Mock“Mock” examination paper

TYra``

Semester I Examination
Academic Year 2016/17

COBDF0001 Bachelor of Commerce

IFBDF0001 Bachelor of Business and Legal Studies

ACC20010

Financial Accounting Level 2

Professor Andrew Stark

Professor Ciarán Ó hÓgartaigh
Professor Eamonn Walsh
Professor Niamh Brennan*

Time Allowed: 2 hours

Instructions for Candidates

Please answer both questions

Instructions for Invigilators

Use of non-programmable calculators is permitted

Page 1 of 9
QUESTION 1

You are required to answer the following four short questions, all of which stand alone from
each other.

Short question 1

The following trial balance was extracted from the books of Pro Duct plc at 30 November 2016.
€000 €000
Share capital 24,000
Retained earnings at 1/12/2015 100
Advertising 830
Bad debts 605
Provision for bad debts 1/12/2015 1,000
Factory power 3,614
General expenses – Factory 205
– Office 346
Insurance 902
Purchases of raw materials 33,668
Distribution costs 1,085
Rent & rates, Light & heat 1,968
Repairs to plant 785
Factory direct wages 20,700
Administrative expenses 3,810
Sales 79,174
Inventory 1/12/2015 – Raw Materials 5,230
– Work in Progress 1,670
– Finished Goods 7,380
Plant and Equipment (Cost/Aggregate Depreciation) 16,000 2,935
Trade receivables and Trade payables 11,460 6,150
Balance at bank 3,101 _____
113,359 113,359

You are given the following additional information: €000

(1) Inventory at 30 November 2016 was: Raw Materials 3,560
Work in Progress 1,740
Finished Goods 9,650

(2) The following adjustments are to be made for accruals and prepayments:
Accruals €000 Prepayments €000
Factory power 562 Insurance 170
Rent & rates, Light & heat 390
General expenses – Factory 25
– Office 40

(3) 5/6ths of Rent & rates, Light & heat and Insurance are to be allocated to the factory and 1/6 th
to the office.

(4) Depreciation of 10% on cost is to be provided on Plant and Equipment.

Required:

(a) Prepare the Manufacturing Account only for the year ended 30 November 2016.
(11 Marks)

Page 2 of 9
 …over

Page 3 of 9
QUESTION 1 (continued)

Short question 2

Extracts from the financial statements of Fast H20 plc are shown below:

Fast H20 plc

Consolidated Income Statement (extract) for the year ended 30 November 2016
€m
Group net profit before taxation 500
Taxation 270
Group net profit after taxation 230

Statement of changes in equity (extract) for the year ended 30 November 2016
Equity share 10% cumulative
capital of 25c preference share Retained Total
each capital of €1 each earnings
€m €m €m €m
Balance at 1 December 2015 1,000 250 100 1,350
Bonus shares issued 200 200
Issue of share capital 250 250
Share options exercised 25 25
Dividends: Preference (25) (25)
Equity (100) (100)
Net income for period _____ ___ 230 230
Balance at 30 November 2016 1,475 250 205 1,930

Notes

1. Issued share capital, 1 December 2015: 250 million 10% cumulative preference shares of
€1 each, and 4,000 million ordinary shares of 25c each.

2. Changes during the year ended 30 November 2016:

1 December 2015 Bonus issue of ordinary shares, 1 for 5

1 March 2016 Issue of 1,000 million ordinary shares: at full price
1 June 2016 Exercise of 100 million equity options

3. Equity options, 1 December 2015: 500 million equity options (convertible into 1 equity
share per option, at an exercise price of €nil). Conversion rights are unaffected by the
bonus issue.

4. Basic earnings per share attributable to equity shareholders for the year ended 30
November 2015 was 4.0 cents; Diluted earnings per share was 3.8 cents.

Required:

(a) Compute the company’s basic earnings per share figures required by IAS 33 for the
current year.
(b) Compute the company’s diluted earnings per share figures required by IAS 33 for the
current year.
(c) Using the data in Note 4, compute comparatives for basic and diluted earnings per
share attributable to equity shareholders for the previous year, 2014/15.
(9 Marks)
…over

Page 4 of 9
QUESTION 1 (continued)

Short question 3

You are the financial accountant of Mars plc, a company in the electronics industry, whose
accounting year-end date is 30 November. You have been provided with the following
information in respect of its property, plant and equipment on 1 December 2015.

Cost Accumulated Total

depreciation depreciable life
€m €m Years
Land 60 nil -
Freehold buildings 150 30 50
Plant and equipment 500 365 10
Motor vehicles 50 35 5

Notes

(1) None of the property plant and equipment will be fully depreciated by 30 November
2016.

