C
ONTENTS
Chapter 2: Double-Entry Book-keeping and the Trial Balance ......................................................... 1
Chapter 3: Profit Measurement and Balance Sheet Preparation ........................................................ 5
Chapter 4: Value Added Tax and Statutory Deductions..................................................................... 8
Chapter 5: Accruals, Prepayments, Bad Debts, Provisions and Bad Debts Recovered..................... 12
Chapter 6: Depreciation and Revaluation .......................................................................................... 15
Chapter 8: Final Accounts of a Sole Trader with Adjustments .......................................................... 29
Chapter 9: Bank Reconciliation Statements....................................................................................... 44
Chapter 10: Control Accounts.............................................................................................................. 48
Chapter 11: Correction of Errors – Suspense Account ........................................................................ 53
Chapter 12: The Conceptual Framework of Accounting ..................................................................... 66
Chapter 14: Limited Companies .......................................................................................................... 67
Chapter 15: Final Accounts of a Limited Company with Adjustments ............................................... 73
Chapter 16: Manufacturing Accounts .................................................................................................. 96
Chapter 17: Departmental Accounts .................................................................................................... 113
Chapter 18: Published Accounts (Higher Level Only) ........................................................................ 126
Chapter 19: Analysis and Interpretation of Financial Statements........................................................ 148
Chapter 20: Cash Flow Statements ...................................................................................................... 168
Chapter 21: Club Accounts and Accounts of Service Firms................................................................ 181
Chapter 22: Incomplete Records I ....................................................................................................... 206
Chapter 23: Incomplete Records II ...................................................................................................... 232
Chapter 24: Farm Accounts.................................................................................................................. 259
Chapter 25: Tabular Statements ........................................................................................................... 272
Chapter 26: Introduction to Management Accounting......................................................................... 275
Chapter 27: Cost Classification............................................................................................................ 276
Chapter 28: Product Costing ................................................................................................................ 278
Chapter 29: Cost Volume Profit Analysis (Marginal Costing) ............................................................. 288
Chapter 30: Budgeting and Budgetary Control.................................................................................... 299
© Kevin O Riordan 2000
ISBN 1841 31 3750
Folens Publishers, Hibernian Industrial Estate, Greenhills Road. Tallaght, Dublin 24.
The Publisher reserves the right to change, without notice, at any time the specification of thisproduct, whether by change of materials, colours, bindings, format, text revision or any othercharacteristic.
1
Double-Entry Book-keeping andthe Trial Balance: Solutions
2
QUESTION 2.1
Bank Account
July 1 Capital 35,000 July 12 Creditor 10,500July 25 Sales 4,000 July 15 Wages 2,000
July 21 Advertising 1,000July 28 Machinery 15,000July 31 Balance c/d 10,500
39,000 39,000Aug 1 Balance b/d 10,500
Capital Account (Peter Howard)
July 31 Balance c/d 35,000 July 1 Bank 35,00035,000 35,000
Aug 1 Balance b/d 35,000
Purchases Account
July 5 Creditor 12,000July 20 Creditor 8,000 July 31 Balance c/d 20,000
20,000 20,000Aug 1 Balance b/d 20,000
Creditor Account
July 12 Bank 10,500 July 5 Purchases 12,000July 12 Discount Received 1,500 July 20 Purchases 8,000July 22 Purchases Returns 1,000July 31 Balance c/d 7,000
20,000 20,000Aug 1 Balance b/d 7,000
Discount Received Account
July 31 Balance c/d 1,500 July 12 Creditor 1,5001,500 1,500
Aug 1 Balance b/d 1,500
Purchases Returns Account
July 31 Balance c/d 1,000 July 22 Creditor 1,0001,000 1,000
Aug 1 Balance b/d 1,000
Sales Account
July 17 Debtor 16,000July 25 Bank 4,000
July 31 Balance c/d 21,500 July 31 Debtor 1,50021,500 21,500
Aug 1 Balance b/d 21,500
Debtor Account
July 7 Sales 16,000 July 8 Sales Returns 3,000July 31 Sales 1,500 July 31 Balance c/d 14,500
17,500 17,500Aug 1 Balance b/d 14,500
Leaving Certificate Accounting
2
QUESTION 2.2
Sales Returns Account
July 8 Debtor 3,000 July 31 Balance c/d 3,0003,000 3,000
Aug 1 Balance b/d 3,000
Wages Account
July 15 Bank 2,000 July 31 Balance c/d 2,0002,000 2,000
Aug 1 Balance b/d 2,000
Advertising Account
July 21 Bank 1,000 July 31 Balance c/d 1,0001,000 1,000
Aug 1 Balance b/d 1,000
Machinery Account
July 28 Bank 15,000 July 31 Balance c/d 15,00015,000 15,000
Aug 1 Balance b/d 15,000
Trial Balance as at 31 July
€ €
Name of Account Debit CreditBank............................................................ 10,500Capital......................................................... 35,000Purchases .................................................... 20,000Creditors ..................................................... 7,000Discount Received........................................ 1,500Purchases Returns........................................ 1,000Sales............................................................ 21,500Debtor......................................................... 14,500Sales Returns ............................................... 3,000Wages ......................................................... 2,000Advertising .................................................. 1,000Machinery ................................................... 15,000
66,000 66,000
Bank Account
Mar 1 Capital 12,000 Mar 3 Rent 150Mar 30 Cash 4,800 Mar 8 Wages 100
Mar 11 Creditor 2,900Mar 16 Wages 100Mar 20 Rates 50Mar 22 Motor Vehicle 5,000Mar 23 Wages 100Mar 25 Rent 150Mar 31 Wages 120Mar 31 Balance c/d 8,130
16,800 16,800Apr 1 Balance b/d 8,130
Solutions
3
Rent Account
Mar 3 Bank 150Mar 25 Bank 150 Mar 31 Balance c/d 300
300 300Apr 1 Balance b/d 300
Creditor Account
Mar 11 Bank 2,900 Mar 7 Purchases 3,000Mar 11 Discount Received 100 Mar 24 Purchases 2,000Mar 26 Purchases Returns 300Mar 31 Balance c/d 1,700
5,000 5,000Apr 1 Balance b/d 1,700
Purchases Account
Mar 7 Creditor 3,000 Mar 29 Drawings 600Mar 24 Creditor 2,000 Mar 31 Balance c/d 4,400
5,000 5,000Apr 1 Balance b/d 4,400
Discount Received Account
Mar 31 Balance c/d 100 Mar 11 Creditor 100100 100
Apr 1 Balance b/d 100
Purchases Returns Account
Mar 31 Balance c/d 300 Mar 26 Creditor 300300 300
Apr 1 Balance b/d 300
Wages Account
Mar 8 Bank 100Mar 16 Bank 100Mar 23 Bank 100Mar 31 Bank 120 Mar 31 Balance c/d 420
420 420Apr 1 Balance b/d 420
Sales Account
Mar 10 Cash 2,000Mar 19 Debtor 4,000Mar 27 Debtor 2,700
Mar 31 Balance c/d 13,200 Mar 28 Cash 4,50013,200 13,200
Apr 1 Balance b/d 13,200
Cash Account
Mar 10 Sales 2,000 Mar 15 Advertising 750Mar 28 Sales 4,500 Mar 30 Bank 4,800
Mar 31 Balance c/d 9506,500 6,500
Apr 1 Balance b/d 950
Advertising Account
Mar 15 Cash 750 Mar 31 Balance c/d 750750 750
Apr 1 Balance b/d 750
Leaving Certificate Accounting
4
Debtor Account
Mar 19 Sales 4,000 Mar 21 Sales Returns 500Mar 27 Sales 2,700 Mar 31 Balance c/d 6,200
6,700 6,700Apr 1 Balance b/d 6,200
Sales Returns Account
Mar 21 Debtor 500 Mar 31 Balance c/d 500500 500
Apr 1 Balance b/d 500
Rates Account
Mar 20 Bank 50 Mar 31 Balance c/d 5050 50
Apr 1 Balance b/d 50
Motor Vehicle Account
Mar 21 Bank 5,000 Mar 31 Balance c/d 5,0005,000 5,000
Apr 1 Balance b/d 5,000
Drawings Account
Mar 29 Purchases 600 Mar 31 Balance c/d 600600 600
Apr 1 Balance b/d 600
Capital Account
Mar 31 Balance c/d 12,000 Mar 1 Bank 12,00012,000 12,000
Apr 1 Balance b/d 12,000
Trial Balance as at 31 March
€ €
Name of Account Debit CreditBank............................................................. 8,130Rent ............................................................. 300Creditor........................................................ 1,700Purchases ..................................................... 4,400Discount Received ........................................ 100Purchases Returns......................................... 300Wages .......................................................... 420Sales............................................................. 13,200Cash............................................................. 950Advertising ................................................... 750Debtor.......................................................... 6,200Sales Returns ................................................ 500Rates ............................................................ 50Motor Vehicles ............................................. 5,000Drawings...................................................... 600Capital ......................................................... 12,000
27,300 27,300
5
Profit Measurement and Balance Sheet Preparation: Solutions
3
QUESTION 3.1
QUESTION 3.2
QUESTION 3.3
(a) Revenue (b) Capital (c) Revenue (d) Capital(e) Capital (f) Revenue (g) Revenue (h) Capital(i) Revenue (j) Capital (k) Capital
(a) Trading Account (b) Profit and Loss Account (c) Balance Sheet (d) Balance Sheet(e) Trading account (f) Profit and Loss Account (g) Profit and Loss Account (h) Profit and Loss Account(i) Balance Sheet (j) Balance Sheet (k) Balance Sheet
Trading and Profit and Loss Account for the year ended 31/12/-0
€ € €
Sales 89,000Less Cost of SalesOpening Stock 4,000Add Purchases 42,000Less Purchases Returns (700)
41,30045,300
Less closing stock (5,000)(40,300)
Gross profit 48,700Add incomeDiscount received 400
49,100Less expensesWages 10,000Discount allowed 600Insurance 1,500Carriage outwards 890Postage and stationery 110Light and heat 1,700
(14,800)Net profit 34,300
Leaving Certificate Accounting
6
QUESTION 3.4
Balance Sheet as at 31/12/-0
€ € €
Fixed AssetsPremises 80,000Furniture and fittings 12,000
92,000Current AssetsStock 5,000Debtors 8,000
13,000Less Current LiabilitiesCreditors 4,000Bank Overdraft 2,000
(6,000)7,000
99,000Financed byCapital 71,700Add Net Profit 34,300
106,000Less Drawings (7,000)
99,000
Trading and Profit and Loss Account for the year ended 30/6/-9
€ €
Sales 151,000Less sales returns (1,000)
150,000Less Cost of SalesOpening Stock 20,000Add Purchases 107,000Add carriage inwards 3,000Add custom duties 4,500
134,500Less closing stock (30,000)
(104,500)Gross profit 45,500Add incomeRent received 7,500
53,000Less expensesWages 19,000Light and heat 2,000Advertising 3,000Insurance 7,000General expenses 6,000
(37,000)Net profit 16,000
Solutions
7
Balance Sheet as at 30/6/-9
€ € €
Fixed AssetsLand and buildings 100,000Furniture and equipment 20,000Motor vehicles 12,000
132,000Current AssetsStock 30,000Debtors 20,000Cash 1,000
51,000Less Current LiabilitiesCreditors 25,000Bank Overdraft 16,000
(41,000)10,000
142,000Financed byCapital 136,000Add Net Profit 16,000
152,000Less Drawings (10,000)
142,000
8
Value Added Tax and Statutory Deductions: Solutions
4
QUESTION 4.1
Purchases Account
May 1 Creditor 15,000May 19 Creditor 5,000 May 31 Balance c/d 20,000
20,000 20,000June 1 Balance c/d 20,000
VAT Account
May 1 Creditor (Purchases) 1,500 May 3 Debtor (Sales) 2,500May 15 Bank (Eircom) 4 May 4 Creditor (Purchases returns) 100May 19 Creditors (Purchases) 500 May 11 Debtor (Sales) 700May 20 Debtors (Sales returns) 50 May 28 Debtor (Sales) 400May 27 Bank (Stationery) 10May 31 Balance c/d 1,636
3,700 3,700June 1 Balance b/d 1,636
Creditor Account
May 4 Purchases returns 1,100 May 1 Purchases 16,500May 22 Bank 15,400 May 19 Purchases 5,500May 31 Balance b/d 5,500
22,000 22,000June 1 Balance b/d 5,500
Sales Account
May 3 Debtor 25,000May 11 Debtor 7,000
May 7 Balance c/d 36,000 May 28 Debtor 4,00036,000 36,000
June 1 Balance b/d 36,000
Debtor Account
May 3 Sales 27,500 May 10 Bank 27,500May 11 Sales 7,700 May 20 Sales returns 550May 28 Sales 4,400 May 31 Balance c/d 11,550
39,600 39,600June 1 Balance b/d 11,550
Purchases Returns Account
May 31 Balance b/d 1,000 May 4 Creditor 1,0001,000 1,000
June 1 Balance b/d 1,000
Bank Account
May 10 Debtor 27,500 May 15 Telephone expenses 44May 17 Entertainment expenses 330May 22 Creditor 15,400May 25 Motor vehicles 6,600May 27 Stationery 110May 28 Balance c/d 5,016
27,500 27,500June 1 Balance b/d 5,016
Solutions
9
QUESTION 4.2
Telephone Expenses Account
May 15 Bank 40 May 31 Balance c/d 4040 40
June 1 Balance b/d 40
Entertainment Expenses Account
May 17 Bank 330 May 31 Balance c/d 330330 330
June 1 Balance b/d 330
Sales Returns Account
May 20 Debtor 500 May 31 Balance c/d 500500 500
June 1 Balance b/d 500
Motor Vehicles Account
May 25 Bank 6,600 May 31 Balance c/d 6,6006,600 6,600
June 1 Balance b/d 6,600
Stationery Account
May 27 Bank 100 May 31 Balance c/d 100100 100
June 1 Balance b/d 100
The Trading Account for the month will show the following entries:
SalesLess sales returns
€
36,000 (500)
PurchasesLess purchases returns
€
20,000 (1,000)
€
35,500
€
19,000
The Profit and Loss Account at the end of the month will show the following expenses:
TelephoneEntertainmentStationery
€
40
€
330
€
100
The Balance Sheet at the end of the month will show the following:
Fixed assetsMotor vehicle
Current assetsDebtorBank
Current liabilitiesCreditorsVAT
€
6,600
€
11,550
€
5,016
€
5,500
€
1,636
Wages Account
Nov 30 BankPAYEPRSI (EE)VHISavings clubPRSI (ER)
16,02010,3202,310
3504,0004,950 Nov 30 Balance c/d 37,950
37,950 37,950Dec 1 Balance b/d 37,950
Leaving Certificate Accounting
10
QUESTION 4.3
Bank Account
Nov 30 Wages 16,020
PAYE/PRSI Account
Nov 30 Wages 10,320Wages (EE) 2,310
Nov 30 Balance c/d 17,580 Wages (ER) 4,95017,580 17,580
Dec 1 Balance b/d 17,580
VHI Account
Nov 30 Balance c/d 350 Nov 30 Wages 350350 350
Dec 1 Balance b/d 350
Savings Club Account
Nov 30 Balance c/d 4,000 Nov 30 Wages 4,0004,000 4,000
Dec 1 Balance b/d 4,000
The Profit and Loss Account for the year will show the following expense:
Wages
€
37,950
The Balance Sheet at the end of the month will show the following:Current liabilities
PAYE/PRSI €17,580VHI €350Savings club €4,000
Trading and Profit and Loss Account for the year ended 31/12/-0€ € €
SalesLess Returns In
45,000(1,000)
Less Cost of SalesOpening StockAdd PurchasesLess Returns Out
21,000(500)
2,000
44,000
Add Carriage In20,500
500
Less Closing Stock23,000(4,000)
(19,000)Gross ProfitAdd IncomeDiscount ReceivedRent Received
25,000
5002,000
Less ExpensesWagesRatesInsuranceDiscount allowedLight and HeatPostage and Stationery
14,000600
1,400300600700
27,500
(17,600)Net Profit 9,900
Solutions
11
Balance Sheet As At 31/12/-0
€ € €
Fixed AssetsPremises 60,000Motor Vehicles 20,000
80,000Current AssetsClosing Stock 4,000Debtors 14,000Cash 1,000
19,000Less Current LiabilitiesCreditors 8,000Bank Overdraft 2,000PRSI/PAYE 2,500VAT 1,800
(14,300)4,700
84,700Financed byCapital 78,800Add Net Profit 9,900
88,700Less Drawings (4,000)
84,700
12
Accruals, Prepayments, Bad Debts, Provisions and Bad Debts Recovered: Solutions5
QUESTION 5.1
QUESTION 5.2
QUESTION 5.3
QUESTION 5.4
Car Tax Account1/1/-6 Balance b/d 721/4/-6 Bank 168 31/12/-6 Profit and Loss Account 3241/10/-6 Bank 168 31/12/-6 Balance c/d (three months prepaid) 84
408 4081/1/-7 Balance b/d 841/4/-7 Bank 210 31/12/-7 Profit and Loss Account 3991/10/-7 Bank 210 31/12/-7 Balance c/d (three months prepaid) 105
504 5041/1/-8 Balance b/d 105
(a) Bad Debts Account1/10/-7 Debtors 44031/12/-7 Debtors 100 31/12/-7 Profit and Loss Account 540
540 540
(b) Provision for Bad Debts Account1/1/-8 Balance b/d 620
31/12/-7 Balance c/d (5% of 14,000) 700 31/12/-7 Profit and Loss Account 80700 700
1/1/-8 Balance b/d 700
Car Insurance Account1/1/-8 Balance b/d 200 31/12/-8 Profit and Loss Account 9201/4/-8 Bank 960 31/12/-8 Balance c/d (three months prepaid) 240
1,160 1,1601/1/-9 Balance b/d 240 31/12/-9 Profit and Loss Account 1,1401/4/-9 Bank 1,200 31/12/-9 Balance c/d (three months prepaid) 300
1,440 1,4401/1/-0 Balance b/d 300
Rent Receivable Account31/12/-5 Profit and Loss Account 1,350 1/1/-5 Balance b/d 60031/12/-5 Balance c/d (six months prepaid) 750 1/7/-5 Bank 1,500
2,100 2,10031/12/-6 Profit and Loss Account 1,650 1/1/-6 Balance b/d 75031/12/-6 Balance c/d (six months prepaid) 900 1/7/-6 Bank 1,800
2,550 2,5501/1/-7 Balance b/d 900
Solutions
13
QUESTION 5.5
QUESTION 5.6
QUESTION 5.7
QUESTION 5.8
Motor Vehicles Tax Account1/1/-7 Balance b/d 2401/4/-7 Bank 520 31/12/-7 Profit and Loss Account 1,0201/10/-7 Bank 520 31/12/-7 Balance c/d (three months prepaid) 260
1,280 1,2801/1/-8 Balance b/d 2601/4/-8 Bank 600 31/12/-8 Profit and Loss Account 1,1601/10/-8 Bank 600 31/12/-8 Balance c/d (three months prepaid) 300
1,460 1,4601/1/-9 Balance b/d 300
(a) Bad Debts Account1/5/-8 Debtors 550 1/5/-8 Provision for Bad Debts 55031/12/-8 Debtors 200 31/12/-8 Provision for Bad Debts 200
750 750
(b) Provision for Bad Debts Account1/5/-8 Bad Debts 550 1/1/-8 Balance b/d 80031/12/-8 Bad Debts 20031/12/-8 Balance c/d (5% of 18,000) 900 31/12/-8 Profit and Loss Account 850
1,650 1,6501/1/-9 Balance b/d 900
(a) Bad Debts Account1/6/-6 Debtors 48031/12/-8 Debtors 400 31/12/-8 Profit and Loss Account 880
880 880
(b) Provision for Bad Debts Account1/1/-6 Balance b/d 940
31/12/-6 Balance c/d (5% of 19,600) 980 31/12/-6 Profit and Loss Account 40980 980
1/1/-7 Balance b/d 980
Rent Account1/1/-7 Balance b/d 1501/4/-7 Bank 360 31/12/-7 Profit and Loss Account 6901/10/-7 Bank 360 31/12/-7 Balance c/d (three months prepaid) 180
870 8701/1/-8 Balance b/d 1801/4/-8 Bank 420 31/12/-8 Profit and Loss Account 8101/10/-8 Bank 420 31/12/-8 Balance c/d (three months prepaid) 210
1,020 1,0201/1/-9 Balance b/d 210
Leaving Certificate Accounting
14
QUESTION 5.9
QUESTION 5.10
QUESTION 5.11
(a) Bad Debts Account1/6/-8 Debtors 640 1/6/-8 Provision for Bad Debts 64031/12/-8 Debtors 500 31/12/-8 Provision for Bad Debts 500
1,140 1,140
(b) Provision for Bad Debts Account1/6/-8 Bad Debts 640 1/1/-8 Balance b/d 1,68031/12/-8 Bad Debts 50031/12/-8 Balance c/d (5% of 24,000) 1,200 31/12/-8 Profit and Loss Account 660
2,340 2,3401/1/-9 Balance b/d 1,200
(a) Bad Debts AccountDebtors 900 31/12/-8 Profit and Loss Account 900
900 900
(b) Provision for Bad Debts Account1/1/-8 Balance b/d 800
31/12/-8 Balance c/d 1,400 31/12/-8 Profit and Loss Account 6001,400 1,400
1/1/-9 Balance b/d 1,400
(c) Provision for Discount Allowed Account31/12/-8 Profit and Loss Account
31/12/-8 Balance c/d 392 (2% of 20,000 – 400) 392392 392
1/1/-9 Balance b/d 392
(d) Profit and Loss Account for the year ended 31/12/-8 (Extract)ExpensesBad Debts 900Provision for Bad Debts Increase 600Provision for Discount Allowed Increase 392
(e) Balance Sheet as at 31/12/-8 (Extract)Current AssetsDebtors 26,000Less Provision for Bad Debts (1,400)Less Provision for Discount Allowed (392) 24,208
Rent and Rates Account3/1/-7 Bank 1,800 1/1/-7 Balance c/d (three months rates due) 4207/1/-7 Bank 84020/6/-7 Bank 1,8004/9/-7 Bank 9606/9/-7 Bank 1,80030/12/-7 Bank 960 31/12/-7 Profit and Loss Account 9,06031/12/-7 Balance c/d (three months rent due) 1,800 31/12/-7 Balance c/d (three rates prepaid) 480
9,960 9,9601/1/-8 Balance b/d 480 1/1/-8 Balance b/d 1,800
15
Depreciation andRevaluation: Solutions6
QUESTION 6.1
QUESTION 6.2
(a) Buses Account1/1/-31/7/-3
Balance b/dBank
80,00025,000 31/12/-3 Balance c/d 105,000
105,000 105,0001/1/-4 Balance b/d 105,000 1/1/-4 Disposal 20,000
31/12/-4 Balance c/d 85,000105,000 105,000
(b) Provision for Depreciation Account
31/12/-3 Balance c/d 35,0001/1/-331/12/-3
Balance b/dProfit and loss
25,00010,000
35,000 35,0001/1/-431/12/-4
DisposalBalance c/d
12,50031,000
1/1/-431/12/-4
Balance b/dProfit and Loss
35,0008,500
43,500 43,500
(c) Bus Disposal Account1/1/-4 Bus 20,000 1/1/-4
1/1/-431/12/-4
DepreciationBankLoss
12,5007,000
50020,000 20,000
(a) Buses Account1/1/-51/7/-5
Balance b/dBank
95,00035,000 31/12/-5 Balance c/d 130,000
130,000 130,0001/1/-6 Balance b/d 130,000 1/7/-6
31/12/-6DisposalBalance c/d
28,000102,000
130,000 130,000
(b) Provision for Depreciation Account
31/12/-5 Balance c/d 64,0001/1/-531/12/-5
Balance b/dProfit and Loss
40,00024,000
64,000 64,0001/7/-631/12/-6
DisposalBalance c/d
24,10060,900
1/1/-631/12/-6
Balance b/dProfit and Loss
64,00021,000
85,000 85,000
(c) Bus Disposal Account1/7/-631/12/-6
BusProfit
28,000700
1/7/-61/7/-6
DepreciationBank
24,1004,600
28,700 28,700
Leaving Certificate Accounting
16
QUESTION 6.3
QUESTION 6.4
QUESTION 6.5
(a) Lorries Account1/1/-71/4/-7
Balance b/dBank
150,00060,000 31/12/-7 Balance c/d 210,000
210,000 210,0001/1/-8 Balance b/d 210,000 1/9/-8
31/12/-8DisposalBalance c/d
40,000170,000
210,000 210,000
(b) Provision for Depreciation Account
31/12/-7 Balance c/d 66,0001/1/-731/12/-7
Balance b/dProfit and Loss
45,00021,000
66,000 66,0001/9/-831/12/-8
DisposalBalance c/d
28,50056,500
1/1/-831/12/-8
Balance b/dProfit and Loss
66,00019,000
85,000 85,000
(c) Lorry Disposal Account1/9/-8 Lorries 40,000 1/9/-8
1/9/-831/12/-8
DepreciationBankLoss
28,5009,0002,500
40,000 40,000
(a) Buses Account1/1/-81/4/-8
Balance b/dBank
175,00070,000
1/4/-831/12/-8
DisposalBalance c/d
45,000200,000
245,000 245,0001/1/-9 Balance b/d 200,000 31/12/-9 Balance c/d 200,000
200,000 200,000
(b) Provision for Depreciation Account1/4/-831/12/-8
DisposalBalance c/d
27,00043,500
1/1/-831/12/-8
Balance b/dProfit and Loss
54,00017,500
71,500 71,5001/1/-9 Balance b/d 43,500
31/12/-9 Balance c/d 63,500 Profit and Loss 20,00031/12/-963,500 63,500
(c) Bus Disposal Account1/4/-831/12/-8
BusProfit
45,0001,000
1/4/-81/4/-8
DepreciationBank
27,00019,000
46,000 46,000
(a) Truck Account1/1/-61/10/-6
Balance b/dBank
160,00054,000
1/12/-631/12/-6
DisposalBalance c/d
25,000189,000
214,000 214,0001/1/-71/7/-7
Balance b/dBank
189,00036,000
1/9/-731/12/-7
DisposalBalance c/d
30,000195,000
225,000 225,000
Solutions
17
QUESTION 6.6
QUESTION 6.7 (HIGHER LEVEL) (Reference to Calculations in Brackets).
(b) Provision for Depreciation Account1/12/-631/12/-6
DisposalBalance c/d
14,00051,000
1/1/-631/12/-6
Balance b/dProfit and loss
46,00019,000
65,000 65,0001/9/-731/12/-7
DisposalBalance c/d
20,00058,000
1/1/-731/12/-7
Balance b/dProfit and loss
51,00027,000
78,000 78,000
(c) Truck Disposal Account1/12/-631/12/-6
TruckProfit
25,0005,000
1/12/-61/12/-6
DepreciationBank
14,00016,000
30,000 30,0001/9/-731/12/-7
TruckProfit
30,0002,000
1/9/-71/9/-7
DepreciationBank
20,00012,000
32,000 32,000
Bus Account1/1/-8 Buses at cost amounted to €145,0001/7/-8 Bus which cost €40,000 was sold31/12/-8 Buses at cost amounted to €105,0001/9/-9 Bus purchased for €25,0001/12/-9 Bus purchased on credit for €27,00031/12/-9 Buses at cost amounted to €157,000
Provision for Depreciation Account1/1/-8 Accumulated balance on depreciation was €30,0001/7/-8 Bus sold on 1/7/-8 had accumulated depreciation of €10,00031/12/-8 Annual depreciation charge was €11,00031/12/-8 Accumulated balance on depreciation was €31,00031/12/-9 Annual depreciation charge was €23,00031/12/-9 Accumulated balance on depreciation was €54,000
Disposal Account1/7/-8 Bus sold cost €40,0001/7/-8 Accumulated depreciation on bus sold was €10,0001/7/-8 Bus was sold for €28,00031/12/-8 Loss on disposal of bus was €2,000
(a) Vehicles Account1/1/-81/4/-8
Balance b/d (1)Trade-inBank
80,00015,00020,000
1/4/-8
31/12/-8
Disposal
Balance c/d
26,000
89,000115,000 115,000
1/1/-91/10/-9
Balance b/dBank
89,00044,000
1/10/-931/12/-9
DisposalBalance c/d
32,000101,000
133,000 133,0001/1/00 Balance b/d 101,000
Leaving Certificate Accounting
18
CALCULATIONS (€)
1. Opening balance on Vehicles Account as 1/1/-8No. 1 – 22,000No. 2 – 26,000No. 3 – 30,000Tachograph 2,000
80,000
2. Opening balance on Provision for Depreciation Account as at 1/1/-8
No. 1 – (1/7/-3 – 1/1/-8) = 4 years, 6 months (4 ) x 20% of 22,000 = ...................................... 19,800
No. 2 – (1/10/-5 – 1/1/-8) = 2 years, 3 months (2 ) x 20% of 26,000 = ................................... 11,700
No. 3 – (1/4/-6 – 1/1/-8) = 1 year, 9 months (1 ) x 20% of 30,000 = ....................................... 10,500
Tachograph – (1/1/-7 – 1/1/-8) = 1 year x 20% of 2,000 = ......................................................... 400
Total = ............................................................................................................................. 42,400
3. Depreciation to date of Sale Vehicle No. 2
1/10/-5 – 1/4/-8 = 2 years, 6 months (2 ) x 20% of 26,000 =.................................................... 13,000
4. Annual Depreciation Charge for the year ended 31/12/-8
No. 1 – 1 year x 20% of 22,000 (N.B. – only year remaining) = ........................................... 2,200
No. 2 – 3 months ( ) of 20% of 26,000...................................................................................... 1,300
No. 3 – 1 year x 20% of 32,000 = .............................................................................................. 6,400
No. 4 – 9 months ( ) x 20% of 35,000 = ................................................................................... 5,250
Total = ................................................................................................................................ 15,150
5. Depreciation to date of Sale Vehicle No. 3
Vehicle – (1/4/-6 – 1/10/-9) = 3 years, 6 months (3 ) x 20% of 30,000 = ................................ 21,000
Tachograph – (1/1/-7 – 1/10/-9) = 2 years, 9 months (2 ) x 20% of 2,000 = ........................... 1,100
Total = ................................................................................................................................ 22,100
(b) Provision for Depreciation Account1/4/-831/12/-8
Disposal (3)Balance c/d
13,00044,550
1/1/-831/12/-8
Balance b/d (2)Profit and loss (4)
42,40015,150
57,550 57,5501/10/-931/12/-9
Disposal (5)Balance c/d
22,10036,450
1/1/-931/12/-9
Balance b/dProfit and loss (6)
44,55014,000
58,550 58,5501/1/00 Balance b/d 36,450
(c) Vehicles Disposal Account1/4/-831/12/-8
VehicleProfit and loss
26,0002,000
1/4/-81/4/-8
Depreciation (3)Trade-in
13,00015,000
28,000 28,0001/10/-9 Vehicle 32,000 1/10/-9
1/10/-931/12/-9
Depreciation (5)BankProfit and loss
22,100500
9,40032,000 32,000
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Solutions
19
6. Annual Depreciation Charge for the year ended 31/12/-9No. 1 – Fully depreciated = ........................................................................................................ Nil
No. 3 – 9 months ( ) x 20% of 32,000 =.................................................................................... 4,800
No. 4 – 1 year x 20% of 35,000 = ............................................................................................... 7,000
No. 5 – 3 months ( ) x 20% of 44,000 = ................................................................................... 2,200
Total = ................................................................................................................................ 14,000
QUESTION 6.8 (HIGHER LEVEL) (Reference to Calculations in Brackets)
CALCULATIONS (€)
1. Opening balance on Vehicles Account as at 1/1/-8No. 1 – 20,000No. 2 – 24,000No. 3 – 32,000Tachograph 4,000
80,000
2. Opening balance on Provision for Depreciation Account as at 1/1/-9No. 1 – (1/7/-9 – 1/1/-8) = 8 years, 6 months, i.e. fully depreciated =........................................ 20,000
No. 2 – (1/10/-2 – 1/1/-8) = 5 years, 3 months (5 ) x 12 % of 24,000 = ................................ 15,750
No. 3 – (1/4/-5 – 1/1/-8) = 2 years, 9 months 2( ) x 12 % of 32,000 = .................................. 11,000
Tachograph – (1/1/-6 – 1/1/-8) = 2 years x 12 % of 4,000 =..................................................... 1,000
Total = ............................................................................................................................. 47,750
(a) Vehicles Account1/1/-81/10/-8
Balance b/d (1)BankTrade-in
80,00031,0009,000
1/10/-8
31/12/-8
Disposal
Balance c/d
20,000
100,000120,000 120,000
1/1/-91/8/-9
Balance b/dBank
100,00048,000
1/7/-931/12/-9
DisposalBalance c/d
36,000112,000
148,000 148,0001/1/-0 Balance b/d 112,000
(b) Provision for Depreciation Account1/10/-831/12/-8
Disposal (3)Balance c/d
20,00036,500
1/1/-831/12/-8
Balance b/d (2)Profit and loss (4)
47,7508,750
56,500 56,5001/7/-931/12/-9
Disposal (5)Balance b/d
18,75030,500
1/1/-931/12/-9
Balance b/dProfit and loss (6)
36,50012,750
49,250 49,2501/1/-0 Balance b/d 30,500
(c) Vehicles Disposal Account1/10/-831/12/-8
VehiclesProfit and Loss
20,0009,000
1/10/-81/10/-8
Depreciation (3)Trade-in
20,0009,000
29,000 29,0001/7/-931/12/-9
Vehicles Profit and Loss
36,0001,250
1/7/-91/7/-91/7/-9
Depreciation (5)BankBank (Insurance)
18,7502,500
16,00037,250 37,250
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Leaving Certificate Accounting
20
3. Depreciation to date of Sale Vehicle No. 11/7/-9 – 1/10/-8 = Fully Depreciated = ....................................................................................... 20,000
4. Annual Depreciation Charge for the year ended 31/12/-8No. 1 – Fully Depreciated = ....................................................................................................... Nil
No. 2 – 1 year x 12 % of 24,000................................................................................................ 3,000
No. 3 – 1 year x 12 % of 36,000 = ........................................................................................... 4,500
No. 4 – 3 months ( ) x 12 % of 40,000 = ................................................................................ 1,250
Total = ................................................................................................................................ 8,750
5. Depreciation to date of Sale Vehicle No. 3
Vehicle – (1/4/-5 – 1/7/-9) = 4 years, 3 months (4 ) x 12 % of 32,000 = ............................... 17,000
Tachograph – (1/1/-6 – 1/7/-9) = 3 years, 6 months (3 ) x 12 % of 4,000 = ........................... 1,750
Total = ................................................................................................................................ 18,750
6. Annual Depreciation Charge for the year ended 31/12/-9
No. 2 – 1 year x 12 % of 24,000 = ........................................................................................... 3,000
No. 3 – 6 months ( ) x 12 % of 36,000 =................................................................................. 2,250
No. 4 – 1 year x 12 % of 40,000 = ............................................................................................ 5,000
