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ACCA Certified Accounting Technician Examination – Paper T6 (INT) June 2009 Answers
Drafting Financial Statements (International) and Marking Scheme
Section A
1 A Berino’s payables 244,000 + Muggie’s payables 40,000 less 6,000 owed to Berino = 278,000; Berino’s receivables
360,000 + Muggies receivables 150,000 less 6,000 from Berino = 504,000
2 A
3 B
4 D
$
Consideration 8,000,000
Fair value of non-controlling interest (3 million x $1·20) 3,600,000
–––––––––––
11,600,000
Less fair value of net assets at acquisition (8,750,000)
–––––––––––
Goodwill 2,850,000
5 D Rent 3,000 + (building insurance 6,000 x 6/12) +loan 10,000 + (interest 10,000 x 5%) = 16,500
6 A (72,000 x 2/12) + (84,000 x 10/12) = 82,000; 84,000 x 2/12 = 14,000
7 D
8 C
9 B (24,000 + ((470,000 – 24,000) x 5%) – 25,000)) = 21,300
10 A
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Section B
Marks Workings
$000
1 (a) (i) Portsmere
Statement of Comprehensive Income for the year ended 31 May 2009 0·5
Revenue
$
1,482,000 1·0 (1,510 – 28)
Cost of sales (W1) (1,087,400)
–––––––––––
5·5
Gross profit 394,600
Distribution costs (W1) (81,680) 3·0
Administrative expenses (W1) (126,320) 7·0
Finance cost (4,000)
–––––––––––
1·0
Profit before tax 182,600 0·5
Income tax expense (40,000)
–––––––––––
1·0
Profit for the year
Other comprehensive income:
142,600
Gains on land revaluation 12,000
––––––––
1·5 (200 – 188)
Total comprehensive income for the year 154,600
––––––––
1·0
––––
22·0
––––
(ii) Portsmere Ltd
Statement of Financial Position as at 31 May 2009 0·5
$ $
Assets
Non-current assets
Property, plant and equipment (W2) 780,400 4·0
Intangible asset (W3)
Current assets
45,000
––––––––––
825,400
1·0
Inventory 60,000 0·5
Trade receivables 243,200 1·0 (256 – 12·8)
Prepayments 2,000 1·0
Cash and cash equivalents 30,000 335,200
––––––––––
0·5
Total assets
Equity and liabilities
Capital and reserves
1,160,600
––––––––––
$1 Ordinary shares 570,000 0·5
Retained earnings 226,600 1·5 (104 + 142·6 – 20)
Share Premium Account 60,000 0·5
Revaluation reserve
Non-current liabilities
12,000
––––––––––
868,600
1
10% Loan notes
Current liabilities
40,000 1·0
Trade payables 200,000 0·5
Current tax 40,000 0·5
Accruals 12,000
––––––––––
252,000
––––––––––
1·0
Total equity and liabilities 1,160,600
–––––––––– ––––
15·0
––––
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Workings Cost of Distribution
Marks
Administrative
Sales Cost Expenses
W1 $ $ $
Amortisation of intangible asset 5,000 1
Wages and salaries (40:35:25) 57,600 50,400 36,000 1·5
Insurance ($14,000 – $2,000) 6,000 6,000 1
Energy expenses ($70,000 + $12,000) (50:20:30) 41,000 16,400 24,600 3
Opening inventory 128,000 0·5
Administrative expenses 64,000 0·5
Purchases 884,000 0·5
Discounts received (1 mark) (76,000) 1
Director’s remuneration 56,000 0·5
Depreciation – plant 22,000 1
Depreciation – buildings (50:30:20) 14,800 8,880 5,920 3
Increase in allowance for receivables (1 mark) 4,800 1
Closing inventory (1 mark) (60,000)
–––––––––– ––––––– ––––––––
1
1,087,400
––––––––––
81,680
–––––––
126,320
––––––––
(5·5 marks) (3 marks) (7 marks) (15·5 marks)
W2 Non-current assets Total
Land Buildings Plant
Property, Plant
& Equipment
$ $ $ $
Cost 188,000 592,000 176,000 956,000
Depreciation b/f
Current year’s depreciation:
(48,000) (88,000) (136,000)
Plant ($176,000 – $88,000) x 25% (22,000) (22,000)
Buildings $592,000 x 5% (29,600) (29,600)
Revaluation of land 12,000
–––––––– –––––––– ––––––––
12,000
––––––––
200,000
––––––––
514,400
––––––––
66,000
––––––––
780,400
––––––––
(1 mark) (1·5 marks) (1·5 marks) (4 marks)
W3 Intangible Assets
$000
Cost 50
Amortisation (50/5) * 6/12 (5)
–––
Value as at 31 May 2009 45
–––
(b) Accounting ratios
(i) Earnings per Share
Profit after tax
––––––––––––––––––– =
142,600
–––––––––
No. of ordinary shares 570,000
= 25·0 cents
(ii) Price earnings ratio
Current share price per share
––––––––––––––––––––––––– =
110c
––––– = 4·4
Earnings per share 25c
Marking scheme: 0·5 mark for stating the correct formula and 1 mark for calculating the correct ratio.