(2) During the year, C Star, a chartered surveyor, was engaged to value the properties at an
open market value for existing use. Her valuations as on 1 December 2015 were as
follows:

€m
Land 400
Freehold buildings 240

(3) Additions during the year were:

€m
Plant and equipment 100
Motor vehicles 20

(4) The only disposals were motor vehicles which cost €10 million and which had
accumulated depreciation at 1 December 2015 of €5 million.

(5) All purchases and disposals took place on 1 June 2016. All deprecation is charged on a
straight-line basis from the date of acquisition to the date of sale.

(6) Mars plc classifies its property plant and equipment into three categories: land and
buildings, plant and equipment and motor vehicles.

Required:

Present the Property, plant and equipment note to the financial statements (Statement of
Financial Position) of Mars plc at 30 November 2016.
(16 Marks)

…over

Page 5 of 9
QUESTION 1 (continued)

Short question 4

(a) The two terms “recognised” and “realised” have particular meanings in financial
reporting.

Required:

(i) What do the two terms “recognised” and “realised” mean?

(ii) How are recognised, unrecognised, realised and unrealised revenues/expenses and
gains/losses dealt with in the financial statements?
(7 Marks)

Total (43 Marks)

…over

Page 6 of 9
QUESTION 2

The following trial balance is available for B.R.C.H.H plc at 30 November 2016:

€000 €000
Turnover 2,400
Cost of sales 1,650
Distribution costs 330
Administrative expenses 150
Dublin factory (Valuation at 30 November 2015) 1,200
Kerry factory (cost €960,000) 600
Plant and equipment (cost €750,000) 540
Trade receivables/payables 420 390
Inventory at 30 November 2016 750
Bank 750
Retained earnings at 1 December 2015 900
Ordinary shares 2,100
Share premium ____ 600
6,390 6,390

The following additional information is available:

(1) B.R.C.H.H plc has two manufacturing plants, one in Dublin and one in Kerry. During
2016 a strategic decision was taken to close the Kerry factory and it was closed on 30
June 2016. The following analysis is available for the Kerry factory up to the date of
closure:

€000
Turnover 300
Cost of sales 150
Distribution costs 30
Administrative expenses 60

(2) As a result of the closure of the Kerry factory:

 Closure costs amounting to €30,000 were incurred. These costs are included in
the Kerry administrative expenses in the above trial balance.
 As part of the closure of the Kerry factory, it was necessary to carry out a
fundamental re-organisation of the remaining operation. The Dublin re-
organisation expenses amounting to €150,000 were accruing at the year end.
These expenses are not included in the trial balance.
 The Kerry factory was sold on 28th November for €900,000. The proceeds of sale
were received on 2 December 2016. No transactions relating to the sale of the
Kerry factory were recorded in the trial balance.

(3) Plant and equipment of the Kerry factory was subsumed into the Dublin factory at no profit/loss.

(4) A piece of manufacturing equipment developed a fault during the year. The yearly
production of Product X was normally 50,000 units. This year only 25,000 units were
produced. The direct costs of making Product X are €15 per unit and the allocated
production overhead is €18 per unit (€450,000Production overhead  25,000Units produced). Inventory
of 10,000 units of Product X remains at year end and is included at €330,000 in the
closing inventory figure in the trial balance. All of Product X was manufactured in the
Dublin factory.

Page 7 of 9
 /over...
QUESTION 2 (continued)

(5) Following an impairment review, the end of year net book value (after depreciation for
2014/15) of the Dublin factory had been revalued on 30 November 2015 and a
revaluation/impairment loss of €180,000 had been recorded in the income statement.

On 30 November 2016, the Dublin factory was again revalued to €1,500,000. This
revaluation is not reflected in the above trial balance. Following the revaluation,
depreciation for the year is to be charged on this asset. Commencing 2015/16, and based
on the 30/11/2016 valuation, the directors decided that the remaining useful life of the
Dublin factory was 20 years.

(6) The company’s policy is to charge a full year’s depreciation in the year of disposal
regardless of disposal date. Depreciation should be provided as follows:

 The Kerry factory is depreciated over 40 years on a straight line basis.

 The depreciation charge on plant and equipment is €60,000. Depreciation on plant and
equipment should be allocated 80% to Dublin and 20% to Kerry.
 It is company policy to include depreciation on both plant and equipment and factories
as part of cost of sales.

Required:

Prepare in a form suitable for publication under International Financial Reporting Standards:

(a) An income statement for B.R.C.H.H plc for the year ended 30 November 2016
(8.5 Marks)

(b) The note to the income statement for B.R.C.H.H plc concerning the Kerry factory
(5 Marks)

(c) A statement of comprehensive income for B.R.C.H.H plc for the year ended 30
November 2016
(2 Marks)

(d) A statement of changes in equity for B.R.C.H.H plc for the year ended 30 November
2016
(3 Marks)

(e) A statement of financial position for B.R.C.H.H plc at 30 November 2016

(8.5 marks)

Total (27 Marks)

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