No. 5 – 5 months ( ) x 12 % of 48,000 = ............................................................................. 2,500
Total = ................................................................................................................................ 12,750
QUESTION 6.9 (HIGHER LEVEL) (Reference to Calculations in Brackets)
(a) Vehicles Account1/1/-01/9/-0
Balance b/d (1)BankTrade-in
128,00036,00018,000
1/9/-0
31/12/-0
Disposal
Balance c/d
48,000
134,000182,000 182,000
1/1/-11/4/-1
Balance b/dBankTrade-in
134,00035,00023,000
1/4/-1
31/12/-1
Disposal
Balance c/d
44,000
148,000192,000 192,000
1/1/-2 Balance b/d 148,000
(b) Provision for Depreciation Account1/9/-031/12/200
Disposal (3)Balance c/d
28,80047,600
1/1/-031/12/-0
Balance b/d (2)Profit and Loss (4)
50,40026,000
76,400 76,4001/4/-131/12/-1
Disposal (5)Balance b/d
13,20059,100
1/1/-131/12/-1
Balance b/dProfit and Loss (5)
47,60024,700
72,300 72,3001/1/-2 Balance b/d 59,100
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Solutions
21
CALCULATIONS (€)
1. Opening balance on Vehicles Account as at 1/1/-0No. 1 – 36,000No. 2 – 42,000No. 3 – 44,000Tachograph 6,000
128,000
2. Opening balance on Provision for Depreciation Account as at 1/1/-0
No. 1 – (1/6/-6 – 1/1/-0) = 3 years, 7 months (3 ) x 20% of 36,000 = ..................................... 25,800
No. 2 – (1/8/-7 – 1/1/-0) = 2 years, 5 months (2 ) x 20% of 42,000 = ..................................... 20,300
No. 3 – (1/10/-9 – 1/1/-0) = 3 months ( ) x 20% of 44,000 = ................................................... 2,200
Tachograph – (1/4/-8 – 1/1/-0) = 1 year, 9 months (1 ) x 20% of 6,000 = ............................... 2,100
Total = ............................................................................................................................. 50,400
3. Depreciation to date of Sale Vehicle No. 2
Vehicle – (1/8/-7 – 1/9/-0) = 3 years, 1 months (3 ) x 20% of 42,000 = .................................. 25,900
Tachograph – (1/4/-8 – 1/9/-0) = 2 years, 5 months (2 ) x 20% of 6,000 = ............................. 2,900
Total = ............................................................................................................................. 28,800
4. Annual Depreciation Charge for the year ended 31/12/-0No. 1 – 1 year x 20% of 36,000 .................................................................................................. =7,200
No. 2 – 8 months ( ) x 20% of 48,000 ....................................................................................... =6,400
No. 3 – 1 year x 20% of 44,000 = .............................................................................................. 8,800
No. 4 – 4 months ( ) x 20% of 54,000 = ................................................................................... 3,600
Total = ................................................................................................................................ 26,000
5. Depreciation to date of Sale Vehicle No. 3
1/10/-9 – 1/4/-1 = 1 year, 6 months (1 ) x 20% of 44,000 = ..................................................... 13,200
6. Annual Depreciation Charge for the year ended 31/12/-1
No. 1 – 1 year (only 5 months chargeable) ( ) x 20% of 36,000 =......................................... 3,000
No. 3 – 3 months ( ) x 20% of 44,000 =.................................................................................... 2,200
No. 4 – 1 year x 20% of 54,000 = ............................................................................................... 10,800
No. 5 – 9 months ( ) x 20% of 58,000 = .................................................................................. 8,700
................................................................................................................................ 24,700
(c) Vehicles Disposal Account1/9/200 Vehicles 48,000 1/9/-0
1/9/-031/8/-0
Depreciation (3)Trade-inProfit and Loss
28,80018,0001,200
48,000 48,0001/4/-1 Vehicles 44,000 1/4/-1
1/4/-11/4/-131/12/-1
Depreciation (5)Trade-inBank (insurance)Profit and Loss
13,20023,0004,0003,800
44,000 44,000
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Leaving Certificate Accounting
22
QUESTION 6.10 (HIGHER LEVEL) (Reference to Calculations in Brackets)
CALCULATIONS (€)
1. Opening balance on Vehicles Account as at 1/1/-8No. 1 – 40,000No. 2 – 39,000No. 3 – 42,000Tachograph 6,000
127,000
2. Opening balance on Provision for Depreciation Account as at 1/1/-0No. 1 – (1/1/-5 – 1/1/-8) = 3 years
Year 1 – 40,000 x 20% = ............................................................. 8,000Year 2 – (40,000 – 8,000) = 32,000 x 20% =............................... 6,400Year 3 – (32,000 – 6,400) = 25,600 x 20% =............................. 5,120 ................19,520
No. 2 – (1/1/-6 – 1/1/-8) = 2 yearsYear 1 – 39,000 x 20% = ............................................................ 7,800Year 2 – (39,000 – 7,800) = 31,200 x 20% = ............................. 6,240 ................14,040
No. 3 – (1/1/-7 – 1/1/-8) = 1 yearYear 1 – 42,000 x 20% = ........................................................... 8,400 ..................8,400
Tachograph – (1/1/-6 – 1/1/-8) = 2 years, Year 1 – 6,000 x 20% = ............................................................... 1,200Year 2 – (6,000 – 1,200) = 4,800 x 20%..................................... 960 ..................2,160
Total = .................................................................................................................... 44,120
(a) Vehicles Account1/1/-81/9/-8
Balance b/d (1)BankTrade-in
127,00038,00016,000
1/9/-8
31/12/-8
Disposal
Balance c/d
46,000
135,000181,000 181,000
1/1/-91/4/-9
Balance b/dBankTrade-in
135,00053,00011,000
1/4/-9
31/12/-9
Disposal
Balance c/d
42,000157,000
199,000 199,0001/1/-0 Balance b/d 157,000
(b) Provision for Depreciation Account1/9/-831/12/-8
Disposal (3)Balance c/d
24,92337,752
1/1/-831/12/-8
Balance b/d (2)Profit and Loss (4)
44,12018,555
62,675 62,6751/4/-931/12/-9
Disposal (5)Balance c/d
16,46446,306
1/1/-931/12/-9
Balance b/dProfit and Loss (6)
37,75225,018
62,770 62,7701/1/-0 Balance b/d 46,306
(c) Vehicles Disposal Account1/9/-8 Vehicles 46,000 1/9/-8
1/9/-831/12/-8
Depreciation (3)Trade-inProfit and Loss
24,92316,0005,077
46,000 46,0001/4/-9 Vehicles 42,000 1/4/-9
1/4/-91/4/-931/12/-9
Depreciation (5)Trade-inBank (Insurance)Profit and Loss
16,46411,0008,0006,536
42,000 42,000
Solutions
23
3. Depreciation to date of Sale Vehicle No. 1
Vehicle – (1/1/-5 – 1/9/-8) = 3 years, 8 months (3 )
Years 1, 2 and 3 (as above calculation 2) = .............................. 19,520
Year 4 (25,600 – 5,120) = 20,480 x 20% x ( ) = .................... 2,731 ................22,251
Tachograph – (1/1/-6 – 1/9/-8) = 2 years, 8 months (2 )
Years 1 and 2 (as above calculation 2) = ..................................... 2,160
Year 3 (4,800 – 960) = 3,840 x 20% x ( ) = .............................. 512 ..................2,672
Total = .....................................................................................................................24,923
4. Annual Depreciation Charge for the year ended 31/12/-8
No. 1 – year (as above calculation 3) .............................................................................3,243
No. 2 – 1 year x 20% of (31,200 – 6,240) = 24,960 = .......................................................4,992No. 3 – 1 year x 20% of (42,000 – 8,400) = 33,600 = ......................................................6,720
No. 4 – year x 20% of 54,000 = ....................................................................................3,600
Total = .................................................................................................................... 18,555
5. Depreciation to date of Sale Vehicle No. 3
(1/1/-7 – 1/4/-9) = 2 years, 3 months (2 )
Year 1 Calculation 2 = .................................................................. 8,400Year 2 Calculation 4 = .................................................................. 6,720
Year 3 – year x 20% of (33,600 – 6,720 = 26,880) ............................. 1,344
Total = ........................................................................................ 16,464
6. Annual Depreciation Charge for the year ended 31/12/-9No. 2 – 1 year x 20% of (24,960 – 4,992) = 19,968 = .................................... ..................3,994
No. 3 – year (as above calculation 5) .......................................................... ..................1,344
No. 4 – 1 year x 20% of (54,000 – 3,600) = 50,400 = .................................... ................10,080
No. 5 – year x 20% of 64,000 = ................................................................. ..................9,600
Total = .................................................................................................... ................25,018
QUESTION 6.11 (HIGHER LEVEL) (Reference to Calculations in Brackets)
(a) Trucks Account1/1/-41/8/-4
Balance b/d (1)BankTrade-in
170,50048,00017,000
1/8/-4
31/12/-4
Disposal
Balance c/d
55,500
180,000235,500 235,500
1/1/-51/4/-5
Balance b/dBankTrade-in
180,00042,00026,000
1/5/-4
31/12/-4
Disposal
Balance c/d
60,000
188,000248,000 248,000
1/1/-6 Balance b/d 188,000
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24
CALCULATIONS (€)
1. Opening balance on Trucks Account as at 1/1/-4No. 1 – 50,000No. 2 – 55,000No. 3 – 60,000Tachograph 5,500
170,500
2. Opening balance on Provision for Depreciation Account as at 1/1/-4No. 1 – (1/1/-0 – 1/1/-4) = 4 years
Year 1 – 50,000 x 20% = ........................................................... 10,000Year 2 – (50,000 – 10,000) = 40,000 x 20% =............................. 8,000Year 3 – (40,000 – 8,000) = 32,000 x 20% =............................... 6,400Year 4 – (32,000 – 6,400) = 25,600 x 20% =.............................. 5,120 ................29,520
No. 2 – (1/1/-1 – 1/1/-4) = 3 yearsYear 1 – 55,000 x 20% = .......................................................... 11,000Year 2 – (55,000 – 11,000) = 44,000 x 20% =............................. 8,800Year 3 – (44,000 – 8,800) = 35,200 x 20% = ............................ 7,040 ................26,840
No. 3 – (1/1/-2 – 1/1/-4) = 2 yearsYear 1 – 60,000 x 20% = .......................................................... 12,000Year 2 – (60,000 – 12,000) = 48,000 x 20% =........................... 9,600 ................21,600
Tachograph – (1/1/-6 – 1/1/-8) = 2 years, Year 1 – 5,500 x 20% = ............................................................... 1,100Year 2 (5,500 – 1,100) = 4,400 x 20%............................................ 880 ..................1,980
Total = .................................................................................................... ................79,940
3. Depreciation to date of Sale: Truck No. 1
Vehicle – (1/1/-0 – 1/8/-4) = 3 years, 7 months (3 )
Years 1, 2 and 3 (as above calculation 2) = .............................. 29,520
Year 4 (25,600 – 5,120) = 20,480 x 20% x ( ) = .................. 2,389 ................31,909
Tachograph – (1/1/-2 – 1/8/-4) = 2 years, 7 months (2 )
Years 1 and 2 (as above calculation 2) = ..................................... 1,980
Year 3 (4,400 – 880) = 3,520 x 20% x ( ) = ............................ 411 ..................2,391
Total = .................................................................................................... ................34,300
(b) Provision for Depreciation Account1/8/-431/12/-4
Disposal (3)Balance c/d
34,30067,169
1/1/-431/12/-4
Balance b/d (2)Profit and Loss (4)
79,94021,529
101,469 101,4691/5/-531/12/-5
Disposal (5)Balance c/d
31,32863,379
1/1/-531/12/-5
Balance b/dProfit and Loss (6)
67,16927,538
94,707 94,7071/1/-6 Balance b/d 63,379
(c) Trucks Disposal Account1/8/-4 Trucks 55,500 1/8/-4
1/8/-431/12/-4
Depreciation (3)Trade-inProfit and Loss
34,30017,0004,200
55,500 55,5001/5/-5
31/12/-5
Trucks
Profit and Loss
60,000
7,328
1/5/-51/5/-51/5/-5
Depreciation (5)Trade-inBank (Insurance)
31,32826,00010,000
67,328 67,328
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Solutions
25
4. Annual Depreciation Charge for the year ended 31/12/-4
No. 1 – year (as above calculation 3) = ....................................................... ..................2,800
No. 2 – 1 year x 20% of (35,200 – 7,040) = 28,160 = .................................... ..................5,632No. 3 – 1 year x 20% of (48,000 – 9,600) = 38,400 = ................................... ..................7,680
No. 4 – year x 20% of 65,000 = ................................................................. ..................5,417
Total = .................................................................................................... ................21,529
5. Depreciation to date of Sale Truck No. 3
(1/1/-2 – 1/5/-5) = 3 years, 4 months (3 )
Year 1 and 2 – Calculation 2 =............................................................. ................21,600Year 3 – Calculation 4 = ....................................................................... ..................7,680
Year 4 – year x 20% of (38,400 – 7,680) = 30,720 = ........................ ..................2,048
Total = .................................................................................................... ................31,328
6. Annual Depreciation Charge for the year ended 31/12/-5No. 2 – 1 year x 20% of (28,160 – 5,632) = 22,528 = .................................... ..................4,506
No. 3 – year (as above calculation 5) .......................................................... ..................2,048
No. 4 – 1 year x 20% of (65,000 – 5,417) = 59,583 = .................................... ................11,917
No. 5 – year x 20% of 68,000 = ................................................................. ..................9,067
Total = .................................................................................................... ................27,538
QUESTION 6.12 (HIGHER LEVEL)
(a) Land and Buildings Account1/1/-71/1/-7
Balance b/dRevaluation reserve
800,000614,000
1/1/-731/12/-7
DisposalBalance c/d
200,0001,214,000
1,414,000 1,414,0001/1/-8 Balance b/d 1,214,000
(b) Provision for Depreciation Account1/1/-71/1/-731/12/-7
Disposal (2)Revaluation ReserveBalance c/d
15,00022,50022,000
1/1/-731/12/-7
Balance b/d (1)Profit and Loss (3)
37,50022,000
59,500 59,5001/1/-7 Balance b/d 22,000
(c) Buildings Disposal Account1/1/-731/12/-7
Land and BuildingsProfit and Loss
200,000265,000
1/1/-71/1/-7
Depreciation (2)Bank
15,000450,000
465,000 465,000
(d) Revaluation Reserve Account
31/12/-7 Balance c/d 636,5001/1/-71/1/-7
Land and BuildingsDepreciation
614,00022,500
636,500 636,5001/1/-8 Balance b/d 636,500
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26
CALCULATIONS (€)
1. Opening Balance on Provision for Depreciation Account as at 1/1/-7
1/1/-4 – 1/1/-7 = 3 years x = .......................................................................................37,500
2. Depreciation to date of Sale of buildings on 1/1/-7
1/1/-4 – 1/1/-7 = 3 years x = .......................................................................................15,000
3. Annual Depreciation charge for the year ended 31/12/-7
1 year x = ....................................................................................................................22,000
QUESTION 6.13 (HIGHER LEVEL)
CALCULATIONS (€)
1. Opening Balance on Provision for Depreciation Account as at 1/1/-7
1/1/-2 – 1/1/-7 = 5 years x = .......................................................................................80,000
2. Depreciation to date of sale of buildings on 1/1/-7
1/1/-2 – 1/1/-7 = 5 years x = .......................................................................................20,000
3. Annual Depreciation charge for the year ended 31/12/-7
1 year x = ................................................................................................35,000
(a) Land and Buildings Account1/1/-71/1/-7
Balance b/dRevaluation reserve
1,300,0001,225,000
1/1/-731/12/-7
DisposalBalance c/d
200,0002,325,000
2,525,000 2,525,0001/1/-8 Balance b/d 2,325,000
(b) Provision for Depreciation Account1/1/-71/1/-731/12/-7
Disposal (2)Revaluation ReserveBalance c/d
20,00060,00035,000
1/1/-731/12/-7
Balance b/d (1)Profit and Loss (3)
80,00035,000
115,000 115,0001/1/-8 Balance b/d 35,000
(c) Buildings Disposal Account1/1/-731/12/-7
Land and BuildingsProfit and Loss
200,00050,000
1/1/-71/1/-7
Depreciation (2)Bank
20,000230,000
250,000 250,000
(d) Revaluation Reserve Account
31/12/-7 Balance c/d 1,285,0001/1/-71/1/-7
Land and BuildingsDepreciation
1,225,0060,000
1,285,000 1,285,0001/1/-8 Balance b/d 1,285,000
500,00040
-------------------
200,00040
-------------------
814,00037
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800,00050
-------------------
200,00050
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2 325,000 750,000–,45
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Solutions
27
QUESTION 6.14 (HIGHER LEVEL)
Land and Buildings Account1/1/-4 Balance b/d 250,0001/1/-4 Revaluation reserve 230,000 31/12/-4 Balance c/d 480,000
480,000 480,0001/1/-5 Balance b/d 480,0001/1/-5 Bank 200,000 31/12/-5 Balance c/d 680,000
680,000 680,0001/1/-6 Balance b/d 680,0001/1/-6 Revaluation reserve (4) 140,000 31/12/-6 Balance c/d 820,000
820,000 820,0001/1/-7 Balance b/d 820,000 1/1/-7 Disposal (7) 450,000
31/12/-7 Balance c/d 370,000820,000 820,000
Depreciation Land and Buildings Account1/1/-4 Revaluation Reserve 36,000 1/1/-4 Balance b/d (1) 36,00031/12/-4 Balance c/d 7,200 31/121/-4 Profit and Loss (2) 7,200
43,200 43,2001/1/-5 Balance b/d 7,200
31/12/-5 Balance c/d 18,400 31/12/-5 Profit and Loss (3) 11,20018,400 18,400
1/1/-6 Revaluation reserve 18,400 1/1/-6 Balance b/d 18,40031/12/-6 Balance c/d 14,000 31/12/-6 Profit and Loss (5) 14,000
32,400 32,4001/1/-7 Disposal (6) 9,000 1/1/-7 Balance b/d 14,00031/12/-7 Balance c/d 10,000 31/12/-7 Profit and Loss (8) 5,000
19,000 19,000
Revaluation Reserve Account1/1/-4 Land and Buildings 230,000
31/12/-4 Balance c/d 266,00 1/1/-4 Depreciation 36,000266,000 266,000
31/12/-5 Balance b/d 266,000 1/1/-5 Balance b/d 266,000266,000 266,000
1/1/-6 Balance b/d 266,0001/1/-6 Land and Buildings 140,000
31/12/-6 Balance c/d 424,400 1/1/-6 Depreciation 18,400424,400 424,000
31/12/-7 Profit and Loss (9) 300,400 1/1/-7 Balance b/d 424,00031/12/-7 Balance c/d 124,000
424,400 424,400
Disposal Account1/1/-7 Land and Buildings 450,000 1/1/-7 Depreciation 9,00031/12/-7 Profit and Loss 79,000 1/1/-7 Bank 520,000
529,000 529,000
Leaving Certificate Accounting
28
CALCULATIONS (€)
1. Accumulated Depreciation to date on 1/1/-49 years at 2% of €200,000 = ........................................................................................ €36,000
2. Annual Depreciation charge for year ended 31/12/-41 year at 2% of €360,000 =............................................................................................ €7,200
3. Annual Depreciation charge for year ended 31/12/-41 year at 2% of €560,000 =.......................................................................................... €11,200
4. Revaluation on 1/1/-625% on €560,000 =.................................................................................................... €140,000
5. Annual Depreciation charge for year ended 31/12/-61 year at 2% of €700,000 =............................................................................................ €9,000
6. Accumulated depreciation on buildings sold on 1/1/-71 year at 2% of €450,000 =............................................................................................ €9,000
7. Revalued value of buildings sold on 1/1/-7Purchased 1/1/-5 = €200,000Revalued 1/1/-4 = €160,000Revalued 1/1/-6 = 90,000
€450,000
8. Annual Depreciation charge for year ended 31/12/-71 year at 2% of €250,000 =............................................................................................ €5,000
9. Revalued amount of buildings disposed of on 1/1/-7 transferred to Profit and Loss Account.Revaluation 1/1/-4 = 160,000Accumulated depreciation on 1/1/-4 = 36,000Revaluation 1/1/-6 (25% of 360,000) = 90,000Accumulated depreciation on 1/1/-6
(2 years at 2% of 360,000) = 14,400 300,400
29
Final Accounts of a Sole Trader with Adjustments: Solutions8
QUESTION 8.1
Schedule of Adjustments (€)Trading Account P+L Account Balance Sheet
1. Closing Stock 15,000 15,000 – 15,0002. Light and Heat 6,000 + 410 – 6,410 4103. Rent and Rates 12,000 + 12,000 – 24,000 12,0004. Insurance 9,000 – 3,000 – 6,000 3,0005. Advertising 10,000 + 3,000 – 13,000 3,0006. Carriage Out 5,000 + 1,500 – 6,500 1,5007. Depreciation Land and Buildings 12,000 + 3,600 – 3,600 15,6008. Depreciation Motor Vehicles 40,000 + 16,000 – 16,000 56,0009. Depreciation Furniture and Equipment 6,000 + 1,000 – 1,000 7,000
(a) Trading and Profit and Loss Account for the year ended 31/12/-9Sales 8. 400,000Less Cost of SalesOpening Stock 12,000Add Purchases 210,000– Returns Out (400)
209,600Add Carriage In 6,000
227,600Less Closing Stock 1. (15,000)
(212,600)Gross Profit 187,400Add Income –
187,400Less ExpensesLight and Heat 2. 6,410Rent and Rates 3. 24,000Insurance 4. 6,000Advertising 5. 13,000Carriage Out 6. 6,500Depreciation Land and Buildings 7. 3,600Depreciation Motor Vehicles 8. 16,000Depreciation Furniture and Equipment 9. 1,000Wages 24,000
(100,510)Net Profit 86,890
Leaving Certificate Accounting
30
QUESTION 8.2
(b) Balance Sheet as at 31/12/-9Cost Depreciation Value
Fixed AssetsLand and Buildings 7. 180,000 15,600 164,400Motor Vehicles 8. 80,000 56,000 24,000Furniture and Equipment 9. 10,000 7,000 3,000
270,000 78,600 191,400Current AssetsClosing Stock 1. 15,000Insurance Prepaid 4. 3,000Debtors 40,000
58,000Less Current LiabilitiesLight and Heat Due 2. 410Rent and Rates Due 3. 12,000Advertising Due 5. 3,000Carriage Out Due 6. 1,500Creditors 18,000Bank 5,600
(40,510)17,490
208,890Financed ByCapital 120,000Add Net Profit 86,890
206,890Less Drawings (18,000)
188,890Long-Term Liabilities15-Year Loan 20,000
208,890
Schedule of Adjustments (€)Trading a/c P+L a/c Bal. Sheet
1. Closing Stock 100,000 100,000 – 100,0002. Rates 6,800 – 3,400 – 3,400 3,4003. Postage and Stationery 4,500 – 500 – 4,000 5004. Bad Debts 500 – 500 –5. Debtors 70,000 – 500 – – 69,5006. Provision for Bad Debts 3,475 – 3,475 3,4757. Depreciation on Buildings 4,000 – 4,000 4,0008. Depreciation on Delivery Vans 24,000 + 12,000 – 12,000 36,0009. Fixtures and Fittings 24,000 + 12,000 – 12,000 36,000
Solutions
31
(a) Trading and Profit and Loss Account for the year ended 31/12/-0Sales– Returns In
520,000(4,000)
Less Cost of SalesOpening StockAdd Purchases– Returns Out
300,000(5,000)
90,000
516,000
295,000
Less Closing Stock 1.385,000
(100,000)(285,000)
Gross ProfitAdd IncomeRent ReceivedDiscount Received
231,000
18,0003,800
Less ExpensesRatesPostage and StationeryBad DebtsProvision for Bad DebtsDepreciation on BuildingsDepreciation on Delivery VansDepreciation on Fixtures, FittingsDiscount AllowedLoan InterestGeneral ExpensesInsurance
2.3.4.6.7.8.9.
3,4004,000
5003,4754,000
12,00012,0002,5001,9208,000
11,200
252,800
(62,995)Net Profit 189,805
(b) Balance Sheet as at 31/12/-0Cost Depreciation Value
Fixed AssetsBuildingsDelivery VansFixtures and Fittings
7.8.9.
200,000120,00080,000
4,00036,00036,000
196,00084,00044,000
400,000 76,000 324,000Current AssetsClosing StockRates PrepaidStock of StationeryDebtorsLess Provision for Bad Debts
1.2.3.5.6.
69,500(3,475)
100,0003,400
500
66,025
Less Current LiabilitiesCreditorsBankVAT
28,20027,00016,000
169,925
(71,200)98,725
422,725Financed ByCapitalAdd Net Profit
250,000189,805
Less Drawings439,805(33,080)
Long-Term Liabilities15 Year Loan
406,725
16,000422,725
Leaving Certificate Accounting
32
QUESTION 8.3
Schedule of Adjustments (€)Trading Acc P+L Acc Bal. Sheet
1. Closing Stock 12,000 12,000 – 12,0002. Advertising 14,000 – 3,500 – 10,500 3,5003. Carriage In 2,400 – 960 1,440 – –4. Drawings 17,000 + 960 – – 17,9605. Depreciation on Motor Vehicles 20,000 + 12,000 – 12,000 32,0006. Depreciation on Furniture and Equipment 18,000 + 2,800 – 2,800 20,8007. Loan Interest 1,000 + 1,000 – 2,000 1,0008. Provision for Bad Debts 1,000 + 200 – 200 1,200
(a) Trading, Profit and Loss Account for the year ended 31/12/-8Sales 190,000– Returns In (600)
189,400Less Cost of SalesOpening Stock 21,000Add Purchases 74,000– Returns Out (500)
73,500Add Carriage In 3. 1,440
95,940Less Closing Stock 1. (12,000)
(83,940)Gross Profit 105,460Add IncomeDiscount Received 4,200Rent Received 9,000Patent Royalties 7,000
20,200125,660
Less ExpensesAdvertising 2. 10,500Depreciation on Motor Vehicles 5. 12,000Depreciation on Fixtures + Fittings 6. 2,800Loan Interest 7. 2,000Provision for Bad Debts 8. 200Discount Allowed 3,000Rent 6,500Wages and Salaries 20,000Light and Heat 7,000General Expenses 6,000
(70,000)Net Profit 55,660
Solutions
33
QUESTION 8.4
(b) Balance Sheet as at 31/12/-8Cost Depreciation Value
Fixed AssetsMotor Vehicles 5. 60,000 32,000 28,000Furniture and Equipment 6. 46,000 20,800 25,200
106,000 52,800 53,200Patents 40,000Current Assets 93,200Closing Stock 1. 12,000Advertising Prepaid 2. 3,500Debtors 20,000Less Provision for Bad Debts 8. (1,200)Bank 18,800
7,00041,300
Less Current LiabilitiesLoan Interest Due 7. 1,000VAT 9,000PRSI 2,800Creditors 30,000
(42,800)(1,500)91,700
Financed ByCapital 34,000Add Net Profit 55,660
89,660Less Drawings 4. (17,960)
71,700Long-Term Liabilities10 Year Loan 20,000
91,700
Schedule of Adjustments (€)Trading Acc P+L Acc Bal. Sheet
1. Closing Stock 6,000 6,000 – 6,0002. Rent, Rates, Insurance 12,000 – 1,000 – 600 – 10,400 1,6003. Postage and Stationery 6,200 – 400 – 5,800 4004. Advertising 3,000 – 750 – 2,250 7505. Commission 33,000 + 3,000 – 36,000 3,0006. Bad Debts 400 + 600 – 1,000 –7. Debtors 16,000 – 600 – – 15,4008. Provision for Bad Debts 800 + 124 – 124 9249. Depreciation on Motor Vehicles 30,000 + 5,000 – 5,000 35,000
10. Carriage 12,000 – 8,400 3,600 8,400 –11. Wages and Salaries 24,000 – 2,400 – 21,600 –12. Drawings 29,100 + 2,400 – – 31,50013. Loan Interest 18,000 – 18,000 18,000
Leaving Certificate Accounting
34
(a) Trading, Profit and Loss Account for the year ended 30/6/-9Sales 225,000– Returns In (500)
224,500Less Cost of SalesOpening Stock 7,000Add Purchases 115,000– Returns Out (1,100)
113,900Add Carriage In 10. 3,600
124,500Less Closing Stock 1. (6,000)
(118,500)Gross Profit 106,000Add IncomeCommission 5. 36,000Discount Received 1,200Investment Interest Received 4,000
41,200147,200
Less ExpensesRent, Rates, Insurance 2. 10,400Postage and Stationery 3. 5,800Advertising 4. 2,250Bad Debts 6. 1,000Provision for Bad Debts 8. 124Depreciation on Motor Vehicles 9. 5,000Carriage Out 10. 8,400Wages and Salaries 11. 21,600Loan Interest 13. 18,000Discount Allowed 900Light and Heat 7,400Showroom Expenses 4,000Telephone 900
(85,774)Net Profit 61,426
Solutions
35
QUESTION 8.5
(b) Balance Sheet as at 30/6/-9Cost Depreciation Value
Fixed AssetsBuildings 200,000 – 200,000Motor Vehicles 9. 50,000 35,000 15,000
250,000 35,000 215,00010% Investments 40,000
255,000Current AssetsClosing Stock 1. 6,000Rent, Rates Insurance Prepaid 2. 1,600Stock of Stationery 3. 400Advertising Prepaid 4 750Commission Due 5. 3,000Debtors 7. 15,400Less Provision for Bad Debts 8. (924)
14,476Petty Cash 100Bank 3,200
29,526Less Current LiabilitiesLoan Interest Due 13. 18,000Creditors 14,000VAT 1,900PRSI 700
(34,600)(5,074)
249,926Financed ByCapital 100,000Add Net Profit 61,426
161,426Less Drawings 12. 31,500
129,926Long-Term Liabilities15% Loan 120,000
249,926
Schedule of Adjustments (€)Trading Acc P+L Acc Bal. Sheet
1. Closing Stock 65,000 65,000 – 65,0002. Stationery 1,400 – 300 – 1,100 3003. Carriage 8,000 – 4,800 3,200 4,800 –4. Wages and Salaries 74,000 – 14,800 – 59,200 –5. Drawings 12,000 + 14,800 – – 26,8006. Depreciation on Buildings 5,000 – 5,000 5,0007. Depreciation on Motor Vehicles 44,000 + 22,000 – 22,000 66,0008. Depreciation on Office Equipment 5,000 + 1,300 – 1,300 6,3009. Loan Interest 3,000 + 3,000 – 6,000 3,000
10. Advertising 3,600 – 1,200 – 2,400 1,20011. Provision for Bad Debts 1,500 – 100 – 100 1,400
Leaving Certificate Accounting
36
(a) Trading and Profit and Loss Account for the year ended 31/12/-6Sales 520,000– Returns In (6,000)
514,000Less Cost of SalesOpening Stock 48,000Add Purchases 398,000– Returns Out (1,200)
396,800Add Carriage In 3. 3,200
448,000Less Closing Stock 1. (65,000)
(383,000)Gross Profit 131,000Add IncomeCommission 6,700Discount Received 2,100Reduction in Provision for Bad Debts 11. 100
8,900139,900
Less ExpensesStationery 2. 1,100Carriage Out 3. 4,800Wages and Salaries 4. 59,200Depreciation on Buildings 6. 5,000Depreciation on Motor Vehicles 7. 22,000Depreciation on Office Equipment 8. 1,300Loan Interest 9. 6,000Advertising 10. 2,400General Expenses 14,000Showroom Expenses 4,000
(119,800)Net Profit 20,100
Solutions
37
QUESTION 8.6
(b) Balance Sheet as at 31/12/-6Cost Depreciation Value
Fixed AssetsBuildings 6. 250,000 5,000 245,000Motor Vehicles 7. 110,000 66,000 44,000Office Equipment 8. 18,000 6,300 11,700
378,000 77,300 300,700Patents 30,000
330,700Current AssetsClosing Stock 1. 65,000Stock of Stationery 2. 300Advertising Prepaid 10. 1,200Debtors 28,000Less Provision for Bad Debts 11. (1,400)
26,600VAT 1,600
94,700Less Current LiabilitiesLoan Interest Due 9. 3,000Creditors 30,000PRSI 2,900Bank 26,200
(62,100)32,600
363,300Financed ByCapital 280,000Add Net Profit 20,100
300,100Less Drawings 5. (26,800)
273,300Long-Term LiabilitiesTerm Loan 90,000
363,300
Schedule of AdjustmentsTrading Acc P+L Acc Bal. Sheet
1. Closing Stock 83,000 83,000 – 83,0002. Investment Interest 4,000 – 4,000 4,0003. Provision for Bad Debts 600 – 100 – 100 5004. Repairs 20,000 – 15,000 – 5,000 –5. Buildings 100,000 + 15,000 – – 115,0006. Loan Interest 200 + 200 – 400 2007. Depreciation on Buildings 20,000 + 3,450 – 3,450 23,4508. Depreciation on Motor Vehicles 16,000 + 6,000 – 6,000 22,0009. Depreciation on Furniture and Fittings 3,000 + 700 – 700 3,700
10. Wages 58,000 – 18,000 – 40,000 –11. Drawings 49,300 + 18,000 – – 67,30012. Light and Heat 4,100 + 900 – 5,000 90013. Insurance 5,600 – 1,400 – 4,200 1,400
Leaving Certificate Accounting
38
(a) Trading, Profit and Loss Account for the year ended 31/5/-0Sales 825,000Less Cost of SalesOpening Stock 80,000Add Purchases 615,000
695,000Less Closing Stock 1. (83,000)
(612,000)Gross Profit 213,000Add IncomeInvestment Interest 2. 4,000Provision for Bad Debts 3. 100
4,100217,100
Less ExpensesRepairs 4. 5,000Loan Interest 6. 400Depreciation on Buildings 7. 3,450Depreciation on Motor Vehicles 8. 6,000Depreciation on Furniture and Fittings 9. 700Wages 10. 40,000Light and Heat 12. 5,000Insurance 13. 4,200Distribution Expenses 5,000Bad Debts 800
(70,550)Net Profit 146,550
Solutions
39
QUESTION 8.7
(b) Balance Sheet as at 31/5/-0Cost Depreciation Value
Fixed AssetsBuildingsMotor VehiclesFixtures and Fittings
5.7.8.9.
115,00030,00010,000
23,45022,0003,700
91,5508,0006,300
155,000 49,150 105,850Investments
Current AssetsClosing StockInvestment Interest DueDebtorsLess Provision for Bad Debts
1.2.
3.
50,000
10,000(500)
83,0004,000
155,850
Insurance PrepaidPetty Cash
13.9,5001,400
100
Less Current LiabilitiesLoan Interest DueLight and Heat DueCreditorsBankLoan (Repayable in eight months)VATPAYEPRSI
6.12.
