tax £196

5 Factory machinery is depreciated at 10% per annum on cost.

6 Office equipment is depreciated at 5% per annum on cost.

7 Salaries are to be apportioned between the factory and the office in the ratio 2:1.

Higher Accounting

Company Accounts

8 Insurance, taking into account the receivable (prepayment), is to be divided 75% to the factory and 25% to the office.

9 An interim dividend of 15% has been paid on ordinary shares but has been omitted from the accounts.

(a) Prepare, for internal use, the Manufacturing Account only, for the year ended 31 December Year 2, labelling clearly the:

(i) Cost of raw materials consumed

(ii) Prime cost

(iii) Factory cost of production 10

(b) Prepare the Income Statement (Trading, Profit and Loss Account), for internal use, (including the appropriation of available profits), for the year ended 31 December Year 2. 10

Total marks (20)

Higher Accounting

Company Accounts

Question 2

The following balances were taken from the books of Gleneagles plc for the year ended 31 March Year 2.

£000 £000

Gross Profit 353

300,000 Ordinary shares of £1 each 300

50,000 12% Preference shares of £1 each 50

Retained earnings at 1 April Year 1 17

10% Debentures (Year 2 — Year 6) 80

Trade payables 40

Trade receivables 178

Rates 84

General expenses 27

Wages and salaries 75

Property at cost 259

Vehicles at cost 50

Inventory at 31 March Year 2 150

Provision for depreciation on vehicles at 1 April Year 1 20

Administration expenses 42

Distribution expenses 12

Cash and cash equivalents 13

VAT 25

Preference dividend paid 6

Ordinary dividend paid 15

898 898 Notes at 31 December Year 2 1. Rates payable at 31 March Year 2 amounted to £6,000.

2. General expenses include a prepayment of £7,000 for next year. 3. Debenture finance costs (interest) for the year has still to be paid. 4. Deprecation on vehicles is to be provided at 20% on cost. 5. Provide for corporation tax of 25% on the year’s profits. You are required to prepare: a) i) the income statement (profit and loss account) and a statement of changes in

retained earnings for the year ended 31 March Year 2 10

ii) a statement of financial position as at the above date 10 20 marks

Higher Accounting

Company Accounts

Question 3 The following balances were extracted from the books of Uryside plc:

Dr Cr £000 £000

Opening inventory — raw materials 20

Purchases of raw materials 140

Factory wages 180

Royalties 20

Depreciation of factory machinery 30

General factory expenses 60

Factory rent and rates 31

Factory insurance 35

Opening inventory: work-in-progress 12

Sales revenue 800

Sales returns 20

Opening inventory: finished goods 40

Carriage on purchases of raw materials 20

Purchases returns on raw materials 5

Provision for bad debts 11

Office expenses 36

Selling expenses 40

Bad debts 6

Unappropriated profit 14

Ordinary dividend 6

Property 215

Equipment 100

Provision for depreciation equipment 6

Factory machinery 80

Preliminary expenses 9 Share premium 110 Investments 100 Goodwill 30 Trade receivables 80 VAT 11 Trade payables 50 Cash and cash equivalents 5 10% Debentures 60 100,000 7% Preference shares of £1·00 each 100 100,000 Ordinary shares of £1·00 each 100

1,291 1,291

Higher Accounting

Company Accounts

NOTES AT 31 DECEMBER YEAR 5 1 Closing inventory: Raw materials £18,000 Work-in-progress £16,000 Finished goods £55,000 2 Factory wages are to be split 80% direct factory wages, 20% indirect factory wages. 3 Market value of production is £500,000 4 Office expenses prepaid — £4,000 5 Selling expenses due — £10,000 6 The provision for doubtful debts is to be adjusted to 10% of closing trade receivables. 7 Preliminary expenses are to be written down by transfer from the share premium

account. 8 Non-current assets are to be depreciated as follows: Factory machinery 10% of the reduced balance Equipment — 5% on cost 9 Property was professionally revalued at £250,000 10 Dividends of £5,000 were owing on the quoted investments. 11 Provide for corporation tax at 25% of profit for the year. 12 Goodwill is to be written down by £20,000 13 The preference dividend was paid in full by cheque, but omitted from the accounts in

error. You are required to prepare (for internal use), from the trial balance and notes: (a) Manufacturing account for the year ended 31 December Year 5 10 (b) Income statement for the year ended 31 December Year 5 16 (c) Statement of financial position as at 31 December Year 5 14

(40)

Higher Accounting

Company Accounts

Question 4 The following is the trial balance of Alexander plc as at 31 December Year 2.

£0 £0

Sales Revenue 4,000

Purchases 3,200

Inventory at 1 January Year 2 300

Bad debts 5

Discounts (net) 7

Selling expenses 380

Office expenses 160

Debenture finance costs (interest) 16

Dividend - preference shares 60

1,000,000 Ordinary shares of £1 each 1,000

600,000 10% Preference shares 600

8 % Debentures Year 8 400

Investment property (investments) 170

Property (premises) 1,700

Fittings (at cost) 100

Vehicles (at cost) 160

Provisions for depreciation at 1 January Year 2

Fittings 60

Vehicles 40

Provision for doubtful debts at 1 January Year 2 4


Trade payables 50


VAT 16


6,371 6,371

Notes: 6. Inventory (Inventory) at 31 December Year 2 was valued at £280,000.

