# ACCA f1 with answers 2004

Part 1 Examination – Paper 1.1 (INT)
Preparing Financial Statements (International Stream)

Section A
1
2
3
4
5

B
C
D
B
A

146,000 + 218,000 – 83,000
(240,000 x 20%) + (160,000 x 20% x

Balance
Sales
Interest

6/ )
12

– (60,000 x 20% x

614,000
301,000
1,600

Cash
Discounts
Contras
Balance

––––––––
916,600
––––––––
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

A
A
A
D
D
B
A
C
C
B
A
D
B
D
A
B
B
C
B
C

A
B
C
D

7
8
5
5
–––
25
–––

9/ )
12

311,000
3,400
8,650
32,000
561,550
––––––––
916,600
––––––––

(2 x 5,000) + ( 10 x 6,000)
[2/3 x

1/
2

x (540,000 + 30,000)] – 20,000 + (50% x 285,000)

17

[P.T.O.

Section B
1

(a)

Bob
Income statement for the year ended 30 September 2004

Sales
Less: Cost of sales
Less: Opening inventory
Less: Purchases

Reference
to workings
1

\$
604,200

138,000
410,800
––––––––
448,800
146,000
––––––––

2

Less: less: Closing inventory
Gross profit
Expenses

\$

402,800
––––––––
201,400
194,000
––––––––
107,400
––––––––

3

Net profit

(b)

Calculation of goods taken by Bob:
Purchases as above
Purchases per information in question:
408,100 – 68,100 + 77,100 + 14,200

410,800
431,300
––––––––
20,500
––––––––

Goods taken by Bob therefore total
Workings
1
Sales
Credit sales \$519,400 – \$119,200 + \$125,000
Cash sales
Sales for income statement
2

Purchases and cost of sales
Cost of sales \$604,200 x 2/3
Details
Opening inventory
Purchases (balancing figure)

less: closing stock
3

\$
525,200
79,000
––––––––
604,200
––––––––
402,800

38,000
410,800
––––––––
448,800
46,000
––––––––

Expenses \$89,400 + \$4,100 – \$3,900 + \$4,600 + \$2,400 – \$2,600

Alternative workings for (b)
Purchases and cost of sales (before deducting goods taken by Bob)
Purchases
\$408,100 – \$68,100 + \$77,100 + \$14,200
Cost of sales
\$431,300 + \$38,000 – \$46,000
Calculation of goods taken by Bob
Cost of sales allowing for 50% mark-up \$604,200 x 2/3
Cost of sales as above
Goods taken by Bob therefore total
Purchases total becomes \$431,300 – \$20,500

18

402,800
––––––––
94,000
––––––––

431,300
423,300
402,800
423,300
––––––––
20,500
––––––––
410,800
––––––––

2

(a)

At 1 July 2003
Arising on issue of shares
Surplus on land
revaluation, now realised
Net profit for year (40 + 6)
Dividends paid

3

Cougar
Statement of changes in equity
Year ended 30 June 2004
Share
Revaluation
capital
account
reserve
\$m
\$m
\$m
100
140
60
11
–––
–––
–––
100
140
60
100
180
(60)
1
–––
200
–––

–––
320
–––

–––

–––

Accumulated
profits
\$m
120
1((6)
–––
114

Total

160
146
1((8)
–––
212
–––

146
1((8)
––––
732
––––

\$m
420
1(6)
–––
414
280

Leo Group
Consolidated balance sheet as at 30 June 2004
\$
3,100,000
–––––––––––
\$3,100,000
–––––––––––
500,000
800,000
1,470,000
–––––––––––
2,770,000
330,000
–––––––––––
\$3,100,000
–––––––––––

Sundry net assets

Share capital
Revaluation reserve
Accumulated profits
Minority interest

Workings
Cost of control
Shares in Pard

\$
700,000

Share capital 70%
Accumulated profits:
70% pre-acq
Accumulated profits:
goodwill written off

––––––––
700,000
––––––––

\$
1,140,000
1,420,000
1,140,000
1,––––––––
1,700,000
1,––––––––

Minority interest
\$
Balance for CBS

330,000
––––––––
330,000
––––––––

Share capital 30%
Accumulated profits 30%

\$
1, 60,000
1,270,000
1,––––––––
1,330,000
1,––––––––

Accumulated profits
\$
Cost of control
70% x 600,000
Minority interest
30% x 900,000
Cost of control
goodwill written off
Balance for CBS