200900
9,0003,0004,0001,9003,5002,100
98,000
(24,600)73,400
229,250Financed ByCapitalAdd Net Profit
150,000146,550
Less Drawings 11.296,550(67,300)
229,250
Schedule of AdjustmentsTrading Acc P+L Acc Bal. Sheet
1. Closing Stock 62,000 62,000 – 62,0002. Postage and Stationery 7,200 – 400 – 6,800 4003. Repairs 25,000 – 20,000 – 5,000 –4. Drawings 27,000 + 20,000 + 5,000 – – 52,000
5. Loan Interest 4,000 (2/3 year) – 4,000 4,000
6. Bad Debts 1,000 – 1,000 –7. Debtors 40,000 – 1,000 – – 39,0008. Provision for Bad Debts 1,500 + 450 – 450 1,9509. Carriage 6,700 – 2,680 = 4,020 2,680 4,020 –
10. Rates 6,000 – 2,000 – 4,000 2,00011. Wages and Salaries 75,000 – 5,000 – 70,000 –12. Depreciation on Motor Vehicles 30,000 + 30,000 – 30,000 60,00013. Depreciation on Office Equipment 30,000 + 8,000 – 8,000 38,00014. Rent Received 18,000 – 3,000 – 15,000 3,000
Leaving Certificate Accounting
40
i
(a) Trading, Profit and Loss Account for the year ended 31/12/-8Sales 543,550– Returns In (5,000)
538,550Less Cost of SalesOpening Stock 84,000Add Purchases 289,000– Returns Out (6,300)
282,700Add Carriage In 9. 2,680
369,380Less Closing Stock 1. (62,000)
(307,380)Gross Profit 231,170Add IncomeRent Received 14. 15,000Commission 4,000Discount Received 3,700
22,700253,870
Less ExpensesPostage and Stationery 2. 6,800Repairs 3. 5,000Loan Interest 5. 4,000Bad Debts 6. 1,000Provision for Bad Debts 8. 450Carriage Out 9. 4,020Rates 10. 4,000Wages and Salaries 11. 70,000Depreciation on Motor Vehicles 12. 30,000Depreciation on Office Equipment 13. 8,000Discount Allowed 2,100Rent Paid 6,000Distribution Expenses 4,800General Expenses 14,000
(160,170)Net Profit 93,700
Solutions
41
QUESTION 8.8
(b) Balance Sheet as at 31/12/-8Cost Depreciation Value
Fixed AssetsPremises 150,000 – 150,000Motor Vehicles 12. 120,000 60,000 60,000Office Equipment 13. 70,000 38,000 32,000
340,000 98,000 242,000Current AssetsClosing Stock 1. 62,000Stock of Stationery 2. 400Debtors 7. 39,000Less Provision for Bad Debts 8. (1,950)
37,050Rates Prepaid 10. 2,000Petty Cash 150VAT 1,400
103,000Less Current LiabilitiesLoan Interest Due 5. 4,000Rent Received Prepaid 14. 3,000Creditors 30,000Bank 22,500PRSI 3,800
(63,300)39,700
281,700Financed ByCapital 200,000Add Net Profit 93,700
293,700Less Drawings 4. (52,000)
241,700Long-Term Liabilities10 Year Loan 40,000
281,700
Schedule of AdjustmentsTrading Acc P+L Acc Bal. Sheet
1. Closing Stock 21,000 21,000 – 21,0002. Rent 6,500 + 500 – 7,000 5003. Depreciation on Delivery Vans 18,000 + 9,600 – 9,600 27,6004. Depreciation on Office Equipment 11,000 + 1,950 – 1,950 12,9505. Carriage 4,000 – 1,600 = 2,400 1,600 2,400 –6. Wages and Salaries 40,000 – 6,000 – 34,000 –7. Drawings 17,500 + 6,000 + 600 – – 24,100
8. Loan Interest 1,000 (5/12 year) – 1,000 1,000
9. Commission 3,000 – 750 – 2,250 75010. Light and Heat 7,000 + 300 – 7,300 30011. Bad Debts 700 – 700 –12. Debtors 16,000 – 700 – – 15,30013. Provision for Bad Debts 300 + 465 – 465 76514. General Expenses 8,000 – 600 – 7,400 –
Leaving Certificate Accounting
42
(a) Trading and Profit and Loss Account for the year ended 31/5/-2Sales 311,000Less Cost of SalesOpening Stock 27,000Add Purchases 198,000– Returns Out (400)
197,600Add Carriage In 5. 1,600
226,200Less Closing Stock 1. (21,000)
(205,200)Gross Profit 105,800Add IncomeCommission 9. 2,250Discount Received 1,100
3,350109,150
Less ExpensesRent 2. 7,000Depreciation on Delivery Vans 3. 9,600Depreciation on Office Equipment 4. 1,950Carriage Out 5. 2,400Wages and Salaries 6. 34,000Loan Interest 8. 1,000Light and Heat 10. 7,300Bad Debts 11. 700Provision for Bad Debts 13. 465General Expenses 14. 7,400Repairs 36,000Distribution 11,000Insurance 2,800
(121,615)Net Loss (12,465)
Solutions
43
(b) Balance Sheet as at 31/5/-2Cost Depreciation Value
Fixed AssetsDelivery Vans 3. 48,000 27,600 20,400Office Equipment 4. 24,000 12,950 11,050
72,000 40,550 31,450Current AssetsClosing Stock 1. 21,000Debtors 12. 15,300Less Provision for Bad Debts 13. (765)
14,53535,535
Less Current LiabilitiesRent Due 2. 500Loan Interest Due 8. 1,000Commission Prepaid 9. 750Light and Heat Due 10. 300Creditors 14,000VAT 1,300PAYE and PRSI 1,700Bank 20,000
(39,550) (4,015)27,435
Financed ByCapital 40,000Less Net Loss (12,465)
27,535Less Drawings 7. (24,100)
Long-Term Liabilities 3,435Term Loan 24,000
27,435
44
Bank ReconciliationStatements: Solutions9
QUESTION 9.1
QUESTION 9.2
QUESTION 9.3
(a) Adjusted Bank AccountBalance b/d 165 Standing Order 106Dividends Received 550 Bank Charges 14Interest Received 250 J. Brady (r/d) 205
Balance c/d 640965 965
Balance b/d 640
(b) Bank Reconciliation StatementBalance as per adjusted bank account 640Add cheques not yet presented for payment – 019415 310
– 019417 130– 019418 290– 019422 105 835
1,475Less lodgements not yet credited by the bank (1,225)Balance which should be on statement 250Add bank error 50Balance as per bank statement 300
(a) Adjusted Bank AccountBalance b/d 850 R/D (iii) 410Dividends (iv) 200 Error (ii) 296Credit Transfer (iv) 320 Charges (iv) 40
Balance c/d 6241,370 1,370
Balance b/d 624
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 624Add Cheques not yet presented for payment (i) 630Less Lodgement not yet credited by the bank (vi) (80)Balance which should be on bank statement 1,174Add error at Bank (v) 90Less error at Bank (vii) (350)Balance as per bank statement 914
(a) Adjusted Bank AccountBalance b/d 800 Error on cheque No. 019328 27Dividends 120 R/D 140
Charges 30Standing Order 180Balance c/d 543
900 920Balance b/d 543
Solutions
45
QUESTION 9.4
QUESTION 9.5
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 543Add cheques not yet presented for payment – 019326 110
– 019329 120230
Less Lodgements not yet credited by the bank (350)Balance which should be on bank statement 423Less error at Bank 123Balance as per bank statement 300
(a) Adjusted Bank AccountBalance b/d 1,500 Error (i) 840Interest (iii) 120 R/D (ii) 200
Charges (iii) 60Interest (iii) 160ATM (iii) 100Balance c/d 260
1,620 1,620Balance b/d 260
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 260Add Cheques not yet presented for payment (iv) 205Less Lodgements not yet credited by the bank (iv) (430)Balance which should be on bank statement 35Add error at bank (v) 80Less error at Bank (vi) 115Balance as per bank statement 230
(a) Adjusted Bank AccountBalance b/d 1,520 R/D (i) 234Dividends (ii) 217 Standing Order (ii) 124Error (iv) 1,176 Charges (ii) 29
Balance c/d 2,5262,913 2,913
Balance b/d 2,526
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 2,526Add Cheques not yet presented for payment (vi) 312Less Lodgements not yet credited by the bank 597 (iv)
450 (v)(1,047)
Balance which should be on bank statement 1,791Add error at Bank (iii) 154Less error at Bank (vii) (140)Balance as per bank statement 1,805
Leaving Certificate Accounting
46
QUESTION 9.6
QUESTION 9.7
QUESTION 9.8 (HIGHER LEVEL)
(a) Adjusted Bank AccountBalance b/d 2,065 R/D 130Interest 80 Charges 45
Standing Order 280Balance c/d 1,690
2,145 2,145Balance b/d 1,690
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 1,690Add Cheques not yet presented for payment – 567894 120
– 567897 140260
Less Lodgements not yet credited by the bank (750)Balance which should be on bank statement 1,200Less error at Bank (160)Balance as per bank statement 1,040
(a) Adjusted Bank AccountBalance b/d 1,340 R/D (ii) 110Error (i) 718 Standing Order (v) 124Credit Transfer (v) 230 Charges (v) 22
Balance c/d 2,0322,288 2,288
Balance b/d 2,032
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 2,032Add Cheques not yet presented for payment (iv) 642Less Lodgements not yet credited by the bank (iii) (740)Balance which should be on bank statement 1,934Add error at Bank (vi) 190Less error at Bank (vii) 650Balance as per bank statement 2,774
(a) Adjusted Bank AccountBalance b/d 1,868 Standing Order 140Lodgement Error (22/9) 80 Direct Debit 284Dividends 129 Charges 17Credit Transfer 28 R/D 24
Balance c/d 1,6402,105 2,105
Balance b/d 1,640
Solutions
47
QUESTION 9.9 (HIGHER LEVEL)
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 1,640Add Cheques not yet presented for payment – 000130 123
– 000133 25– 000135 119– 000137 402– 000138 117
786Less Lodgements not yet credited by the bank – 1,100
– 380(1,480)
Balance which should be on bank statement 946Add bank error (cheque No. 000134) 90Less bank error (cheque No. 019384) (310)Add error at Bank (c/t to be refunded) 28Balance as per bank statement 754
(a) Adjusted Bank AccountBalance b/d 6,310 Error (i) 1,176Credit Transfer (ii) 28 Standing Orders (ii) 118Cancelled cheque (v) 103 Direct Debits (ii) 72Lodgement Error (viii) 3 R/D (iv) 109
Balance c/d 4,9696,444 6,444
Balance b/d 4,969
(b) Bank Reconciliation StatementBalance as per adjusted Bank Account 4,969Add Cheques not yet presented for payment (2,605 – 103) (v) 2,502Less Lodgements not yet credited by the bank (784)Balance which should be on bank statement 6,687Add Bank error (ii) 300Add Bank error (vi) 165Balance as per bank statement 7,152
48
Control Accounts10QUESTION 10.1
QUESTION 10.2
QUESTION 10.3
Debtors Ledger Control Account1/3/-3 Balance b/d 612 1/3/-3 Balance b/d 18
Credit Sales 3,800 Returns In 150Cheques 2,111Discount Allowed 29Bad Debts 120
31/3/-3 Balance c/d 18 31/3/-3 Balance c/d 2,0024,430 4,430
1/4/-3 Balance b/d 2,002 1/4/-3 Balance b/d 18
Creditors Ledger Control Account1/3/-3 Balance b/d 19 1/3/-3 Balance b/d 290
Returns Out 27 Credit Purchases 2,700Cheques 1,527Discount Received 121Bills Payable 300
31/3/-3 Balance c/d 1,015 31/3/-3 Balance c/d 193,009 3,009
1/4/-3 Balance b/d 19 1/4/-3 Balance b/d 1,015
Debtors Control Account1/9/-6 Balance b/d 3,500 Bad Debts 50
Credit Sales (11,500 – 2,500) 9,000 Cheques 9,800Interest Charged 30 Contras 280
Returns In 510Discount Allowed 270
30/9/-6 Balance c/d 35 30/9/-6 Balance c/d 1,65512,565 12,565
1/10/-6 Balance b/d 1,655 1/10/-6 Balance b/d 35
Debtors Ledger Control Account1/1/-1 Balance b/d 8,000 1/1/-1 Balance b/d 300
Credit Sales 34,000 Discount Allowed 1,000R/d cheques 100 Returns In 350
Bills Receivable 3,200Cheques 24,000Bad Debts 400Contras 560
31/1/-1 Balance c/d 300 31/1/-1 Balance c/d 12,59042,400 42,400
1/2/-1 Balance b/d 12,590 1/2/-1 Balance b/d 300
Solutions
49
QUESTION 10.4
QUESTION 10.5
Creditors Ledger Control Account1/1/-1 Balance b/d 150 1/1/-1 Balance b/d 7,000
Returns Out 700 Credit Purchases 25,000Discount Received 300 Interest Charged 105Bills Payable 1,510Cheques 18,200Contras 560
31/1/-1 Balance c/d 10,835 31/1/-1 Balance c/d 15032,255 32,255
1/2/-1 Balance b/d 150 1/2/-1 Balance b/d 10,835
Debtors Ledger Control Account1/1/-8 Balance b/d 1,600 1/1/-8 Balance b/d 65
Interest 40 Bills Receivable 400Credit Sales 6,120 Returns In 210Cheques Dishonoured 100 Discount Allowed 130
Cash 3,700Bad Debts 60Contras 125
31/1/-8 Balance c/d 55 31/1/-8 Balance c/d 3,2257,915 7,915
1/2/-8 Balance b/d 3,225 1/2/-8 Balance b/d 55
Creditors Ledger Control Account1/1/-8 Balance b/d 80 1/1/-8 Balance b/d 2,100
Returns Out 120 Credit Purchases 4,900Discount Received 290Payments 4,300Contras 125
31/1/-8 Balance c/d 2,155 31/1/-8 Balance c/d 707,070 7,070
1/2/-8 Balance b/d 70 1/2/-8 Balance b/d 2,155
Debtors Ledger Control Account1/1/-9 Balance b/d 4,300 Returns In 220
Cheques Dishonoured 120 Discount Allowed 370Interest 60 Bills Receivable 1,200Credit Sales (11,400 – 500) 10,900 Cheques 5,200Discount Disallowed 20 Bad Debts 110
Contras 19031/1/-9 Balance c/d 80 31/1/-9 Balance c/d 8,190
15,480 15,4801/2/-9 Balance b/d 8,190 1/2/-9 Balance b/d 80
Creditors Ledger Control AccountBills Payable 400 1/1/-9 Balance b/d 3,800Discount Received 410 Credit Purchases 8,200Returns Out 180Cash 4,000Contras 190
31/1/-9 Balance c/d 6,870 31/1/-9 Balance c/d 5012,050 12,050
1/2/-9 Balance b/d 50 1/2/-9 Balance b/d 6,870
Leaving Certificate Accounting
50
QUESTION 10.6
QUESTION 10.7
QUESTION 10.8 (HIGHER LEVEL)
Debtors Ledger Control Account1/2/-3 Balance b/d 8,400 1/2/-3 Balance b/d 230
Sales 32,000 Discount Allowed 960Interest 70 Returns In 340Cheques Dishonoured 330 Bills Receivable 1,300
Cheques 22,780Bad Debts 220Contras 410
28/2/-3 Balance c/d 160 28/2/-3 Balance c/d 14,72040,960 40,960
1/3/-3 Balance b/d 14,720 1/3/-3 Balance b/d 160
Creditors Ledger Control Account1/2/-3 Balance b/d 120 1/2/-3 Balance b/d 9,300
Returns Out 610 Credit Purchases (24,900 – 1,800) 23,100Discount Received 280Bills Payable 1,320 Discount Disallowed 100Cash 17,300Contras 410
28/2/-3 Balance c/d 12,650 28/2/-3 Balance c/d 19032,690 32,690
1/3/-3 Balance b/d 190 1/3/-3 Balance b/d 12,650
(a) Adjusted Creditors Ledger Control AccountReturns to P.Burke (III) 160 31/12/-5 Balance b/d 8,560Contra (V) 220 Discount Disallowed (ii) 40Balance c/d 8,510 Error (VII) 290
8,890 8,89031/12/-5 Balance b/d 8,510
(b) Adjusted Schedule (List) of Creditors’ BalancesOriginal Total of Schedule: 8,422Less J. Barry (I) (60)Less P. Burke (II) (160)Add Interest (IV) 48Less Dr. Balance (VI) (30)Add Error (VII) 290Adjusted Total 8,510
(a) Adjusted Creditors Ledger Control Account31/12/-1 Balance b/d 190 31/12/-1 Balance b/d 11,450
Credit Note (V) 120 Returns to J. Arnold (I) 90Capital (VI) 1,000 Discount Disallowed (II) 70
J. Barry (III) 640Interest (IV) 30
Balance c/d 11,160 Balance c/d 19012,470 12,400
Balance b/d 190 Balance b/d 11,160
Solutions
51
QUESTION 10.9 (HIGHER LEVEL)
QUESTION 10.10 (HIGHER LEVEL)
(b) Schedule (List) of Creditors’ BalancesOriginal Total of Schedule: 11,634Add J. Arnold (I) 90Add J. Barry (III) 640Less Interest (IV) (34)Less Credit Note (V) (360)Less Capital (VI) (1,000)Adjusted Total 10,970
(a) Adjusted Debtors Ledger Control Account31/12/-9 Balance b/d 15,430 31/12/-9 Balance b/d 230
Error (III) 92 Error (I) 180Discount Disallowed (VII) 46 Interest (II) 35
Credit Note (IV) 75Balance c/d 230 Balance c/d 15,278
15,798 15,798Balance b/d 15,278 Balance b/d 230
(b) Schedule (List) of Debtors’ BalancesOriginal Total of Schedule: 14,878Add Invoice (I) 790Less Interest (II) (25)Add Error (III) 92Less Credit Note (IV) (132)Add Cash Sales (V) 245Less Bills Payable (VI) (800)Adjusted Total (15,278 – 230) 15,048
(a) Adjusted Debtors Ledger Control Account31/12/-0 Balance b/d 18,840 31/12/-0 Balance b/d 390
Discount Disallowed (II) 30 Interest (I) 10Invoice (III) 90 Credit Note (V) 105Credit Note (VII) 16Balance c/d 390 Balance c/d 18,861
19,366 19,366Balance b/d 18,861 Balance b/d 390
(b) Adjusted Schedule (List) of Debtors’ BalancesOriginal Total of Schedule: 18,202Less Interest (I) (28)Add Invoice (III) 870Less Bills Payable (IV) (750)Less Credit Note (V) (120)Add Cash Sales (VI) 425Less Restocking (VII) (128)Adjusted Total (18,861 – 390) 18,471
Leaving Certificate Accounting
52
QUESTION 10.11 (HIGHER LEVEL)
QUESTION 10.12 (HIGHER LEVEL)
(a) Adjusted Debtors Control Account31/12/-9 Balance b/d 14,280 31/12/-9 Balance b/d 280
Discount Disallowed (II) 96 Credit Note (I) 123Bills payable (V) 100Interest (VI) 81Balance c/d 280 Balance c/d 14,434
14,837 14,837Balance b/d 14,434 Balance b/d 280
(b) Adjusted Schedule (List) of Debtors’ BalancesOriginal Total of Schedule: 13,685Less Credit Note (I) (444)Less Cash Sales (III) (300)Add Invoice (IV) 1,024Add Interest (VI) 189Adjusted Total 14,154
(a) Adjusted Debtors Control Account30/6/-1 Balance b/d 48,370 30/6/-1 Balance b/d 280
Due to Debtor (V) 280 Returns In (I) 3,820Interest (VI) 63 Contras (II) 65Cheque Dishonoured (VII) 392Discount Disallowed (VII) 8 Balance c/d 44,948
49,113 49,113Balance b/d 44,948
(b) Adjusted Schedule (List) of Debtors’ BalancesOriginal Total of Schedule: 45,206Less Returns In (I) (3,820)Add Balance Omitted (IV) 45Add Invoice (VI) 2,770Add Cheque Dishonoured (VII) 721Add Discount Disallowed (VII) 26Adjusted Total 44,948
53
Correction of Errors –Suspense Account: Solutions11
QUESTION 11.1
QUESTION 11.2
(a) Journal EntriesDetails Debit Credit
(i) Sales ReturnsDebtor
7070
(ii) InterestSuspense
1616
(iii) CreditorsBank
150150
(iv) RentSuspense
9090
(v) RepairsMachinery
170170
(b) Suspense AccountOriginal Balance 106 Interest (II) 16
Rent (IV) 90106 106
(a) Journal EntriesDetails Debit Credit
(i) CreditorPurchases Returns
6060
(ii) E. HarveyE. Harley
190190
(iii) SuspenseRent Received
9090
(iv) DebtorsSuspense
99
(v) AssetPurchases
3,0003,000
(b) Suspense AccountRent Received (iii) 90 Original Balance 81
Debtors (iv) 990 90
Leaving Certificate Accounting
54
QUESTION 11.3
QUESTION 11.4
(a) Journal EntriesDetails Debit Credit
(i) SuspensePurchases
1919
(ii) AdvertisingBank
240240
(iii) Carriage InSuspense
6363
(iv) DebtorSales
180180
(v) SuspenseBank
8080
(vi) Rent ReceivedDiscount Allowed
2323
(vii) DrawingsRepairs
148148
(viii) S.KingS. Kidd
2828
(ix) DrawingsPurchases
140140
(b) Suspense AccountPurchases (I) 19 Original Balance 36Bank (V) 80 Carriage In (III) 63
99 99
(c) Statement of Revised ProfitOriginal Net Profit 16,700Add Purchases (I) 19Less Advertising (II) (240)Less Carriage In (III) (63)Add Sales (IV) 180Less Rent Received (VI) (23)Add Discount Allowed (VI) 23Add Repairs (VII) 148Add Purchases (IX) 140Revised Net Profit 16,884
(a) Journal EntriesDetails Debit Credit
(i) SuspenseInterest Received
168168
(ii) Bad DebtsJ. McDonagh (Debtor)
120120
(iii) EquipmentPurchasesSuspenseJ. Treacy (Creditor)
250
500250
500(iv) J. O Toole (Creditor)
Suspense176
176(v) Sales
Suspense89
89(vi) Drawings
Motor Expenses3,000
3,000
Solutions
55
QUESTION 11.5
QUESTION 11.6
(b) Suspense AccountInterest Received (I) 168 Balance 403J. Treacy (III) 500 J. O Toole (IV) 176
Sales (V) 89668 668
(a) Journal EntriesDetails Debit Credit
(i) Bad DebtsJ. Agnew
120120
(ii) SuspenseInterest Received
320320
(iii) CreditorPurchases Returns
110110
(iv) DebtorSuspense
180180
(v) SuspenseSales
9292
(vi) ExpensesSuspense
4545
(b) Suspense AccountInterest (II) 320 Debtor (IV) 180Sales (V) 92 Expenses (VI) 45
Original Balance 187412 412
(a) Journal EntriesDetails Debit Credit
(i) InterestSuspense
240240
(ii) Sales ReturnsDebtor
180180
(iii) PurchasesSuspense
7070
(iv) SuspenseCreditor
9090
(v) Motor RepairsMotor Vehicles
6060
(vi) DrawingsSuspense
150150
(b) Statement of Revised ProfitOriginal Net Profit 10,000Less Interest (I) (240)Less Sales Returns (II) (180)Less Purchases (III) (70)Less Motor Repairs (V) (60)Revised Net Profit 9,450
Leaving Certificate Accounting
56
QUESTION 11.7
(a) Journal EntriesDetails Debit Credit
(i) Sales ReturnsSuspense
300300
(ii) EquipmentSuspenseRepairs
23090
320(iii) Discount Allowed
Suspense180
180(iv) Suspense
Purchases200
200(v) Drawings
Suspense100
100
(b) Suspense AccountRepairs (II) 90 Sales Returns (I) 300Purchases (IV) 200 Discount All. (III) 180Original Balance 290 Drawings (V) 100
580 580
(c) Ledger Accounts(i)
Equipment AccountCorrection 230
Bank AccountOriginal 230
Repairs AccountOriginal 320 Correction 230
Correction – Suspense 90
(ii)
Discount Allowed AccountCorrection – Suspense 180 Original 90
Debtors AccountOriginal 90
(iii)
Purchases AccountOriginal 7,840 Correction – Suspense 200
Creditors AccountOriginal 7,640
Solutions
57
QUESTION 11.8
QUESTION 11.9 (HIGHER LEVEL)
(a) Journal EntriesDetails Debit Credit
(i) EquipmentPurchasesSuspenseCreditor
600
1,200600
1,200(ii) Suspense
Rent Received165
165(iii) Creditor
Suspense90
90(iv) Drawings
General Expenses91
91(v) Bank
Bad DebtsDebtor
40120
160(vi) Commission Received
CapitalSuspense
6,0005,0001,000
(b) Suspense AccountCreditor (I) 1,200 Creditor (III) 90Rent Recd. (II) 165 Commission (vi) 1,000
Original Balance 2751,365 1,365
(c) Statement of Revised ProfitOriginal Net Profit 12,360Add Purchases (I) 600Add Rent Recd. (II) 165Add Gen. Exps (IV) 91Less Bad Debts (V) (120)Less Commission (VI) (6,000)Revised Net Profit 7,096
(a) Journal EntriesDetails Debit Credit
(i) CreditorCapital
320320
(ii) SuspenseP. returnsCreditor
83040
790(iii) Debtor
Discount All.BankBad DebtsDebtor
400
400
20380
400(iv) Creditor
BuildingsRepairsDrawingsSuspense
120300120300
840(v) Sales
DebtorBankCapital
2,600
2,6002,600
2,600
Leaving Certificate Accounting
58
QUESTION 11.10 (HIGHER LEVEL)
(b) Statement of Revised ProfitOriginal Net Profit 30,000Add Purchases Returns (II) 40Add Discount Allowed (III) 20Less Bad Debts (III) (400)Less Repairs (IV) (120)Less Sales (V) (2,600)Revised Net Profit 26,940
(a) Journal EntriesDetails Debit Credit
(i) PurchasesEquipmentP. Wynne (Creditor)Suspense
8,0008,800
16,000800
(ii) EquipmentSales ReturnsSuspenseDebtorPurchases
40540410
540450
(iii) DrawingsDiscount AllowedDebtor
38020
400(iv) Creditor
Purchases ReturnsCreditorSuspense
11,7006,400
6,40011,700
(v) CreditorCommissionCapitalDiscount Received
1,2001,000
2,000200
(b) Statement of Revised ProfitOriginal Net Profit 24,000Less Purchases (I) (8,000)Less Sales Returns (II) (540)Add Purchases (II) 450Less Discount Allowed (III) (20)Less Purchases Returns (IV) (6,400)Less Commission (V) (1,000)Add Discount Received (V) 200Revised Net Profit 8,690
Solutions
59
QUESTION 11.11 (HIGHER LEVEL)
(a) Journal EntriesDetails Debit Credit
(i) SalesLoss on SaleMotor VehiclesJ. Patten (Debtor)Suspense
650100
1,210750
1,210(ii) Creditor
Suspense240
240(iii) Premises
Capital7,000
7,000(iv) Drawings
DebtorSalesPurchases
140
140140
140(v) Bank
Interest Received320
320
(b) Suspense AccountOriginal Balance 1,450 Debtor (I) 1,210
Creditor (II) 2401,450 1,450
(c) Statement of Revised ProfitOriginal Net Profit 8,400Less Sales (I) (650)Less Loss on Sales (I) (100)Less Sales (IV) (140)Add Purchases (IV) 140Add Interest (V) 320Revised Net Profit 7,970
(d) Corrected Balance SheetFixed AssetsPremises (40,000 + 7,000) 47,000Motors (19,000 – 750) 18,250
65,250Current AssetsStock (10,000 – 1,450) 8,550Debtors (4,800 + 1,210 – 140) 5,87010% Deposit Account 3,200
17,620Less Current LiabilitiesCreditors (6,400 – 240) 6,160Bank (5,600 – 320) 5,280
(11,440)6,180
71,430Financed ByCapital (61,000 + 7,000) 68,000Add Net Profit 7,970
75,970Less Drawings (4,400 + 140) (4,540)
71,430
Leaving Certificate Accounting
60
QUESTION 11.12 (HIGHER LEVEL)
(a) Journal EntriesDetails Debit Credit
(i) SuspensePurchasesEquipmentJ. Delaney (Creditor)
760
670760
670(ii) Suspense
BankMotorsCapital
2,500
3,5002,500
3,500(iii) Creditor
Suspense180
180(iv) Repairs
DrawingsBankCreditorMotorsSuspense
8050
130130
130
160(v) Rent
Rent Due1,000
1,000
(b) Suspense AccountPurchases (I)Bank (II)
7602,500
Creditor (III)Creditor (IV)Motors (IV)Original Difference
180130130
2,8203,260 3,260
(c) Statement of Revised ProfitOriginal Net ProfitAdd PurchasesLess RepairsLess Rent
(I)(IV)(V)
23,000760(80)
(1,000)Revised Net Profit 22,680
(d) Corrected Balance SheetFixed AssetsPremises Motors (5,000 + 3,500 + 130)Equipment (9,000 + 670)
30,0008,6309,670
Current AssetsStock (11,000 + 2,820)DebtorsBank (3,000 – 2,500 – 130)
13,8204,000
370
48,300
Less Current LiabilitiesCreditors (8,000 + 670 – 180 – 130)Rent Due
8,3601,000
18,190
(9,360)8,830
57,130Financed ByCapital (38,000 + 3,500)Add Net Profit
41,50022,680
Less Drawings (7,000 + 50)64,180(7,050)57,130
Solutions
61
QUESTION 11.13 (HIGHER LEVEL)
(a) Journal EntriesDetails Debit Credit
(i) J. Collins (Debtor)SalesDelivery VansSuspense
11,0006,400
4,60012,800
(ii) Purchases ReturnsSuspenseCreditor
20680
700(iii) Debtor
BankDiscount AllowedBad DebtsDebtor
500
500
48515
500(iv) Purchases Returns
CreditorsSuspense
36428
464(v) Creditor
CapitalDiscount Received
44040040
(b) Suspense AccountCreditor (II)
Original Balance
680
12,584
Debtor (I)P. Returns (IV)Creditor (IV)
12,80036
42813,264 13,264
(c) Statement of Revised ProfitOriginal Net ProfitLess SalesLess Purchases ReturnsAdd Disc. Allowed Less Bad DebtsLess Purchases ReturnsAdd Disc. Received
(I)(II)(III)(III)(IV)(V)
9,000(6,400)
(20)15
(500)(36)40
Revised Net Profit 2,099
(d) Corrected Balance SheetFixed AssetsPremises Delivery Vans (20,000 – 4,600)
50,00015,400
Current AssetsStock (22,000 – 12,584)Debtors (8,000 + 11,000 + 500 – 500)
9,41619,000
65,400
Less Current LiabilitiesCreditors (12,000 + 700 – 428 – 440)Bank (2,000 + 485)
11,8322,485
28,416
(14,317)14,09979,499
Financed ByCapital (80,000 + 400)Add Net Profit
80,4002,099
Less Drawings82,499(3,000)79,499
Leaving Certificate Accounting
62
QUESTION 11.14 (HIGHER LEVEL)
(a) Journal EntriesDebit Credit
(i) Motor VehiclesPurchasesSuspenseJ. Brady (Creditor)
2,900
4,8002,900
4,800(ii) Suspense
Bank1,600
1,600(iii) Returns In
DebtorStock (Balance Sheet)Stock (Trading Account)
700
600700
600(iv) Debtors
CapitalSalesBank
3,600
3,6003,600
3,600(v) Suspense
Returns OutCreditor
19020
210
(b) Suspense AccountCreditor (I)Bank (II)Creditor (III)
4,8001,600
190
Original Balance 6,950
6,590 6,590
(c) Statement of Revised ProfitOriginal Net ProfitAdd PurchasesLess Returns InAdd Stock (Trading)Less SalesLess Returns Out
(I)(III)(III)(IV)(V)
8,4002,900(700)600
(3,600)(20)
Revised Net Profit 7,580
(d) Corrected Balance SheetFixed AssetsMotor Vehicles (22,000 + 2,900) Equipment
24,90014,000
Current AssetsStock (15,000 + 600)Debtors (7,800 – 700 + 3,600)Bills Receivable
15,60010,7003,000
38,900
Less Current LiabilitiesCreditors (11,000 – 6,590 + 4,800 + 210)Bank (6,800 + 1,600 + 3,600)
9,42012,000
29,300
(21,420)7,880
46,780Financed ByCapital (47,000 + 3,600)Add Net Profit
50,6007,580
58,180Less Drawings (11,400)
46,780
Solutions
63
QUESTION 11.15 (HIGHER LEVEL)
(a) Journal EntriesDebit Credit
(i) BankDiscount ReceivedCreditorCreditorCash
52040
300560
300(ii) Repairs
DrawingsPremisesSuspense
600360960
1,920(iii) Drawings
Discount AllowedDebtor
39010
400(iv) Creditor
PurchasesCapitalDiscount Received
9,2004,5004,500
200(v) Debtor
Sales ReturnsSuspense
188127
315
(b) Suspense AccountOriginal Balance 2,235 Repairs (II) 600
Drawings (II) 360Premises (II) 960Debtor (V) 188Sales Returns (V) 127
2,235 2,235
(c) Statement of Revised ProfitOriginal Net Profit 42,000Less Discount Received (I) (40)Less Repairs (II) (600)Less Discount Allowed (III) (10)Add Purchases (IV) 4,500Add Discount Received (IV) 200Less Sales Returns (V) (127)Revised Net Profit 45,923
Leaving Certificate Accounting
64
QUESTION 11.16 (HIGHER LEVEL)
(d) Corrected Balance SheetFixed AssetsPremises (165,000 + 960) 165,960Furniture and Equipment 33,000
198,960Current AssetsStock 94,000Debtors (10,600 – 400 + 188) 10,388Cash (400 – 300) 100
104,488Less Current LiabilitiesCreditors (72,000 + 2,235 + 560 – 300 – 9,200) 65,295Bank (19,000 – 520) 18,480
(83,775)20,713
219,673Financed ByCapital (176,000 + 4,500) 180,500Add Net Profit 45,923
226,423Less Drawings (6,000 + 360 + 390) (6,750)
219,673
(a) Journal EntriesDetails Debit Credit
(i) BankDiscount ReceivedCreditorCreditorCash
61030
400640
400(ii) Repairs
DrawingsPremisesSuspense
800630
1,4302,860
(iii) CreditorCapitalDiscount Received
75705
(iv) DrawingsCreditorPurchases
800800
1,600(v) Sales Returns
SuspenseDebtor
19674
122
(b) Suspense AccountOriginal Balance 2,934 Repairs (II) 800
Drawings (II) 630Premises (II) 1,430Sales Returns (V) 74
2,934 2,934
Solutions
65
(c) Statement of Revised ProfitOriginal Net Profit 43,000Less Discount Received (I) (30)Less Repairs (II) (800)Add Discount Received (III) 5Add Purchases (IV) 1,600Less Sales Returns (V) (196)Revised Net Profit 43,579
(d) Corrected Balance SheetFixed AssetsPremises (180,000 + 1,430) 181,430Machinery 48,000
229,430Current AssetsStock 73,000Debtors (12,000 – 122) 11,878Cash (600 – 400) 200
85,078Less Current LiabilitiesCreditors (27,000 + 2,934 + 640 – 400 – 75 – 800) 29,299Bank (24,000 – 610) 23,390
(52,689)32,389
261,819Financed ByCapital (227,600 + 70) 227,670Add Net Profit 43,579
271,249Less Drawings (8,000 + 630 + 800) (9,430)
261,819
66
The Conceptual Framework of Accounting: Solutions12
QUESTION 12.1
1. Concept of Going Concern – see text for explanation. Example: The accountant values assets in the balancesheet at cost. If the liquidation of the business was imminent, the assets would have to be valued at market value.
2. Concept of Accruals – see text for explanation. Example: Rent due and unpaid for the last two months of thefinancial year is included in the Profit and Loss Account as part of the Expense Rent.
3. Concept of Prudence – see text for explanation. Example: A provision for bad debts of 5% of outstandingdebtors is maintained.
4. Concept of consistency – see text for explanation. Example: Fixed assets are written off each year on areducing balance system.
QUESTION 12.2
QUESTION 12.3
Concept – PrudenceBase – Research expenditure is not to be capitalisedPolicy – Research expenditure appears as an expense in the Profit and Loss Account of the period in which it was incurred.
QUESTION 12.4
Consistent periods of account allow valid comparisons be made between periods.
QUESTION 12.5
1. Principle of realisation – see text for explanation Example: The rise in value of a fixed asset is not recordedas profit in the period of the rise, but is recorded as profit in the period when the asset is sold.
2. Principle of double-entry – see text for explanation Example: A bank loan received to buy a new delivery vanappears as an asset (delivery vans) and a liability (bank loan due).
3. Principle of objectivity – see text for explanation Example: The valuation and ownership of fixed assets doesnot depend upon the judgement of the accountant but on the receipt paid for the asset and the deeds ofownership.
QUESTION 12.6
An item in the accounts is considered immaterial if its omission would not effect the opinion of the users of the accounts.
QUESTION 12.7 (HIGHER LEVEL)
No, because the accounts, under the money measurement concept, can only show the financial position of the firm. Other factors, relevant or not to the health of the enterprise cannot be shown in the accounts.
QUESTION 12.8 (HIGHER LEVEL)
(a) Going concern (b) Accruals (c) Consistency(d) Prudence (e) Entity (f) Money measurement(g) Materiality (h) Realisation (i) Accruals(j) Accruals (k) Consistency (l) Double entry
(m) Prudence (n) Going concern
Accounting Concept Going Concern
Accounting Base Historical Cost Basis
Accounting Policy Fixed Assets Valued at Cost
67
Limited Companies: Solutions14QUESTION 14.1
QUESTION 14.2
(a) Profit and Loss Account for the year ended 31/12/-7Net Profit 103,000Less Transfer to General Reserve (24,000)
79,000Less Ordinary DividendsProposed (15,200)Preference DividendsPaid 3,850Proposed 3,850 (7,700)
Retained Profits 56,100
(b) Balance Sheet (Extracts)Current LiabilitiesProposed Dividends 19,050Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 300,000 190,000 190,000€1 11% Preference Shares 100,000 70,000 70,000
400,000 260,000 260,000ReservesGeneral Reserve 67,000Profit and Loss Account 56,100
(a) Profit and Loss Account for the year ended 31/12/-8Net Profit 69,000Less Transfer to General Reserve (10,000)
59,000Less Ordinary DividendsProposed (12,000)Preference DividendsPaid 3,000Proposed 9,000
(12,000)Retained Profits 35,000
(b) Balance Sheet (Extracts)Current LiabilitiesProposed DividendsFinanced byShare Capital€1 Ordinary Shares€1 12% Preference Shares
21,000
Authorised300,000200,000
Issued200,000100,000
Paid-up200,000100,000
500,000 300,000 300,000ReservesGeneral ReservesProfit and Loss Account
90,00035,000
Leaving Certificate Accounting
68
QUESTION 14.3
QUESTION 14.4
(a) Profit and Loss Account for the year ended 31/12/-9Net Profit before Taxation 120,000Less Taxation (23,000)Profit after Taxation 97,000Less Transfer to General Reserve (25,000)
72,000Less Ordinary DividendsProposed (17,500)Preference DividendsPaid 3,000Proposed 3,000
(6,000)Retained Profits for the year 48,500Profit and Loss Balance from last year 20,000Profit and Loss Balance to next year 68,500
(b) Balance Sheet (Extracts)Current LiabilitiesProposed Dividends 20,500Taxation Due 23,000Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 300,000 250,000 250,000€1 8% Preference Shares 100,000 75,000 75,000
400,000 325,000 325,000ReservesGeneral Reserves 90,000Profit and Loss Account 68,500
(a) Profit and Loss Account for the year ended 31/12/-9 €
Net Profit before Taxation 210,000Less Taxation (25,000)Profit after Taxation 185,000Less Transfer to General Reserve (15,000)
170,000Less Ordinary DividendsInterim 15,000Proposed 20,000 (35,000)
Preference DividendsInterim 7,000Proposed 7,000
(14,000)Retained Profits for the year 121,000Profit and Loss Balance from last year 101,000Profit and Loss Balance to next year 222,000
Solutions
69
QUESTION 14.5
(b) Balance Sheet as at 31/12/-9€ € €
Fixed AssetsTangible 800,000 200,000 600,000Intangible 100,000
700,000Current AssetsStock 120,000Debtors less Provision for Bad Debts 100,000Cash on Hand 5,000
225,000Less Current LiabilitiesCreditors 70,000Taxation Due 25,000Proposed Dividends 27,000Bank Overdraft 3,000
(125,000)100,000
Total Assets less Current Liabilities 800,000Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 500,000 300,000 300,000€1 7% Preference Shares 300,000 200,000 200,000
800,000 500,000 500,000ReservesShare Premium 3,000General Reserve 25,000Profit and Loss Account 222,000
250,000Shareholders’ Funds 750,000Long Term Liabilities14% Debentures 50,000
800,000
(a) Profit and Loss Account for the year ended 31/12/-8Net Profit before TaxationLess Taxation
136,000(29,000)
Profit after TaxationLess Transfer to General Reserve
107,000(20,000)
Less Ordinary DividendsPaidProposed
24,00040,000
87,000
Preference DividendsPaidProposed
7,5007,500
(64,000)
(15,000)Retained Profits for the yearProfit and Loss Balance from last year
8,00035,000
Profit and Loss Balance to next year 43,000
Leaving Certificate Accounting
70
QUESTION 14.6
(b) Balance Sheet (Extracts)Current LiabilitiesProposed Dividends 47,500Taxation Due 29,000Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 700,000 400,000 400,000€1 10% Preference Shares 300,000 150,000 150,000
1,000,000 550,000 550,000ReservesGeneral Reserve 60,000Profit and Loss Account 43,000
(a) Profit and Loss Account for the year ended 31/12/-7 €
Net Profit before Taxation 170,000Less Taxation (40,000)Profit after Taxation 130,000Less Transfer to General Reserve (10,000)
120,000Less Ordinary DividendsInterim 20,000Proposed 30,000
(50,000)Preference DividendsInterim 6,000Proposed 6,000
(12,000)Retained Profits for the year 58,000Profit and Loss Balance from last year 42,000Profit and Loss Balance to next year 100,000
Solutions
71
QUESTION 14.7
(b) Balance Sheet as at 31/12/-7€ € €
Fixed AssetsTangible 600,000 100,000 500,000Intangible 100,000Financial 50,000
650,000Current AssetsStock 70,000Debtors less Provision for Bad Debts 40,000Cash on Hand and at Bank 15,000
125,000Less Current LiabilitiesCreditors 50,000Taxation Due 40,000Proposed Dividends 36,000
(126,000)(1,000)
Total Assets less Current Liabilities 649,000Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 400,000 340,000 340,00€1 10% Preference Shares 200,000 120,000 120,000
600,000 460,000 460,000ReservesGeneral Reserve 20,000Share Premium 9,000Profit and Loss Account 100,000Shareholders’ Funds 129,000Long Term Liabilities7% Debentures 60,000
649,000
(a) Profit and Loss Account for the year ended 31/12/-1Net Profit before Taxation 82,500Less Taxation (21,000)Profit after Taxation 61,500Less Transfer to General Reserve (10,000)
51,500Less Ordinary DividendsPaid 17,500Proposed 20,000
(37,500)Preference DividendsPaid 4,500Proposed 4,500
(9,000)Retained Profits for the year 5,000Profit and Loss Balance from last year 40,000Profit and Loss Balance to next year 45,000
Leaving Certificate Accounting
72
(b) Balance Sheet (Extracts)Current LiabilitiesProposed Dividends 24,500Taxation Duei 21,000Financed byShare Capital Authorised Issued Paid-up€1 Ordinary Shares 400,000 250,000 250,000€1 9% Preference Shares 150,000 100,000 100,000
550,000 350,000 350,000ReservesGeneral Reserve 30,000Profit and Loss Account 45,000
73
Final Accounts of a Limited Company with Adjustments: Solutions15
QUESTION 15.1
Schedule of Adjustments (€)
AdjustmentsTrading Account
Profit and Loss Account
Balance Sheet
1. Closing Stock 30,000 30,000 – 30,0002. General Expenses 20,000 – 8,000 – 12,000 –3. Debenture Interest 8,000 + 8,000 – 16,000 8,0004. Depreciation on Delivery Vans 10,000 + 10,000 – 10,000 20,0005. Depreciation on Furniture and Fittings 6,000 + 1,200 – 1,200 7,2006. Directors’ Fees 6,000 – 6,000 6,0007. Auditors’ Fees 1,000 – 1,000 1,0008. Patents 100,000 – 10,000 – 10,000 90,0009. Rent of Showroom 5,000 – 1,250 – 3,750 1,250
10. Preference Dividend Proposed 10,000 – 10,000 10,00011. Ordinary Dividend Proposed 10,000 – 10,000 10,00012. Corporation Tax – 27,000 27,000
(a) Trading and Profit and Loss Account for the year ended 31/12/-2 (€)Sales– Cost of SalesOpening Stocks+ Purchases
25,000179,000
385,000
– Closing Stock 1.204,000(30,000)
(174,000)Gross Profit+ IncomeInvestment Interest
211,000
1,600
– ExpensesDistributionRent of ShowroomDepreciation on Delivery Vans
9.4.
3,75010,000
212,600
AdministrationGeneral expensesDepreciation on Furniture and FittingsDirectors’ FeesAuditors’ FeesRates and InsuranceAmortisation of PatentSalaries and Wages
2.5.6.7.
8.
12,0001,2006,0001,0004,000
10,00035,000
13,750
FinancialDebenture Interest 3. 16,000
69,200
16,000(98,950)
Net Profit before TaxationTaxation 12.
113,650(27,000)
Profit after TaxationLess Dividends ProposedOrdinaryPreference
11.10.
10,00010,000
86,650
(20,000)Retained Profits+ Profit and Loss Balance from last year
66,65030,000
Profit and Loss Balance to next year 96,650
Leaving Certificate Accounting
74
(b) Balance Sheet as at 31/12/-2€ € €
Fixed Assets Cost Depr ValueLand and Buildings 300,000 – 300,000Delivery Vans 4. 40,000 20,000 20,000Furniture and Fittings 5. 12,000 7,200 4,800
352,000 27,200 324,800Patents 8. 90,000Goodwill 60,0008% Investments 20,000
494,800Current AssetsClosing Stock 1. 30,000Debtors 30,000Bank 86,600Showroom Rent Prepaid 9. 1,250
147,850– Current LiabilitiesCreditors 18,000VAT 6,000Debenture Interest Due 3. 8,000Directors’ Fees Due 6. 6,000Auditors’ Fees Due 7. 1,000Preference Dividend Proposed 10. 10,000Ordinary Dividend Proposed 11. 10,000Taxation Due 12. 27,000
(86,000)61,850
Total Assets less Current Liabilities 556,650Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 300,000 200,000 200,000€1 10% Preference Shares 200,000 100,000 100,000
500,000 300,000 300,000ReservesProfit and Loss Account 96,650Long Term Liabilities10% Debentures 160,000
556,650
Solutions
75
QUESTION 15.2
Schedule of Adjustments (€)
AdjustmentsTradingAccount
Profit and Loss Account
BalanceSheet
1. Closing Stock 10,000 + 25,000 35,000 – 35,0002. Suspense 1,000 – 250 –750 – – –3. Interim Preference Dividend 2,000 + 250 + 2,250 4,500 2,2504. General Expenses 22,000 + 750 – 22,750 –5. Rent 5,000 – 2,500 – 2,500 2,5006. Land and Buildings 250,000 + 6,000 + 10,000 – – 266,0007. Salaries and Wages 40,000 – 6,000 – 34,000 –8. Purchases 129,000 – 10,000 119,000 – –9. Sales 380,000 – 30,000 350,000 – –
10. Debtors 55,000 – 30,000 – – 25,00011. Depreciation on Land and Buildings 2,920 – 2,920 2,92012. Depreciation on Vans 25,000 + 4,000 – 4,000 29,00013. Depreciation on Fixtures and Fittings 7,000 + 5,000 – 5,000 12,00014. Ordinary Dividend Proposed 15,000 – 15,000 15,00015. Corporation Tax 60,000 – 60,000 60,00016. General Reserve 10,000 + 10,000 – 10,000 20,00017. Debenture Interest 10,000 – 10,000 10,00018. Investment Income 12,100 – 12,100 12,100
Leaving Certificate Accounting
76
(a) Trading and Profit and Loss Account for the year ended 31/12/-3 (€)Sales 9. 350,000Less Cost of SalesOpening Stock 15,000+ Purchases 8. 119,000
134,000– Closing Stock 1. (35,000)
(99,000)Gross Profit 251,000+ IncomeRent 5. 2,500Investment Interest 18. 12,100
265,600– ExpensesDistributionDepreciation on Vans 12. 4,000Salesforce Salaries 6,000Carriage Out 2,000
12,000AdministrationGeneral Expenses 4. 22,750Salaries and Wages 7. 34,000Depreciation on Buildings 11. 2,920Depreciation on Furniture and Fittings 13. 5,000Directors’ Fees 10,000Auditors’ Fees 4,000Rent, Rates and Insurance 25,000
103,670FinancialDebenture Interest 17. 10,000
10,000(125,670)
Net Profit before Taxation 139,930– Taxation 15. (60,000)Profit after Taxation 79,930– Transfer to Reserve 16. (10,000)
69,930– Dividends– Ordinary – Proposed 14. 15,000Preference – Paid 3. 2,250– Proposed 3. 2,250
(19,500)Retained Profits 50,430+ Profit and Loss Balance from last year 42,000Profit and Loss Balance to next year 92,430
Solutions
77
(b) Balance Sheet as at 31/12/-3€ € €
Fixed Assets Cost Depr. ValueLand and Buildings 6. 11. 266,000 2,920 263,080Delivery Vans 12. 45,000 29,000 16,000Furniture and Fittings 13. 25,000 12,000 13,000
336,000 43,920 292,080Goodwill 76,00011% Investments 110,000
478,080Current AssetsClosing Stock 1. 35,000Debtors 10. 25,000Bank 16,000Investment Income Due 18. 12,100
88,100– Current LiabilitiesCreditors 45,000VAT 4,000Preference Dividend Due 3. 2,250Ordinary Dividend Due 14. 15,000Taxation Due 15. 60,000Debenture Interest Due 17. 10,000Rent Prepaid 5. 2,500
(138,750)(50,650)
Total Assets less Current Liabilities 427,430Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 250,000 150,000 150,000€1 9% Preference Shares 150,000 50,000 50,000
400,000 200,000 200,000ReservesGeneral Reserve 16. 20,000Share Premium 15,000Profit and Loss Account 92,430
127,430Long Term Liabilities10% Debentures 100,000
427,430
Leaving Certificate Accounting
78
QUESTION 15.3 (HIGHER LEVEL)
Schedule of Adjustments (€)
AdjustmentsTrading Account Profit and
Loss AccountBalance Sheet
1. Closing Stock 80,000 80,000 – 80,0002. Bank (10,000) + 1,750 – – 8,2503. Investment Income 1,750 + 875 – 2,625 8754. Auditors’ Fees 700 – 700 7005. Directors’ Fees 3,000 – 3,000 3,0006. Patents 6,000 + 2,000 – – 8,0007. Interim Preference Dividend 10,000 – 2,000 + 8,000 – 16,000 8,0008. Depreciation on Land and Buildings 5,000 – 5,000 5,0009. Depreciation on Vans 20,000 + 16,000 – 16,000 36,000
10. Ordinary Dividend Proposed 8,000 – 8,000 8,00011. Debenture Interest 3,000 + 3,000 – 6,000 3,00012. Debtors 30,000 – 1,000 – – 29,00013. Bad Debts 1,000 – 1,000 –14. Provision for Bad Debts 1,450 – 1,450 1,45015. Corporation Tax 20,000 – 20,000 20,000
(a) Trading and Profit and Loss Account for the year ended 31/12/-5 (€)SalesLess Cost of SalesOpening Stock+ Purchases
27,000310,000
606,000
– Closing Stock 1.337,000(80,000)
(257,000)Gross Profit+ IncomeRentInvestment Interest 3.
349,000
6,0002,625
– ExpensesDistributionSelling and DistributionDepreciation on Vans
AdministrationAdministration ExpensesAuditors’ FeesDirectors’ FeesDepreciation BuildingsBad Debts Provision for Bad Debts
FinancialDebenture Interest
9.
4.5.8.13.14.
11.
8,00016,000
138,000700
3,0005,0001,0001,450
6,000
24,000
149,150
357,625
6,000(179,150)
Net Profit before TaxationTaxation 15.
178,475(20,000)
Profit after Taxation– DividendsOrdinary – ProposedPreference – Paid– Proposed
10.7.7.