7. Selling expenses receivable (prepaid) are £4,000 and office expenses payable (accrued)

are £8,000. 8. Provide for depreciation for the year as follows:

i. Fittings — 20% on cost ii. Vehicles — 10% on the reduced balance

9. Provision for doubtful debts is to be adjusted to 5% of trade receivables.

10. Provide for corporation tax at 25% of profit for the Year (net profit).

Higher Accounting

Company Accounts

You are required to prepare: b) the income statement (trading, profit and loss account) for the year ended

31 December Year 2 15

c) a statement of financial position as at the above date 13 Total marks (28)

Question 5

The following is the trial balance of Carluke plc as at 31 December Year 3 after the

preparation of the trading account:

£000 £000

200,000 8% preference shares of £1 each 200

300,000 ordinary shares of 50p each 150

10% debentures 100

Gross profit 142

Inventory (Inventory) at 31 December Year 3 13

Office expenses 60

Discounts 6

Advertising 10


Trade payables (Trade Payables) 21

Trade receivables (Trade Receivables) 22

Cash and Cash equivalents 51

Preference dividend paid 16

Ordinary dividend paid 12

Long-term investments 150

VAT 14

Unappropriated profits at 1 January Year 3 70

Property (at cost) 280

Fixtures and equipment (at cost) 150


Provisions for depreciation at 1 January Year 3

fixtures and equipment 70

vehicles 18

823 823

Higher Accounting

Company Accounts

Notes at 31 December Year 3

1. The market value of the closing inventory is £15,000.

2. Office salaries payable (accrued) are £2,000.

3. The figure for advertising includes the payment for the first quarter of Year 4.

4. The provision for doubtful debts is to be increased by £2,000.

5. Provide for depreciation per annum as follows:

fixtures and fittings — 20% of the reduced balance vehicles — 10% on cost

6. Provide for corporation tax at 25%.

7. Dividends of 10% are receivable (due) on the long-term investments. You are required to prepare:

a) The Income Statement (Trading, Profit and Loss Account) and a statement of changes in retained earnings for the year ended 31 December Year 3. 13

b) A Statement of Financial Position (Statement of Financial Position) as at the above

date. 16 Total marks (29)

Higher Accounting

Company Accounts

Question 6

Kwik-Instalments plc fits bathroom units. The following is the trial balance as at

31 December Year 3.

£000 £000

Sales Revenue 341

Purchases 126


Selling Expenses 20

Office Expenses 35

Warehouse Expenses 50

Wages 71

VAT 40

Provision for Doubtful Debts at 1 January Year 3 4

Trade Receivables 60

Trade Payables 43

Interim Dividend on Ordinary Shares 10

Investment Property 70

Cash and Cash Equivalents 8

Goodwill 24

100,000 Ordinary Shares of £1 each 100

10% Debentures (Year 20) 80

Property (at cost) 50

Showroom Fittings (at cost) 70


Provisions for Depreciation at 1 January Year 3:

Showroom Fittings 20

Vehicles 10

Share Premium 30

Profit and Loss Account balance at 1 January Year 3 6

Preliminary Expenses 6

£674

£674

Higher Accounting

Company Accounts

Notes at 31 December Year 3:

1. The inventory is valued at £22,000.

2. Accrued charges are:

3. carriage inwards — £1,000

4. Selling expenses include a payment of £6,000 for a television advertisement, which

will be shown in the next financial year.

5. Provide for depreciation for the year as follows:

(i) showroom fittings — 10% on cost

(ii) vehicles — 20% of the reduced balance

6. The provision for doubtful debts is to be adjusted to 5% of trade receivables (Trade

Receivables).

7. Dividends of £4,000 are due from investments.

8. Corporation tax is to be provided for at 25% of profit for the year (net profit).

9. During Year 3, a bonus issue of ordinary shares was made on the basis of one share

for every five held. This issue was financed by a transfer from the share premium

account and is still to be recorded.

10. Property is revalued at £60,000.

11. Write-off the preliminary expenses by transfer from the share premium account.

12. Goodwill is to be written down by £6,000.

Prepare:

(a) an income statement, including the appropriation of available profits (trading, profit and loss and appropriation account), for the year ended 31 December Year 3 17

(b) a statement of financial position at that date 23

Total marks (40)

Higher Accounting

Company Accounts

Question 7

The following is the Trial Balance of Glencairn plc at 31 December Year 4.

