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Answers

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ACCA Certified Accounting Technician Examination Paper T6 (UK) June 2011 Answers

Drafting Financial Statements (UK Stream) and Marking Scheme

Section A

1 C

2 C Phil James

Profit 265,625

Salary 25,750 (25,750)

Interest on capital

(200,000 x 5%) (10,000)

(100,000 x 5% x ) 10,000 2,500

(125,000 x 5% x ) 3,125 (5,625)

Profit share 112,125 112,125 224,250

Total profit share 147,875 117,750

3 D

4 B

5 A

Consideration 8,000,000

Less

Fair value of net assets at acquisition 8,750,000

Group share x 75%

6,562,500

Goodwill 1,437,500

6 A

7 C

8 C

Profit after tax 21,800

Preferred dividend 1,800 (6% of 1 x 30,000)

Profit after tax and preferred dividend 20,000

Ordinary dividend 12,000 (60%)Retained Profit 8,000 (40%)

12,000/100,000 = 12 pence

9 D

10 C

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Section B

Marks Workings 000

1 (a) (i) Bayzell Ltd

Profit and loss account for the year ended 31 May 2011 05

000

Turnover 11,483 10 (11,700 217)

Cost of sales (W1) (7,910) 65

Gross profit 3,573

Distribution costs (W1) (578) 35

Administrative expenses (W1) (1,518) 55

Operating profit 1,477

Interest (30) 05

Profit on ordinary activities before tax 1,447

Tax on profit on ordinary activities (310) 05

Profit on ordinary activities after taxation 1,137

180

(ii) Statement of total recognised gains and losses

Profit for financial year 1,137 05

Unrealised surplus on revaluation of property 90 10 (1,550 1,460)

Total recognised gains and losses relating to the year 1,227 05

20

(iii) Bayzell Ltd

Balance sheet as at 31 May 2011 05

000 000

Fixed assets

Tangible assets (W2) 6,092 40

Intangible asset (W3) 336 10

6,428Current assets

Stock 465 05

Trade debtors 1,819 15 (1,900 95 + 14)

Cash at bank 232 052,516

Creditors: amounts falling due within one year

Trade and other creditors 1,886 15 (1,488 + 310 + 88)

Net current assets 630

Creditors: amounts falling due after more than one year

Debentures (300) 106,758

Capital and reserves

Share capital 4,400 05

Share premium 486 05

Revaluation reserve 90 10

Profit and loss account 1,782 15 (800 + 1,137 155)6,758

140

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Marks

Workings

W1 Cost of Distribution Administrative

Sales Costs Expenses

000 000 000

Opening stock 990 05

Purchases 6,850 05

Wages and salaries (40:30:30) 448 336 336 15

Insurance (108 14) (50:50) 47 47 20

Electricity expenses (542 + 88) (60:20:20) 378 126 126 30

Administrative expenses 500 05

Increase in allowance for debtors 33 10

Discounts received (590) 10

Directors remuneration 430 05

Depreciation plant 136 05

Depreciation buildings (50:30:20) 115 69 46 30

Amortisation of intangible asset 48 05

Closing stock (465) 10 7,910 578 1,518

(65 marks) (35 marks) (55 marks) 155

W2 Fixed assets Total

Property, Plant

Land Buildings Plant & Equipment

000 000 000 000

Cost 1,460 4,600 1,362 7,422

Depreciation b/f (372) (682) (1,054)

Current years depreciation:

Plant (1,362 682) x 20% (136) (136)

Buildings 4,600 x 5% (230) (230)

Revaluation of land 90 90 1,550 3,998 544 6,092

(1 mark) (15 marks) (15 marks) (4 marks)W3 Intangible Assets

000

Cost 384

Amortisation (384/4)*6/12 (48)

Value as at 31 May 2011 336

(b) Accounting ratios

Earnings per shareProfit after tax

=1,137

= 258 pence No. of ordinary shares 4,400

Interest cover

Profit before int and tax

=

1,477

= 492 times Interest charges 30

Acid test (quick) ratioCurrent assets stock

=2,051

= 11:1 Current liabilities 1,886

Payments collection periodTrade accounts payable

x 365 =1,488

x 365 = 793 days Purchases 6,850

Alternative calculation:

Payments collection periodTrade accounts payable

x 365 =1,488

x 365 = 687 days Cost of sales 7,910

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

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Marks

2 (a) Calculation of the profit before tax

Accumulated profit and loss account

000 000

Taxation 20 Bal. at 1 June 2010 50 10

Dividends 35 Profit before tax (Bal. fig) 127 20

Interest 2 10

Bal. at 31 May 2011 120 10 177 177 50

(b) Prepared in accordance with FRS 1

Erley Ltd

Cash flow statement for the year ended 31 May 2011 05

000 000

Net cash inflow from operating activities (Note 1) 183

Returns on investments and servicing of finance

Interest paid (2) 05

Taxation

Tax paid (25) 20

Capital expenditure and financial investment

Payments to acquire tangible fixed assets (W1) (316) 25

Receipts from sale of tangible fixed assets 30 10

(286)

Net cash inflow before financing (130)

Financing

Issues of ordinary share capital 150 15

Redemption of debentures (10) 10

Dividends paid (35) 10

Net cash outflow from financing 105

Increase in cash for the period (25) 05

Notes to the cash flow statement:

1 Reconciliation of operating profit to cash flow from operating activities 000

Operating profit 127 05

Depreciation 96 05

Loss on sale of tangible fixed assets 5 05

Decrease in stocks 10 10

Increase in debtors (50) 10

Decrease in creditors (5) 10

Net cash inflow from operating activities 183

150

Workings

Non-current assets

000 000

Balance b/f 565 Depreciation 96

New fixed assets (bal) 316 Disposals 35

Balance c/f 750 881 881

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Marks

3 (a) C Mars accounts

(i) Revaluation account

Plant and machinery loss 10,500 Goodwill 50,000 10 + 05

Capital account 60,125 Property profit 20,625 0 + 10 70,625 70,625

(ii) Capital account

Balance c/f to new business 186,700 Balance b/f 132,075 05 + 0

Motor vehicle 5,500 Profit on revaluation 60,125 10 + 10 192,200 192,200

J Neptunes accounts

(i) Revaluation account

Stock loss 2,750 Goodwill 40,000 10 + 05

Capital account 37,250 40,000 40,000

(ii) Capital account

Balance c/f to new business 120,550 Balance b/f 83,300 05 + 0

Profit on revaluation 37,250 10 120,550 120,550

80

Marks Workings

(b) PlanetsBalance sheet as at 31 May 2011

Fixed assets

Property 110,000 05

Plant and machinery 91,200 1 (34,000 + 57,200)

Motor vehicle 25,025 05226,225

Current assets

Stock 25,300 1 (11,550 + 13,750)

Trade debtors 8,775 05

Cash at bank 13,475 05

47,550

Creditors: amounts falling due within one yearTrade creditors 46,625 05

Net current assets 925

Creditors: amounts falling due after more than one year

Loan from M Pluto (9,900) 05

Net assets 217,250

Capital accounts

C Mars 126,700 15 W1

J Neptune 90,550 15 W1217,250

80

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Marks

Working 1

Partners Capital accounts

Mars Neptune Mars Neptune

Goodwill written off Balance b/f from

2:1 x 90,000 60,000 30,000 old business 186,700 120,550 05 + 05 + 05 + 05

Balance c/f 126,700 90,550 05 + 05 186,700 120,550 186,700 120,550

(c) 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.

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