8,0008,0008,000
158,475
(24,000)Retained Profits+ Profit and Loss Balance from last year
134,475(20,000)
Profit and Loss Balance to next year 114,475
Solutions
79
(b) Balance Sheet as at 31/12/-5€ € €
Fixed Assets Cost Depr ValueLand and Buildings 8. 450,000 5,000 445,000Delivery Vans 9. 100,000 36,000 64,000
550,000 41,000 509,000Patents 6. 8,0007% Investments 50,000
567,000Current AssetsClosing Stock 1. 80,000Debtors 12. 29,000– Provision for Bad Debts 14. (1,450) 27,550Investment Income Due 3. 875
108,425– Current LiabilitiesCreditors 10,000Bank 2. 8,250Auditors’ Fees Due 4. 700Directors’ Fees Due 5. 3,000Preference Dividends Due 7. 8,000Ordinary Dividends Due 10. 8,000Debenture Interest Due 11. 3,000Taxation Due 15. 20,000
(60,950)47,475
Total Assets less Current Liabilities 614,475Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 500,000 200,000 200,000€1 8% Preference Shares 200,000 200,000 200,000
700,000 400,000 400,000ReservesShare Premium 40,000Profit and Loss Account 114,475
154,475Long Term Liabilities10% Debentures 60,000
614,475
Leaving Certificate Accounting
80
QUESTION 15.4 (HIGHER LEVEL)
Schedule of Adjustments (€)
AdjustmentsTrading Account Profit and
Loss AccountBalance Sheet
1. Closing Stock 37,400 –1,500 + 7,000 42,900 – 42,9002. Goodwill 9,500 + 3,000 – 2,500 – 2,500 10,0003. Investment Income 3,000 + 9,000 – 12,000 9,0004. Advertising 3,100 – 50 + 200 – 3,250 –5. Debenture Interest 2,050 + 50 + 6,300 – 8,400 6,3006. Debtors 27,200 – 200 – – 27,0007. Salaries and General Expenses 97,200 – 8,500 – 88,700 –8. Purchases 740,000 + 7,000 – 21,500 725,000 – –9. Creditors 35,100 + 7,000 – – 42,100
10. Buildings 401,000 – 25,000 + 30,000 – – 406,00011. Insurance Claim Due 25,000 – – 25,00012. Preference Dividend Proposed 5,500 – 5,500 5,50013. Ordinary Dividend Proposed 52,500 – 52,500 52,50014. Corporation Tax 15,000 – 15,000 15,00015. Depreciation on Vans 30,000 + 13,750 – 13,750 43,75016. Provision for Bad Debts 1,450 – 100 – 100 1,350
(a) Trading and Profit and Loss Account for the year ended 31/12/-8 (€)SalesLess Cost of SalesOpening Stock+ Purchases 8.
35,600725,500
1,020,000
– Closing Stock761,100(42,900)
(718,200)Gross Profit+ IncomeInvestment IncomeReduction in ProvisionDiscount (Net)
3.16.
301,800
12,000100
2,100
– ExpensesDistributionAdvertisingVan Depreciation
AdministrationSalaries and General ExpensesDirectors’ FeesRentAmount Written off GoodwillFinancialDebenture Interest
4.15.
7.
2.
5.
3,25013,750
88,70011,0008,6002,500
8,400
17,000
110,800
316,000
8,400(136,200)
Net Profit before TaxationTaxation 14.
179,800(15,000)
Profit after Taxation– DividendsOrdinary – Paid– ProposedPreference – Paid– Proposed
13.12.
19,50052,5005,5005,500
164,800
(83,000)Retained Profits– Profit and Loss Balance from last year
81,800(6,400)
Profit and Loss Balance to next year 75,400
Solutions
81
(b) Balance Sheet as at 31/12/-8€ € €
Fixed Assets Cost Depr ValueBuildings 10. 406,000 – 406,000Delivery Vans 15. 140,000 43,750 96,250
546,000 43,750 502,250Goodwill 10,00010% Investments 120,000
632,250Current AssetsClosing Stock 1. 42,900Debtors 6. 27,000– Provision for Bad Debts 16. (1,350) 25,650Investment Income Due 3. 9,000Insurance Claim Due 11. 25,000
102,550– Current LiabilitiesCreditors 9. 42,100Bank 18,000Debenture Interest Due 5. 6,300Preference Dividends Due 12. 5,500Ordinary Dividends Due 13. 52,500Taxation Due 14. 15,000
(139,400)(36,850)
Total Assets less Current Liabilities 595,400Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 650,000 350,000 350,000€1 11% Preference Shares 200,000 100,000 100,000
850,000 450,000 450,000ReservesProfit and Loss Account 75,400Long Term Liabilities12% Debentures 70,000
595,400
Leaving Certificate Accounting
82
QUESTION 15.5 (HIGHER LEVEL)
Notes
(A) Investment Income = €160,000 @ 12% = €192,200 (€5,300 due)(B) Debenture Interest = €80,000 @ 11% for 1 year = €8,800
€20,000 @ 11% for 3/4 year = €1,650 €10,450 (€8,250 due)
Schedule of Adjustments (€)
AdjustmentsTrading Account Profit and
Loss AccountBalance Sheet
1. Closing Stock 36,900 – 2,000 34,900 – 34,9002. Goodwill 8,800 + 6,400 – 3,800 – 3,800 11,4003. Investment Income 6,400 + 7,500 + 5,300 (A) – 19,200 5,3004. Advertising 4,400 – 200 – 300 + 150 –2,500 – 1,550 –5. Debenture Interest 2,000 + 200 + 8250 (B) – 10,450 8,2506. Creditors 31,100 – 300 – – 30,8007. Sales 932,000 + 150 932,150 – –8. Directors Fees 24,500 + 2,500 – 27,000 –9. Bank (17,000) + 7,500 – 300 – 1,740 – 1,200 – – 12,740
10. Debtors 26,400 + 300 – – 26,70011. Rent 8,700 + 1,740 – 10,440 –12. Salaries and General Expenses 99,800 + 1,200 – 101,000 –13. Preference Dividend Proposed 9,000 – 9,000 9,00014. Ordinary Dividend Proposed – 4,000 4,00015. Provision for Bad Debts 1,600 – 265 – 265 1,33516. Corporation Tax 2,000 – 2,000 2,00017. General Reserve 4,000 – 4,000 4,00018. Van Depreciation 38,000 + 28,000 – 28,000 66,000
Solutions
83
(a) Trading and Profit and Loss Account for the year ended 31/12/-9 (€)Sales 7. 932,150Less Cost of SalesOpening Stock 31,700+ Purchases 751,000
782,700– Closing Stock 1. (34,900)
(747,800)Gross Profit 184,350+ IncomeDiscount (Net) 2,700Investment Income 3. 19,200Provision for Bad Debts Decrease 15. 265
206,515– ExpensesDistributionVan Depreciation 18. 28,000 Advertising 4. 1,550
29,550AdministrationAmount Written off Goodwill 2. 3,800Directors’ Fees 8. 27,000Rent 11. 10,440Salaries and General Expenses 12. 101,000
142,240FinancialDebenture Interest 5. 10,450
10,450(182,240)
Net Profit before Taxation 24,275Taxation (2,000)Profit after Taxation 22,275Transfer to General reserve 17. (4,000)Retained Profits 18,275– DividendsOrdinary – Paid 22,500– Proposed 4,000 14. (26,500)Preference – Paid 4,500– Proposed 9,000 13. (13,500)Retained Profits (21,725)+ Profit and Loss Balance from last year 25,900Profit and Loss Balance to next year 4,175
Leaving Certificate Accounting
84
(b) Balance Sheet as at 31/12/-9€ € €
Fixed Assets Cost Depr. ValueBuildings 414,000 – 414,000Delivery Vans 18. 140,000 66,000 74,000
554,000 66,000 488,000Goodwill 2. 11,40012% Investments 160,000
659,400Current AssetsClosing Stock 1. 34,900Debtors 10. 26,700– Provision for Bad Debts 15. (1,335) 25,365Investment Income Due 3. 5,300
65,565– Current LiabilitiesCreditors 6. 30,800Bank 9. 12,740Debenture Interest Due 5. 8,250Preference Dividends Due 13. 9,000Ordinary Dividends Due 14. 4,000Taxation Due 16. 2,000
(66,790)(1,225)
Total Assets less Current Liabilities 658,175Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 600,000 400,000 400,000€1 9% Preference Shares 300,000 150,000 150,000
900,000 550,000 550,000ReservesGeneral Reserve 17. 4,000Profit and Loss Account 4,175
8,175Long Term Liabilities11% Debentures 100,000
658,175
Solutions
85
QUESTION 15.6 (HIGHER LEVEL)
Schedule of Adjustments (€)
AdjustmentsTradingAccount
Profit and Loss Account
BalanceSheet
1. Closing Stock 42,600 – 2,000 + 4,000 – 8,000 36,600 – 36,6002. Goodwill 12,400 + 3,600 – 3,200 – 3,200 12,8003. Investment Income 3,600 + 10,800 – 14,400 10,8004. Sales 875,100 – 6,000 869,100 – –5. Debtors 45,900 – 6,000 – – 39,9006. Purchases 660,000 – 8,000 – 6,000 – 25,500 620,500 – –7. Creditors 43,300 – 8,000 – – 35,3008. Buildings 451,000 – 20,000 + 9,500 + 25,500 – – 466,0009. Salaries and General Expenses 99,800 – 9,500 – 90,300 –
10. Insurance Claim Due 26,000 – – 26,00011. Preference Dividend Proposed 10,000 – 10,000 10,00012. Ordinary Dividend Proposed 40,000 – 40,000 40,00013. Debenture Interest 2,400 + 4,800 – 7,200 4,80014. Corporation Tax 30,000 – 30,000 30,00015. Provision for Bad Debts 1,600 + 395 – 395 1,99516. Van Depreciation 45,000 + 19,000 – 19,000 64,000
(a) Trading and Profit and Loss Account for the year ended 31/12/-9 (€)SalesLess Cost of SalesOpening Stock+ Purchases
4.
6.37,600
620,500
869,100
– Closing Stock 1.658,100(36,600)
(621,500)Gross Profit+ IncomeInvestment IncomeDiscount (Net)
3.
247,600
14,4005,400
– ExpensesDistributionDepreciation on Van Advertising
AdministrationSalaries and General ExpensesRentAmount Written off GoodwillDirectors FeesAudit FeesProvision for Bad Debts Increase
FinancialDebenture Interest
16.
9.
2.
16.
13.
19,0007,500
90,3004,8003,200
24,0005,000
395
7,200
26,500
127,695
267,400
7,200(161,395)
Net Profit before TaxationLess Taxation
106,005(30,000)
Profit after Taxation– DividendsOrdinary – Paid– Proposed 12.
14,00040,000
76,005
(54,000)Preference – Paid– Proposed 11.
10,00010,000 (20,000)
Retained Profits– Profit and Loss Balance from last year
2,005(8,600)
= Profit and Loss Balance to next year (6,595)
Leaving Certificate Accounting
86
(b) Balance Sheet as at 31/12/-9€ € €
Fixed Assets Cost Depr ValueBuildings 8. 466,000 – 466,000Delivery Vans 16. 140,000 64,000 76,000
606,000 64,000 542,000Goodwill 2. 12,8009% Investments 160,000
714,800Current AssetsClosing Stock 1. 36,600Debtors 5. 39,900– Provision for Bad Debts 15. (1,995) 37,905Investment Income Due 3. 10,800Insurance Claim Due 10. 26,000VAT 4,300
115,605– Current LiabilitiesCreditors 7. 35,300Preference Dividends Proposed 11. 10,000Ordinary Dividends Proposed 12. 40,000Debenture Interest Due 13. 4,800Taxation Due 14. 30,000Bank 22,000PAYE 4,900
(147,000)(31,395)
Total Assets less Current Liabilities 683,405Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 600,000 400,000 400,000€1 10% Preference Shares 300,000 200,000 200,000
900,000 600,000 600,000ReservesProfit and Loss Account (6,595)Long Term Liabilities8% Debentures 90,000
683,405
Solutions
87
QUESTION 15.7 (HIGHER LEVEL)
Notes
(A) Debenture Interest = €120,000 at 8% for 1 year = 9,600€60,000 at 8% for 3/4 year = 3,600
€13,200 (€10,800 due)
Schedule of Adjustments (€)
AdjustmentsTradingAccount
Profit and Loss Account
BalanceSheet
1. Closing Stock 50,000 – 2,000 48,000 – 48,0002. Goodwill 12,000 + 4,800 – 8,400 – 8,400 8,4003. Investment Income 4,800 + 9,600 – 14,400 –4. Patents 20,000 – 4,000 – 4,000 16,0005. Advertising 6,000 + 400 – 200 + 180 – 6,380 –6. Debenture Interest 2,800 – 400 + 10,800 (A) – 13,200 10,8007. Creditors 35,400 – 200 – – 35,2008. Rent 17,000 – 180 – 340 – 16,480 3409. Van Depreciation 66,000 + 32,400 – 32,400 98,400
10. Bank (16,000) + 9,600 + 1,500 – – 4,90011. Debtors 31,500 – 1,500 – 5,000 – – 25,00012. Bad Debts 5,000 – 5,000 –13. Preference Dividend Proposed 6,000 – 6,000 6,00014. Ordinary Dividend Proposed 15,000 – 15,000 15,00015. Corporation Tax 40,000 – 40,000 40,00016. Provision for Bad Debts 1,600 – 350 – 350 1,250
Leaving Certificate Accounting
88
(a) Trading and Profit and Loss Account for the year ended 31/12/-0 (€)Sales 906,000Less Cost of SalesOpening Stock 30,000+ Purchases 595,000
625,000– Closing Stock 1. (48,000)
577,000Gross Profit 329,000+ IncomeInvestment Income 3. 14,000Provision for Bad Debts Decrease 16. 350Patent Royalties 3,000
346,750– ExpensesDistributionAdvertising 5. 6,380Van Depreciation 9. 32,400
38,780AdministrationGoodwill Written off 2. 8,400Patents Written off 4. 4,000Rent 8. 16,480Bad Debts 12. 5,000Salaries and General Expenses 102,000Directors’ Fees 40,000Audit Fees 6,000
181,880FinancialDebenture Interest 6. 13,200
13,200(233,860)
Net Profit before Taxation 112,890Taxation 15. (40,000)Profit after Taxation 72,890– DividendsOrdinary – Paid 30,000– Proposed 14. 15,000 (45,000)Preference – Paid 2,000– Proposed 13. 6,000 (8,000)Retained Profits 19,890+ Profit and Loss Balance from last year 19,300= Profit and Loss Balance to next year 39,190
Solutions
89
(b) Balance Sheet as at 31/12/-0€ € €
Fixed Assets Cost Depr. ValueBuildings 400,000 – 400,000Delivery Vans 9. 162,000 98,400 63,600
562,000 98,400 463,600Goodwill 2. 8,400Patents 4. 16,0009% Investments 160,000
648,000Current AssetsClosing Stock 1. 48,000Debtors 11. 25,000– Provision for Bad Debts 16. (1,250) 23,750Rent Prepaid 8. 340
72,090– Current LiabilitiesCreditors 7. 35,200Debenture Interest Due 6. 10,800Bank 10. 4,900Preference Dividend Due 13. 6,000Ordinary Dividend Due 14. 15,000Taxation 15. 40,000VAT 5,600PAYE/PRSI 3,400
(120,900)(48,810)
Total Assets less Current Liabilities 599,190Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 600,000 300,000 300,000€1 10% Preference Shares 400,000 80,000 80,000
1,000,000 380,000 380,000ReservesProfit and Loss Account 39,190Long Term Liabilities8% Debentures 180,000
599,190
Leaving Certificate Accounting
90
QUESTION 15.8 (HIGHER LEVEL)
Notes
(A) Debenture Interest€30,000 at 8% for 1 year = 2,400€40,000 at 8% for 3/4 year = 2,400
€4,800 (All due)
Schedule of Adjustments (€)
AdjustmentsTradingAccount
Profit and Loss Account
BalanceSheet
1. Closing Stock 62,000 – 2,000 60,000 – 60,0002. Purchases 670,000 – 25,000 – 4,000 641,000 – –3. Buildings 400,000 + 25,000 + 75,000 – – 500,0004. Van Depreciation 60,000 + 21,000 – 21,000 81,0005. Buildings Depreciation 100,000 + 8,500 – 108,500 – 8,500 –6. Revaluation Reserve 75,000 + 108,500 – – 183,5007. Insurance Claim 3,000 – – 3,0008. Loss by Fire 1,000 – 1,000 –9. Bank 106,200 – 28,000 – – 78,200
10. Patents 28,000 – 2,800 – 2,800 25,20011. Preference Dividend Proposed 12,000 – 12,000 12,00012. Debenture Interest 4,800 (A) – 4,800 4,80013. Ordinary Dividend Proposed 35,000 – 35,000 35,00014. Corporation Tax 30,000 – 30,000 30,00015. Goodwill 180,000 – 12,000 – 12,000 168,00016. Provision for Bad Debts 1,400 – 85 – 85 1,315
Solutions
91
(a) Trading and Profit and Loss Account for the year ended 31/12/-1 (€)Sales 960,000Less Cost of SalesOpening Stock 49,000+ Purchases 2. 641,000
690,000– Closing Stock 1. (60,000)
(630,000)Gross Profit 330,000+ IncomeRent Received 3,560Provision for Bad Debts Decrease 16. 85Discount (Net) 3,800
337,445– ExpensesDistributionVan Depreciation 4. 21,000Carriage Out 8,000
29,000AdministrationBuildings Depreciation 5. 8,500Fire Loss 8. 1,000Patents Amortised 10. 2,800Goodwill Written off 15. 12,000Salaries and General Expenses 92,000Directors’ Fees 21,500
137,800FinancialDebenture Interest 12. 4,800
4,800(171,600)
Net Profit before Taxation 165,845Taxation (30,000)Profit after Taxation 135,845– DividendsOrdinary – Paid 25,000– Proposed 13. 35,000 (60,000)Preference – Paid –– Proposed 11. 12,000 (12,000)Retained Profits 63,845+ Profit and Loss Balance from last year 8,140Profit and Loss Balance to next year 71,985
Leaving Certificate Accounting
92
(b) Balance Sheet as at 31/12/-1 € € €
Fixed Assets Cost Depr. ValueBuildings 500,000 – 500,000Delivery Vans 5. 270,000 81,000 189,000
770,000 81,000 689,000Goodwill 15. 168,000Patents 10. 25,200
882,200Current AssetsClosing Stock 1. 60,000Debtors 26,300– Provision for Bad Debts 16. (1,315) 24,985Insurance Claim Due 3,000Bank 78,200
166,185– Current LiabilitiesCreditors 27,100Preference Dividend Due 11. 12,000Debenture Interest Due 12. 4,800Ordinary Dividend Due 13. 35,000Taxation Due 14. 30,000VAT 2,100PAYE/PRSI 3,900
(114,900)51,285
933,485Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 700,000 400,000 400,000€1 8% Preference Shares 300,000 150,000 150,000
1,000,000 550,000 550,000ReservesRevaluation Reserve 6. 183,500Share Premium 8,000Debenture Redemption Reserve 50,000Profit and Loss Account 71,985
313,485Long Term Liabilities8% Debentures 70,000
933,485
Solutions
93
QUESTION 15.9 (HIGHER LEVEL)
Notes
(A) Debenture Interest €60,000 at 10% for one year = €6,000 (€4,500 due)
(B) Depreciation to Date of Disposal on 31/5/-7
1/2/-3 31/5/-7 = 41/3 years at 121/2% of €12,000 = €6,500
(C) Annual Depreciation Charge for the year ended 31/12/-7(i) Van Sold - 5/12 year at 121/2% of €12,000 = €625(ii) Van Bought - 7/12 year at 121/2% of €16,800 = €1,225(iii) Remaining Vans – 1 year at 121/2% of (€120,000 – €12,000) = €13,500
Total = €15,350
Schedule of Adjustments (€)
AdjustmentsTradingAccount
Profit and Loss Account
Balance Sheet
1. Closing Stock 45,000 – 400 – 700 – 8,800 35,100 – 35,1002. Salaries and General Expenses 79,000 – 400 – 700 – 1,500 76,400 1,1003. Purchases 712,000 – 8,800 – 500 – 11,800 690,900 – –4. Creditors 24,000 – 8,800 – – 15,2005. Delivery Van Expenses 18,000 + 1,500 + 500 – 20,000 –6. Rent 3,000 – 150 + 200 – 3,050 –7. Debenture Interest 1,350 + 150 + 4,500 (A) 6,000 4,5008. Bad Debt Recovered 200 – 200 –9. Van 120,000 – 12,000 + 5,000 + 11,800 – – 124,800
10. Van Depreciation 20,000 – 6,500 (B) + 15,350 (C) – 15,350 28,85011. Van Disposal 12,000 – 6,500 – 5,000 – 500 –12. Preference Dividend Proposed 9,000 – 9,000 9,00013. Ordinary Dividend Proposed 22,500 – 22,500 22,50014. Corporation Tax 3,000 – 3,000 3,00015. Goodwill 180,000 – 12,000 – 12,000 168,00016. Provision for Bad Debts 1,100 + 765 – 765 1,865
→
Leaving Certificate Accounting
94
(a) Trading and Profit and Loss Account for the year ended 31/12/-7 (€)Sales 880,000Less Cost of SalesOpening Stock 40,000+ Purchases 3. 690,900
730,900– Closing Stock (35,100)
(695,800)Gross Profit 184,200+ IncomeBad Debt Recovered 8. 200
184,400– ExpensesDistributionDelivery Van Expenses 5. 20,000Van Depreciation 10. 15,350Loss on Van Disposal 11. 500Advertising 1,650
37,500AdministrationSalaries and Gen. Expenses 2. 76,400Rent 6. 3,050Goodwill Written off 15. 12,000Provision for Bad Debts Increase 16. 765Discount (Net) 1,500Audit Fees 4,000Directors’ Fees 8,000
105,715FinancialDebenture Interest 7. 6,000
6,000(149,215)
Net Profit before Taxation 35,185Taxation (3,000)Profit after Taxation 32,185– DividendsOrdinary – Paid 25,600– Proposed 22,500 (48,100)Preference – Paid 3,000– Proposed 9,000 (12,000)Retained Profit (27,915)+ Profit and Loss Balance from last year 30,000Profit and Loss Balance to next year 2,085
Solutions
95
(b) Balance Sheet as at 31/12/-7€ € €
Fixed Assets Cost Depr. ValueLand and Buildings 450,000 100,000 350,000Delivery Vans 9.10. 124,800 28,850 95,950
574,800 128,850 445,950Goodwill 15. 168,000
613,950Current AssetsClosing Stock 1. 35,100Debtors 37,300– Provision for Bad Debts (1,865) 35,435Stock of Stationery 2. 400Stock of Fuel 2. 700
71,635– Current LiabilitiesCreditors 4. 15,200Debenture Interest Due 7. 4,500Preference Dividend Due 12. 9,000Ordinary Dividend Due 13. 22,500Taxation Due 14. 3,000VAT 2,800PAYE/PRSI 4,200Bank 300
(61,500)10,135
Total Assets less Current Liabilities 624,085Financed ByShare Capital Auth. Issued Paid-Up€1 Ordinary Shares 500,000 450,000 450,000€1 12% Preference Shares 100,000 100,000 100,000
600,000 550,000 550,000ReservesShare Premium 12,000Profit and Loss Account 2,085
14,085Long Term Liabilities10% Debentures 60,000
624,085
96
Manufacturing Accounts: Solutions16QUESTION 16.1
Clinical Instruments Ltd
QUESTION 16.2Bracken Fencing Ltd
Manufacturing Account for the year ended 31/12/-2 (€)Opening Stock Raw Materials 16,000
+ Purchases Raw Materials 112,000128,000
– Closing Stock Raw Materials (19,000)Cost of Raw Materials Used 109,000+ Direct Costs
Factory Wages 62,000Hire of Special Equipment 12,000
74,000Prime Cost 183,000+ Indirect Costs
Factory Insurance 8,000Factory Light and Heat 9,000Depreciation on Plant and Machinery 6,000Supervisors’ Salaries 18,000Opening Stock WIP 10,000Closing Stock WIP (8,000)
43,000Cost of Production 226,000
Manufacturing Account for the year ended 31/12/-3 (€)Opening Stock Raw Materials 12,000
+ Purchases Raw Materials 211,000– Returns Out (4,000)
207,000219,000
– Closing Stock Raw Materials (13,000)Cost of Materials Used 206,000+ Direct Costs
Royalty Fees 9,000Manufacturing Wages 94,000
103,000Prime Cost 309,000+ Indirect Costs
Factory Rent 7,000Factory Supervisor’s Salary 30,000Depreciation on Plant and Machinery 12,000Factory Light and Heat 7,000Factory Insurance 8,000Factory Rates 6,000Repairs to Plant and Machinery 5,000Opening Stock WIP 18,000Closing Stock WIP (16,000)
77,000Cost of Production 386,000
Solutions
97
QUESTION 16.3
Curtis Cables Ltd
Manufacturing Account for the year ended 31/12/-4 (€)Opening Stock Raw Materials 22,000
+ Purchases Raw Materials 316,000– Returns Out (4,000)
312,000+ Carriage In 2,000
336,000– Closing Stock Raw Materials (24,000)
Cost of Raw Materials Used 312,000+ Direct Costs
Factory Direct Wages 125,000Prime Cost 437,000+ Indirect Costs
Depreciation on Plant and Machinery 13,000Depreciation on Factory Buildings 6,000Factory Indirect Wages 24,000Factory Insurance 12,000Factory Rent and Rates 8,000Factory Light and Heat 17,000Opening Stock Work in Progress 15,000Closing Stock Work in Progress (17,000)
78,000Cost of Production 515,000
Trading Account for the Year Ended 31/12/-4 (€)Sales of Finished Goods 728,000
Less Cost of SalesOpening Stock Finished Goods 17,000
+ Cost of Production 515,000532,000
– Closing Stock Finished Goods (21,000)(511,000)
Gross Profit 217,000
Leaving Certificate Accounting
98
QUESTION 16.4
Clemence Tiles Ltd
Manufacturing Account for the year ended 31/12/-6 Opening Stock Raw Materials 12,000
+ Purchases Raw Materials 285,000+ Carriage In 3,000+ Customs Duty 13,000
326,000– Closing Stock Raw Materials (29,000)
Cost of Raw Materials Used 297,000+ Direct Costs
Factory Direct Wages 120,000Hire of Special Equipment 10,000Royalty Fees 12,000
142,000Prime Cost 439,000+ Indirect Costs
Factory Light and Heat 8,000Factory Supervisor’s Salary 25,000Depreciation on Plant and Machinery 20,000Depreciation on Factory Buildings 2,000Factory Insurance 8,000Opening Stock WIP 24,000Closing Stock WIP (25,000)
62,000501,000
– Sales of Scrap Materials (13,000)Cost of Production 488,000
Trading Account for the Year Ended 31/12/-6 (€)Sales of Finished Goods 627,000
Less Cost of SalesOpening Stock Finished Goods 11,000
+ Cost of Production 488,000499,000
– Closing Stock Finished Goods (9,000)(490,000)
Gross Profit 137,000
Solutions
99
QUESTION 16.5
Barlow Engineering Limited
QUESTION 16.6
Polymer Fabrications LtdSchedule of Adjustments (€)
Manufacturing Account for the year ended 31/12/-8 (€)Opening Stock Raw Materials 12,000
+ Purchases Raw Materials 97,000+ Carriage In 7,200
116,200– Closing Stock Raw Materials (14,200)
Cost of Raw Materials Used 102,000+ Direct Costs
Factory Wages 51,000Prime Cost 153,000+ Indirect Costs
Depreciation on Plant and Machinery 10,000Factory Rent 19,100Factory Insurance 7,300Factory Rates 3,400Indirect Wages 11,500Indirect Materials 17,700Opening Stock WIP 19,000Closing Stock WIP (15,000)
73,000226,000
– Sales of Scrap Materials (6,500)Cost of Production 219,500
Gross Manufacturing Profit 10,500Current Market Value 230,000
Trading Account for the year ended 31/12/-8 (€)Sales of Finished Goods 272,400
Less Cost of SalesOpening Stock Finished Goods 11,000
+ Current Market Value 230,000241,000
– Closing Stock Finished Goods (14,100)226,900
Gross Trading Profit 45,500Gross Manufacturing Profit 10,500
Total Gross Profit 56,000
Adjustments
Trading/Manufacturing
Account
Profit and LossAccount
Balance Sheet
1. Carriage 6,000 4,500 1,500 –2. Wages 48,000 32,000 16,000 –3. Insurance 5,000 4,000 1,000 –4. Rates 2,000 1,600 400 –5. Debenture Interest 7200 – 7,200 7,2006. P+M Depreciation 10,000+4,500 20,000 – 60,0007. Office Equipment Depreciation 10,000+4,500 4,500 14,5008. Advertising 5,000–1,250 3,750 1,250
Leaving Certificate Accounting
100
(a) Manufacturing Account for the year ended 31/12/-3 (€)
++
Opening Stock Raw MaterialsPurchases Raw MaterialsCarriage In 1.
27,000230,000 4,500
– Closing Stock Raw Materials261,500 (31,000)
+Cost of Raw Materials UsedDirect CostsDirect WagesHire of Special Equipment
2. 32,00010,000
230,500
42,000
+Prime Cost
Indirect CostsFactory InsuranceFactory RatesP+M DepreciationFactory Light and HeatOpening Stock WIPClosing Stock WIP
3.4.6.
4,0001,600
20,0006,000
14,000(18,000)
272,500
27,600
– Sales of Scrap Materials300,100 (6,600)
Cost of ProductionGross Manufacturing Loss
293,500(43,500)
Current Market Value 250,000
(b) Trading and Profit and Loss Account for the year ended 31/12/-3 (€)
+
Sales of Finished GoodsLess Cost of SalesOpening Stock Finished GoodsCurrent Market Value
12,000250,000
340,000
– Closing Stock Finished Goods262,000(14,000)
(248,000)
–Gross Trading ProfitGross Manufacturing Loss
92,000 (43,500)
+Total Gross Profit
IncomeRent Received
48,500
5,000
– ExpensesDistributionCarriage OutAdvertisingShowroom Expenses
1.8.
1,5003,750
3,000
53,500
AdministrationAdministration WagesOffice InsuranceOffice RatesEquipment DepreciationDiscount AllowedStationeryDirectors Fees
2.3.4.7.
16,0001,000
4004,5002,900
80030,000
8,250
FinancialDebenture Interest
5.
7,200
55,600
7,200(71,050)
+Net Profit Before TaxationProfit and Loss Balance from last year
(17,550)4,500
= Profit and Loss Balance to next year (13,050)
Solutions
101
(d) The company should cease production and concentrate on retailing only, as its trading profit would be€92,000 if it bought in finished goods at current market value of €250,000
QUESTION 16.7 (HIGHER LEVEL)
O’Hara Extrusions LtdSchedule of Adjustments (€)
(c) Balance Sheet as at 31/12/-3 € € €
Fixed Assets Cost Depr Value BuildingsPlant And MachineryOffice Equipment
6.7.
190,000140,000 30,000
– 60,000 14,500
190,00080,000 15,500
360,000 74,500 285,500Goodwill 25,000
–
Current AssetsClosing Stocks – Raw Materials
– Work-in-Progress– Finished Goods
DebtorsProvision for Bad Debts
18,0001,000
31,00018,00014,000
17,000
310,500
Advertising Prepaid VAT
8. 1,250 700
– Current LiabilitiesCreditorsPAYE / PRSIBankDebenture Interest Due 5.
81,950
26,000800
11,500 7,200
(45,500) 36,450
Total Assets less Current Liabilities 346,950Financed By
Share Capital Auth Issued Paid-up€1 Ordinary Shares 450,000 300,000 300,000
ReservesProfit and Loss Account
Long-Term Liabilities12% Debenture
(13,050)
60,000 346,950
Adjustments Trading/Manufacturing
Account
Profit and LossAccount
Balance Sheet
1. Bank (2,000)+2,500+120+660 – – 1,2802. Creditors 14,000+2500 – – 16,5003. Debtors 28,000–120–180 – – 27,7004. Bad Debts 180 – 180 –5. Investment Income 1,320+660 – 1,980 –6. P+M Depreciation 40,000+36,000 36,000 – 76,0007. Office Equip. Depreciation 30,000+6,000 – 6,000 36,0008. Buildings Depreciation 80,000+15,000 8,250 6,750 95,0009. Preference Dividend Proposed 9,000 – 9,000 9,000
10. Ordinary Dividend Proposed 10,000 – 10,000 10,00011. Corporation Tax – 45,000 45,00012. Debenture Interest 6,000 – 6,000 6,00013. Provision for Bad Debts 1,500–115 – 115 1,385
Leaving Certificate Accounting
102
(a) Manufacturing Account for the year ended 31/12/-3 (€)
+Opening Stock Raw MaterialsPurchases Raw Materials
28,000184,000
– Closing Stock Raw Materials212,000(29,000)
+Cost of Raw Materials UsedDirect CostsManufacturing WagesHire of Special EquipmentOpening Stock WIPClosing Stock WIP
42,00014,00032,000(34,000)
183,000
54,000
+Prime CostIndirect CostsDepreciation on Plant and MachineryFactory Buildings DepreciationFactory Light and HeatFactory InsuranceFactory Supervisor’s Salary
6.8.
36,0008,2501,8002,700
22,000
237,000
70,750
– Sales of Scrap Materials307,750 (2,800)
Cost of ProductionGross Manufacturing Profit
304,950 45,050
Current Market Value 350,000
Trading Account for the year ended 31/12/-2 (€)
+
Sales of Finished GoodsLess Cost of SalesOpening Stock Finished GoodsCurrent Market Value
37,000350,000
466,680
– Closing Stock Finished Goods387,000(36,000)
(351,000)
+Gross Trading ProfitGross Manufacturing Profit
115,680 45,050
Total Gross Profit 160,730+ Income
Investment IncomeReduction in Provision
5.13.
1,980 115 2,095
– ExpensesDistributionDistribution ExpensesAdministrationAdministration ExpensesBad DebtsOffice EquipmentOffice Buildings Depreciation
7.8.
2,800180
6,000 6,750
8,400
162,825
FinancialDebenture Interest 12. 6,000
40,930
6,000 (55,330)
Net Profit Before TaxationTaxation
107,495 (45,000)
–Profit After TaxationDividendsOrdinary – Paid
– ProposedPreference – Paid
– Proposed
10.–
–10,000
9,000
62,495
(10,000)
(9,000)
+Retained Profits
Profit and Loss Balance from last year43,495
20,000Profit and Loss Balance to next year 63,495
Solutions
103
(b) Balance Sheet as at 31/12/-2 € € €
Fixed Assets Cost Depr Value Buildings 8. 300,000 95,000 205,000Plant and Machinery 6. 220,000 76,000 144,000Office Equipment 7. 60,000 36,020 24,000
580,000 207,000 373,000Goodwill 35,00011% Investments 24,000
432,000Current AssetsClosing Stocks – Raw Materials 29,000
– Work-in-Progress 34,000– Finished Goods 36,000
Debtors 3. 27,700– Provision for Bad Debts 13. (1,385) 26,315
Bank 1. 1,280VAT 1,400
127,995– Current Liabilities
Creditors 2. 16,500Preference Dividend Due 9. 9,000Ordinary Dividend Due 10. 10,000Taxation Due 11. 45,000Debenture Interest Due 12. 6,000PAYE/PRSI 10,000
(96,500)31,495
Total Assets Less Current Liabilities 463,495Financed byShare Capital Auth Issued Paid-up€1 Ordinary Shares 300,000 200,000 200,000€1 9% Preference Shares 200,000 100,000 100,000
500,000 300,000 300,000ReservesGeneral Reserve 50,000Profit and Loss Account 63,495
113,495Long-Term Liabilities12% Debenture 50,000
463,495
Leaving Certificate Accounting
104
QUESTION 16.8 (HIGHER LEVEL)
Boxel Plastics Ltd
Schedule of Adjustments (€)
Adjustments Trading/Manufacturing
Account
Profit and LossAccount
Balance Sheet
1. Sales of Scrap 6,500–4,000 2,500 – –2. Office Equipment 63,000–6,000 – – 57,0003. Office Equipment Depreciation 26,000–1,650+6,300 – 6,300 30,6504. Disposal 6,000–1,650–4,000 – 350 –5. Land and Building Depreciation 100,000+15,000–115,000 15,000 – –6. Plant and Machinery Depreciation 60,000+40,000 40,000 – 100,0007. Rent Recd. 6,000–200+7,000+5,000–8,000 – 9,800 –8. Debenture Interest Paid 4,700–200+4,500 – 9,000 4,5009. Debtors 30,000+7,000 – – 37,000
10. Purchases Finished Goods 5,000 5,000 – –11. VAT 3,000+8,000 – – 11,00012. Land and Buildings 400,000+200,000 – – 600,00013. Revaluation Reserve 200,000+115,000 – – 315,00014. Preference Dividend Proposed 4,500 – 4,500 4,50015. Ordinary Dividend Proposed 9,500 – 9,500 9,50016. Corporation Tax – 1,500 1,50017. Provision for Bad Debts 900+950 – 950 185018. General Reserve 28,000–20,000 – 20,000 8,000
(a) Manufacturing Accounts for the year ended 31/12/-3 (€)Opening Stock Raw Materials 22,000
+ Purchases Raw Materials 170,000192,000
– Closing Stock Raw Materials (24,000)Cost of Raw Materials Used 168,000+ Direct Costs
Manufacturing Wages 80,500Hire of Special Equipment 3,100
83,600Prime Cost 251,600
+ Indirect CostsLand and Buildings Depreciation 5. 15,000Plant and Machinery Depreciation 6. 40,000Factory Supervisor’s Salary 10,000Factory General Expenses 4,400Opening Stock WIP 13,500Closing Stock WIP (14,000)
68,900320,500
– Sales of Scrap Materials (2,500)Cost of Production 318,000
Solutions
105
Trading and Profit and Loss Account for the year ended 31/12/-3 (€)Sales of Finished Goods 360,000
Less Cost of SalesOpening Stock Finished Goods 21,000Cost of Production 318,000Purchases of Finished Goods 10. 5,000
344,000– Closing Stock Finished Goods (23,000)
(321,000)Gross Profit 39,000
+ IncomeRent Received 7. 9,800
48,800– Expenses
DistributionDistribution Expenses 11,200
AdministrationAdministration Expenses 13,700Depreciation Office Equipment 3. 6,300Loss on Disposal 4. 350Increase in Provision for Bad Debts 17. 950
21,300FinancialDebenture Interest 8. 9,000
9,000(41,500)
Net Profit Before Taxation 7,300Taxation 16. (1,500)Profits After Taxation 5,800
+ Transfer from General Reserve 18. 20,000 25,800
Ordinary – Paid 18,500– Proposed 15. 9,500 (28,000)
Preference – Paid 1,500– Proposed 14. 4,500 (6,000)Retained Profits (8,200)
+ Profit and Loss Balance from last year 10,500Profit and Loss Balance to next year 2,300
Leaving Certificate Accounting
106
(b) Balance Sheet as at 31/12/-3 € € €
Fixed Assets Cost Depr Value Land and Buildings 5.12. 600,000 – 600,000Plant and Machinery 6. 260,000 100,000 160,000Office Equipment 2.3. 57,000 30,650 26,350
917,000 130,650 786,350Current AssetsClosing Stocks – Raw Materials 24,000
– Work-in-Progress 14,000– Finished Goods 23,000
Debtors 9. 37,000– Provision for Bad Debts 17. (1,850) 35,150
96,150– Current Liabilities
Creditors 44,700Bank 9,000Debenture Interest Due 8. 4,500VAT 11. 11,000Preference Dividend Due 14. 4,500Ordinary Dividend Due 15. 1,500Taxation Due 16. 1,500PAYE / PRSI 2,500
(87,200) 8,950
Total Assets Less Current Liabilities 795,300Financed byShare Capital Auth Issued Paid-up
€1 Ordinary Shares 400,000 280,000 280,000€1 6% Preference Shares 200,000 100,000 100,000
600,000 380,000 380,000Reserves
General Reserve 18. 8,000Revaluation Reserve 13. 315,000Profit and Loss Account 2,300
325,300Long-Term Liabilities10% Debentures 90,000
795,300
Solutions
107
QUESTION 16.9
Cameron Engineering Ltd.Schedule of Adjustments (€)
Notes
A Depreciation to Date of Sale1/2/-1 → 31/ /-4 = 3 1/6 yrs. at 20% of €12,000 =7,600
B Annual Depreciation ChargeVan sold – 1/4 year at 20% of €12,000 = 600Van bought – 3/4 year at 20%of €30,000 = 4,500Remaining vans – 1 year at 20% of €30,000 = 9,600
Total =14,700
Adjustments Trading/Manufacturing
Account
Profitand LossAccount
Balance Sheet
1. Closing Stock Finished Goods 14,000 – 2,400 11,600 – 11,6002. Goodwill 11,500 + 1800 – 2660 – 2,660 10,6403. Vans 60,000 – 12,000 + 6,000 + 24,000 – – 78,000
4. Van Depreciation 21,000 – 7,600A + 14,700B – 14,700 28,100
5. Disposal 12,000 – 7,600 – 6,000 – 1,600 –6. Purchases 100,000 – 24,000 – 7,000 – 7,000 62,000 – –7. Buildings 295,000 – 30,000 + 18,000 + 7,000 – – 290,0008. Manufacturing Wages 67,000 – 18,000 49,000 – –9. Insurance Claim Due 35,000 – – 35,000
10. Loss by Fire 2,000 – 2,00011. Preference Dividend Proposed 5,000 – 5,000 5,00012. Ordinary Dividend Proposed 5,000 – 5,000 5,00013. Investment Income 1,800 + 5,400 – 7,200 5,40014. Administration Expenses 14,900 – 2,400 – 12,500 –15. Debenture Interest 2,400 + 7,200 – 9,600 7,20016. Provision for Bad Debts 700 + 750 – 750 1,45017. Plan and Mach. Depr. 25,000 + 10,000 10,000 – 35,00018. Corporation Tax – 50,000 50,000
Leaving Certificate Accounting
108
(a) Manufacturing Account for the year ended 31/12/-4 (€)
+Opening Stock Raw MaterialsPurchases Raw Materials 6.