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Marks
2 (a) Black’s accounts
(i) Revaluation account
$ $
Plant and machinery – loss 1,200 Goodwill 14,000 1·0 + 0·5
Capital account 20,300
–––––––
Property – profit 7,500
–––––––
0 + 1·0
21,500
–––––––
21,500
–––––––
(ii) Capital account
$ $
Balance c/f to new business 67,800 Balance b/f 49,500 0·5 + 0
Motor vehicle 2,000
–––––––
Profit on revaluation 20,300
–––––––
1·0 + 0·5
Pool’s accounts
69,800
–––––––
69,800
–––––––
(i) Revaluation account
$ $
Inventory – loss 1,000 Goodwill 10,000 1·0 + 0·5
Plant and machinery – loss 800 0·5
Capital account 8,200
––––––– –––––––
10,000
–––––––
10,000
–––––––
(ii) Capital account
$ $
Balance c/f to new business 38,490 Balance b/f 30,290 1·0 + 0
–––––––
Profit on revaluation 8,200
–––––––
0·5
38,490
–––––––
38,490
––––––– –––
Total 8
(b) Marks Workings
Blackpool
Statement of Financial Position as at 31 May 2009
$ $
Assets
Non-current assets
Property 40,000 0·5
Plant and machinery 35,000 1 ($15,000 + $20,000)
Motor vehicle 9,100 0·5
––––––––
84,100
Current assets
Inventory 9,200 1 ($5,000 + $4,200)
Trade receivables 3,190 0·5
Cash at bank 4,900 17,290 0·5
–––––––
––––––––
Total assets 101,390
––––––––
Capital and liabilities
Capital accounts
Black 49,800 1·5 W1
Pool
Current liabilities
32,490
––––––––
82,290
1·5 W1
Trade payables 15,500 0·5
Loan from Peston 3,600
––––––––
0·5
Total capital and liabilities 101,390
–––––––– –––
Total 8
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Marks
Working 1
Black
Partners Capital accounts
Pool Black Pool
$ $ $ $
Goodwill written off Balance b/f from
3:1 x $24,000 18,000 6,000 old business 67,800 38,490 1·0 + 1·0 + 0·5 + 0·5
Balance c/f 49,800
–––––––
32,490
––––––– ––––––– –––––––
67,800
–––––––
38,490
–––––––
67,800
–––––––
38,490
–––––––
(c) Main terms that might be included in a partnership agreement:
Capital – The amount each partner will contribute to the business and how long it will be kept in the business.
Profit sharing ratio – How profits and losses will be shared amongst the partners.
Interest on capital – Details of the rate of interest, if any, that partners will be paid on their capital.
Partners salaries – How much, if anything, will be appropriated to partners as salaries.
Withdrawals on account of profit – How much, if anything, partners will be allowed to withdraw from the business during the
year.
Guaranteed minimum profit share – How much of the profit a partner is guaranteed.
Interest on drawings – The notional rate that will be applied to any drawings made by a partner during the year.
Marking scheme: 1 mark for identifying and explaining a term up to a total of 4 marks.
3 (a) The purpose of a conceptual framework is to set out the concepts that underlie the preparation and presentation of financial
statements for external users. It assists with the development of future accounting standards and reduces the basis for
alternative accounting treatments by establishing the principles that should be followed in preparing financial information.
It can also assist preparers and auditors of financial information in dealing with topics that are not subject to an accounting
standard.
A conceptual framework should prevent the accountancy profession from establishing conflicting accounting rules and
practices as standards are developed following the principles set out within the framework.
Marking scheme: Up to 3 marks.
(b) (i) Relevance
Information is considered to be relevant if it has the ability to influence the economic decisions of users and is provided
in time to influence those decisions
(ii) Reliability
Information is reliable if:
(a) it can be depended upon by users to represent faithfully what it either purports to represent or is reasonably
expected to represent and therefore reflects the substance of the transactions and other events that have taken
place.
(b) it is free from deliberate or systematic bias and material error and is complete; and
(c) in its preparation under conditions of uncertainty, a degree of caution has been applied in exercising the necessary
judgements.
(iii) Comparability
Information is comparable if it enables users to determine and evaluate similarities in, and differences between, the
nature and effects of transactions and other events over time and across different businesses.
(iv) Understandability
Information is understandable if its significance can be appreciated by users that have a reasonable knowledge of
business and economic activities and accounting and a willingness to study with reasonable diligence the information
provided.
Marking scheme: ½ a mark for identifying and up to 1·5 marks for explaining the characteristic. Maximum of 8 marks.
(c) The arguments for having accounting standards
Standards oblige companies to disclose the accounting policies they have used in the preparation of accounts. This should
help the users of accounts better understand the information presented.
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Accounting standards require companies to disclose information in the financial statements which they might not want to
disclose if the standard did not exist.
Accounting standards reduce the number of choices in the method used to prepare financial statements and therefore they
should reduce the risk of creative accounting. This should help the users of financial statements to compare the financial
performance of different entities.
Accounting standards provide a focal point in the accounting profession for discussion about accounting practice.
Accounting standards should increase the credibility of financial statements with the users by improving the amount of
uniformity of accounting treatment between companies.
Marking scheme: 1 mark for each relevant point up to 5 marks.
(d) It might be acceptable to depart from accounting standards if the entity makes the following disclosures:
(i) The management have concluded that the financial statements present fairly the entity’s financial position, financial
performance and cash flows;
(ii) that it has complied with applicable standards, except that it has departed from a particular requirement to achieve a
fair presentation;
(iii) the title of the standards from which the entity has departed, the nature of the departure, including the treatment that
the standard would require, the reason why that treatment would be so misleading in the circumstances that it would
conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and
(iv) for each period presented, the financial effect of the departure on each item in the financial statements that would have
been reported in complying with the requirement.
Marking scheme: 1 mark for identifying each relevant comment up to 4 marks.
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