Examination Period 4: 2020/21

ACC200221R

Financial Reporting
Module Title

Level Five

Time Allowed Two hours and 30 minutes plus fifteen minutes

reading time

Instructions to students:
 Enter your student number not your name on all answer books.
 Students are encouraged to use the first fifteen minutes of the exam
to read the questions carefully and to plan answers.
 Answer all questions from Section A and 1 from Section B.
 The use of a calculator is permitted.
 Students are not permitted to remove this examination paper from the
examination room. For all purposes the examination paper remains the
property of the University of Northampton.

No. of Pages 8

No. of Questions 5

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 ACC200221R

SECTION A – Answer ALL the questions.

Question 1

The following is the trial balance of Friends Plc, a manufacturing company, at 31

Dec 2019.

£000 £000
Revenue 98,000
Bank Balance 4,175
Buildings at cost 23,000
Buildings depreciation at 1 Jan 2019 8,050
Equipment at cost 23,670
Equipment depreciation at 1 Jan 2019 4,350
Land at cost 95,000
Purchases 23,000
Goodwill 5,000
Heating & Lighting 760
Administrative Expenses 850
Trade Receivables 4,500
Trade Payables 3,600
Factory Wages 1,020
Administrative Salaries 2,300
Distribution Salaries 3,200
10% Loan 6,000
Provision for doubtful debts at 1 Jan 2019 200
Directors Remuneration 3,760
Retained Profits 17,400
£1 Ordinary shares 45,000
Inventory at 1 Jan 2019 1,365
Share Premium 9,000
191,600 191,600

Additional information:

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 ACC200221R

1. Closing inventory is valued at cost of £780,000. NRV of the inventory is

£820,000.
2. Further administration salaries costs of £52,000 have not yet been entered in
the above trial balance
3. The directors are entitled to a bonus as follows:
 Chief executive £80,000
 Sales director £30,000
These bonuses are not included in the trial balance

4. The provision for doubtful debts is to be increased to £300,000.

5. Equipment is depreciated at 25% straight line. All Equipment is used in the
factory.
6. Buildings are depreciated at 2% per annum, allocated at 20% to cost of
sales, 40% to administration expenses and the balance to distribution costs.
7. Tax has been estimated at £1,250,000 for the year.
8. Land was revalued on 31 Dec 2019 to £125,000,000 the directors have
decided to include this revaluation in the accounts
9. Interest on the loan has not been included in the trial balance

Required

In accordance with International Accounting Standards:

a) Prepare the Statement of Profit & loss & other comprehensive income for
Friends plc for the year ended 31 December 2019 (14 marks)

b) Prepare a Statement of Financial Position of Friends plc at the year ended

31 December 2019, in accordance with International Accounting
Standards.
(16 marks)

c) Prepare a Statement of Changes in Equity for the year ended 31

December 2019.
(5 marks)

d) Calculate the basic earnings per share (EPS) for Friends plc for the year
ended 31 December 2019.
(5 marks)
(Total 40 marks)

Question 2

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 ACC200221R

Salah Plc has prepared the following information for its financial statements for
the year ending 31 December 2019.

Salah Plc Income Statement for the year ending 31 December 2019

£’000

Revenue 66,000
Cost of sales 26,900

Gross profit 39,100

Distribution costs 6,500
Administration expenses 4,800

Profit from operations 27,800

Finance costs 1,500

Profit before tax 26,300

Taxation 7,060

Net profit for the period 19,240

Other comprehensive income

Revaluation of assets 7,000

Total comprehensive income 26,240

Salah Plc Balance sheets at 31 December

2018 2019
£’000 £’000
Non-Current assets

Cost 117,900 150,990

Depreciation 38,500 42,500
79,400 108,490
Current assets

Inventory 16,520 19,200

Trade receivables 9,200 9,880
Cash - 6,310
25,720 35,390
105,120 143,880
Equity and Liabilities