12,00062,000
– Closing Stock Raw Materials (15,000)74,000
Cost of Raw Materials UsedDirect CostsManufacturing WagesDirect Factory ExpensesOpening Stock WIPClosing Stock WIP
8. 49,00014,60020,000
(25,000)
59,000
58,600Prime Cost 117,600
+ Indirect ExpensesDepreciation on Plant and MachineryIndirect Factory Expenses
17. 10,000 4,800
14,800
– Sales of Scrap Materials132,400 (4,300)
Cost of Production 128,100
Trading and Profit and Loss Account for the year ended 31/12/-4 (€)Sales of Finished Goods
Less Cost of SalesOpening Stock Finished GoodsCost of ProductionPurchases of Finished Goods
11,000128,100 6,000
379,000
– Closing Stock Finished Goods 1.145,100(11,600)
(133,500)Gross Profit 245,500
+ IncomeProfit on DisposalInvestment IncomeDiscount (Net)
5.13.
1,6007,200
600
– ExpensesDistributionDistribution ExpensesVan Depreciation 4.
8,730 14,700
254,900
AdministrationAdministration ExpensesAmount Written off GoodwillLoss by FireProvision for Bad Debts
14.2.
10.16.
12,5002,6602,000
750
23,430
FinancialDebenture Interest 15. 9,600
17,910
9,600(50,940)
Net Profit Before TaxationTaxation
203,960(50,000)
–
Profits After Taxation
DividendsOrdinary – Paid
– Proposed 12.10,000 5,000 (15,000)
153,960
Preference – Paid– Proposed 11.
5,000 5,000 (10,000) (25,000)
Retained ProfitsProfit and Loss Balance from last year
128,96020,900
Profit and Loss Balance to next year 149,860
Solutions
109
(b) Balance Sheet at 31/12/-4 € € €
Fixed Assets Cost Depr Value Buildings 7. 290,000 – 290,000Plant and Machinery 17. 100,000 35,000 65,000Delivery Vans 3.4. 78,000 28,100 49,900
486,000 63,100 404,900Goodwill 2. 10,64016% Investment 45,000
460,540Current AssetsClosing Stock – Raw Materials 15,000
– Work-in-Progress 25,000– Finished Goods 1. 11,600
Debtors 29,000– Provision for Bad Debts 16. (1,450) 27,550
Insurance Claim Due 9. 35,000Investment Income Due 13. 5,400
119,550– Current Liabilities
Creditors 47,000Bank 10,030VAT 6,000PAYE/ PRSI 3,000Preference Dividend Due 11. 5,000Ordinary Dividend Due 12. 5,000Debenture Interest Due 15. 7,200Taxation Due 18. 50,000
(133,230)(13,680)
Total Assets Less Current Liabilities 446,860
Financed byShare Capital Auth Issued Paid-up€1 Ordinary Shares 200,000 100,000 100,000€1 10% Preference Shares 200,000 100,000 100,000
400,000 200,000 200,000Reserves
General Reserve 17,000Profit and Loss Account 149,860
166,860Long-Term Liabilities12% Debenture 80,000
446,860
(c) Unit Cost of ProductionProduction
+Opening StockProduction commenced
26307
– Closing Stock333(33)
= Units Produced 300
Unit Cost = = €427Cost of ProductionNumber of Units Produced------------------------------------------------------------- 128,100
300-------------------=
Leaving Certificate Accounting
110
QUESTION 16.10
Garfield Pumps Ltd
Schedule of Adjustments (€)
Adjustments Trading/Manufacturing
Account
Profit andLoss
Account
Balance Sheet
1. Purchases Raw Materials 270,000+5,600 275,600 – –2. Creditors 24,200+5,600 – – 29,8003. Stock Raw Materials 17,500+5,600 23,100 – 23,1004. Sales Finished Goods 495,000–10,000 485,000 – –5. Debtors 22,800–10,000 – – 12,8006. Stock Finished Goods 18,200+8,000 26,200 – 26,2007. Plant and Machinery 160,000–8,000 – – 152,0008. Repairs to Plant and Machinery 8,000 8,000 – –9. Rent 6,800+400+3,240–2,250 – 8,190 –
10. Discount 900–400 – 500 –11. Factory Rates 5,000+3,240 8,240 – –12. Preference Dividend 4,500–2,250+2,250 – 4,500 2,25013. Plant and Machinery Depreciation 40,000+30,400 30,400 – 70,40014. Office Furniture Depreciation 6,000+3,000 – 10,000 4,50015. Buildings Depreciation 40,000+10,000 6,000 4,000 50,,00016. Ordinary Dividend 5,500+4,500 – 10,000 4,50017. Debenture Interest 3,250 – 3,250 3,25018. Corporation Tax – 12,000 12,00019. Provision for Bad Debts 400+240 – 240 640
(a) Manufacturing Account for the year ended 31/12/-6 (€)Opening Stock Raw Materials 16,000
+ Purchases Raw Materials 1. 275,600291,600
– Closing Stock Raw Materials 3. (23,100)Cost of Raw Materials Used 268,500+ Direct Costs
Direct Wages 62,000Hire of Special Equipment 13,600Opening Stock WIP 16,000Closing Stock WIP (21,000)
70,600Prime Cost 339,100
+ Indirect CostsFactory Rates 11. 8,240Factory Insurance 8,000Indirect Wages 18,000Depreciation Plant and Machinery 13. 30,400Depreciation Factory Buildings 15. 6,000Repairs Plant and Machinery 8. 8,000Factory Light and Heat 14,100
92,740431,840
– Sales of Scrap (13,500)Cost of Production 418,340
Gross Manufacturing Profit 11,660Current Market Value 430,000
Solutions
111
Trading, Profit and Loss Account for the year ended 31/12/-6 (€)Sales of Finished Goods 4. 485,000
– Cost of SalesOpening Stock Finished Goods 19,400+ Current Market Value 430,000
449,400– Closing Stock Finished Goods 6. (26,200)
(423,200)Gross Trading Profit 61,880
+ Gross Manufacturing Profit 11,660Total Gross Profit 73,460
+ IncomeRent Received 8,190Discount(Net) 500
82,150– Expenses
Distribution 10,900AdministrationExpenses 15,600Depreciation Office Furniture 14. 3,000Depreciation Office Buildings 15. 4,000Provision for Bad Debts 19. 240
22,840Financial
Debenture Interest 17. 3,250 3,250
(36,990)Net Profit Before Taxation 45,160
Taxation (12,000)Profit After Taxation 33,160
– DividendsOrdinary 16. 10,000Preference 12. 4,500
(14,500)Retained Profits 18,660
+ Profit and Lass Balance from last year 13,000Profit and Loss Balance to next year 31,660
Leaving Certificate Accounting
112
(b) Balance Sheet at 31/12/-6 € € €
Fixed Assets Cost Depr Value Buildings 15. 200,000 50,000 150,000Plant and Machinery 7.13. 152,000 70,400 81,600Office Furniture 14. 30,000 9,000 21,000
382,000 129,400 252,600Current Assets
Closing Stocks – Raw Materials 3. 23,100– Work-in-Progress 21,000– Finished Goods 6. 26,200
Debtors 5. 12,800Provisions for Bad Debts 19. (640)
12,160 82,460
– Current LiabilitiesCreditors 2. 29,800VAT 4,000Bank 7,600Preference Dividend Due 12. 2,250Ordinary Dividend Due 16. 4,500Debenture Interest Due 17. 3,250Taxation Due 18. 12,000
(63,400) 19,060
Total Assets less Current Liabilities 271,660Financed byShare Capital Auth Issued Paid–up
€1 Ordinary Shares 200,000 100,000 100,000€2 9% Preference Shares 200,000 50,000 50,000
400,000 150,000 150,000Reserves
Revaluation Reserve 25,000Profit and Loss Account 31,660
56,660Long-Term Liabilities10% Debentures 65,000
271,660
113
Departmental Accounts: Solutions17QUESTION 17.1
P. Ganley Ltd
Trading Account for the year ended ... (€)
QUESTION 17.2
T. Printle Ltd
Trading Account for the year ended ... (€)
Grocery Hardware Total Grocery Hardware TotalSales 150,000 275,000 425,000Less Cost of SalesOpening Stock 22,000 31,000 53,000+ Purchases 80,000 110,000 190,000+ Carriage In – 8,000 8,000+ Import Duty 10,000 – 10,000
112,000 149,000 261,000– Closing Stock (19,000) (33,000) (52,000)
(93,000) (116,000) (209,000)Gross Profit 57,000 159,000 216,000
Footwear Sportswear Total Footwear Sportswear TotalSales 56,000 70,000 126,000– Returns In (3,000) (2,000) (5,000)
53,000 68,000 121,000Less Cost of SalesOpening Stock 11,000 25,000 36,000+ Purchases 42,000 49,000 91,000– Returns Out (200) (800) (1,000)+ Carriage In 2,000 5,000 7,000
54,800 78,200 133,000– Closing Stock (9,000) (21,000) (30,000)
(45,800) (57,200) (103,000)7,200 10,800 18,000
Leaving Certificate Accounting
114
QUESTION 17.3
Younge Ltd
(a) Trading and Profit and Loss Account for the year ended 31/12/-4Grocery Drapery Total Grocery Drapery Total
Sales 180,000 180,000 360,000Less Cost of SalesOpening Stock 25,000 14,200 39,200+ Purchases 140,000 130,000 270,000
165,000 144,200 309,200– Closing Stock (23,000) (12,500) (35,500)
(142,000) (131,700) (273,700)Gross Profit 38,000 48,300 86,300– ExpensesDistributionTailoring Expenses – 200 200Advertising (Sales 1:1) 650 650 1,300Van Depreciation (Sales 1:1) 9,000 9,000 18,000AdministrationRent and Rates (Fl. Space 4:1) 420 1,680 2,100Stationery (Sales 1:1) 450 450 900Cleaning / Repairs (Fl. Space 4:1) 680 2,720 3,400Insurance (Fl. Space 4:1) 152 608 760Light / Heat (Fl. Space 4:1) 640 2,560 3,200Salaries (Sales 1:1) 20,300 20,300 40,600Equipment Depr. (Fl. Space 4:1) 160 640 800FinancialOverdraft Int. (Sales 1:1) 150 150 300Term Loan Int. (Sales 1:1) 1,850 1,850 3,700
(34,452) (40,808) (75,260)Net Profit 3,548 7,492 11,040+ P+L Balance From Last Year 1,200= P+L Balance To Next Year 12,240
Solutions
115
QUESTION 17.4
Berri Ltd
Schedule of Adjustments (€)
(b) Balance Sheet as at 31/12/-4€ € €
Fixed Assets Cost Depr. Value
Delivery Vans 72,000 28,000 44,000
Equipment 8,000 2,800 5,200
80,000 30,000 49,200
Goodwill 20,000
69,200
Current Assets
Closing Stock – Grocery 23,000
– Drapery 12,500
Debtors 22,800
– Provision for Bed Debts (200) 22,60058,100
– Current LiabilitiesCreditors 7,600VAT 2,600PAYE / PRSI 1,400Bank 3,460
(15,060)
43,040
Total Assets less Current Liabilities 112,240
Financed By
Share Capital Auth Issued Paid-up
€1 Ordinary Shares 100,000 50,000 50,000
Reserves
Profit and Loss Account 12,240
Long-Term Liabilities
Bank Term Loan 50,000
112,240
AdjustmentsTrading Account
Profit / LossAccount
Balance Sheet
1. Van Depreciation 30,000 + 14,000 – 14,000 44,0002. Equipment Depreciation 9,000 + 5,200 – 5,200 14,2003. Debenture Interest 5,600 – 5,600 5,6004. Advertising 2,100 – 700 – 1,400 7005. Stationery 1,800 – 400 – 1,400 400
Leaving Certificate Accounting
116
(a) Trading and Profit and Loss Account for the year ended 31/12/-9Footwear Sportswear Total Footwear Sportswear Total
SalesLess Cost of SalesOpening Stock+ Purchases+ Carriage In+ Import Duty
17,500155,000
1,300–
21,500167,000
–1,700
39,000322,000
1,3001,700
210,000 280,000 490,000
– Closing Stock173,800(17,000)
190,200(18,500)
364,000(35,500)
(156,800) (171,700) (328,500)Gross Profit+ Income – Equipment Repairs
53,200–
108,300490
161,500490
– ExpensesDistributionAdvertising (Sales 3:4)Van Depreciation (Sales 3:4)AdministrationGeneral Expenses (Sales 3:4)Salaries (Sales 3:4)Repairs to Buildings (Fl. Space 3:2)Insurance (Fl. Space 3:2)Bad Debts (Sales 3:4)Stationery (Sales 3:4)Equipment Depr. (Fl. Space 3:2)FinancialDebenture Interest (Sales 3:4)
41
52
3
6006,000
9,00021,0002,1001,680
180600
3,120
2,400
8008,000
12,00028,0001,4001,120
240800
2,080
3,200
1,40014,000
21,00049,0003,5002,800
4201,4005,200
5,600
53,200 108,790 161,990
(46,680) (57,640) (104,320)Net Profit 6,520 51,150 57,670– P+L Balance From Last Year (14,480)= P+L Balance To Next Year 43,190
Solutions
117
QUESTION 17.5
Smith Ltd
Schedule of Adjustments (€)
Balance Sheet as at 31/12/-9 € € €
Fixed Assets Cost Depr ValueDelivery Vans 1. 142,000 44,000 98,000Equipment 2. 35,000 14,200 20,800
177,000 58,200 118,800Goodwill 44,000
162,800Current AssetsClosing Stocks – Footwear 17,000
– Sportswear 18,500Debtors 23,400Advertising Prepaid 4. 700Stationery 5. 500
60,000- Current Liabilities
Creditors 29,000Bank 8,010Debenture Interest Due 3. 5,600VAT 1,600PAYE / PRSI 1,400
(45,610) 14,390
Total Assets Less Current Liabilities 177,190Financed by
Share Capital Auth. Issued Paid-up€1 Ordinary Shares 150,000 80,000 80,000
ReservesGeneral Reserve 14,000
Profit and Loss Account 43,19057,190
Long-Term Liabilities14% Debentures 40,000
177,190
AdjustmentsTrading Account
Profit and LossAccount
Balance Sheet
1. Provision for Bad Debts 780 – 300 – 300 4802. Purchases – Grocery 75,000 – 4,000 71,000 – –3. Purchases – Drapery 150,000 + 4,000 154,000 – –4. Debenture Interest 6,000 – 6,000 6,0005. Investment Income 8,200 – 8,200 8,2006. Rent and Rates 4,000 – 1,000 – 3,000 1,0007. Van Depreciation 20,000 + 12,000 – 16,000 32,0008. Equipment Depreciation 4,000 + 1,200 – 1,200 5,200
Leaving Certificate Accounting
118
(a) Trading and Profit and Loss Account for the year ended 31/12/-2 (€)Drapery Grocery Total Drapery Grocery Total
Sales 200,000 100,000 300,000– Returns In (400) (200) (600)
199,600 99,800 299,400Less Cost of SalesOpening Stock 29,000 24,000 53,000+ Purchases 2. 154,000 71,000 225,000+ Import Duty 1,000 1,300 2,300
184,000 96,300 280,300– Closing Stock (27,000) (21,000) (48,000)
(157,000) (75,300) (232,300)Gross Profit 42,600 24,500 67,100+ IncomeProvision / Bad Debts (Sales 2:1) 1. 200 100 300
42,800 24,600 67,400– ExpensesDistributionVan Depreciation (Sales 2:1) 7. 8,000 4,000 12,000Advertising (Sales 2:1) 1,600 800 2,400AdministrationRent and Rates (Sales 3:1) 6. 2,250 750 3,000Cleaning (Fl. Space 3:1) 900 300 1,200Discount (Sales 2:1) 1,000 500 1,500Equipment Depr. (Fl. Space 3:1) 8. 900 300 1,200FinancialInterest on Loan (Sales 2:1) 1,000 500 1,500Overdraft Interest (Sales 2:1) 200 100 300Debenture Interest (Sales 2:1) 4. 2,000 4,000 6,000
(17,850) (11,250) (29,100)Net Profit 24,950 13,350 38,300+ Investment Income 5. 8,200
46,500– Dividends (7,000)Retained Profits 39,500
Solutions
119
QUESTION 17.6Modern Fashions Ltd
Schedule of Adjustments (€)
(b) Balance Sheet as at 31/12/-2€ € €
Cost Depr. ValueFixed AssetsDelivery Vans 7 80,000 32,000 48,000Equipment 8 16,000 5,200 10,800
96,000 37,200 58,800Goodwill 8,00010% Investments 82,000
148,800Current AssetsClosing Stocks – Drapery 27,000
– Grocery 21,000Debtors 12,000– Provision for Bad Debts 1 (480) 11,520Investment Income Due 5 8,200Rent and Rates Prepaid 6 1,000
68,720- Current LiabilitiesCreditors 15,000Bank 3,020VAT 4,000PAYE / PRSI 3,000Debenture Interest Due 4 6,000
(31,020)37,700
Total Assets less Current Liabilities 186,500Financed byShare Capital Auth. Issued Paid-up€1 Ordinary Shares 150,000 70,000 70,000ReservesGeneral Reserve 12,000Profit and Loss Account 39,500
51,500Long-Term LiabilitiesTerm Loan 15,00012% Debentures 50,000
65,000186,500
AdjustmentsTrading Account
Profit/Loss Account
Balance Sheet
1. Buildings Depreciation 20,000 + 7,000 – 7,000 27,0002. Vans Depreciation 18,000 + 20,000 – 20,000 38,0003. Equipment Depreciation 10,000 + 1,600 – 1,600 11,6004. Debenture Interest 2,000 – 2,000 2,0005. Rates 500 + 500 – 1,000 5006. Provision for Bad Debts 1,800 + 600 – 600 2,4007. Purchases Childrenswear 140,000 – 10,000 130,000 – –8. Purchases Ladieswear 88,000 + 10,000 – 6,000 92,000 – –9. Repairs to Equipment 6,000 – 6,000 –10. Stationery 1,620 – 100 – 1,520 100
Leaving Certificate Accounting
120
(a) Trading and Profit and Loss Account for the year ended 31/12/-4 (€)Ladies Wear
ChildrensWear
Total Ladies Wear
Childrens Wear
Total
Sales 180,000 270,000 450,000Less Cost of SalesOpening Stock 19,000 20,000 39,000+ Purchases 7. 92,000 130,000 222,000+ Import Duty 1,100 1,500 2,600
112,100 151,500 263,600– Closing Stock (21,000) (16,000) (37,000)
(91,100) (135,500) (226,600)Gross Profit 88,900 134,500 223,400+ Income – Alteration Fees 1,000 – 1,000
89,900 134,500 224,400– ExpensesDistributionVan Depreciation (Sales 2:3) 2. 8,000 12,000 20,000Advertising (Sales 2:3) 1,200 1,800 3,000AdministrationBuildings Depreciation (Fl Space 3:1) 1. 5,250 1,750 7,000Equipment Depr. (Fl. Space 3:1) 3. 1,200 400 1,600Rates (Fl. Space 3:1) 5. 750 250 1,000Provision for Bad Debts (Sales 2:3) 6. 240 360 600Equipment Repairs 9. 6,000 – 6,000Stationery (Sales 2:3) 10. 608 912 1,520Salaries (Employees 7:3) 58,660 25,140 83,800Building Repairs (Fl. Space 3:1) 3,375 1,125 4,500Insurance (Fl. Space 3:1) 4,350 1,450 5,800
FinancialDebenture Interest (Sales 2:3) 4. 800 1,200 2,000
(90,433) (46,387) (136,820)Net Profit (Loss) (533) 88,113 87,580– Dividends (10,000)Retained Profits 77,580+ P+L Balance From Last Year 5,000= P+L Balance To Next Year 82,580
Solutions
121
QUESTION 17.7 (HIGHER LEVEL)O’Driscolls Ltd
Schedule of Adjustments (€)
(b) Balance Sheet as at 31/12/-4€ € €
Cost Depr. ValueFixed AssetsBuildingsDelivery VansEquipment
1.2.3.
140,000100,00026,000
27,00038,00011,600
113,00062,00014,400
266,000 76,600 189,400Goodwill 18,000
Current AssetsClosing Stock – Ladieswear
– ChildrenswearDebtors– Provision for Bad Debts 6.
48,000(2,400)
21,00016,000
45,600
207,400
Stock of Stationery 100
– Current LiabilitiesCreditorsVATPAYE/PRSIBankDebenture Interest DueRates Due
4.5.
35,4001,5003,000
1202,000
500
82,700
(42,520)40,180
Total Assets less Current Liabilities 247,580Financed byShare Capital Auth. Issued Paid-up€1 Ordinary Shares 100,000 65,000 65,000ReservesGeneral ReserveProfit and Loss Account
20,00082,580
Long-Term Liabilities10% Debentures
102,580
80,000247,580
AdjustmentsTrading Account
Profit/Loss Account
Balance Sheet
1. Closing Stock – Paint 23,000 – 1,600 21,400 – 21,4002. Bank 5,000 – 20 – 500 – 800 + 540 – – 4,2203. Bank charges 20 – 20 –4. Insurance 2,500 + 500 – 3,000 –5. Rent and Rates 5,200 + 800 – 6,000 –6. Creditors 22,200 + 540 – – 22,7407. Advertising 3,600 – 1,350 – 2,250 1,3508. Van Depreciation 26,000 + 40,000 – 40,000 66,0009. Equipment Depreciation 14,000 + 3,600 – 3,600 17,600
10. Debenture Interest 10,000 + 1,200 – 11,200 1,20011. Preference Dividend 3,500 – 3,500 3,50012. Ordinary Dividend 2,500 – 2,500 2,50013. Goodwill 40,000 + 2,100 – – 42,10014. Discount Received 2,100 – 2,100 –
Leaving Certificate Accounting
122
(a) Trading and Profit and Loss Account for the year ended 31/12/-9 (€)Hardware Paint Total Hardware Paint Total
Sales 350,000 350,000 700,000Less Cost of SalesOpening Stock 48,000 24,000 72,000+ Purchases 280,000 210,000 490,000Carriage In 3,000 3,400 6,400
331,000 237,400 568,400– Closing Stock 1. (42,000) (21,400) (63,400)
(289,000) (216,000) (505,000)Gross Profit 61,000 134,000 195,000+ Income Disc. Recd. (Purchases 4:3) 14. 1,200 900 2,100Key Cutting 2,400 – 2,400
64,600 134,900 199,500– ExpensesDistributionAdvertising (Sales 1:1) 7. 1,125 1,125 2,250Van Depreciation (Sales 1:1) 20,000 20,000 40,000AdministrationBank Charges (Sales 1:1) 3. 10 10 20Insurance (Fl. Space 4:1) 4. 2,400 600 3,000Rent and Rates (Fl. Space 4:1) 5. 4,800 1,200 6,000Equipment Depr. (Bk. Value 2:3) 9. 1,440 2,160 3,600Equipment Repairs (Bk. Value 2:3) 3,120 4,680 7,800Stationery (Sales 1:1) 1,400 1,400 2,800Hire of Paint Mixer – 1,400 1,400Wages (Employees 3:1) 61,650 20,550 82,200Light and Heat (Fl. Space 4:1) 5,920 1,480 7,400FinancialDebenture Interest (Sales 1:1) 10. 5,600 5,600 11,200
(107,465) (60,205) (167,670)Net Profit(Loss) (42,865) 74,695 31,830– DividendsOrdinary 12. (2,500)Preference 11. (3,500)Retained Profits 25,830+ P+L Balance From Last Year 6,900= P+L Balance To Next Year 32,730
Solutions
123
(c) Report on the Advisability of Closing Down the Hardware DepartmentThe Hardware Department is suffering a loss of €42,865 on its operations. In accounting terms the net profit on the firm as a whole would rise to €74,695 if the department was shut down but other factors must be considered:
(i) Has the Hardware Department consistently made losses over a number of trading periods or was this just a‘once-off’ loss?
(ii) Can the floor space of the closed department be utilised by the other department or rented out to anotherfirm?
(iii) Can the staff of the closed department be successfully redeployed within the firm?(iv) What, if any, redundancy costs will arise?(v) The closing down of the Hardware Department will not affect the fixed expenses which must be paid, e.g.
debenture interest, rent and rates etc.
(b) Balance Sheet as at 31/12/-9€ € €
Cost Depr. ValueFixed AssetsDelivery Vans 8. 160,000 66,000 94,000Equipment 9. 36,000 17,600 18,400
196,000 83,600 112,400Goodwill 13. 42,100
154,500Current AssetsClosing Stock – Hardware 42,000
– Paint 1. 21,400Debtors 47,600– Provision for Bad Debts (300) 47,300Bank 3. 4,220Advertising Prepaid 7. 1,350
116,270– Current LiabilitiesCreditors 6. 22,740Debenture Interest Due 10. 1,200Preference Dividend Due 11. 3,500Ordinary Dividend Due 12. 2,500VAT 1,700PAYE / PRSI 1,400
(33,040)83,230
237,730Financed byShare Capital Auth. Issued Paid-up€1 Ordinary Shares 200,000 50,000 50,000€1 7% Preference Shares 200,000 50,000 50,000
400,000 100,000 100,000ReservesGeneral Reserve 25,000Profit and Loss Account 32,730
57,730Long-Term Liabilities14% Debentures 80,000
237,730
Leaving Certificate Accounting
124
QUESTION 17.8 (HIGHER LEVEL)
O’Reilly and Sons Ltd
Schedule of Adjustments (€)
AdjustmentsTrading Account
Profit/Loss Account
Balance Sheet
1. Stock of Footwear 43,000 – 4,000 39,000 – 39,0002. Buildings 400,000 + 5,000 – – 405,0003. Wages 50,000 – 3,000 – 47,000 –4. Purchases Drapery 232,000 – 2,000 230,000 – –5. Advertising 11,500 – 250 – 200 – 11,050 –6. Debenture Interest 1000 +250 + 1,250 – 2,500 1,2507. Bad Debts 200 – 200 –8. Buildings Depreciation 40,000 + 8,100 – 8,100 48,1009. Equipment Depreciation 12,000 + 4,800 – 4,800 16,800
10. Vans Depreciation 22,000 + 11,600 – 11,600 33,60011. Preference Dividend 10,000 – 10,000 10,00012. Ordinary Dividend 15,000 – 15,000 15,00013. Investment Income 1,200 – 1,200 1,20014. Corporation Tax – 12,000 12,000
(a) Trading and Profit and Loss Account for the year ended 31/12/-8 (€)Footwear Drapery Total Footwear Drapery Total
SalesLess Cost of SalesOpening Stock+ Purchases 4.
40,000108,500
39,000230,000
79,000338,500
200,000 300,000 500,000
– Closing Stock 1.148,500(39,000)
269,000(42,000)
417,500(81,000)
(109,500) (227,000) (336,500)Gross Profit– ExpensesDistributionAdvertising (Sales 2:3)Van Depreciation (Sales 2:3)AdministrationWages (Employees 3:2)Bad Debts (Sales 2:3)Buildings Depr. (Fl. Space 1:3)Equipment Depr. (Bk. Value 4:1)Equipment Repairs (Bk. Value 4:1)Tailoring ExpensesRent and Rates (Fl. Space 1:3)Stationery (Sales 2:3)Insurance (Fl. Space 1:3)Directors’ Fees (Sales 2:3)FinancialDebenture Interest (Sales 2:3)
5.10.
3.7.8.9.
6.
4,4204,640
28,20080
2,0253,8401,520–
1,800320450
3,200
1,000
6,6306,960
18,800120
6,075960380
2,0005,400
4801,3504,800
1,500
11,05011,600
47,000200
8,1004,8001,9002,0007,200
8001,8008,000
2,500
90,500 73,000 163,500
(51,495) (55,455) (106,950)Net Profit 39,005 17,545 56,550+ Investment Income 13. 1,200Net Profit Before Taxation– Taxation 14.
57,750(12,000)
– DividendsPreferenceOrdinary
11.12.
45,750
(10,000)(15,000)
Retained Profits+ P+L Balance From Last Year
20,7504,000
= P+L Balance To Next Year 24,750
Solutions
125
(b) Balance Sheet as at 31/12/-8€ € €
Cost Depr. ValueFixed Assets
Buildings 2.8. 405,000 48,100 356,900Equipment 9. 60,000 16,800 43,200Delivery Vans 10. 116,000 33,600 82,400
581,000 98,500 482,50020,000
6% Investments 502,500
Current AssetsClosing Stock – Footwear 1 39,000
– Drapery 42,000Debtors 40,000– Provision for Bad Debts (700) 39,300Investment Income Due 13 1,200
121,500– Current LiabilitiesCreditors 11,000VAT 3,600PAYE / PRSI 400Bank 11,000Debenture Interest Due 6. 1,250Preference Dividend Due 11. 10,000Ordinary Dividend Due 12. 15,000Taxation Due 14. 12,000
(64,250)57,250
Total Assets less Current Liabilities 559,750Financed byShare Capital Auth. Issued Paid-up€1 Ordinary Shares 400,000 300,000 300,000€1 5% Preference Shares 300,000 200,000 200,000
700,000 500,000 500,000ReservesGeneral Reserve 10,000Profit and Loss Account 24,750
34,750Long-Term Liabilities10% Debentures 25,000
559,750
126
Published Accounts(Higher Level Only): Solutions18
QUESTION 18.1
Published Profit and Loss Account for the Year Ended 31/12/-9€’000
Turnover 932Cost of Sales (748)Gross Profit 184Distribution Costs (30)Administration Expenses (142)Other Operating Income 3Operating Profit 15Interest Receivable 19Interest Payable (10)Profit on Ordinary Activities Before Taxation 24Taxation on Profit on Ordinary Activities (4)Profit on Ordinary Activities After Taxation 20Dividends Paid (7)Dividends Proposed (9)Retained Profits 4Profit and Loss Balance brought forward 4Profit and Loss Balance to be carried forward 8
Published Balance Sheet as at 31/12/-9€’000
Fixed Assets Intangible 12Tangible 488Financial 160Current Assets 660Stocks 34Debtors 30
64Creditors: Amounts falling due within one year (66)Net Current Assets (Liabilities) (2)Total Assets less Current Liabilities 658Financed byCreditors: Amounts falling due after more than one year 100Capital and ReservesCalled up Share Capital 550Profit and Loss Account 8
658
Solutions
127
QUESTION 18.2
Notes to the Financial Statements1. Operating Profit
The Operating Profit is arrived at after charging:
Published Profit and Loss Account for the Year Ended 31/12/-1Note €’000
Turnover 869Cost of Sales (621)Gross Profit 248Distribution Costs (26)Administration Expenses (123)Operating Profit (1) 99Interest Receivable 16Interest Payable (12)Profit on Ordinary Activities Before Taxation 103Tax on Profit on Ordinary Activities (20)Profit on Ordinary Activities After Taxation 83Dividends Paid (2) (24)Dividends Proposed (2) (50)Retained Profits 9Profit and Loss Balance brought forward 21Profit and Loss Balance to be carried forward 30
Published Balance Sheet as at 31/12/-1Note €’000
Fixed Assets Intangible 13Tangible (3) 542Financial 160Current Assets 715
Stocks 36Debtors 60
96Creditors: Amounts falling due within one year (91)Net Current Assets (Liabilities) 5Total Assets less Current Liabilities 720Financed byCreditors: Amounts falling due after more than one year 90Capital and ReservesCalled up Share Capital 600Profit and Loss Account 30
720
Depreciation €19,000Amortisation of Goodwill €3,000Directors’ Remuneration €24,000Auditors’ Remuneration €5,000
Leaving Certificate Accounting
128
2. DividendsOrdinary Dividends – Interim Paid (3.5 cent per share) €14,000
– Proposed (10 cent per share) €40,000Preference Dividends – Interim Paid (5 cent per share) €10,000
– Proposed (5 cent per share) €10,0003. Tangible Fixed Assets
QUESTION 18.3
Palace Plc
Buildings Vans TotalCost or Valuation1/1/-1 466,000 140,000 606,000Disposals/Acquisitions – – –Revaluations – – –31/12/-1 466,000 140,000 606,000Depreciation1/1/-1 – 45,000 45,000Charge for the year – 19,000 19,000Revaluation – – –31/12/-1 – 64,000 64,000Net Book Value31/12/-1 466,000 76,000 542,000
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance) 25Purchases (Trial Balance) 179Patents Written Off (Note v) 10
214Closing Stock (Note i) (30)
184(B) Distribution Costs
Rent of Showroom (Trial Balance) 5Depreciation on Vans (Note iii) 10
15(C) Administration Expenses
Salaries and Wages (Trial Balance) 35General Expenses (Trial Balance) 20Rates and Insurance (Trial Balance) 4Depreciation Fixtures and Fittings (Note iii) 3Directors’ Fees (Note iv) 6Auditors’ Fees (Note iv) 1Goodwill written off (Note vi) 3Damages Provision (Note viii) 6
78(D) Interest Payable
Debenture Interest Due (Note iv) 16
(E) Dividends ProposedOrdinary Dividends (Note vii) 10Preference Dividends (Note vii) 10
20
Solutions
129
(F) Intangible Fixed AssetsPatents (Trial Balance) 100Written Off (Note v) (10)Goodwill (Trial Balance) 60Written Off (Note vi) (3)
147(G) Tangible Fixed Assets
Land and Buildings (Trial Balance) 300Revaluation (Note ii) 150 450Delivery Vans (Trial Balance) 40Depreciation Vans (Trial Balance) (10)Profit and Loss Charge (Note iii) (10) 20Fixtures and Fittings (Trial Balance) (12)Depreciation (Trial Balance) (6)Profit and Loss Charge (3) 3
473(H) Creditors: Amounts falling due within one year
Creditors (Trial Balance) 18VAT (Trial Balance) 6Taxation Due (Note iv) 27Debenture Interest Due (Note iv) 16Directors’ Fees Due (Note iv) 6Auditors’ Fees Due (Note iv) 1Proposed Dividends (Note vii) 20
94
Published Profit and Loss Account of Palace Plc for the year ended 31/12/-2Note: €’000 Workings
Turnover 385Cost of Sales (184) (A)Gross Profit 201Distribution Costs (15) (B)Administration Expenses (78) (C)Operating Profit (1) 108Interest Receivable 3Interest Payable (16) (D)Profit on Ordinary Activities Before Taxation 95Tax on Profit on Ordinary Activities (27)Profit on Ordinary Activities After Taxation 68Dividends Proposed (2) (20) (E)Retained Profits 48Profit and Loss Balance brought forward 30Profit and Loss Balance to be carried forward 78
Leaving Certificate Accounting
130
(a) Accounting Policy Notes
StockStocks are valued at the lower of cost and net realisable value.Stocks are valued using First In First Out (FIFO).
(b) Notes to the Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
2. DividendsOrdinary Dividends – Proposed (5 cent per share) €10,000Preference Dividends – Proposed (10 cent per share) €10,000
3. Tangible Fixed Assets
4. Provisions for Liabilities and ChargesThe company is being sued for breach of contract by one of its customers. The company’s legal advisors considerthe company to be liable for damages of €6,000. Consequently, a provision has been made for this amount.
Balance Sheet of Palace Plc as at 31/12/-2
Fixed AssetsIntangibleTangibleFinancial
Note
(3)
€’000
14747320
Workings
(F)(G)
Current AssetsStocksDebtorsBank
640
303088
Creditors: Amounts falling due within one year148(94) (H)
Net Current Assets 54Total Assets less Current Liabilities 694Financed byCreditors: Amounts falling due after more than one yearProvisions for liabilities and chargesCapital and ReservesCalled up CapitalRevaluation ReserveProfit and Loss Account
1606
30015078
694
DepreciationPatent AmortisedGoodwill AmortisedDirectors’ RemunerationAdvisors’ Remuneration
€13,000€10,000
€3,000€6,000€1,000
Land and Buildings
Delivery Vans
Fixtures andFittings
Total
Cost or Valuation (€)1/1/-2Disposals/AcquisitionsRevaluations31/12/-2
300,000–
150,000450,000
40,000––
40,000
12,000––
12,000
352,000–
150,000502,000
Depreciation (€)1/1/-2Charge for the yearRevaluation31/12/-2
––––
10,00010,000
–20,000
6,0003,000–
9,000
16,00013,000
–29,000
Net Book Value (€)31/12/-2 450,000 20,000 3,000 473,000The Land and Buildings were revalued on 31/12/-2 to €450,000
Solutions
131
QUESTION 18.4Pallisade Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance) 15Purchases (Trial Balance) 130
145Closing Stock (Note i) (10)
135(B) Distribution Costs
Salesforce Salaries (Trial Balance) 16Carriage Out (Trial Balance) 2Depreciation Vans (Note ii) 4
22(C) Administration Expenses
Rent, Rates and Insurance (Trial Balance) 25Directors’ Fees (Trial Balance) 10Auditors’ Fees (Trial Balance) 4Salaries and Wages (Trial Balance) 40General Expenses (Trial Balance) 22Depreciation Buildings (Note ii) 4Depreciation Fixtures and Fittings (Note ii) 5Goodwill written off (Note v) 10
120(D) Dividends Proposed
Ordinary Dividends (Note vi) 6Preference Dividends (Note v) 3
9(E) Intangible Fixed Assets
Goodwill (Trial Balance) 76Written Off (Note v) (10)
66(F) Tangible Fixed Assets
Land and Buildings (Trial Balance) 300Revaluation (Note iv) 200Depreciation (Trial Balance) (50)Profit and Loss Charge (Note ii) (4)Revaluation (Note iv) 54 500Delivery Vans (Trial Balance) 45Depreciation (Trial Balance) (25)Profit and Loss Charge (Note ii) (4) 16Fixtures and Fittings (Trial Balance) 25Depreciation (Trial Balance) (7)Profit and Loss Charge (Note ii) (5) 13
529(G) Creditors: Amounts falling due within one year
Creditors (Trial Balance) 45VAT (Trial Balance) 7Taxation Due (Note iii) 60Debenture Interest Due (Note iii) 10Dividends Due (Note vi) 9
131(H) Revaluation Reserve
Land and Buildings (Note iv) 200Depreciation (Note iv) 54
254
Leaving Certificate Accounting
132
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO).
Tangible Fixed AssetsFreehold land is not depreciated. Other tangible fixed assets are depreciated at the following rates:
Published Profit and Loss Account of Pallisade Plc for the year ended 31/12/-3Note €’000 Workings
Turnover 380Cost of Sales (135) (A)Gross Profit 245Distribution Costs (22) (B)Administration Expenses (120) (C)Other Operating Income 5Operating Profit (1) 108Interest Payable (10)Profit on Ordinary Activities Before Taxation 98Tax on Profit on Ordinary Activities (60)Profit on Ordinary Activities After Taxation 38Dividends Paid (2) (15)Dividends Proposed (2) (9) (D)Retained Profits 14Profit and Loss Balance brought forward 42Profit and Loss Balance to be carried forward 56
Published Balance Sheet of Pallisade Plc as at 31/12/-3Note €’000 Workings
Fixed Assets Intangible 66 (E)Tangible (3) 529 (F)Financial 110
705Current Assets
Stocks 10Debtors 55Bank 6
71Creditors: Amount falling due within one year (131) (G)Net Current Assets (Liabilities) (60)Total Assets less Current Liabilities 645Financed byCreditors: Amount falling due after more than one year 100Capital and ReservesCalled up Capital 210Revaluation Reserve 254 (H)General Reserve 10Share Premium 15Profit and Loss Account 56
645
Buildings – 2% on costVans – 20% on reduced valueFixtures and fittings – 20% on cost.
Solutions
133
(b) Notes To The Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
2. DividendsOrdinary dividends – Paid (8 cent per share) €12,000
– Proposed (4 cent per share) €6,000Preference dividends – Paid (5 cent per share) €3,000
– Proposed (5 cent per share) €3,0003. Tangible Fixed Assets
4. Contingent LiabilitiesThere exists a liability not provided for in the accounts. The company is being sued for €30,000 but the company’slegal advisors believe the suit will be unsuccessful.