£000 £000

Sales revenue 430

Purchases 246


Administration expenses 36

Selling and distribution expenses 33

Warehouse expenses 16

Discounts (net) 4

VAT 16

Wages 40



Trade payables 35

Quoted investments 70


Goodwill 20

Preliminary expenses 10

150,000 £1 ordinary shares 150

10% debentures 80

Property (Buildings) (at cost) 100

Office equipment (at cost) 30

Motor vehicles (at cost) 50

Provisions for depreciation at 1 January Year 4:

office equipment 8

motor vehicles 10

Share premium 30

Interim dividend-ordinary shares 6

Rent and rates 5


£768 £768

Higher Accounting

Company Accounts

Notes at 31 December Year 4

(1) Inventory, valued at £20,000 (cost) has a value of £24,000 (market value).

(2) Administration expenses receivable (prepaid) — £2,000.

(3) The provision for doubtful debts is to be adjusted to 10% of trade receivables.

(4) Dividends of £3,000 are due from investments.

(5) Provide for depreciation for the year as follows:

(i) office equipment — 10% on cost

(ii) motor vehicles — 20% on the diminished balance

(6) Provide for corporation tax at 25% of profit for the year (Net profit).

(7) Property (Buildings) has been revalued at £110,000 — the surplus on revaluation

is to be transferred directly to a revaluation reserve.

(8) Preliminary expenses are to be written down by transfer from share premium.

(9) A cheque for payment of rent for £1,000 for this year has been completely

omitted from the books and has still to be recorded.

(10) Goodwill is to be written down by £12,000.

(a) You are required to prepare from the Trial Balance and Notes:

Income Statement for the year ended 31 December Year 4 and a Statement of

Financial Position. 38

Total marks (38)

Higher Accounting

Company Accounts

8. The following is the Trial Balance of Gibshill Enterprises plc as at 30 April Year 2.

£000 £000

Sales Revenue 250

Purchases 170

Inventory at 1 May Year 1 15

Selling Expenses 16

Office Expenses 18

Provision for Doubtful Debts at 1 May Year 1 1

Bad Debts 4

Discounts (net) 1

Debenture Interest Paid (half year) 2

Preference Dividend Paid 2


Trade Payables 10

VAT 4

Cash equivalent 6

Goodwill 13

20,000 10% Preference Shares of £1 each 20


8% Debentures 50



Provisions for Depreciation at 1 May Year 1

Fittings 12

Vehicles 15

Equity Reserve 16

Share Premium 15

Profit and Loss Account Balance at 1 May Year 1 6

________________

£449 £449

================

NOTES

(1) Inventory at 30 April Year 2 - £18,000.

(2) Selling Expenses payable - £4,000.

(3) Office Expenses receivable - £5,000.


Higher Accounting

Company Accounts

(i) Fittings—20% on cost;

(ii) Vehicles—10% of the reduced balance.

(5) The Provision for Doubtful Debts at 30 April Year 2 is to be adjusted to 5% of

Trade Receivables.

(6) Interest of £1,000 is due on the cash equivalent overdraft.

(7) Provide for Corporation Tax at 25% of Profit for the Year.

(8) Provide for Debenture Interest for the full year.

(9) During January Year 2 a bonus issue of Ordinary Shares was made on the basis of

one share for every four held. This issue is to be financed by a transfer from the

Share Premium Account and is still to be recorded.

(10) The Directors propose to:

(i) write off the Goodwill;

(ii) pay a final dividend for the year of 8% on the Ordinary Shares, including

the bonus shares.

You are required to prepare, from the Trial Balance and Notes:

Income Statement (including appropriation of the available profits) for the year

ended 30 April Year 2, and a Statement of Financial Position as at that date.

Higher Accounting

Company Accounts

9. The following is the Trial Balance of Lylehill plc as at 30 April Year 3.

£000 £000

Sales Revenue 200

Purchases 51

Inventory at 1 May Year 2 10

Selling and Advertising Expenses 15

Office and Administration Expenses 14

Salaries 58

Provision for Doubtful Debts at 1 May Year 2 6

Bad Debts 1

Discounts (net) 5

Dividend paid on Ordinary Shares 7


10% Debentures 30

Premises 100


Vehicles (at Cost) 25

Provisions for Depreciation at 1 May Year 2

Fittings 10

Vehicles 5

Equity Reserve 2

Share Premium 26

Profit and Loss Account Balance at 1 May Year 2 4


Trade Payables 35

VAT 6

Cash equivalent 15

________________

£378 £378

================

NOTES

(1) Inventory at 30 April Year 3 - £12,000.

(2) Office and Administration Expenses payable - £2,000.

(3) Selling and Advertising Expenses receivable - £3,000.


(i) Fittings—l0% of the reduced balance;

(ii) Vehicles—20% on cost.

Higher Accounting

Company Accounts

(5) The Provision for Doubtful Debts at 30 April Year 3 is to be adjusted to 5% of

Trade Receivables.

(6) Provide for Corporation Tax at 25% of Profit for the Year.

(7) Premises have been revalued at £150,000 and the surplus is to be transferred

directly to the Equity Reserve.

You are required to prepare, from the Trial Balance and Notes:

Income Statement (including appropriation of the available profits) for the year

ended 30 April Year 3, and a Statement of Financial Position as at that date. (50)

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