Leo
Pard

\$
1,400,000
1,900,000

1,420,000
1,270,000
1,140,000
1,470,000
–––––––––
2,300,000
–––––––––

–––––––––
2,300,000
–––––––––

19

4

(a)

Research and development
Balance at
1 Oct 2003
\$
Project Q
1,000,000
1)(200,000)
R
)))400,000
S
––––––––––
1,200,000
––––––––––
Equipment

Balance at
1 Oct 2003
\$
1500,000
((200,000)
––––––––––
300,000
––––––––––

New
expenditure
\$

Income statement
Amortisation
Research
\$
\$

Balance sheet
30 Sept 2004
\$

(100,000)

1,700,000
1,650,000

250,000
(140,000)
–––––––––
(140,000)
–––––––––

––––––––
250,000
––––––––

–––––––––
(100,000)
–––––––––

New
expenditure
\$
180,000

Depreciation
\$
(136,000)
–––––––––
(136,000)
–––––––––

––––––––
180,000
––––––––

––––––––––
1,350,000
––––––––––
Balance sheet
30 Sept 2004
\$
1,680,000
1,(336,000)
––––––––––
1,344,000
––––––––––

The amortisation of deferred development expenditure (\$100,000) and the research expenditure (\$140,000) and the
depreciation of the research equipment (\$136,000) will appear in the income statement under cost of sales.
The total deferred development expenditure (\$1,350,000) will appear in the balance sheet under intangible non-current
assets.
(b)

Disclosure notes
Income statement
The aggregate amount of research and development expenditure recognised as an expense during the period was \$376,000,
all charged in cost of sales.
Balance sheet
Movements on deferred development expenditure during the year were:

Balance at 1 October 2003
Year ended 30 September 2004
Amortisation
New expenditure

5

Cost
\$
1,400,000

250,000
––––––––––
1,650,000
––––––––––

Amortisation
\$
(200,000)

Net book value
\$
1,200,000

(100,000)

(100,000)
250,000
––––––––––
1,350,000
––––––––––

–––––––––
(300,000)
–––––––––

The use of historical cost accounting can mislead users when prices are rising in the following ways:
(i)

Depreciation is based on the original cost of non-current assets and thus understates the true value obtained by the business
from the use of these assets. The result is that profit is overstated.

(ii)

Inventory is often valued at cost, using FIFO or average costs. If prices are rising, sales in current terms are matched with
cost of sales in historical cost terms. Profit is again overstated.

(iii) Balance sheet values of assets may become seriously below their current value.
(iv) The combined effects of the above three factors mean that return on capital employed is overstated.
(v)

Year on year comparison of results is likely to be misleading as figures will show an automatic increase as prices rise, when
in real terms sales and profits may have risen far less, or even have fallen.

Any four points needed for full marks.

20

Part 1 Examination – Paper 1.1 (INT)
Preparing Financial Statements (International Stream)

December 2004 Marking Scheme

Section B
1

(a)

Calculations

(b)

2

3

sales
4 x 1/2
cost of sales
purchases as balancing figure
expenses
6 x 1/2
2 x 1/2

Calculation of purchases
Correct method (subtraction of net purchases)

Opening balances
Share issue
Surplus on revaluation transferred
Net profit for year
Dividends paid

Goodwill
Minority interest
Accumulated profits
Balance sheet
Share capital
Sundry net assets
Revaluation reserve
B/S layout

4x

1/
2

2x1

4x
2x
5x

1/
2
1/
2
1/
2

Marks
2
1
1
3
1
–––
8
–––
2
2
–––
4
–––
12
–––
1
1
2
2
1
1
–––
8
–––
2
1
21/2
1
1
1
1
1/
2

–––
41/2
–––
10
–––
4

(a)

Project

Q
R
S
Equipment Cost
Depreciation
Accumulated profits
Balance sheet

1
1
1
1/
2

1
1
1/
2

–––
6
–––
(b)
(b)

5

Income statement Total
Balance sheet

2
1
3
–––
6
–––
12
–––

4x2

8
–––
50
–––

21

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