Depreciation €13,000Goodwill amortised €10,000Directors’ remuneration €10,000Auditors’ remuneration €4,000
Land and Buildings
Delivery Vans
Fixtures andFittings
Total
Cost or Valuation (€)1/1/-3 300,000 45,000 25,000 370,000Disposals/Acquisitions – – – –Revaluations 200,000 – – 200,00031/12/-3 500,000 45,000 25,000 570,000Depreciation (€)1/1/-3 50,000 25,000 7,000 82,000Charge for the year 4,000 4,000 5,000 13,000Revaluation (54,000) – – (54,000)31/12/-3 – 29,000 12,000 41,000Net Book Value (€)31/12/-3 500,000 16,000 13,000 529,000
The Land and Buildings were valued by Selby, Auctioneers and Valuers on 31/12/-3 on an existing use, open market basis.
Leaving Certificate Accounting
134
QUESTION 18.5Plimpton Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance) 1,600Purchases (Trial Balance) 17,000Amortisation of Patent (Note v) 10
18,610Closing Stock (Note i) (1,800)
16,810(B) Administration Expenses
Administration Expenses (Trial Balance) 1,800Depreciation Buildings (Note ii) 10Depreciation Equipment (Note ii) 56Goodwill Written Off (Note vi) 18Directors’ Remuneration (Note iv) 50Auditors’ Remuneration (Note iv) 15
1,949(C) Interest Payable
Debenture Interest Paid (Trial Balance) 16Debenture Interest Due (Note iv) 16
32(D) Intangible Fixed Assets
Patents (Trial Balance) 100Written Off (Note v) 10 90Goodwill (Trial Balance) 180Written Off (Note vi) (18) 162
252(E) Tangible Fixed Assets
Buildings (Trial Balance) 200Revaluation (Note iii) 150Depreciation (Trial Balance) (100)Profit and Loss Charge (Note ii) (10)Revaluation (Note iii) 110 350Equipment (Trial Balance) 280Depreciation (Trial Balance) (100)Profit and Loss Charge (Note ii) (56) 124
474(F) Debtors
Debtors (Trial Balance) 1,700Provision for Bad Debts (Trial Balance) (60)VAT (Trial Balance) 9
1,649(G) Creditors: Amounts falling due within one year
Creditors (Trial Balance) 1,000PAYE / PRSI (Trial Balance) 7Directors’ Remuneration Due (Note iv) 50Auditors’ Remuneration Due (Note iv) 15Taxation Due (Note iv) 190Debenture Interest Due (Note iv) 16Dividends Due (Note vii) 22
1,300(H) Revaluation Reserve
Buildings (Note iii) 150Depreciation (Note iii) 110
260
Solutions
135
Published Profit and Loss Account of Plimpton Plc for the year ended 31/12/-4Note €’000 Workings
Turnover 22,000Cost of Sales (16,810) (A)Gross Profit 5,190Distribution Costs (2,000)Administration Expenses (1,949) (B)Other Operating Income 190Operating Profit (1) 1,431Interest Payable (32) (C)Profit on Ordinary Activities Before Taxation 1,399Tax on Profit on Ordinary Activities (190)Profit on Ordinary Activities After Taxation 1,209Dividends Paid (2) (24)Dividends Proposed (2) (22)Retained Profits 1,163Profit and Loss Balance brought forward 400Profit and Loss Balance to be carried forward 1,563
Published Balance Sheet of Plimpton plc as at 31/12/-4Note: €’000 Workings
Fixed Assets Intangible 252 (D)Tangible (3) 474 (E)Financial (4) 80
806Current AssetsStocks 1,800Debtors 1,649 (F)Bank 12
3461Creditors: Amounts falling due within one year (1,300) (G)Net Current Assets 2,161Total Assets less Current Liabilities 2,967Financed byCreditors: Amount falling due after more than one year 400Capital and ReservesCalled up Capital 500General Reserve 44Share Premium 200Revaluation Reserve 260 (H)Profit and Loss Account 1,563
2,967
Leaving Certificate Accounting
136
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO)
Tangible Fixed AssetsTangible Fixed Assets are depreciated at the following rates:
(b) Notes To The Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
2. DividendsOrdinary dividends – Paid (4.75p per share) €19,000
– Proposed (4.25p per share) €17,000Preference dividends – Paid (5p per share) €5,000
– Proposed (5p per share) €5,0003. Tangible Fixed Assets
4. Listed InvestmentsInvestments held are quoted on the Irish Stock Exchange.The market value of these investments at 31/12/-4 was €95,000.(At 31/12/-3: €92,000)
Buildings – 5% on costEquipment – 20% on cost.
Depreciation €66,000Intangible assets amortised €28,000Directors’ remuneration €50,000Auditors’ remuneration €15,000
Buildings Equipment TotalCost or Valuation (€)1/1/-4 200,000 280,000 480,000Disposals/Acquisitions – – –Revaluation 150,000 – 150,00031/12/-4 350,000 280,000 630,000Depreciation (€)1/1/-4 100,000 100,000 200,000Charge for the year 10,000 56,000 66,000Revaluation (110,000) – (110,000)31/12/-4 – 156,000 156,000Net Book Value (€)31/12/-4 350,000 124,000 474,000
Solutions
137
QUESTION 18.6Proofrock Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance)Purchases (Trial Balance)
702,100
Closing Stock (Note i)2,170
(90)2,080
(B) Administration ExpensesAdministration Expenses (Trial Balance)Depreciation Buildings (Note ii)Depreciation Equipment (Note ii)Auditors’ Remuneration (Note iv)Directors’ Remuneration (Note iv)Goodwill Written Off (Note v)Provision for Damages (Note viii)
700264010408
12836
(C) Dividends ProposedOrdinary Dividends (Note vi)Preference Dividends (Note vi)
304
34(D) Tangible Fixed Assets
Land and Buildings (Trial Balance)Depreciation (Trial Balance)Profit and Loss Charge (Note ii)
1,600(400)(26) 1,174
Equipment (Trial Balance)Depreciation (Trial Balance)Profit and Loss Charge (Note ii)
400(200)(40) 160
1,334(E) Creditors: Amounts falling due within one year
Creditors (Trial Balance)Bank (Trial Balance)VAT (Trial Balance)PAYE/PRSI (Trial Balance)Taxation Due (Note iv)Auditors’ Remuneration Due (Note iv)Directors’ Remuneration Due (Note iv)Dividends Due (Note vi)
120301218
150104034
414
Published Profit and Loss Account of Proofrock Plc for the year ended 31/12/-5Note €’000 Workings
TurnoverCost of Sales
3,900(2,080) (A)
Gross ProfitDistribution CostsAdministration Expenses
1,820(50)
(836) (B)Operating ProfitProfit on Sale of LandInterest Payable
(1) 93420
(10)Profit on Ordinary Activities Before TaxationTax on Profit on Ordinary Activities
944(150)
Profit on Ordinary Activities After TaxationDividends PaidDividends Proposed
(2)(2)
794(40)(34) (C)
Retained ProfitsProfit and Loss Balance brought forward
720210
Profit and Loss Balance to be carried forward 930
Leaving Certificate Accounting
138
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO)
Tangible Fixed AssetsFreehold land is not depreciated. Other tangible assets are depreciated at the following rates:
(b) Notes To The Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
2. DividendsOrdinary dividends – Paid (12 cent per share) €36,000
– Proposed (10 cent per share) €30,000Preference dividends – Paid (4 cent per share) €4,000
– Proposed (4 cent per share) €4,000
3. Tangible Fixed Assets
Published Balance Sheet of Proofrock as at 31/12/-5Note €’000 Workings
Fixed Assets IntangibleTangibleFinancial
(3)(4)
721,334
120(D)
Current AssetsStocksDebtors
1,526
90240
Creditors: Amounts falling due within one year330
(414) (E)Net Current Assets (Liabilities) (84)Total Assets less Current Liabilities 1,442Financed byCreditors: Amounts falling due after more than one yearProvisions for Liabilities and ChargesCapital and ReservesCalled up CapitalProfit and Loss Account
(5)10012
400930
1,442
Buildings – 2% on costEquipment – 10% on cost.
Depreciation €66,000Directors’ remuneration €40,000Auditors’ remuneration €10,000Goodwill amortised €8,000
Land andBuildings Equipment Total
Cost or Valuation (€)1/1/-5Disposals/AcquisitionsRevaluation31/12/-5
1,620,000(20,000)
–1,600,000
400,000––
400,000
2,020,000(20,000)
–2,000,000
Depreciation (€)1/1/-5Charge for the yearRevaluation31/12/-5
400,00026,000
–426,000
200,00040,000
–240,000
600,00066,000
–666,000
Net Book Value (€)31/12/-5 1,174,000 160,000 1,334,000
Solutions
139
4. Financial Fixed AssetsListed investments, cost €75,000, have an Irish Stock Exchange market value of€94,000 at 31/12/-5 (31/12/-4: €78,000)Unlisted investments, cost €45,000, are valued by the directors at €51,000 at31/12/-5 (31/12/-4: €50,000)There were no purchases or sales of investments during the year.
5. Provisions for Liabilities and ChargesA claim for breach of contract of €12,000 has been made against the company by one of its customers. Our legaladvisors believe the company to be liable, so a provision has been made in this year’s accounts.
QUESTION 18.7
Principals Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance) 1,936Purchases (Trial Balance) 20,000Amortisation of Patent (Note v) 25
21,961Closing Stock (Note i) (1,998)
19,963(B) Distribution Costs
Distribution Costs (Trial Balance) 1,660Buildings Depreciation (Note iii) 6Machinery Depreciation (Note iii) 4
1,670(C) Administration Expenses
Administration Expenses (Trial Balance) 1,000Buildings Depreciation (Note iii) 24Machinery Depreciation (Note iii) 36Directors’ Remuneration (Note vi) 60Auditors’ Remuneration (Note vi) 20
1,140(D) Interest Payable
Debenture Interest Paid (Trial Balance) 35Debenture Interest Due (Note vi) 35
70(E) Dividends Proposed
Ordinary Dividends (Note vii) 36Preference Dividends (Note vii) 18
54(F) Intangible Fixed Assets
Patents (Trial Balance) 250Amortised (Note v) (25)
225(G) Tangible Fixed Assets
Land and Buildings (Trial Balance) 400Revaluation (Note iv) 250Depreciation (Trial Balance) (50)Profit and Loss Charge (Note iii) (30)Revaluation (Note iv) 80 650Machinery (Trial Balance) 200Depreciation (Trial Balance) (60)Profit and Loss Charge (Note iii) (40) 100
750
Leaving Certificate Accounting
140
(H) DebtorsDebtors (Trial Balance)Provision for Bad Debts (Trial Balance)VAT (Trial Balance)
3,500(60)42
(I) Creditors: Amounts falling due within one yearCreditors (Trial Balance)Directors’ Remuneration Due (Note vi)Auditors’ Remuneration Due (Note vi)Taxation Due (Note vi)Debenture Interest Due (Note vi)Dividends Due (Note vii)
3,482
1,8516020
4003554
(J) Revaluation ReserveLand and Buildings (Note iv)Depreciation (Note iv)
2,420
25080
330
Published Profit and Loss Account for Principals Plc for the year ended 31/12/-6Note €’000 Workings
TurnoverCost of Sales
25,000(19,963) (A)
Gross ProfitDistribution CostsAdministration ExpensesOther Operating Income
5,037(1,670)(1,140)
76
(B)(C)
Operating ProfitInterest Payable
(1) 2,303(70) (D)
Profit on Ordinary Activities Before TaxationTax on Profit on Ordinary Activities
2,233(400)
Profit on Ordinary Activities after TaxationDividends PaidDividends Proposed
(2)(2)
1,833(42)(54) (E)
Retained ProfitsProfit and Loss Balance Brought Forward
1,737708
Profit and Loss Balance to be Carried Forward 2,445
Published Balance Sheet as at 31/12/-6Note €’000 Workings
Fixed AssetsIntangibleTangibleFinancial
(3)225750180
(F)(G)
1,155Current Assets
StocksDebtorsBank
1,9983,482
260(H)
Creditors: Amounts falling due within one year5,740
(2,420) (I)Net Current Assets 3,320
Total Assets Less Current Liabilities 4,475Financed ByCreditors: Amounts falling due after one yearCapital and ReservesCalled up Share Capital
Revaluation ReserveProfit and Loss Account
7001,000
3302,445
(J)
4,475
Solutions
141
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO)
Tangible Fixed AssetsFreehold land is not depreciated. Other tangible fixed assets are depreciated at the following rates:
(b) Notes To The Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
An exceptional bad debt of €300,000 was incurred during the year as one of the company’s debtors went intobankruptcy
2. DividendsOrdinary dividends – Paid (2 cent per share) €24,000
– Proposed (3 cent per share) €36,000Preference dividends – Paid (4.5 cent per share) €18,000
– Proposed (4.5 cent per share) €18,000
3. Tangible Fixed Assets
4. Capital CommitmentsThe following capital commitments, authorised by the directors have not been provided for in the financialstatements:
Buildings – 10% on costMachinery – 20% on cost.
Depreciation €70,000Directors’ remuneration €60,000Auditors’ remuneration €20,000
Land andBuildings Machinery Total
Cost or Valuation (€)1/1/-6 400 200 600Disposals/Acquisitions – – –Revaluation 250 – 25031/12/-6 650 200 850Depreciation (€)1/1/-6 50 60 110Charge for the year 30 40 70Revaluation (80) – (80)31/12/-6 – 100 100Net Book Value31/12/-6 650 100 750
Contracted for €300,000Not contracted for €400,000
Leaving Certificate Accounting
142
QUESTION 18.8
Shore Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance)Purchases (Trial Balance)
1,2805,800
Closing Stock (Note i)7,080
(1,340)
(B) Distribution CostsDistribution Costs (Trial Balance)Depreciation Buildings (Note iv)Depreciation Fixtures and Fittings (Note iv)
5,740
2,9003
44
(C) Administration ExpensesAdministration Expenses (Trial Balance)Directors’ Remuneration (Note ii)Auditors’ Remuneration (Note ii)Depreciation Buildings (Note iv)Depreciation Fixtures and Fittings (Note iv)Goodwill Written Off (Note v)Provision for Liability (Note viii)
2,947
1,4422057
112440
(D) Interest PayableDebenture Interest Paid (Trial Balance)Debenture Interest Due (Note ii)
1,549
1818
(E) Dividends ProposedOrdinary Dividends (Note vi)Preference Dividends (Note vi)
36
245
(F) Tangible Fixed AssetsBuildings (Trial Balance)Revaluation (Note iii)Depreciation (Trial Balance)Revaluation (Note iii)Profit and Loss Charge (Note iv)
300200(50)50
(10)
29
490Fixtures and Fittings (Trial Balance)Depreciation (Trial Balance)Profit and Loss Charge (Note iv)
260(40)(55) 165
(G) DebtorsDebtors (Trial Balance)Provision for Bad Debts (Trial Balance)
655
2,400(115)
(H) Creditors: Amounts falling due within one yearCreditors (Trial Balance)VAT (Trial Balance)Directors’ Remuneration Due (Note ii)Auditors’ Remuneration Due (Note ii)Taxation Due (Note ii)Debenture Interest Due (Note ii)Dividends Proposed (Note vi)
2,285
1,51091205
3001829
(I) Revaluation ReserveBuildings (Note iii)Depreciation (Note iii)
1,973
20050
250
Solutions
143
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO).
Tangible Fixed AssetsTangible assets are depreciated at the following rates:
Buildings were revalued on 1/1/-6 by Gant Properties on an open market, existing use basis.
Published Profit and Loss Account for the year ended 31/12/-6
Note €’000 WorkingsTurnover 11,900Cost of Sales (5,740) (A)Gross Profit 6,160Distribution Costs (2,947) (B)Administration Expenses (1,549) (C)Operating Income 55Operating Profit (1) 1,719Interest Payable (36) (D)Profit on Ordinary Activities Before Taxation 1,683Tax on Profit on Ordinary Activities (300)Profit on Ordinary Activities after Taxation 1,383Dividends Paid (2) (23)Dividends Proposed (2) (29) (E)Retained Profits 1,331Profit and Loss Balance Brought Forward 340Profit and Loss Balance to be Carried Forward 1,671
Published Balance Sheet as at 31/12/-6Note €’000 Workings
Fixed AssetsIntangible 216Tangible (3) 655 (F)Financial (4) 200
1,071Current Assets
Stocks 1,340Debtors 2,285 (G)Bank 78
3,703Creditors: Amounts falling due within one year (1,973) (H)Net Current Assets 1,730
Total Assets Less Current Liabilities 2,801Financed ByCreditors: Amounts falling due after more than one year 300Provision for Liabilities and Charges (5) 40Capital and Reserves
Called up Share Capital 500Share Premium 40Revaluation Reserve 250 (I)Profit and Loss Account 1,671
2,801
Buildings – 2% on costFixtures and Fittings – 25% on the reduced value
Leaving Certificate Accounting
144
(b) Notes To The Financial Statements
1. Operating ProfitThe operating profit is arrived at after charging:
2. DividendsOrdinary dividends – Paid (4.5 cent per share) €18,000
– Proposed (6 cent per share) €24,000Preference dividends – Paid (5 cent per share) €5,000
– Proposed (5 cent per share) €5,000
4. Financial Fixed AssetsThese are in listed companies on the Irish Stock Exchange. They are shown at cost. Their market value on 31/12/-6is €280,000
5. Provisions for Liabilities and ChargesA claim has been made against the company by an employee for damages as a result of an accident at work. Thecompany’s legal advisors believe the company to be liable for damages of €40,000. A provision for this amount isincluded in this year’s accounts.
Depreciation €65,000Directors’ remuneration €20,000Auditors’ remuneration €5,000Goodwill Amortised €24,000
3. Tangible Fixed Assets
BuildingsFixtures
and Fittings TotalCost or Valuation (€)1/1/-6 300,000 260,000 560,000Disposals/Acquisitions – – –Revaluation 200,000 – 200,00031/12/-6 500,000 260,000 760,000Depreciation (€)1/1/-6 50,000 40,000 90,000Revaluation (50,000) – (50,000)Charge for the year 55,000 65,00031/12/-6 – 95,000 105,000Net Book Value31/12/-6 490,000 165,000 655,000
Solutions
145
QUESTION 18.9DOR Plc
Workings (Sources given in Brackets)(A) Cost of Sales
Opening Stock (Trial Balance) 1,320Purchases (Trial Balance) 14,120Patent Amortised (Note vii) 20
15,460Closing Stock (Note i) (1,438)
14,022(B) Distribution Costs
Distribution Costs (Trial Balance) 1,137Depreciation Buildings (Note iv) 1Depreciation Fixtures and Fittings (Note iv) 18
1,156
(C) Administration ExpensesAdministration Expenses (Trial Balance) 689Bad Debts (Trial Balance) 120Directors’ Remuneration (Note iii) 15Auditors’ Remuneration (Note iii) 3Depreciation Buildings (Note iv) 4Depreciation Fixtures and Fittings (Note iv) 42Provision for Liability (Note viii) 65
938(D) Interest Payable
Debenture Interest Paid (Trial Balance) 18Debenture Interest Due (Note iii) 18
36(E) Tangible Fixed Assets
Land and Buildings (Trial Balance) 250Revaluation (Note vi) 250Depreciation (Trial Balance) (46)Profit and Loss Charge (Note iv) (5)Revaluation (Note vi) 51 500Fixtures and Fittings (Trial Balance) 560Depreciation (Trial Balance) (260)Profit and Loss Charge (Note iv) (60) 240
740(F) Debtors
Debtors (Trial Balance) 1,953Provision for Bad Debts (Trial Balance) (39)VAT (Trial Balance) 22
1,936(G) Creditors: Amounts falling due within one year
Creditors (Trial Balance) 1,645Directors’ Remuneration Due (Note iii) 15Auditors’ Remuneration Due (Note iii) 3Taxation Due (Note iii) 355Debenture Interest Due (Note iii) 18Dividends Proposed (Note x) 51
2,087(H) Revaluation Reserve
Land and Buildings (Note v) 250Depreciation (Note v) 51
301
Leaving Certificate Accounting
146
(a) Accounting Policy NotesStocksStocks are valued at the lower of cost and net realisable value. Stocks are valued using First In First Out (FIFO).
Tangible Fixed AssetsFreehold Land is not depreciated. Other tangible assets are depreciated at the following rates:
Published Profit and Loss Account of DOR Plc for the year ended 31/12/-3
TurnoverCost of Sales
Note €’00016,950
(14,022)
Workings
(A)Gross ProfitDistribution CostsAdministration ExpensesOther Operating Income
2,928(1,156)
(938)31
(B)(C)
Operating ProfitProfit on Sale of LandInterest ReceivableInterest Payable
(1)
(2)
86511015
(36) (D)Profit on Ordinary Activities Before TaxationTax on Profit on Ordinary Activities
954(355)
Profit on Ordinary Activities after Taxation 599(10)
Transfer to ReserveDividends PaidDividends Proposed
(3)(3)
(589)(12)(51)
Retained ProfitProfit and Loss Balance Brought Forward
526500
Profit and Loss Balance to be Carried Forward 1,026
Balance Sheet of DOR Plc as at 31/12/-3
Fixed AssetsIntangibleTangibleFinancial
Note
(4)(5)
€’000
140740350
Workings
(E)
1,230Current Assets
StocksDebtorsBank
1,4381,936
55(F)
Creditors: Amounts falling due within one year3,429
(2,087) (G)Net Current Assets 1,342
Total Assets Less Current Liabilities 2,572Financed ByCreditors: Amounts falling due after more than one yearProvision for Liabilities and ChargesCapital and Reserves
Called up Share CapitalShare PremiumRevaluation ReserveGeneral ReserveProfit and Loss Account
(6)
(7)
30065
70017030110
1,026
(H)
2,572
Buildings – 2% on costFixtures and Fittings – 20% on the reduced value
Solutions
147
(b) Notes To The Financial Statements
1. Operating ProfitOperating profit is arrived at after charging:
There was an exceptional bad debt of €120,000 because a customer was declared bankrupt.
2. Interest PayableThis is payable on debentures repayable within five years.
3. DividendsOrdinary dividends – Paid (.75 cent per share) €9,000
– Proposed (4 cent per share) €48,000Preference dividends – Paid (3 cent per share) €3,000
– Proposed (3 cent per share) €3,000
5. Financial Fixed AssetsListed Investments, cost €350,000, have a market value of €370,000 at 31/12/-3.There were no purchases or sales of investments during the year.
6. Debentures12% Debentures of €300,000 are secured by a fixed charge over the company’s tangible fixed assets. They arerepayable within five years at the company’s option.
7. Called up Share Capital
Capital CommitmentsThe following capital commitments, authorised by the directors have not been provided for in the financialstatements.
8. Contingent LiabilityThe company is being sued by a customer for late delivery of goods. The company’s legal advisors believe thecompany is unlikely to be liable under the terms of the sales contract. They estimate the maximum liability at€25,000.
Depreciation €65,000Patent Amortised €20,000Directors’ remuneration €15,000Auditors’ remuneration €3,000
4. Tangible Fixed AssetsLand and Buildings
Fixtures and Fittings Total
Cost or Valuation (€)1/1/-3 275,000 560,000 835,000Disposals/Acquisitions (25,000) – (25,000)Revaluation 250,000 – 250,00031/12/-3 500,000 560,000 1,060,000Depreciation (€)1/1/-3 46,000 260,000 306,000Charge for the year 5,000 60,000 65,000Revaluation (51,000) – (51,000)31/12/-3 – 320,000 320,000Net Book Value31/12/-3 500,000 240,000 740,000
Authorised Issued Paid-upOrdinary Shares at 50 cent 600,000 600,000 600,0006% Preference Shares at €1 100,000 100,000 100,000
700,000 700,000 700,000
Contracted for €550,000Not contracted for €350,000
148
Analysis and Interpretation of Financial Statements: Solutions19
QUESTION 19.1
(a) (i) Return on Capital Employed
= = 23.5%
(ii) Purchases = 434,000 (iii) Period of Credit allowed to Debtors
=
(iv) Interest Cover
=
(b) (i) Liquid AssetsLiquid Assets are the current assets which are readily convertible into cash. They comprise bank, cash,debtors, short-term investments etc.
(ii) GearingThis is concerned with finance of limited companies. A highly geared company is mainly financed byfixed interest debt (debenture loans and preference shares). a lowly geared company is mainly financedby equity (ordinary shareholders and reserves).
(iii) Rate of Stock TurnoverRate of Stock Turnover measures the frequency with which stock is sold during the trading period. It isgiven by the formula:
For Finn Ltd the rate is given by
If stock turns over 18 times a year then stock is on the shelves for 365/18, or 20 days, on average,between purchase and sale.
Finn Ltd
Sales 516,000– Cost of Sales
Opening Stock 22,000+ Purchases 434,000
456,000– Closing Stock (26,000)
430,000Gross Profit 86,000
– Expenses (51,000)Net Profit 35,000
+ Balance b/f 21,000Balance c/f 56,000
Profit (Before interest and TaxShareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 100× 35,000 12,000 100×+
200,000--------------------------------------------------=’
DebtorsCredit sales------------------------- 365× 30 Days=
Operating ProfitInterest
------------------------------------- 35,000 12,000+12,000
------------------------------------= 3.9 times=
Cost of SalesAverage Stock--------------------------------
430,00022,000 26,000+( ) 2÷
-------------------------------------= 18 times
Solutions
149
(iv) Intangible AssetsIntangible Assets are assets which have value but no physical presence, e.g. goodwill, patents andtrademarks, copyrights and capitalised development costs. Trademarks and Copyrights are known asIntellectual Property. Intangible assets have a finite life, in most cases, so they are written off, oramortised, in the Profit and Loss Account in much the same way as tangible assets are depreciated.
(c) Interests of ShareholdersShareholders are interested in:
(i) Profitability
Return on Shareholders’ funds = =
This rate is compared to the rates of interest offered by risk-free investments, i.e. banks, buildingsocieties, etc.
(ii) Liquidity
Both of these ratios are satisfactory as norms are 1.5:1 and 1:1 for current and liquid ratios respectively.Finn Ltd can meet its short-term debts as they become due.
QUESTION 19.2
(a) (i) Percentage Mark-up on Cost
= = 24%
(ii) Closing Stock = €46,000(iii) Period of Credit received from Creditors
=
(iv) Return on Capital Employed
=
(b) (i) Intangible Assets (See solution to question 19.1)(ii) Dividends
Dividends is the portion of company profit given to shareholders. It is the return on their investment inthe company. Preference shareholders get a fixed return and ordinary shareholders’ dividend depends onthe level of profits available in any year.
(iii) Shareholders’ fundsShareholders’ funds is the total investment by shareholders in a company. It is made up of issued sharecapital plus reserves.
(iv) Rate of Stock Turnover (see solution to question 19.1)
Current Ratio = Current Assets: Current Liabilities = 1.68:1Acid Test = Liquid Assets: Current Liabilities = 1.24:1
McCool Ltd
Sales 310,000
– Cost of Sales
Opening Stock 36,000
Purchases on credit 260,000
296,000
– Closing Stock (46,000)
(250,000)
Gross Profit 60,000
Profit (After Tax and Preference Dividends) Ordinary Shares+Reserves
--------------------------------------------------------------------------------------------------- 100× 35,000120,000----------------- 100× 29%=
Gross ProfitCost of Sales---------------------------- 100× 60,000
250,000----------------- 100×=
CreditorsCredit Purchases------------------------------------- 365× 50,000
260,000----------------- 365× 70 days= =
Profit (Before Interest and Tax)Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 100× =18,000 7,000+
230,000-------------------------------- 100× =10.9%
Leaving Certificate Accounting
150
(c) LiquidityThis year’s liquidity ratios are:
Liquidity has disimproved since the previous year. The company is less able to meet its short-term debts as they fall due.
QUESTION 19.3
(a) (i) Sales = €492,000(ii) Return on Capital Employed
(iii) Mark-up on Cost
=
(iv) Interest Cover
=
(b) (i) Liquid AssetsLiquid assets are the current assets which are readily convertible into cash. They comprise bank, cash,debtors, short-term investments etc.
(ii) GearingGearing is concerned with finance of limited companies. A highly geared company is mainly financedby fixed interest debt (debenture loans and preference shares). A lowly geared company is mainlyfinanced by equity (ordinary shares and reserves).
(iii) Rate of Stock TurnoverRate of stock turnover measures the frequency with which stock is sold during the trading period. It isgiven by the formula:
For Calley Ltd, the rate is given by
If stock turns over 17 times a year then stock is on the shelves for 365/17 or 21 days, on average,between purchase and sale.
Current ratio = Current assets : Current liabilities= 104,000 : 68,000= 1.5 : 1
Acid Test = Current assets less Stock : Current Liabilities= 58,000 : 68,000= .85 :1
Calley Ltd
Sales 492,000
– Cost of Sales
Opening Stock 26,000
+ Purchases 406,000432,000
– Closing Stock (22,000)
(410,000)
Gross Profit 82,000
= Profit (Before Interest and Tax)Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 100× 7,000 9,000 100×+
280,000--------------------------------------------- = 5.7%=
Gross ProfitCost of Sales---------------------------- 100× 82,000
410,000----------------- 100× 20%= =
Operating ProfitInterest
------------------------------------- 7,000 9,000+9,000
----------------------------- 1.7 times= =
Cost of SalesAverage Stock--------------------------------
410,00026,000 22,000+( ) 2÷
------------------------------------------------ 17 times=
Solutions
151
(iv) Intangible AssetsIntangible assets are assets which have value but no physical presence, e.g. goodwill, patents andtrademarks, copyrights and capitalised development costs. Trademarks and copyrights are known asintellectual property. Intangible assets have a finite life, in most cases, so they are written off, oramortised, in the Profit and Loss Account in much the same way as tangible assets are depreciated.
(c) Interests of ShareholdersShareholders are interested in:
(i) ProfitabilityReturn on shareholders’ funds
=
=
This rate is compared to the rates of interest offered by risk-free investments, i.e. banks, buildingsocieties etc.
(ii) Liquidity
Both of these rates are unsatisfactory as norms are 1.5:1 and 1:1 for Current Ratio and Acid Testrespectively. Calley Ltd cannot meet its short-term debts as they fall due.
QUESTION 19.4
(a) (i) PurchasesPurchases = €116,000
(ii) Period of Credit given to Debtors
=
(iii) Return on Capital Employed
(iv) Rate of Stock Turnover
=
Current ratio = Current assets : Current liabilities= 74,000 : 67,000= 1.1 : 1
Acid Test = Current assets less Stock : Current Liabilities= (74,000 – 22,000) : 67,000= 0.77 :1
Raltherm LtdSales 145,000 Fixed Assets 168,000– Cost of sales Current Assets 55,000Opening Stock 17,000 Current Liabilities (25,000)+ Purchases 116,000 30,000
133,000 198,000– Closing Stock (23,000) Financed By
(110,000) Share Capital 130,000Gross Profit 35,000 Reserves – Profit and Loss Account 18,000– Expenses 15,000 Long Term LiabilitiesNet Profit for year 20,000 6% Debentures 50,000– Dividends Proposed (6,500) 198,000Retained Profits 13,500Profit and Loss Balance B/F 4,500Profit and Loss Balance C/F 18,000
Profit (After Interest and Tax)Ordinary Shares + Reserves
------------------------------------------------------------------- 100×
7,000 9,000+220,000
----------------------------- 100× 7.2%=
DebtorsCredit Sales-------------------------- 365× 29,000
145,000----------------- 365× 73 days= =
= Profit (Before Interest and Tax)Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 100× 20,000 3,000 100×+
198,000------------------------------------------------ = 11.6%=
Cost of SalesAverage Stock-------------------------------- 110,000
17,000 23,000+( ) 2÷------------------------------------------------ 110,000
20,000----------------- 5.5 times= = =
Leaving Certificate Accounting
152
(b) (i) AuditorsAuditors are independent experts who give their opinion on whether the accounts give a ‘true and fairview’ of the financial position of the company. They are independent accountants appointed by theshareholders.
(ii) Gearing (See solution to question 19.1)(iii) Liquid Assets (See solution to question 19.1)(iv) Shareholders’ funds (See solution to question 19.2)
(c) GearingThe gearing ratio is given by:Equity capital : Fixed Interest Debt = 148,000 : 50,000= 2.96:1, i.e. a lowly geared company as the majority of its finance comes from equity capital.
QUESTION 19.5
(a) (i) PurchasesPurchases = €140,000
(ii) Return on capital employed
=
(iii) Period of Credit given to Debtors
=
(iv) Gross Margin
=
(b) (i) Rate of stock turnover (See solution to question 19.1)(ii) Memorandum of Association
A Memorandum of Association is a document which governs a company’s dealings with the outsideworld. It states the company name, its objects, its limited liability and its authorised share capital.
(iii) Capital EmployedCapital Employed is the total invested in a company. It is made up of shareholders’ funds (capital andreserves) plus long-term liabilities.
(iv) 8% Cumulative Preference SharesThis is a share entitled to a fixed return of 8% per annum. The return is payable before any payment toordinary shareholders. If dividends are unpaid, due to insufficient profits, the dividend is carried forward(or accumulated) to a future date.
(c) Liquidity RatiosThe liquidity ratios are:
(i) Current Ratio = Current Assets : Current liabilities = 1.6:1(ii) Acid Test = Current Assets less Stock : Current Liabilities = .88:1
The firm has liquidity problems as it cannot meet its short-term debts as they fall due.
Moriarty LtdSales 250,000Less Cost of salesOpening Stock 66,000
+ Purchases 140,000206,000
– Closing Stock (18,000)(188,000)
Gross Profit 62,000
Profit (Before Interest and Tax)Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 100× 40,000 3,600 100×+
160,000------------------------------------------------ = 27.25%=’
DebtorsCredit Sales-------------------------- 365× 15,000
200,000----------------- 365× 27 days= =
Gross ProfitSales
-------------------------- 100× 62,000250,000----------------- 100× 25%= =
Solutions
153
QUESTION 19.6
(a) (i) Cost of Sales = €154,000(ii) Rate of Stock Turnover
=
(iii) Acid Test Ratio
(iv) Total Expenses to Sales Ratio
=
(b) (i) Articles of AssociationThe Articles of Association is a document which governs the internal conditions of a company. It statesthe rights of shareholders, the procedure for meetings and any other internal regulations.
(ii) Debenture (See solution to question 19.3)(iii) Shareholders’ funds (See solution to question 19.2)(iv) Gearing (See solution to question 19.1)
(c) Return on Shareholders’ Funds
The return on shareholders’ funds =
= This is far better than the 13% earned by an investment in the financial
institutions.
Durie LtdSales 29000 Fixed Assets 337,000– Cost of sales Current Assets 82,000Opening Stock 21,000 Current Liabilities (39,000)+ Purchases 156,000 43,000
177,000 380,000– Closing Stock (23,000) Financed By
(154,000) Share Capital 250,000Gross Profit 136,000 Reserves – Profit and Loss Account 90,000– Expenses (36,000) Long-Term LiabilitiesNet Profit for year 100,000 6% Debentures 40,000– Dividends Proposed (25,000) 380,000Retained Profits 75,000Profit and Loss Balance B/F 15,000Profit and Loss Balance C/F 90,000
= Current Assets minus stock : Current Liabilities(82,000 – 23,00) : 39,0001.5 : 1
Cost of SalesAverage Stock-----------------------------------
154,00021,000 23,000+( ) 2÷
----------------------------------------------------- = 7 times=
Total ExpensesSales
--------------------------------- 100× 36,000290,000----------------- 100× 12.4%= =
Profit (After Tax and Preference Dividends) 100×Ordinary Shares + Reserves
-----------------------------------------------------------------------------------------------------------------
100,000 100×250,000 90,000+-------------------------------------- 29%=
Leaving Certificate Accounting
154
QUESTION 19.7
(a) (i) Closing Stock = €35,000(ii) Period of Credit given to Debtors
=
(iii) Period of Credit Received from Creditors
=
(iv) Return on Shareholders’ Funds
=
(b) (i) Debt / Total Capital PercentageThis shows what percentage of total capital invested in a company is represented by debt capital, i.e.
Borrowings. For Avril Ltd it is
(ii) Auditor (See solution to question 19.4)(iii) Liquid Assets (See solution to question 19.1)(iv) Intangible Assets (See solution to question 19.1)
(c) Interest Cover for Year Ended 31/12/-1
=
The interest cover, which measures a firm’s ability to meet its interest payments has dropped from theprevious year. Thus Avril Ltd is less able to meet its interest repayments this year.
QUESTION 19.8James Ltd
(a) (i) PurchasesPurchases for year ended 31/12/-2 = €106,000Purchases for year ended 31/12/-3 = €102,000
Avril Ltd
Sales 150,000– Cost of Sales
Opening Stock 25,000+ Purchases 120,000
145,000– Closing Stock (35,000)
(110,000)Gross Profit 40,000
31/12/-2 31/12/-3 31/12/-2 31/12/-3Sales 140,000 135,000 Fixed Assets 153,000 170,000– Cost of Sales Current Assets 30,000 36,000Opening Stock 14,000 16,000 Current Liabilities (18,000) 23,000+ Purchases 106,000 102,000 12,000 13,000
120,000 118,000 165,000 183,000– Closing Stock (15,000) (19,000)
(105,000) (99,000) Financed ByGross Profit 35,000 36,000 Share Capital 100,000 100,000– Expenses (20,000) (18,000) Reserves 25,000 43,000Net Profit 15,000 18,000 Long-Term Liabilities 40,000 40,000+ P+L Balance b/f 10,000 25,000 165,000 183,000P+L Balance c/f 25,000 43,000
DebtorsCredit Sales-------------------------- 365× 12,000
125,000----------------- 365× 35 days= =
CreditorsCredit Purchases------------------------------------- 365× 22,000
120,000----------------- 365× 66 days= =
Profit (After Tax and Preference Dividends)Ordinary shares+Reserves
-------------------------------------------------------------------------------------------------- 100× 15,00080,000--------------- 100× 18.75%= =
100,000180,000----------------- 100× 56%=
Operating ProfitInterest
------------------------------------- 25,000 5,000+5,000
-------------------------------- 6 times= =
Solutions
155
(ii) Fixed AssetsFixed Assets as at 31/12/-2 = €153,000Fixed Assets as at 31/12/-3 = €170,000
(iii) Mark-up =
for year ended 31/12/-2 =
for year ended 31/12/-3 =
(iv) Acid Test Ratio = Current Assets minus stock : Current Liabilitiesfor year ended 31/12/-2 = 30,000 – 15,000 : 18,000 = .83:1for year ended 31/12/-3 = 36,000 – 19,000 : 23,000 = .74:1
(b) (i) DividendDividend is the portion of company profits which is given to shareholders. It is the return on theirinvestment in the company. Preference shareholders get a fixed return and ordinary shareholdersdividend depends on the level of profits available in any year.
(ii) Shareholders' fundsShareholders’ funds is the total investment by shareholders in a company. It is made up of issued sharecapital plus reserves.
(iii) Rate of Stock TurnoverRate of Stock Turnover measures the frequency with which stock is sold during the trading period. It isgiven by the formula:
for James Ltd. The rate is given as:
for year ended 31/12/-2 =
for year ended 31/12/-3 =
(iv) AuditorsAuditors are independent experts who give their opinion on whether the accounts are a ‘true and fairview’ of the financial position of the company. They are independent accountants appointed by theshareholders.
(c) ProfitabilityThe return on capital employed is the best measure of the profitability of the company as a whole.The return is calculated by:
for year ended 31/12/-2 =
for year ended 31/12/-3 =
James Ltd was more profitable for the year ended 31/12/-3.
Gross ProfitCost of Sales---------------------------- 100×
35,000105,000----------------- 100× 33.3%=
36,00099,000--------------- 100× 36.3%=
Cost of SalesAverage Stock--------------------------------
105,00014,000 15,000+( ) 2÷
------------------------------------------------ 7.2 times=
99,00016,000 19,000+( ) 2÷
------------------------------------------------ 5.6 times=
Profit (Before Interest and Tax)Shareholders funds Long-Term Liabilities+-------------------------------------------------------------------------------------------------- 100×’
15,000 4,000+165,000
-------------------------------- 100× 11.5%=
18,000 4,000+183,000
--------------------------------- 100× 12%=
Leaving Certificate Accounting
156
QUESTION 19.9 (HIGHER LEVEL)
Smith Plc
(a) (i) Opening StockStock Turnover
=
∴ 9x = 602,000x = 68,000∴ Opening Stock + Closing stock = 2(68,000) = 136,000Opening Stock = 136,000 – 60,000 = 76,000
(ii) Dividend Cover
=
(iii) Dividend Yield
=
(iv) Earnings per share
=
(v) Price Earnings Ratio
=
(b) Advice to Potential ShareholdersA potential shareholder would be interested in the following:
1. Profitability of the firm compared with the borrowing rate of financeReturn on capital employed
Return on shareholders’ funds
These rates compare very favourably with the 10% being charged for the finance.2. Proportion of the Company Owned after the Purchase
The holder of 230,000 of the 400,000 ordinary shares issued would have a controlling interest in thecompany. Thus the holder could change any company policy such as dividend payment etc.