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 ACC200221R

Ordinary share capital 43,000 57,000

Share premium 11,300 12,600
Retained profit 23,500 42,300
Revaluation reserve ______ 7,000
77,800 118,900

Non current liabilities

Loans 1,420 4,680

Current liabilities

Bank overdraft 7,500 -

Trade payables 10,600 11,900
Taxation 7,800 8,400
25,900 20,300
105,120 143,880

Other information:

1. During the year the non-current assets were revalued by £7,000,000.

2. An interim and a final dividend were paid during the year.

Required:

a) Prepare the statement of cash flows for Salah Plc for the year ended 31 st
December 2019 in accordance with International Accounting Standards.
(15 marks)

b) Briefly explain why you consider this financial statement to be important

to users of financial statements.
(5 marks)

(Total 20 marks)

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 ACC200221R

Question 3

Balotelli Plc has one subsidiary undertaking, Suarez Ltd, which was acquired on
1st October 2014. The statements of financial position of Balotelli Plc and Suarez
Ltd as at 30th September 2015 are as below:

Assets Balotelli Plc Suarez Ltd

Non current Assets £000's £000's
Property, plant and equipment 88,301 45,523
Investment in Suarez Ltd 39,500
127,801 45,523
Current assets
Inventory 25,205 6,861
Trade & Other receivables 9,147 4,725
Cash 401 1,028
34,753 12,614
Total Assets 162,554 58,137

Equity & Liabilities

Share capital 30,000 5,000
Share Premium 20,000 2,000
Retained earnings 46,069 37,430
96,069 44,430
Current liabilities    
Trade & Other Payables 11,669 5,002
Accruals 2,984 991
Tax Liabilities 1,832 714
16,485 6,707
Non Current Liabilities
Long term loan 50,000 7,000

Total Liabilities 66,485 13,707

Total Equity & liabilities 162,554 58,137

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 ACC200221R

You have been given the following further information.

1. The share capital of Suarez ltd Ltd consists of ordinary shares of £1 each.
There have been no changes to the balances of share capital & share premium
during the year

2. No dividends were paid or proposed by Suarez Ltd during year.

3. Balotelli plc acquired 3,000,000 shares in Suarez ltd on 1 October 2014

4. On 1 October 2014 the balance of retained earnings of Suarez ltd was

£32,550,000

5. The fair value of the non current assets of Suarez ltd at 1 October 2014
was £42,500,000. The book value of the non-current assets at 1 October 2014
was £38,500,000. The revaluation has not been recorded in the books of Suarez
ltd (ignore any effect on the depreciation for the year).

6. Included in Trade and other receivables for Balotelli plc and in Trade and
other payables for Suarez ltd is an inter-company transaction for £1,750,000
that took place in early Oct 2014.

7. The directors of Balotelli plc have concluded that goodwill has been
impaired by 10% during
the year.

Required

Prepare the group Statement of Financial position for the year ended 30th
September 2015 in accordance with international accounting standards.

(20 Marks)

SECTION B - Answer one question only.

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 ACC200221R

Question 4

A ‘Conceptual framework’ for financial reporting consists of coherent set of

fundamental principles which underpin financial accounting.

Explain the purpose and scope of this framework

(Total: 20 marks)

Question 5

Geoffrey plc is a fashion retailer with stores in many city centres, you have been
recruited as financial accountant to help with the production of the published
financial statements.

Required

In order that company operates within correct financial discipline, the managing
director has asked you to write short notes for the benefit of the team explaining
the following areas and how they are accounted for in financial statements
(provide examples) in accordance with international accounting standards:

a) Goodwill
(4 marks)

b) Share Premium account.

(4 marks)

c) Bank
(4 marks)

d) Revaluation reserve
(4 marks)

e) Depreciation of Non current assets

(4 marks)

(Total 20 marks)

END OF SECTION B
END OF PAPER

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