Sales 982,000 Fixed Assets (+ Investments) 682,000– Cost of sales (602,000) Current Assets 212,000Gross Profit 380,000 Current Liabilities– Expenses (136,000) Creditors 45,000Net Profit for year 244,000 Dividends 27,000 (72,000)– Dividends Proposed (27,000) 140,000Retained Profits 217,000 822,000Profit and Loss Balance B/F (20,000) Financed ByProfit and Loss Balance C/F 197,000 Shares – Ordinary 400,000
– Preference 100,000Reserves – Profit and Loss Account 197,000Long Term Liabilities8% Debentures 125,000
822,000
Cost of SalesAverage Stock-------------------------------- 602,000
x----------------- 9= =
Profit (After Tax and Preference Dividend)Total Ordinary Dividend
------------------------------------------------------------------------------------------------ 244,000 7,000–20,000
---------------------------------- 11.85 times= =
Dividend per shareMarket price per share--------------------------------------------------- 100×
20,000/400,0002.50
---------------------------------- 0.052.50--------- 100× 2%= = =
Profit (After Tax and Preference dividend)Number of issued ordinary shares
------------------------------------------------------------------------------------------------ = 244,000 7,000–400,000
---------------------------------- 59 cent=
Market price per shareEarnings per share
--------------------------------------------------- 2.500.59--------- 4.2 years or 4.2:1= =
= Profit (Before Interest and Tax) 100×Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 244,000 10,000+
822,000-------------------------------------- 100× = 31%=’
= Profit (After Tax and Preference Dividends)Ordinary shares + reserves
-------------------------------------------------------------------------------------------------- 100× 244,000 7,000–400,000 197,000+---------------------------------------- 100× = 40%=
Solutions
157
3. Present Dividend PolicyEPS : DPS = 59 cent : 5 centThe ordinary shareholders only received 5 cent out of 59 cent they have earned. This represents only8% of their earnings. This is a very poor payout ratio.
4. Profit TrendsLast year’s Profit and Loss balance was €20,000 loss and this has been turned around into a€197,000 profit. Good trend.
5. Investment PolicyA good investment policy as they have gained 80% in value.
6. LiquidityCurrent Ratio = 212,000 : 72,000 = 3:1Acid Test = 152,000 : 72,000 = 2:1These are both above acceptable norms of 1.5:1 and 1:1respectively.
7. SectorLeisurewear is a growth sector.
8. Share PriceShare price is 20 cent below market price offering a discount of €46,000 on the purchase.
9. GearingThe Debt/Total capital percentage is 27% making this a low-geared firm which would suit an ordinaryshareholder as interest commitments are not high.
Overall I would advise my friend to buy the shares.
QUESTION 19.10 (HIGHER LEVEL)
(a) (i) Return on Shareholders’ Funds
=
=
(ii) General Reserve General Reserve at 31/12/-8 was €125,000
(iii) Stock Turnover
= ∴ 8x = 600,000
x = 75,000Opening stock + closing stock = 2(75,000) = 150,000Opening stock = 150,000 – closing stock= 150,000 – 80,000
Sales 950,000 Fixed Assets 666,000– Cost of sales (600,000) Investments 178,000Gross Profit 350,000 Current Assets 270,000– Total Expenses (160,000) Current Liabilities (179,000)Net Profit before tax 190,000 91,000Taxation (50,000) 935,000Profit after tax 140,000 Financed By– Proposed Dividends (86,000) Shares – Ordinary 450,000
54,000 – Preference 200,000– Transfer to Reserve (24,000) Reserves – General Reserve 125,000Retained Profits 30,000 – Profit and Loss Account 50,000Profit and Loss Balance B/F 20,000 Long Term LiabilitiesProfit and Loss Balance C/F 50,000 9% Debentures 110,000
935,000
Profit (After Tax and Preference dividends)Ordinary shares + reserves
-------------------------------------------------------------------------------------------------- 100×
14,000 16,000–450,000 175,000+---------------------------------------- 100× 19.8%=
Cost of salesAverage stock-------------------------------- 600,000
x----------------- 8= =
Leaving Certificate Accounting
158
= 70,000(iv) Dividend Yield
= =
(v) Price Earnings Ratio
=
(b) Report For: Bank requested for loan €300,000By whom prepared: S. OmebodySubject matter: Advisability of granting the loanBody of report:
1. GearingThe debt / total capital percentage of the company is 33%. Thus it is a low geared company. If the loan isgranted the gearing will become high at 65%, making the fixed interest payment on the loan a greater burdenon company profits. The interest cover now is 20 times but this will fall to five times if the loan is granted,unless profits increase.
2. SecurityCollateral is provided by the fixed assets. At the moment the book value of fixed assets available forcollateral is €556,000 (666,000-110,000). The nature of, and depreciation policy on these fixed assets mustbe ascertained.
3. Purpose of the loanThe loan is for productive purposes. This would suit the bank as it is interested in lending for profit-enhancing projects.
4. SectorFurther investigations are necessary to see if Pendrive Plc is performing comparably well with itscompetitors in the pharmaceutical industry. The area of Research and Development is very important.
5. LiquidityCurrent Ratio = 1.51:1Acid Test = 1.06:1These compare favourably with norms of 1.5:1 and 1:1 respectively.
6. ProfitabilityThe return on shareholders’ funds is 19.8%The return on capital employed is 21%Both compare favourably with the 11% charged on the loan.
7. Investment policy – Investments have risen in value by 11%. Good policy.
Recommendations
Grant the loan provided the market value of tangible fixed assets can provide enough collateral for the loan.With increased profits generated by the new machinery, the loan interest should be easily covered.
Dividend per share 100×Market price per share
--------------------------------------------------------- 70,000/450,000 100×1.75
-------------------------------------------------=0.156 100×
1.75-------------------------- 8.9%=
Market Price per ShareEarnings per share
---------------------------------------------------- 1.75140,000 16,000–
450,000-------------------------------------------------------------------------- 1.75
0.28--------- 6.25 years= = =
Solutions
159
QUESTION 19.11 (HIGHER LEVEL)
(b) Interests of Debenture HoldersDebenture holders would be interested in:
1. Repayment dateDebenture loan is due for repayment on 31/12/-6. This is four years hence and there are noreserves set aside for this repayment.
2. SecurityThe security for the debentures is provided by the fixed assets in the year ended 31/12/-1. Thesecurity cover was 460,000:100,000 (or 4.6:1) and in the year ended 31/12/-2 the cover hasimproved to 487,000:100,000 (or 4.9:1). Security cover is satisfactory provided the assets’ bookvalue is a true reflection of their market value.
3. Interest CoverInterest cover has fallen from 4.6 times to four times. This is a drop in cover of 13% in one year. Avery poor trend.
4. LiquidityCurrent ratio fell from 1.25:1 to 1.04:1Acid test ratio fell from .9:1 to .39:1The firm has severe liquidity problems. It is below the norms of 1.5:1 and 1:1 respectively in bothyears and the situation is worsening.
5. Return on Capital Employed 31/12/-2 31/12/-1
= 6.7% 7.6%
The downward trend in profitability is an unhealthy development.6. Dividend Policy (EPS:DPS)
In the year ended 31/12/-1 the company paid each ordinary shareholder a dividend of 5 centdespite earnings per share of only 3.5 cent. In the year ended 31/12/-2, the situation has worsenedto where ordinary shareholders are still receiving a dividend per share of 5 cent despite earningsper share of only 2.5 cent. The company is using profits and reserves to pay dividends, whichwould better suit debenture holders if they were retained as reserves.
7. GearingThe firm is low geared but any possible advantage to the debenture holders is offset by the poor,and worsening, profit performance.
8. SectorThe construction industry is cyclical. If the industry is heading into the downward part of thecycle, the debenture holders can see no end to the poor profit performance.The debenture holders would be worried about their loan repayment in four years time. If thepresent trends in profitability and liquidity continue, they may consider calling in a receiver.
Watson Plc(a) 31/12/-2 31/12/-1
(i) Interest Cover
=
= 4 times = 4.6 times
(ii) Earnings per Share
=
= 2.5p = 3.5p
(iii) Dividend Yield
=
= 6.7% = 5.6%
Operating ProfitInterest Charges------------------------------------- 33,500 11,000–
11,000-------------------------------------
39,500 11,000+11,000
-----------------------------------
Profit (After tax and preference dividend)Number of issued ordinary shares
-----------------------------------------------------------------------------------------------23,500 13,500–
400,000---------------------------------- 27,500 13,500–
400,000----------------------------------
Dividend per ShareMarket Price per Share---------------------------------------------------- 100×
20,000/400,0000.75
---------------------------------- 20,000/400,0000.9
----------------------------------
Profit (Before interest and tax)Shareholders funds Long-term liabilities+------------------------------------------------------------------------------------------------’
Leaving Certificate Accounting
160
QUESTION 19.12 (HIGHER LEVEL)
McMillan Plc
(a) (i) Cash SalesPeriod of Credit allowed to Debtors
=
∴2x = 636,000∴ x = 318,000
Total Sales = 545,000Cash Sales = Total Sales – Credit Sales
= 545,000 – 318,000= 227,000
(ii) Earnings per Share
=
(iii) Dividend Cover
=
(iv) Interest Cover
=
(v) Market Value of SharesDividend Yield
=
= =
∴10x = 25= 2.50
The market value of one ordinary share is €2.50
Sales 545,000 Fixed AssetsCost of sales (218,500) Tangible 500,000Gross Profit 326,500 Intangible 100,000Operating Expenses (160,000) Investments 100,000Operating Profit 166,500 700,000Interest (16,500) Current Assets 190,000Net Profit for year 150,000 Current LiabilitiesDividends Proposed (74,000) Creditors 41,000
76,000 Dividends due 74,000 (115,000)Transfer to Reserve (40,000) 75,000Retained Profits 36,000 775,000Profit and Loss Balance B/F (11,000) Financed ByProfit and Loss Balance C/F 25,000 Shares – Ordinary 200,000
– Preference 300,000Reserves – General Reserve 100,000– Profit and Loss Account 25,000Long Term Liabilities11% Debentures 150,000
775,000
Debtors 12×Credit Sales
----------------------------- 53,000 12×x
-------------------------- 2= =
Profit (After tax and preference dividend)Number of issued ordinary shares
----------------------------------------------------------------------------------------------- 150,000 24,000–200,000
-------------------------------------- 63 cent= =
Profit (After tax and preference dividend)Total ordinary dividend
----------------------------------------------------------------------------------------------- 150,000 24,000–50,000
------------------------------------------ 2.5 times= =
Operating profitInterest charges------------------------------------- 166,500
16,500----------------- 10 times= =
Dividend per share 100×Market price per share
---------------------------------------------------------
50,000/200,000x
---------------------------------- 100× 10%=0.25 100×
x------------------------ 10=
Solutions
161
(b) Interests of Potential ShareholderA potential shareholder would be interested in the following:
1. Profitability of the firm Compared with Borrowing Rate of Finance
Return on capital employed
=
Return on Shareholders’ Funds
=
These rates compare favourably with the 13% being charged for finance. Borrowings will amountto €250,000 with annual interest of €32,500.
2. Proportion of the Company Owned after the PurchaseThe holder of 100,000 ordinary shares would be a major, if not the major shareholder in thecompany. As such he/she would exert great influence over dividend policies and policies ingeneral.
3. Present Dividend PolicyEPS:DPS = 63 cent : 25 centThe ordinary shareholders are 25 cent out of the 63 cent they earned. This is a payout rate of 40%.Shareholders would be satisfied with these figures.
4. Profit TrendsMcMillan Plc. increased its reserves (€11,000) last year to a positive balance of €25,000 this year.This is an improving trend.
5. Investment policyA good investment policy as they have risen 10% in value.
6. LiquidityCurrent ratio = 1.6:1Acid test = 0.8:1Current ratio is acceptable but the acid test ratio is below the accepted norm of 1:1.
7. Contingent LiabilityIf this materialises, then an already poor liquidity situation will worsen.
8. SectorComputer software is a successful but highly mobile industry. Unless the Research andDevelopment function is located in Ireland, the company could lose out to lower wage economiesin Eastern Europe or Asia.
9. DebenturesDebentures are repayable in two years time but there are reserves built up and there is enough timeto meet the €150,000 payout.Overall, this is a sound investment, the only worrying point being the liquidity and the contingentliability. As long as the licence is guaranteed, I would advise my friend to buy the shares.
QUESTION 19.13 (HIGHER LEVEL)
Tinn Plc(a) 31/12/-6 31/12/-5
(i) Return on Shareholders’ Funds
=
= 8.8% = 2.25%
Profit (Before interest and tax) 100×Shareholders funds + Long-Term Liabilities-------------------------------------------------------------------------------------------------- 166,500
775,000----------------- 100× 21%= =
Profit (After tax and preference dividends) 100×Ordinary shares and reserves
--------------------------------------------------------------------------------------------------------------- 150,000 24,000–325,000
------------------------------------- 100× 39%= =
Profit (After tax and preference dividend)Shareholders funds + Long-Term Liabilities( )
--------------------------------------------------------------------------------------------------------’74,000 8,000 100×–
750,000----------------------------------------------- 24,000 8,000 100×–
708,000-----------------------------------------------
Leaving Certificate Accounting
162
(b) Interests of Ordinary ShareholdersOrdinary shareholders would be interested in:
1. Profit trendsReturn on shareholders’ funds has improved from 2.25% to 8.8%. This is a healthy trend.The return on capital employed has risen from 5.2% to 13.6% which compares favourablywith returns from risk free investments.
2. DividendsDividend cover has improved from 1.6 times to 2.75 times. The cover is low but improving.Dividend Policy (EPS:DPS) in the year ended 31/12/-5 was to give 62% of earnings toordinary shareholders as dividends. This dropped to 36% for the year ended 31/12/-6. Thecompany is retaining more profits as reserves.Dividend yield has doubled from 1.3% to 2.6%. The yield is low by comparison with yieldsfrom risk-free investments but the trend is good.
3. LiquidityCurrent ratio has improved from 1.03:1 to 2:1Acid test ratio has improved from 0.3:1 to 1.4:1The liquidity position is much healthier and the trend is good.
4. SectorThe current economic health of the industrial sector would be of interest to shareholders.This is linked directly to the health of the economy as a whole.
5. GearingGearing is low at around 25%. This suits ordinary shareholders as less profit is devoted tofixed interest repayments.
6. Interest coverThis has improved from 4.6 times to 12.6 times. This is a healthy trend.
7. SecurityThe book value of fixed assets has fallen, probably due to depreciation charges. The shareholderswould need to know the nature of and depreciation policy for, all fixed assets.
8. Market PriceThe stock market price may be a guide to the general health of the company. The price hasrisen by 23% in the last year. Coupled with a rising P/E ratio, the indications are that themarket has confidence in the company. However share prices are prone to movement due torumours of takeover bids, general economic conditions, political events and many otherfactors which have little to do with the company itself.
(c) Limitations of Ratio Analysis
1. Ratios deal with figures only. Figures in isolation do not give a full picture of the company.2. Comparisons of the company over time may be misleading if conditions have changed.3. Changes in the value of money due to inflation will distort the ratios.4. Comparisons of different companies must take into consideration different accounting
policies adopted by different firms.
(ii) Dividend Yield
=
= =
= 2.6% = 1.3%
(iii) Interest Cover
=
= 12.6 times = 4.6 times
Dividend per ShareMarket Price per Share---------------------------------------------------- 100× 32,000 8,000/500,000–
1.85----------------------------------------------------- 18,000 8,000/500,000–
1.50-----------------------------------------------------
0.048 100×1.85
-------------------------- 0.02 100×1.50
------------------------
Net profit Interest+Interest
-----------------------------------------------94,000 8,100+
8,100--------------------------------- 29,000 8,100+
8,100---------------------------------
Solutions
163
QUESTION 19.14 (HIGHER LEVEL)
Fryere Plc
(b) Would the Bank grant the Loan?A bank which has been asked for a loan would be interested in:
1. GearingThe firm is low geared but the rate is rising from 30% to 34%. If the loan is granted, the gearingwould rise to 65% making it a highly geared firm. This would make fixed interest repayments agreater burden on company profits. The interest cover is good at 20 times but this would fall if theloan is granted, unless profits increase.
2. Purpose of the LoanThe loan is for productive purposes. This would suit the bank as it is interested in lending for profitgenerating projects.
3. CollateralCollateral is provided by the fixed assets. At the moment, the book value of fixed assets availablefor collateral is €778,000 (898,000 – 120,000). The nature of, and depreciation policy for, thesefixed assets must be ascertained.
4. LiquidityCurrent ratio has improved from 1.03:1 to 1.3:1Acid test ratio has improved from .6:1 to 1.1:1These are healthy trends.
31/12/-7 31/12/-6 31/12/-7 31/12/-6Sales 1,072,000 806,000 Fixed Assets 898,000 728,000Cost of Sales (692,000) (430,000) Current Assets 210,000 200,000Gross Profit 380,000 376,000 Current LiabilitiesOperating Expenses (190,000) (170,000) Creditors (93,200) (136,600)Operating Profit 190,000 206,000 Dividends due (64,000) (57,000)Interest (9,600) (9,600) 950,800 734,400Net Profit 180,400 196,400 Financed byDividends (64,000) (57,000) 8% Debentures 120,000 120,000Retained 116,400 139,400 Shares – Ordinary 500,000 500,000P+L Balance B/F 14,400 (125,000) Shares – Preference 200,000 100,000P+L Balance C/F 130,800 14,400 Reserves 130,800 14,400
950,800 734,400
(a) 31/12/-7 31/12/-6
(i) Earnings per Share
=
= 33 cent = 38 cent
(ii) Return on Shareholders’ Funds x 100
=
= 26% = 37%
(iii) Interest Cover
=
= 20 times = 21 times
(iv) Debt/Total Capital Percentage
= 34% = 30%
Profit (After tax and preference dividend)Number of issued ordinary shares
----------------------------------------------------------------------------------------------- 180,400 14,000–500,000
------------------------------------- 196,400 7,000–500,000
----------------------------------
Profit (After tax and preference dividend)Ordinary shares Reserves+
----------------------------------------------------------------------------------------------- 180,400 14,000–500,000 130,800+---------------------------------------- 196,400 7,000–
500,000 14,000+--------------------------------------
Operating profitInterest
-------------------------------------190,0009,600
----------------- 206,0009,600
-----------------
Debt capitalTotal capital---------------------------- 100×
120,000 200,000+950,800
---------------------------------------- 120,000 100 000,+734,400
------------------------------------------
Leaving Certificate Accounting
164
5. SectorThe fast food sector is bouyant and with increased leisure time will probably expand.
6. ProfitabilityReturn on capital employed has dropped from 28% to 19%.Return on shareholders funds has dropped from 37% to 26%.While the rates of profitability are high, the falling trend is unhealthy.
The bank would grant the loan after careful examination of the security available.
QUESTION 19.15 (HIGHER LEVEL)
(b) Interests of Ordinary ShareholdersOrdinary shareholders would be interested in the following:
1. Profit trendsReturn on shareholders’ funds has improved from 19% to 27%. This is a very healthy trend .Return on capital employed has improved from 18% to 24% which compares favourably with risk-free investments.
2. DividendsDividend cover has dropped slightly from 2 times to 1.58 times. This is low cover.Dividend Policy/(EPS:DPS) in the year ended 31/12/-2 was to give 49% of earnings toshareholders in the form of dividends. This rose to 63% in the year ended 31/12/-3. Shareholderswould be happy with this trend.Dividend yield has risen from 6.7% to 12%. This is a good yield by comparison with most risk-free investments. The trend is rising.
Clodagh Fashions Plc(a) 31/12/-3 31/12/-2
(i) Dividend Yield
=
= =
= 12% = 6.7%
(ii) Return on Shareholders’ Funds
=
= 12% = 6.7%
(iii) Calculation of PurchasesPurchases = Cost of sales+ Closing Stock– Opening stock
579,00078,000
(63,000)
527,00063,000
(58,000)
594,000 532,000
(iv) Cash Purchase FiguresAverage Period of Credit Received
x = 120,000 x = 518,400Cash purchases = Total purchases 594,000 532,000– Credit purchases (120,000) (518,400)
474,000 13,600
Dividend per share 100×Market price per share
--------------------------------------------------------- 68,000 18,000/250,000–1.65
------------------------------------------------------- 43,000 18,000/250,000–1.50
-------------------------------------------------------
0.2 100×1.65
--------------------- 0.1 100×1.50
---------------------
Profit (After tax and preference dividend)Ordinary shares reserves+
----------------------------------------------------------------------------------------------- 97,000 18,000–250,000 43,000+-------------------------------------- 69,000 18,000–
250,000 14,000+--------------------------------------
Creditors 12×Credit purchases-------------------------------------
20,000 12×x
-------------------------- 2= 108,000 12×x
----------------------------- 2.5=
Solutions
165
3. LiquidityCurrent ratio has improved from 1.05 to 1.48:1Acid test ratio has improved from .7:1 to .9:1Liquidity is improving but still remains below the norms of 2:1 and 1:1 for current ratio and acidtest ratio respectively.
4. Debenture Repayment DateDebenture loan is repayable in five years time. Reserves are increasing.
5. SectorHigh quality women’s clothing is a profitable but volatile market. The huge increase in cashpurchases (€13,600 in year ended 31/12/-2 to €474,000 in the year ended 31/12-3) shows areluctance amongst suppliers to grant credit to Clodagh Fashions Plc. What has caused this?
6. GearingGearing has moved from 53% to 50%, i.e. neutral gearing.
7. Interest CoverThe cover has improved from 10.4 times to 14.5 times. This is a healthy trend.
8. SecurityThe book value of fixed assets has fallen, probably due to depreciation charges. The shareholderswould need to know the nature of, and depreciation policy for, these fixed assets.
9. Market PriceSee solution to question 19.13
QUESTION 19.16 (HIGHER LEVEL)
Penn Plc
Sales 870,000 Fixed Assets 715,000Cost of Sales (710,000) Current Assets 190,000Gross Profit 160,000 Current Liabilities (158,000)Operating Expenses (95,600) 32,000Operating Profit 64,400 747,000Interest Charges (14,400) Financed ByNet Profit before Taxation 50,000 Long Term LiabilitiesTaxation (25,000) 12% Debentures 120,000Profit after Taxation 25,000 Share Capital –Ordinary 350,000Proposed Dividends (25,000) – Preference 200,000Retained Profits – ReservesProfit and Loss Balance B/F 60,000 Revaluation Reserve 17,000Profit and Loss Balance C/F 60,000 Profit and Loss Account 60,000
747,000
(a) (i) Interest Cover
=
(ii) Return on Shareholders’ Funds
=
(iii) Opening StockStock Turnover
=
Opening Stock + Closing Stock = 2(71,000) = 142,000Opening stock = 142,000 – Closing Stock
= 142,000 – 112,000= 30,000
Operating profitInterest
------------------------------------- 64,40014,400--------------- 4.47 times= =
Profit (After tax and preference dividend) 100×Ordinary shares Reserves+
-------------------------------------------------------------------------------------------------------------- 25,000 18,000–350,000 77,000+-------------------------------------- 1.6%==
Cost of salesAverage stock-------------------------------- 710,000
x----------------- 10 x∴ 71,000= = =
Leaving Certificate Accounting
166
(b) Report
For: Bank requested for loan €200,000By whom prepared: A. StudentSubject matter: Advisability of granting the loan
Body of report:
1. GearingThe debt/total capital percentage of the company is 16%. Thus it is a low geared company. If the loan isgranted, the gearing will rise to 43% which is still low. The interest cover is 4.47 times at the moment but atthe present profit level, the €26,000 annual interest would reduce the cover to 2.2 times, which is too low forcomfort.
2. SecurityCollateral is provided by the fixed assets. At the moment, the book value of the fixed assets available forcollateral is €595,000 (715,000 – 120,000). The nature of and depreciation policy for these fixed assets mustbe ascertained. The presence of a revaluation reserve in the Balance Sheet shows assets have been revaluedin the past and they may need to be revalued again.
3. Purpose of the LoanThe loan is to finance new technology. The bank would be interested in lending for profit-generatingventures.
4. ProfitabilityThe return on shareholders’ funds is 1.6%The return on capital employed is 8.6%These compare unfavourably with the 13% being charged on the loan. If the profit trend is falling, the loaninterest would become an increasing burden on the company, eventually becoming unsustainable. Projectedprofit figures would be required from the company.
5. LiquidityThe current ratio is 1.2:1 and the acid test is 0.5:1. These are poor when compared with norms of 2:1 and 1:1respectively.
6. SectorThe ice-cream market is seasonal and dependent on good summer weather. The fact that closing stock isnearly four times greater than opening stock suggests that the company may have had a poor year and that itis producing goods that are not selling and being stored. The closing stock may be overvalued.
Recommendation: Refuse the loan.
(iv) Earnings per Share
=
(v) Price Earnings Ratio
=
Profit (After tax and preference dividend)Number of issued ordinary shares
----------------------------------------------------------------------------------------------- 25,000 18,000–350,000
---------------------------------- 2 cent= =
Market price per shareEarnings per share
------------------------------------------------------ 2.000.02---------- 100= =
Solutions
167
QUESTION 19.17
(b) Interests of Ordinary ShareholdersOrdinary shareholders would be interested in the following:
1. Profit TrendsReturn on shareholders’ funds has improved from 21% to 24%. This is a healthy trend. Return oncapital employed has improved from 24.6% to 27%. This is a healthy trend and comparesfavourably with returns from risk-free investments.
2. DividendsDividend cover has dropped slightly from 5.6 times to 5.3 times. Dividend policy (EPS:DPS) inthe year ended 31/12/-6 was to give 18% of earnings to shareholders in the form of dividends. Thishas remained fairly constant at 18.5% in the year ended 31/12/-7. Shareholders would be satisfiedwith this policy. Dividend yield has risen from 3.08% to 4.76%. The trend is positive.
3. LiquidityCurrent ratio has improved from 1.3:1 to 1.4:1Acid test has improved from 0.8:1 to 1.04:1The current ratio is below the accepted norm of 1.5:1 minimumThe acid test is above the accepted norm of 1:1Both ratios have a positive trend.
4. Revaluation ReserveThe revaluation reserve increased by €60,000 over the year. This indicates that a fixed asset,probably land, had a market value in excess of its book value. The increase in the value of the assetrepresents unrealised profits for the shareholders. They would be satisfied with this.
5. SectorFoldups Plc serves the computer industry. This is a growth sector.
6. GearingThe debt/total capital has fallen from 33 1/3% to 26%.The gearing is becoming lower. Coupled with the rising interest cover, this is a healthy trend.
7. Market PriceSee solution to question 19.13
(c) Ratio ComparisonRatios may be compared with the same ratios for 1) a budgeted period, 2) competitors and 3) industry normsor averages.
Foldups Plc(a) 31/12/-7 31/12/-6
(i) Dividend Yield
=
=
= 4.76%
=
= 3.08%(ii) Return on Shareholders’ Funds
=
=
= 24%
=
= 21%
(iii) Price Earnings Ratio
=
=
= 3.9:1
=
= 5.7:1(iv) Interest Cover
=
= 12.6 times = 9 times
Dividend per share 100×Market price per share
--------------------------------------------------------- 27,500/275,000 100×2.10
-------------------------------------------------
0.10 100×2.10
------------------------
16,500/275,000 100×1.95
-------------------------------------------------
0.06 100×1.95
------------------------
Profit (After tax and preference dividends) 100×Ordinary shares Reserves+
--------------------------------------------------------------------------------------------------------------- 159,500 12,000 100×–275,000 345,000+
----------------------------------------------------
147,500 100×620,000
--------------------------------
105,000 12,000 100×–275,000 165,000+
----------------------------------------------------
93,000 100×440,000
-----------------------------
Market price per shareEarnings per share
--------------------------------------------------- 2.10147,500/275,000-------------------------------------
2.100.54---------
1.9593,000/275,000----------------------------------
1.950.34---------
Operating profitInterest charges------------------------------------- 209.500 18,000+
18,000-------------------------------------- 145,000 18,000+
18,000--------------------------------------
168
Cash Flow Statements20QUESTION 20.1
QUESTION 20.2
Mayhope Ltd(a) Reconciliation of Operating Profit to Net Cash Flow
Operating Profit 79,000Depreciation 40,000Stock Decrease 30,000Debtors Increase (20,000)Creditors Increase 21,000Net Cash Inflow from Operating Activities 150,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 150,000Returns on Investments and Servicing of FinanceDividends Paid (27,000)TaxationCorporation Profits Tax Paid (41,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets (100,000)Net Cash Outflow Before Financing (18,000)FinancingShares Issued 20,000Increase in Cash 2,000ProofOpening Bank Balance 5,000Closing Bank Balance 7,000Increase in Cash 2,000
Grimm Ltd(a) Reconciliation of Operating Profit to Net Cash Flow
Operating Profit 91,000Depreciation 11,000Stock Increase (12,000)Debtors Increase (7,000)Creditors Increase 21,000Net Cash Inflow from Operating Activities 104,000
Solutions
169
QUESTION 20.3
Firestal Ltd
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 104,000Returns on Investments and Servicing of FinanceDividends Paid (37,000)TaxationCorporation Profits Tax Paid (31,000)Investing ActivitiesPayments to Acquire Fixed Assets (70,000)Net Cash Outflow Before Financing (34,000)FinancingShares Issued 20,000Decrease in Cash (14,000)ProofOpening Bank Balance 16,000Closing Bank Balance 2,000Decrease in Cash (14,000)
(a) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 430,000Depreciation 30,000Stock Decrease (30,000)Debtors Increase (20,000)Creditors Increase (40,000)Net Cash Inflow from Operating Activities 370,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 370,000Returns on Investments and Servicing of FinanceDividends Paid (140,000)Interest Paid (10,000)
(150,000)TaxationCorporation Profits Tax Paid (150,000)Investing ActivitiesPayments to Acquire Fixed Assets (100,000)Net Cash Outflow Before Financing (30,000)FinancingLoans Repaid (30,000)Shares Issued 100,000
70,000Increase in Cash 40,000ProofOpening Bank Balance 20,000Closing Bank Balance 60,000Increase in Cash 40,000
Leaving Certificate Accounting
170
QUESTION 20.4
QUESTION 20.5 (HIGHER LEVEL)
Tuxedo Plc
Sliotar Ltd(a) Reconciliation of Operating Profit to Net Cash Flow
Operating Profit 44,000
Depreciation 27,000Stock Decrease 18,000Debtors Decrease 5,000Creditors Increase 21,000Net Cash Inflow from Operating Activities 115,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 115,000Returns on Investments and Servicing of FinanceDividends Paid (35,000)TaxationCorporation Tax Paid (53,000)Investing ActivitiesPayments to Acquire Fixed Assets (70,000)Net Cash Outflow Before Financing (43,000)FinancingShares Issued 50,000Increase in Cash 7,000ProofOpening Bank Balance 16,000Closing Bank Balance 23,000Increase in Cash 7,000
Preparatory Notes (in €’000s) Discovered Items marked with AsteriskNote 1 Land and Buildings Account Note 4 Plant and Machinery AccountBalance b/d 320 Disposal 100 Balance b/d 290Bank * 80 Balance c/d 300 Bank * 120 Balance c/d 410
400 400 410 410
Note 2 Depreciation Account Note 5 Depreciation AccountDisposal * 70 Balance b/d 79 Balance b/d 150Balance c/d 75 Profit and Loss 66 Balance c/d 190 Profit and Loss 40
145 145 190 190
Note 3 Disposal Account Note 6 Taxation AccountBuildings 100 Bank 45 Bank * 210 Balance b/d 190Profit * 15 Depreciation * 70 Balance c/d 180 Profit and Loss 200
115 115 390 390
Note 7 Dividends AccountBank * 100 Balance b/d 30Balance c/d 40 Profit and Loss 110
140 140
Solutions
171
QUESTION 20.6
Lapwing Plc
(a) Reconciliation of Operating Profit to Net Cash FlowOperating ProfitDepreciation (Notes 2 and 5)Profit on Disposal (Note 3)Stock IncreaseDebtors IncreaseCreditors Decrease
408,000106,000(15,000)(30,000)(30,000)(10,000)
Net Cash Inflow from Operating Activities 429,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating ActivitiesReturns on Investments and Servicing of FinanceDividends Paid (Note 7)Interest Paid
(100,000)(15,000)
429,000
TaxationCorporation Tax Paid (Note 6)Investing ActivitiesPayments to Acquire Tangible Fixed Assets– Land and Buildings (Note 1)– Plant and Machinery (Note 4)Quoted InvestmentsCash on Disposal (Note 3)
(80,000)(120,000)(50,000)45,000
(115,000)
(210,000)
(205,000)Net Cash Outflow Before FinancingFinancingLoan BorrowedShares Issued
50,00050,000
(101,000)
100,000Decrease in Cash (1,000)ProofOpening Bank BalanceClosing Bank Balance
30,00029,000
Decrease in Cash (1,000)
Preparatory Notes (in €’000s) Discovered Items are marked with an AsteriskNote 1 Land and Buildings Account Note 4 Plant and Machinery Account
Balance b/dBank *
480150
DisposalBalance c/d
120510
Balance b/dBank *
30050
DisposalBalance c/d
100250
630 630 350 350
Note 2 Depreciation Account Note 5 Depreciation AccountDisposal *Balance c/d
70150
Balance b/dProfit and Loss
110110
Disposal *Balance c/d
30100
Balance b/dProfit and Loss
9040
220 220 130 130
Note 3 Disposal Account Note 6 Disposal AccountLand and BuildingsProfit *
12010
BankDepreciation *
6070
Plant and Machinery 100 LossDepreciationBank *
53065130 30
100 100
Leaving Certificate Accounting
172
QUESTION 20.7 (HIGHER LEVEL)
Jaycee Plc
Note 7 Motor Vehicles Note 8 Depreciation AccountBalance b/dBank *
7050 Balance c/d 120 Balance c/d 60
Balance b/dProfit and Loss
3030
120 120 60 60
(a) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 126,000Depreciation (110 + 40 + 30) 180,000Loss on Disposal 5,000Profit on Disposal (10,000)Stock Increase (30,000)Debtors Decrease 20,000Creditors Decrease (60,000)Net Cash Inflow from Operating Activities 231,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 231,000Returns on Investments and Servicing of FinanceDividends Paid (70,000)Interest Paid (9,000)
(79,000)TaxationCorporation Profits Tax Paid (25,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets(150 + 50 + 50) (250,000)Cash on Disposal (60 + 65) 125,000
(125,000)Net Cash Outflow Before Financing 2,000FinancingDebenture Loan 30,000Increase in Cash 32,000ProofOpening Bank Balance (17,000)Closing Bank Balance 15,000Decrease in Cash 32,000
Preparatory Notes Discovered Items are marked with an AsteriskNote 1 Debenture Interest Account Note 2 Investment Interest AccountBank * 26,800 Balance b/d 15,000 Balance b/d 10,000 Bank * 18,000Balance c/d 5,000 Profit and Loss 16,800 Profit and Loss 10,000 Balance c/d 2,000
31,800 31,800 20,000 20,000
Calculation of Debenture Interest Payable Note 5 Calculation of Investment Interest Receivable
€150,000 at 12% for 2/3 year 12,000 €100,000 at 10% for 1 year = 10,000
€120,000 at 12% for 1/3 year 4,800
16,800
Solutions
173
Note 3 Land and Buildings Account Note 6 Plant and Machinery AccountBalance b/d 400,000 Disposal 120,000 Balance b/d 300,000 Disposal 100,000Bank * 312,000 Balance c/d 600,000 Balance c/d 200,000
712,000 712,000 300,000 300,000
Note 4 Depreciation Account Note 7 Depreciation AccountDisposal * 20,000 Profit and Loss 150,000 Disposal * 40,000 Balance b/d 110,000Balance c/d 190,000 Balance b/d * 60,000 Balance c/d 140,000 Profit and Loss 70,000
210,000 210,000 180,000 180,000
Note 5 Disposal Account Note 8 Disposal AccountBuildings 112,000 Bank 90,000 Machinery 100,000 Depreciation * 40,000
Depreciation * 20,000 Loss 6,000Loss * 2,000 Bank * 54,000
112,000 112,000 100,000 100,000
Note 9 Dividends Account Note 10 Taxation AccountBank * 160,000 Balance b/d 70,000 Balance b/d 20,000 Profit and Loss 90,000Balance c/d 39,000 Profit and Loss 129,000 Balance c/d 90,000 Bank * 20,000
199,000 199,000 110,000 110,000
(a) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 231,800Depreciation 130,000Loss on Disposal (Notes 5 and 8) 8,000Stock Increase (30,000)Debtors Increase (18,000)Creditors Increase 21,000Net Cash Inflow from Operating Activities 342,800
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 342,800Returns on Investments and Servicing of FinanceDividends Paid (Note 9) (160,000)Interest Paid (Note 1) (26,800)Interest Received (Note 2) 18,000
(168,800)TaxationTax Rebate (Note 10) 20,000Investing ActivitiesPayments to Acquire Tangible Fixed Assets – (Note 3) (312,000)Cash on Disposal (Notes 5 and 8) 144,000
(168,000)Net Cash Inflow Before Financing 26,000FinancingLoan Repaid (30,000)Shares Issued 10,000
(20,000)Increase in Cash 6,000ProofOpening Bank Balance 21,000Closing Bank Balance 27,000Increase in Cash 6,000
Leaving Certificate Accounting
174
QUESTION 20.8 (HIGHER LEVEL)
Manimex Plc(a) Abridged Profit and Loss Account for the year ended 31/12/-5
Profit and Loss Balance c/f 29,000Profit and Loss Balance b/f 21,000Retained Profits 8,000Dividends (600,000 at 5 cent) 30,000Profit after Taxation 38,000Taxation (Note 7) 42,000Profit before Taxation 80,000Interest Paid (10% on 100,000 for 6 months) 5,000Operating Profit 85,000
Preparatory Notes (in €’000s) Discovered Items are marked with an AsteriskNote 1 Land and Buildings Account Note 4 Equipment AccountBalance b/d 350 Disposal 130 Balance b/d 190 Disposal * 40Bank * 190 Balance c/d 410 Bank * 90 Balance c/d 240
540 540 280 280
Note 2 Depreciation Account Note 5 Depreciation AccountDisposal * 20 Balance b/d 60 Disposal * 10 Balance b/d 75Balance c/d 70 Profit and Loss 30 Balance c/d 92 Profit and Loss 27
90 90 102 102
Note 3 Disposal Account Note 6 Disposal AccountBuildings 130 Bank 160 Equipment * 40 Loss 10Profit 50 Depreciation * 20 Depreciation * 10
180 180 Bank * 2040 40
Note 7 Taxation Account Note 8 Dividends AccountBank 29 Balance b/d 54 Bank * 27 Balance b/d 19Balance c/d 67 Profit and Loss * 42 Balance c/d 22 Profit and Loss 30
96 96 49 49
(b) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 85,000Depreciation (30 + 27 + 20) 77,000Loss on Disposal (Note 6) 10,000Profit on Disposal (Note 3) (50,000)Stock Increase (19,000)Debtors Decrease 30,000Creditors Decrease (16,000)Net Cash Inflow from Operating Activities 117,000
Solutions
175
QUESTION 20.9 (HIGHER LEVEL)Ark Plc
(c) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 117,000Returns on Investments and Servicing of FinanceDividends Paid (Note 8) (27,000)Interest Paid (5,000)
(32,000)TaxationCorporation Profits Tax Paid (Note 7) (29,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets (Note 1) (190,000)(Note 2) (90,000)Cash on Disposal (Notes 3 and 6) 180,000
(100,000)Net Cash Outflow Before Financing (44,000)FinancingShares Issued 110,000Repayment of Loan (100,000)
10,000Decrease in Cash (34,000)ProofOpening Cash and Bank Balance 4,000Closing Cash and Bank Balance (30,000)Decrease in Cash (34,000)
Preparatory Notes (in €’000s) Discovered Items are marked with an AsteriskNote 1 Tangible Fixed Assets Account Note 2 Disposal AccountBalance b/d 290 Disposal 43 Fixed Assets 43 Bank 49Bank 47 Depreciation * 17 Profit * 6Revaluation 33 Balance c/d 310 49 49
370 370
Note 3 Interest Receivable Account Note 4 Interest Payable AccountBalance b/d 4 Bank * 6 Bank * 18 Balance b/d 14Profit and Loss 5 Balance c/d 3 Balance c/d 12 Profit and Loss 16
9 9 30 30
Note 5 Dividends Account Note 6 Taxation AccountBank * 74 Balance b/d 60 Bank * 40 Balance b/d 33Balance c/d 70 Profit and Loss 84 Balance c/d 38 Profit and Loss 45
144 144 78 78
(a) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 198,000Amounts Written Off Intangible Assets 10,000Depreciation (Note 1) 17,000Profit on Disposal (Note 2) (6,000)Stock Increase (18,000)Debtors Decrease 4,000Creditors Decrease (13,000)Net Cash Inflow from Operating Activities 192,000
Leaving Certificate Accounting
176
QUESTION 20.10 (HIGHER LEVEL)
Cain Plc
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 192,000Returns on Investments and Servicing of FinanceDividends Paid (Note 5) (74,000)Interest Paid (Note 4) (18,000)Interest Received (Note 3) 6,000
(86,000)TaxationCorporation Profits Tax Paid (Note 6) (40,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets – (Note 1) (47,000)Payments to Acquire Financial Fixed Assets (30,000)Cash on Disposal 49,000
(28,000)Net Cash Inflow Before Financing 38,000FinancingLoan Repaid (119,000)Shares Issued 50,000
(69,000)Decrease in Cash (31,000)ProofOpening Bank Balance 12,000Closing Bank Balance (19,000)Decrease in Cash (31,000)
Preparatory Notes (in €’000s) Discovered Items are marked with an AsteriskNote 1 Tangible Fixed Assets Note 2 Disposal AccountBalance b/d 1,384 Disposal 110 Assets 110 Bank 130Revaluation 400 Depreciation 152 Profit * 20Bank * 455 Balance c/d 1,977 130 130
2,239 2,239
Note 3 Interest Account Note 4 Calculation of Interest PayableBank * 65 Balance b/d 30 300 at 10% for 1 year = 30
Profit and Loss (Note 4) 35 100 at 10% for 1/2 year = 5
65 65 35
Note 5 Dividends Account Note 6 Taxation AccountBank * 105 Balance b/d 60 Bank * 259 Balance b/d 117Balance c/d 45 Profit and Loss 90 Balance c/d 148 Profit and Loss 290
150 150 407 407
Solutions
177
(c) See textbook page 281.
QUESTION 20.11 (HIGHER LEVEL)
(a) Reconciliation of Operating Profit to Net Cash FlowProfit before Taxation 411,000Add Interest Payable (Note 4) 35,000Operating Profit 446,000Depreciation 152,000Amounts Written Off Intangible Assets 20,000Profit on Disposal (Note 1) (20,000)Stock Increase (69,000)Debtors Increase (15,000)Creditors Decrease (81,000)Net Cash Inflow from Operating Activities 433,000
(b) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 433,000Returns on Investments and Servicing of FinanceDividends Paid (Note 5) (105,000)Interest Paid (Note 4) (65,000)
(170,000)TaxationCorporation Profits Tax Paid (Note 6) (259,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets (Note 1) (455,000)Payments to Acquire Financial Fixed Assets (40,000)Cash on Disposal (Notes 5 and 8) 130,000
(365,000)Net Cash Outflow Before Financing (361,000)FinancingLoan Borrowed 100,000Shares Issued 300,000
400,000Increase in Cash 39,000ProofOpening Bank Balance 73,000Closing Bank Balance 112,000Increase in Cash 39,000
Abel Plc(a) Abridged Profit and Loss Account for the year ended 31/12/-4
Profit and Loss Balance c/f 314,000Profit and Loss Balance b/f 290,000Retained Profits 24,000Dividends (400,000 x 10 cent) 40,000Profit after Taxation 64,000Taxation (Note 10) 85,000Profit before Taxation 149,000Interest Payable (Note 12) 10,000Operating Profit 159,000
Leaving Certificate Accounting
178
Preparatory Notes (in €’000s) Discovered Items are marked with an AsteriskNote 1 Land and Buildings Account Note 7 Vehicles AccountBalance b/d 380 Disposal 20 Balance b/d 112 Disposal 20Revaluation 60 Balance c/d 92Bank * 40 Balance c/d 460 112 112
480 480
Note 2 Depreciation Account Note 8 Depreciation AccountDisposal * 5 Balance b/d 40 Balance b/d 22Balance c/d 70 Profit and Loss 35 Balance c/d 42 Profit and Loss 20
75 75 42 42
Note 3 Disposal Account (Buildings) Note 9 Disposal Account (Vehicles)Buildings 20 Bank 25 Vehicles 20 Loss 12Profit * 10 Depreciation * 5 Bank * 8
30 30 20 20
Note 4 Equipment Account Note 10 Taxation AccountBalance b/d 210 Disposal 30 Bank 75 Balance b/d 75Bank * 120 Balance c/d 300 Balance c/d 85 Profit and Loss * 85
330 330 160 160
Note 5 Depreciation Account Note 11 Dividends AccountDisposal 25 Balance b/d 90 Bank * 30 Balance b/d 40Balance c/d 80 Profit and Loss * 15 Balance c/d 50 Profit and Loss 40
105 105 80 80
Note 6 Disposal Account (Equipment) Note 12 Interest AccountEquipment 30 Depreciation 25 Bank * 9 Balance b/d 5Profit 15 Bank * 20 Balance c/d 6 Profit and Loss 10
45 45 15 15
(b) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 159,000Depreciation (Note 2, 5, 8) 70,000Amount Written off Goodwill 20,000Profit on Disposal (Note 3, 6) (25,000)Loss on Disposal (Note 9) 12,000Stock Decrease 40,000Debtors Decrease 35,000Creditors Increase 10,000Net Cash Inflow from Operating Activities 321,000
Solutions
179
QUESTION 20.12 (HIGHER LEVEL)
(c) Cash Flow StatementOperating ActivitiesNet Cash Inflow from Operating Activities 321,000Returns on Investments and Servicing of FinanceDividends Paid (Note 11) (30,000)Interest Paid (Note 12) (9,000)
(39,000)TaxationCorporation Profits Tax Paid (Note 10) (75,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets – (Notes 1, 4) (160,000)Cash on Disposal (Notes 3, 6, 9) 53,000
(107,000)Net Cash Inflow Before Financing 100,000FinancingLoan Repaid (100,000)Shares Issued 100,000
–Net Cash Increase 100,000ProofOpening Bank Balance (25,000)Closing Bank Balance 75,000Increase in Cash 100,000
Lerner Plc(a) Abridged Profit and Loss Account for the year ended 31/12/-5
Profit and Loss Balance c/f 237,000Profit and Loss Balance b/f 150,000Retained Profits 87,000Dividends 43,000Profit after Taxation 130,000Taxation (Note 10) 41,000Profit before Taxation 171,000Interest Paid €200,000 at 12% 24,000Operating Profit 195,000
Preparatory Notes (in €’000s) Discovered Items marked with AsteriskNote 1 Fixed Assets AccountBalance b/d 510 Disposal 60Bank * 200 Balance c/d 650
710 710
Note 2 Depreciation AccountDisposal 40 Balance b/d 130Balance c/d 150 Profit and Loss Account * 60
190 190
Note 3 Disposal Account (Buildings)Fixed Assets 60 Depreciation 40
Bank 15Loss * 5
60 60
Leaving Certificate Accounting
180
(b) Reconciliation of Operating Profit to Net Cash FlowOperating Profit 195,000Depreciation (Note 2) 60,000Loss on Disposal (Note 3) 5,000Stock Decrease 3,000Debtors Increase (99,000)Creditors Decrease (21,000)Net Cash Inflow from Operating Activities 143,000
(c) Cash Flow StatementOperating Activities 143,000Net Cash Inflow from Operating ActivitiesReturns on Investments and Servicing of FinanceInterest Paid (24,000)Dividends Paid (50,000)
(74,000)TaxationCorporation Profits Tax Paid (33,000)Investing ActivitiesPayments to Acquire Tangible Fixed Assets (Note 1) (200,000)Cash on Disposal (Note 3) 15,000
(185,000)Net Cash Outflow Before Financing (149,000)FinancingIssue of Shares – 100,000At a Premium – 50,000Debentures Issued 50,000
200,000Increase in Cash 51,000ProofBank Balance on 31/12/-4 (63,000)Bank Balance on 31/12/-5 (12,000)Increase in Cash 51,000
181
Club Accounts and Accounts of Service Firms: Solutions21
QUESTION 21.1
Artane Residents Association
QUESTION 21.2
Donegal Musical Society
(b) Limitations of a Receipts and Payments Account (i) Does not take accruals and prepayments into account.
(ii) Does not distinguish between capital and revenue payments and receipts.(iii) Does not record depreciation on assets held(iv) Cannot reveal if activities which should generate profits are, in fact, generating profits.
QUESTION 21.3
Tralee Tennis Club
Receipts and Payments Account for the year ended 31/12/-0Balance b/d 800 Rent of Parish Hall 240Subscriptions 2,400 Printing Costs 250Golf Classic Receipts 1,100 Stationery 150Bingo Receipts 10,800 Bingo Prizes 2,900Sale of Work Receipts 820 Advertising Costs 310
Golf Classics Expenses 410Furniture 2,500Ladders 900Balance c/d 8,260
15,920 15,920
(a) Receipts and Payments Account for the year ended 31/12/-1Balance b/d 350 Hire of Parish Hall 300Subscriptions 1,680 Hire of Costumes 1,500Gate Receipts 3,820 Hire of Musicians 1,700Raffle Ticket Sales 5,000 Raffle Prizes 3,000Church Gate Collection 525 Royalties 300Donation 2,000 Advertising 4,000
Insurance 800Purchase of Props. 1,400Balance c/d 375
13,375 13,375
(a) Calculation of Accumulated Fund on 1/1/-4Assets LiabilitiesClubhouse and Land 120,000 Sundry Expenses Due 120Equipment 19,000Investments 8,000Bar Stock 2,000Subscriptions Due 300Bank 4,120 Accumulated Fund 153,300
153,420 153,420
Leaving Certificate Accounting
182
Notes 1. Bar Trading AccountOpening Stock 2,000 Bar Sales 41,000Bar Purchases 21,000
23,000Closing Stock 23,000Cost of Sales 20,900Profit on Bar 20,100
41,000 41,000
2. Subscriptions AccountBalance b/d 300 Receipts and Payments 24,500Income and Expenditure 23,000Balance c/d 1,200
24,500 24,500
3. Sundry Expenses AccountReceipts and Payments 5,000 Balance b/d 120Balance c/d 180 Income and Expenditure 5,060
5,180 5,180
(b) Income and Expenditure Account for the year ended 31/12/-4Sundry Expenses (Note 3) 5,060 Profit on Bar (Note 1) 20,100Depreciation on Equipment(20% of 19,000 + 6,000) 5,000
Subscriptions (Note 2)Interest
23,0001,600
Profit on Competition (2,500 – 300) 2,200Surplus 37,440 Profit on Raffle (1,500 – 900) 600
47,500 47,500
(c) Balance Sheet as at 31/12/-4Cost Depr. Value
Fixed AssetsClubhouse and Land (120,000 + 30,000) 150,000 – 150,000Equipment (19,000 + 6,000) 25,000 5,000 20,000
175,000 5,000 170,000Investments 8,000Current Assets 178,000Bar Stock 2,100Bank 12,020
14,120Current LiabilitiesSundry Expenses Due 180Subscriptions Prepaid 1,200
(1,380)12,740
190,740Financed ByAccumulated Fund 153,300+ Surplus 37,440
190,740
Solutions
183
QUESTION 21.4
Nenagh Golf Club
(a) Calculation of Accumulated Fund on 1/1/-6Assets LiabilitiesClubhouse 150,000 Expenses Due 420Equipment 20,000 Bar Creditors 1,700Investments 16,000Bar Stock 2,900Subscriptions Due 530Cash 1,540 Accumulated Fund 188,850
190,970 190,970
Notes 1. Subscriptions AccountBalance b/d 530 Receipts and Payments 26,250Income and Expenditure 25,550Balance c/d 170
26,250 26,250
2. Bar Trading AccountOpening Stock 2,900 Bar Sales 24,800Bar Purchases (Note 2a) 14,800
17,700Closing Stock (2,300)Cost of Sales 15,400Profit on Restaurant 9,400
24,800 24,800
2. a Bar Creditors Control AccountReceipts and Payments 14,700 Balance b/d 1,700Balance c/d 1,800 Income and Expenditure 14,800
16,500 16,500
3. General Expenses AccountReceipts and Payments 27,500 Balance b/d 420
Income and Expenditure 26,800Balance c/d 280
27,500 27,500
(b) Income and Expenditure Account for the year ended 31/12/-6General Expenses (Note 3) 26,800 Subscriptions (Note 1) 25,550Loss on Competitions 1,120 Profit on Bar (Note 2) 9,400Depreciation on Equipment(20% of 20,000 + 6,300) 5,260
Interest 1,600
Depreciation on Clubhouse 3,000Surplus 370
36,550 36,550
Leaving Certificate Accounting
184
QUESTION 21.5
Ballina Football Club
(c) Balance Sheet as at 31/12/-6Cost Depr. Value
Fixed AssetsClubhouse 150,000 3,000 147,000Equipment (20,000 + 6,300) 26,300 5,260 21,040
176,300 8,260 168,040Investments 16,000Building Society 3,000
187,040Current AssetsBar Stock 2,300Expenses Prepaid 280Cash 1,570
4,150Current LiabilitiesBar Creditors 1,800Subscriptions Prepaid 170
(1,970)2,180
189,220Financed ByAccumulated Fund 188,850+ Surplus 370
189,220
(a) Calculation of Accumulated Fund on 1/1/-7Assets LiabilitiesClubhouse and Land 120,000 Bar Creditors 2,700Equipment 22,000Bar Stock 4,600Investments 15,000Bar Debtors 200Subscriptions Due 420Expenses Prepaid 120Cash in Hand 410Cash at Bank 3,200 Accumulated Fund 163,250
165,950 165,950
Notes 1. Subscriptions AccountBalance b/d 420 Receipts and Payments 26,000Income and Expenditure 25,850 Balance c/d 270
26,270 26,270
2. Bar Trading AccountOpening Stock 4,600 Sales (Note 2a) 28,680Bar Purchases (Note 2b) 18,500
23,100Closing Stock (5,100)Cost of Sales 18,000Profit on Bar 10,680
28,680 28,680
Solutions
185
(d) Differences between an Income and Expenditure Account and a Receipts and Payments AccountA Receipts and Payments Account is a cash book. It shows opening cash/bank balances, all monies received,all monies paid out and a closing cash/bank balance.An Income and Expenditure Account is a Profit and Loss Account. It shows all revenue receipts andpayments, it includes all prepayments and accruals, it shows all non-cash expenditure, e.g. depreciation andit shows the surplus or deficit of income for the period.
2. a Bar Debtors Control AccountBalance b/d 200 Receipts and Payments 28,600Sales 28,680 Balance c/d 280
28,880 28,880
2. b Bar Creditors Control AccountReceipts and Payments 18,900 Balance b/d 2,700Balance c/d 2,300 Purchases 18,500
21,200 21,200
3. General Expenses AccountBalance b/d 120Receipts and Payments 24,800Balance c/d 290 Income and Expenditure 25,210
25,210 25,210
(b) Income and Expenditure Account for the year ended 31/12/-7General Expenses (Note 3) 25,210 Subscriptions (Note 1) 25,850Depreciation on Equipment(10% of 22,000 + 12,000) 3,400
Profit on Bar (Note 2)Interest
10,6801,800
Surplus 10,220 Profit on Disco 50038,830 38,830
(c) Balance Sheet as at 31/12/-7Cost Depr. Value
Fixed AssetsClubhouse and Land 120,000 – 120,000Equipment (22,000 + 12,000) 34,000 3,400 30,600
154,000 3,400 150,600Investments 15,000
165,600Current AssetsBar Stock 5,100Bar Debtors 280Subscriptions Due 270Cash 710Bank 4,100
10,460Current LiabilitiesBar Creditors 2,300Expenses Due 290
(2,590)7,870
173,470Financed ByAccumulated Fund 163,250+ Surplus 10,220
173,470
Leaving Certificate Accounting
186
QUESTION 21.6
Clare Kayak Club
(b) Calculation of Unpaid Summer MembersUnpaid members at 31/12/-3 1,720
– Unpaid all-year members (3 x 120) (360)= Unpaid summer members 1,360
QUESTION 21.7
Malahide Bowling Club
(a) Subscriptions Account for the year ended 31/12/-31/1/-3 Balance b/d(6 x 120 + 10 x 80) 1,520
1/1/-3 Balance c/d(7 x 120 + 2 x 80) 1,000
31/12/-3 Income and Expenditure(45 x 120 + 160 x 80) 18,200 31/12/-3 Receipts and Payments 18,440Balance c/d(4 x 120 + 12 x 80) 1,440 Balance c/d 1,720
21,160 21,1601/1/-4 Balance b/d 1,720 1/1/-4 Balance b/d 1,440
(a) Calculation of Accumulated Fund on 1/1/-8Assets LiabilitiesClubhouse 230,000 Bar Creditors 1,400Equipment 54,000 Subscriptions Prepaid 190Investments 18,000 Expenses Due 380Bar Stock 3,400 Life Membership 5,000Bar Debtors 160Cash 380 Accumulated Fund 298,970
305,940 305,940
Notes 1. Subscriptions AccountBalance b/d 190
Income and Expenditure 29,670 Receipts and Payments 29,350Balance c/d 170 Balance c/d 300
29,840 29,840
2. Life Members AccountIncome and Expenditure 700 Balance b/d 5,000Balance c/d 6,300 Receipts and Payments 2,000
7,000 7,000
3. Bar Trading AccountOpening Stock 3,400 Sales (Note 3a) 48,070Bar Purchases (Note 3b) 29,000
32,400Closing Stock (4,200)Cost of Sales 28,200Profit on Bar 19,870
48,070 48,070
Unpaid summer membersSummer members subscription---------------------------------------------------------------------- Number of unpaid summer members=
⇒ 1,36080
------------ 17 members=
Solutions
187
3. a Bar Debtors Control AccountBalance b/d 160 Receipts and Payments 48,000Sales 48,070 Balance c/d 230
48,230 48,230
3. b Bar Creditors Control AccountReceipts and Payments 29,300 Balance b/d 1,400Balance c/d 1,100 Purchases 29,000
30,400 30,400
4. General Expenses AccountReceipts and Payments 27,100 Balance b/d 380
Income and Expenditure 26,72027,100 27,100
(b) Income and Expenditure Account for the year ended 31/12/-8General Expenses (Note 4) 26,720 Subscriptions (Note 1) 29,670Depreciation on Equipment(54,000 + 16,000 – 62,000) 8,000
Life Membership (Note 2)Profit on Bar (Note 3)
70019,870
Profit on Poker Classic 4,300Surplus 20,720 Interest 900
55,440 55,440
(c) Balance Sheet as at 31/12/-8Cost Depr. Value
Fixed AssetsClubhouse 230,000 – 230,000Equipment (54,000 + 16,000) 70,000 8,000 62,000
300,000 8,000 292,000Investments 18,000Prize Bonds 3,000Building Society 14,000
327,000Current AssetsBar Stock 4,200Bar Debtors 230Subscriptions Due 300Cash 530
5,260Current LiabilitiesBar Creditors 1,100Subscriptions Prepaid 170
(1,270)3,990
330,990Financed ByAccumulated Fund 298,970+ Surplus 20,720Donation 5,000
324,690Life Membership (Note 2) 6,300
330,990
Leaving Certificate Accounting
188
QUESTION 21.8
Sligo Leisure and Recreation Club
(a) Calculation of Accumulated Fund on 1/1/-9AssetsClubhouse and LandEquipmentInvestmentsBar StockCoffee Shop StockBar DebtorsSubscriptions DueCashBank
500,000200,00020,0002,5001,200
140500150
2,950
LiabilitiesBar CreditorsSubscriptions PrepaidLife MembershipExpenses Due
Accumulated Fund
2,900200
16,000920
707,420
727,440 727,440
Notes 1. Subscriptions AccountBalance b/dIncome and ExpenditureBalance c/d
50027,750
150
Balance b/dReceipts and PaymentsBalance c/d
20027,300
90028,400 28,400
2. Life Members AccountIncome and ExpenditureBalance c/d
1,90017,100
Balance b/dReceipts and Payments
16,0003,000
19,000 19,000
3. Bar Trading AccountOpening StockBar Purchases (Note 3b)Closing StockCost of SalesProfit on Bar
2,50031,20033,700(3,900)29,8008,260
Sales (Note 3a) 38,060
38,060 38,060
3. a Bar Debtors Control AccountBalance b/dSales
14038,060
Receipts and PaymentsBalance c/d
38,000200
38,200 38,200
3. b Bar Creditors Control AccountReceipts and PaymentsBalance c/d
31,0003,100
Balance b/dPurchases
2,90031,200
34,100 34,100
4. Coffee Shop Trading AccountOpening StockPurchases
1,2008,000
Sales 12,000
Closing Stock9,200(800)
Cost of SalesProfit on Coffee Shop
8,4003,600
12,000 12,000
5. Wages AccountReceipts and PaymentsBalance c/d
20,0001,500 Income and Expenditure 21,500
21,500 21,500
Solutions
189
6. General Expenses AccountReceipts and Payments 18,710 Balance b/d
Income and Expenditure920
17,79018,710 18,710
7. Interest Receivable Account
Income and Expenditure 2,5002,500
Receipts and PaymentsBalance c/d
2,000500
2,500
8. Interest Receivable Account
Income and Expenditure 2,500Receipts and PaymentsBalance c/d
2,000500
2,500 2,500
9. Equipment AccountBalance b/dReceipts and Payments
200,00029,000
Income and Expenditure (Depr.)Balance c/d
13,000216,000
229,000 229,000
(b) Income and Expenditure Account for the year ended 31/12/-9Wages (Note 5)General Expenses (Note 4)Depreciation on Equipment (Note 8)
Surplus
21,50017,79013,000
11,720
Subscriptions (Note 1)Life Membership (Note 2)Profit on Bar (Note 3)Profit on Coffee Shop (Note 4)Interest Receivable (Note 7)Locker RentsAdvertising Receipts
27,7501,9008,2603,6002,5004,000
16,000
64,010 64,010
(c) Balance Sheet as at 31/12/-8
Fixed AssetsClubhouse and LandEquipment (Note 8)
Cost
500,000229,000
Depr.
–13,000
Value
500,000216,000
729,000 13,000 716,000Investments 20,000
Current AssetsBar StockCoffee Shop StockSubscriptions DueBar DebtorsInterest DueCash
3,900800900200500280
736,000
Current LiabilitiesSubscriptions PrepaidBar CreditorsWages DueBank Overdraft
1503,1001,5001,590
6,580
(6,340)240
736,240Financed ByAccumulated Fund+ Surplus
707,42011,720
Life Memberships (Note 2)719,14017,100
736,240
Leaving Certificate Accounting
190
QUESTION 21.9 (HIGHER LEVEL)
Ballaghaderreen Cricket Club
(a) Calculation of Accumulated Fund on 1/1/-9Assets LiabilitiesClubhouse and Land 220,000 Levy Reserve Fund 2,800Equipment 80,000 Life Members 6,000Bar Stock 1,300 Bar Creditors 3,200Bar Debtors 190 Wages Due 98Subscriptions Due 300 Loan 10,000Bank Current Account 2,900 Loan Interest Due
(12,000 – 10,000 = 2,000)2,000 Interest = 2 years1 year = 1,000 1,000Accumulated Fund 281,592
304,690 304,690
Notes 1. Subscriptions AccountBalance b/d 300 Receipts and Payments 8,250Income and Expenditure 8,700 Balance c/d 750
9,000 9,000
2. Life Members AccountIncome and Expenditure 700 Balance b/d 6,000Balance c/d 6,300 Receipts and Payments 1,000
7,000 7,000
3. Bar Trading AccountOpening Stock 1,300 Sales (54,002 – 190 + 320) 54,132Purchases (31,600 – 3,200 + 2,900) 31,300
32,600Closing Stock (2,700)Cost of Sales 29,900Profit on Bar 24,232
54,132 54,132
4. Equipment AccountBalance b/d 80,000 Receipts and Payments 5,000Receipts and Payments 6,000 Depreciation 5,000
Balance c/d 76,00086,000 86,000
(b) Income and Expenditure Account for the year ended 31/12/-0Depreciation on Equipment (Note 4) 5,000 Subscriptions (Note 1) 8,700Groundsman’s Wages (15,602 – 98) 15,504 Life Members (Note 2) 700Sundry Expenses 10,500 Profit on Bar (Note 3) 24,232Loan Interest 1,000Surplus 1,628
33,632 33,632
Solutions
191
QUESTION 21.10 (HIGHER LEVEL)
Carndonagh Golf Club
(c) Balance Sheet as at 31/12/-0Cost Depr. Value
Fixed AssetsClubhouse and Land 220,000 – 220,000Equipment (Note 4) 81,000 5,000 76,000
301,000 5,000 296,000Current AssetsBar Stock 2,700Subscriptions Due 750Bar Debtors 320
3,770Current LiabilitiesBar Creditors 2,900Bank Overdraft 3,150
(6,050)(2,280)
293,720
Financed ByAccumulated Fund 281,592Surplus 1,628Entrance Fees 200Donations 1,200
284,620Levy Reserve Fund 2,800Life Memberships (Note 2) 6,300
293,720
(a) Calculation of Accumulated Fund on 1/1/-1Assets LiabilitiesClubhouse and Land 500,000 Life Members 8,000Machinery 25,000 Bar Creditors 2,540Equipment 65,000 Subscriptions Prepaid 750Bar Stock 3,500 Loan 6,000Bar Debtors 720 Loan Interest Due
(7,440 – 6,000 = 1,440)2 years = 1,440 Interest11/2 years = 1,080 1,080
6% Investments 20,000Bank Current Account 900
Accumulated Fund 596,750615,120 615,120
Notes 1. Subscriptions AccountLife Member 500 Balance b/d 750Levy Reserve Fund 6,500 Receipts and Payments 24,800Income and Expenditure 18,200Balance c/d 350
25,550 25,550
Leaving Certificate Accounting
192
2. Bar Trading AccountOpening Stock 3,500 Sales (58,200 – 720 + 290) 57,770Purchases (37,000 – 2,540 + 3,800) 38,260
41,760Closing Stock (5,800)Cost of Sales 35,960Profit on Bar 21,810
57,770 57,770
3. Investment Interest AccountIncome and Expenditure 1,200 Receipts and Payments 800
Balance c/d 4001,200 1,200
4. Equipment AccountBalance b/d 65,000 Disposal 17,000Receipts and Payments 28,000 Depreciation 6,000
Balance c/d 70,00093,000 93,000
5. Equipment Disposal AccountEquipment 17,000 Receipts and Payments 6,000
Loss on Disposal 11,00017,000 17,000
6. Machinery AccountBalance b/d 25,000 Depreciation 2,000
Balance c/d 23,00025,000 25,000
7. Loan AccountReceipts and Payments 6,000 Balance b/d 6,000
8. Loan Interest AccountReceipts and Payments 1,440 Balance b/d 1,080
Income and Expenditure 3601,440 1,440
(b) Income and Expenditure Account for the year ended 31/12/-1Depreciation on Equipment (Note 4) 6,000 Subscriptions (Note 1) 18,200Depreciation on Machinery (Note 6) 2,000 Profit on Bar (Note 2) 21,810Loss on Disposal (Note 5) 11,000 Investment Interest (Note 3) 1,200Loan Interest (Note 8) 360 Profit on Competition (2,540 – 1,980) 560Sundry Expenses 15,800 Locker Rents 2,800
Green Fees 11,200Surplus 20,610
55,770 55,770
Solutions
193
(d) Advice to ClubThe club may dispense with the imposition of the levy on its members. The €20,000 extension can befinanced by withdrawing the money invested in the building society and cashing in some of the 6%investments held.
QUESTION 21.11
Portarlington Tennis Club
(c) Balance Sheet as at 31/12/-1Cost Depr. Value
Fixed AssetsClubhouse and Land 500,000 – 500,000Machinery (Note 6) 25,000 2,000 23,000Equipment (Note 4) 76,000 6,000 70,000
601,000 8,000 593,0006% Investments 20,000Building Society 15,000
628,000Current AssetsBar Stock 5,800Bar Debtors 290Investment Interest Due (Note 3) 400Bank 2,020
8,510Current LiabilitiesBar Creditors 3,800Subscriptions Prepaid 350
(4,150)4,360
632,360Financed ByAccumulated Fund 596,750Surplus 20,610
617,360Levy Reserve 6,500Life Memberships (Note 2) 8,500
632,360
(a) Calculation of Accumulated Fund on 1/1/-2Assets LiabilitiesClubhouse and Grounds 230,000 Life Membership 20,000Bar Stock 12,000 Bar Creditors 9,300Equipment 15,000 Levy Reserve Fund 24,000Bar Debtors 220 Bank 6,1208% Investments 20,000 Loan 30,000Investment Interest Due 400 Loan Interest Due
(35,400 – 3,000 = 5,400)
11/2 years = 5,400 Interest
10 months =
= 3,000
Levies Due (11 x 40) 440Subscriptions Due 1,860
3,000Accumulated Fund 187,500
279,920 279,920
5,4001 1/2------------- 10
12------×
Leaving Certificate Accounting
194
Notes 1. Subscriptions AccountBalance b/d 1,860 Receipts and Payments 65,300Levy Reserve Fund 12,000Levies Due 440Income and Expenditure 51,000
65,300 65,300
2. Bar Trading AccountOpening Stock 12,000 Sales (85,000 – 220 + 310) 85,090Purchases (67,400 – 9,300 + 6,600) 64,700
76,700Closing Stock (15,200)Cost of Sales 61,500Profit on Bar 23,590
85,090 85,090
3. Investment Interest AccountBalance b/d 400 Receipts and Payments 2,000Income and Expenditure 1,600
2,000 2,000
4. Equipment AccountBalance b/d 15,000 Depreciation 4,000Receipts and Payments 17,000 Balance c/d 28,000
32,000 32,000
5. Loan AccountReceipts and Payments 30,000 Balance b/d 30,000
6. Loan Interest AccountReceipts and Payments 5,400 Balance b/d 3,000
Income and Expenditure 2,4005,400 5,400
(b) Income and Expenditure Account for the year ended 31/12/-2Depreciation on Equipment (Note 4) 4,000 Subscriptions (Note 1) 51,000Loan Interest (Note 6) 2,400 Profit on Bar (Note 2) 23,590Loss on Catering (3,700 – 4,100) 400 Investment Interest (Note 3) 1,600General Expenses 28,700 Annual Grant 10,000Surplus 51,590 Profit on Competition (2,800 – 1,900) 900
87,090 87,090
Solutions
195
(d) Advice to the Treasurer:(i) Get outside caterers to come in on a fee-per-job basis. Cease the internal catering as it is running at a loss.
(ii) Get rid of the levy as it is no longer required. The club is cash-rich. It has turned an overdraft of €6,120into a bank balance of €6,180 after paying off a €30,000 loan plus interest accrued.
QUESTION 21.12 (HIGHER LEVEL)
Kinvara Golf Club
(c) Balance Sheet as at 31/12/-2
Fixed AssetsClubhouse and GroundsEquipment
Cost
230,00032,000
Depr.
–4,000
Value
230,00028,000
262,000 4,000 258,0008% InvestmentsPrize Bonds
20,0002,000
Current AssetsBar StockBar DebtorsBank
15,200310
6,180
280,000
Current LiabilitiesBar Creditors
21,690
(6,600)15,090
295,090Financed ByAccumulated FundSurplus
187,50051,590
Life MembershipsLevy Reserve Fund (24,000 + 12,000)
239,09020,00036,000
295,090
(a) Calculation of Accumulated Fund on 1/1/-3Assets LiabilitiesEquipment 25,000 Life Membership 10,000Bar Debtors 610 Bar Creditors 4,900Investment Interest Due 350 Levy Reserve Fund 15,000Rent Prepaid 4,000 Bank Current Account 9,350Prize Bonds 5,000 Loan 5,000Bar Stock 7,000 Loan Interest Due
(6,392 – 5,000 = 1,392)2 years = 1,392
20 months =
= 1,160
11% Investments(2,550 – 350 = 2,200)11% = 2,200100% = 20,000 20,000 1,160
Subscriptions Due 1,500 Accumulated Fund 18,05063,460 63,460
Notes 1. Subscriptions AccountBalance b/dLevy Reserve FundLife MembershipIncome and Expenditure
1,50015,0005,000
36,000
Receipts and Payments 57,500
57,500 57,500
1,39224
------------- 20×
Leaving Certificate Accounting
196
2. Bar Trading AccountOpening StockPurchases (72,380 – 4,900 + 9,600)
7,00077,080
Sales (85,000 – 610 + 380) 84,770
*Closing Stock
84,080(9,000)
Cost of SalesProfit on Bar
75,0809,690
84,770 84,770
3. Equipment AccountBalance b/d 25,000 Disposal
DepreciationBalance c/d
8,0002,000
15,00025,000 25,000
(b) Income and Expenditure Account for the year ended 31/12/-3Depreciation on Equipment (Note 3) 2,000 Subscriptions (Note 1) 36,000Loss on Catering (2,600 – 4,700) 2,100 Profit on Bar (Note 2) 9,690Loss on Disposal 4,000 Investment Interest 2,200Rent (30,000 + 4,000 – 5,000) 29,000General Expenses 25,300Loan Interest (1,392 – 1,160) 232 Deficit 14,742
62,632 62,632
(c) Balance Sheet as at 31/12/-3Cost Depr. Value
Fixed AssetsEquipment 17,000 2,000 15,00011% Investments 20,000Prize Bonds 5,000
40,000Current AssetsBar Stock 9,000Bar Debtors 380Rent Prepaid (2 months) 5,000Bank 18,528
32,908Current LiabilitiesBar Creditors (9,600)
23,30863,308
Financed ByAccumulated Fund 18,050Deficit (14,742)
3,308Prize Bond Prize 10,000Lotto Grant 5,000
18,308Levy Reserve Fund (15,000 + 15,000) 30,000Life Membership (10,000 + 5,000) 15,000
63,308
Solutions
197
(d) Advice to the Treasurer:(i) The levy should be continued as the purchase of the land will enable the club to reduce or discontinue
paying rent which is its main expense.(ii) The deficit of income must be addressed by
a) Discontinuing the catering.b) Investigating the bar profit which is only 11% of sales, far below the norm for the pub industry.c) Increase subscriptions (at present they are €120 per member).d) Sell more life memberships.
(iii) The capital receipts cannot be expected to recur. The investments may have to be liquidated to provideworking capital next year.
QUESTION 21.13 (HIGHER LEVEL)
Newbridge Basketball Club
(a) Calculation of Accumulated Fund on 1/1/-4Assets LiabilitiesClubhouse and Arena 300,000 Life Membership 16,000Equipment 17,000 Levy Reserve Fund 15,000Bar Stock 6,000 Bar Creditors 3,5007% Government Investments 10,000 Wages Due 500Bar Debtors 110 Loan 20,000Bank 12,000 Loan Interest Due
(23,780 – 20,000 = 3,780)11/2 years = 3,7801 year = 2,520 2,520
Investment Interest Due 200Levies Due (14 x 50) 700
Subscriptions Due 1,050 Accumulated Fund 289,540347,060 347,060
Notes 1. Subscriptions AccountBalance b/dLife MembersLevy Reserve FundLevies DueIncome and Expenditure
1,0504,0007,500
70042,750
Receipts and Payments 56,000
56,000 56,000
2. Life Membership AccountIncome and ExpenditureBalance c/d
2,50017,500
Balance b/dSubscriptions
16,0004,000
20,000 20,000
3. 7% Government Investment Interest AccountBalance b/dIncome and Expenditure
200700
Receipts and Payments 900
900 900
4. Bar Trading AccountOpening StockPurchases (49,000 – 3,500 + 4,800)
6,00050,300
Sales (76,000 – 110 + 240) 76,130
*Closing Stock
56,300(6,400)
Cost of SalesBarman’s Wages (16,500 – 500)
49,90016,000
*Profit on Bar
65,90010,23076,130 76,130
Leaving Certificate Accounting
198
(d) Advice to the Treasurer(i) Renegotiate a sponsorship agreement with the existing sponsor or seek a new sponsor.
(ii) With new sponsorship in place, the levy may be discontinued as there are funds available within theclub (Investments and bank balance) to finance the extension.
5. Equipment AccountBalance b/dReceipts and Payments
17,00011,000
DisposalDepreciation (20% of 24,000)Balance c/d
4,0004,800
19,20028,000 28,000
6. 9% Investment Bonds Interest AccountIncome and Expenditure 540 Balance c/d 540
540 540
7. Loan AccountReceipts and Payments 20,000 Balance b/d 20,000
8. Loan Interest AccountReceipts and Payments 3,780 Balance b/d
Income and Expenditure2,5201,260
3,780 3,780
(b) Income and Expenditure Account for the year ended 31/12/-4Depreciation on Equipment (Note 5)Loan Interest (Note 8)Loss on Disposal (4,000 – 3,000)Sundry Expenses
Surplus
4,8001,2601,000
39,720
31,540
Subscriptions (Note 1)Life Membership (Note 2)7% Interest (Note 3)Profit on Bar (Note 4)9% Interest (Note 6)SponsorshipProfit on Catering (2,800 – 1,200)
42,7502,500
70010,230
54020,0001,600
78,320 78,320
(c) Balance Sheet as at 31/12/-4
Fixed AssetsClubhouse and ArenaEquipment (Note 5)
Cost
300,00024,000
Depr.
–4,800
Value
300,00019,200
324,000 4,800 319,2007% Government Investments9% Investments Bonds
10,00012,000
Current AssetsBar StockBar Debtors9% Investment Interest DueBank
6,400240540
17,500
341,200
Current LiabilitiesBar Creditors
24,680
(4,800)19,880
361,080Financed ByAccumulated FundSurplus
289,54031,540
Levy Reserve Fund (15,000 + 7,500)Life Membership (Note 2)
321,08022,50017,500
361,080
Solutions
199
QUESTION 21.14 (HIGHER LEVEL)
Merrion Bowling Club
(a) Calculation of Accumulated Fund on 1/1/-5Assets LiabilitiesClubhouse and Greens 300,000 Bar Creditors 3,500Bar Stock 12,000 Life Memberships 24,000Equipment 16,000 Subscriptions Prepaid 300Bar Debtors 200 Greenkeeper’s Wages Due 150Subscriptions Due 400 Loan 16,000Investment Interest Due 280 Loan Interest Due
(20,800 – 16,000 = 4,800)21/2 years = 4,800
21 months =
= 3,360 3,360
Bank 2,8007% Government Investments(1,120 – 280 = 840)7% = 840100% = 12,000 12,000
Accumulated Fund 296,370343,680 343,680
Notes 1. Subscriptions AccountBalance b/d 400 Balance b/d 300Life Members 4,000 Receipts and Payments 23,700Income and Expenditure 20,000Balance c/d 400 Balance c/d 800
24,800 24,800
2. Equipment AccountBalance b/d 16,000 Depreciation 3,000Receipts and Payments 12,000 Balance c/d 25,000
28,000 28,000
3. Bar Trading AccountOpening Stock 12,000 Sales (29,300 – 200 + 350) 29,450Purchases (17,200 – 3,500 + 2,700) 16,400
28,400Closing Stock (10,000)Cost of Sales 18,400Profit on Bar 11,050
29,450 29,450
4. Greenkeeper’s Wages AccountReceipts and Payments 15,000 Balance b/d 150Balance c/d 170 Income and Expenditure 15,020
15,170 15,170
(b) Income and Expenditure Account for the year ended 31/12/-5Depreciation on Equipment (Note 2)Greenkeeper’s Wages (Note 4)Loan Interest (4,800 – 3,360)Honorarium to TreasurerSurplus
3,00015,0201,440
20015,730
Subscriptions (Note 1)Profit on Bar (Note 3)Investment InterestProfit on Coffee Morning
20,00011,050
8403,500
35,390 35,390
4,80030
--------------- 21×
Leaving Certificate Accounting
200
QUESTION 21.15 (HIGHER LEVEL)
Blackheath Sport and Fitness Club
(c) Balance Sheet as at 31/12/-5
Fixed AssetsClubhouse and GreensEquipment (Note 2)
Cost
300,00028,000
Depr.
–3,000
Value
300,00025,000
328,000 3,000 325,0007% Government Investments 12,000
Current AssetsBar StockBar DebtorsSubscriptions Due
10,000350800
337,000
Current LiabilitiesBar CreditorsSubscriptions PrepaidBank OverdraftWages DueHonorarium Due
2,700400
4,580170200
11,150
(8,050)3,100
340,100Financed ByAccumulated FundSurplus
296,37015,730
Life Membership (24,000 + 4,000)312,10028,000
340,100
(a) Calculation of Accumulated Fund on 1/1/-6Assets LiabilitiesEquipment 56,000 Levy Reserve 22,750Bar Stock 2,100 Bar Creditors 3,800Rent Prepaid 600 Subscriptions Prepaid 300Bar Debtors 150 General Expenses Due 4208% Government Investments 15,000 Bank Overdraft 3,500Prize Bonds 2,000 Loan 10,000Subscriptions Due 400 Loan Interest Due
(11,800 – 10,000 = 1,800)3 years = 1,80021/2 years = 1,500 1,500
Investment Interest Due(1,800 – 1,200 = 600) 600
Accumulated Fund 34,58076,850 76,850
Notes 1. Subscriptions AccountBalance b/d 400 Balance b/d 300Levy Reserve 22,750 Receipts and Payments 55,550Income and Expenditure 32,500Balance c/d 200
55,850 55,850
Solutions
201
(d) Advice on Five-Year LevyThe levy should continue as the club’s liquid assets (Investments €15,000, prize bonds €3,000 and bankaccount €36,050) total €54,050 which is short of the €115,000 required to build the premises.
2. Bar Trading AccountOpening Stock 2,100 Sales (52,900 – 150 + 180) 52,930Purchases (37,200 – 3,800 + 2,500) 35,900
38,000Closing Stock (3,800)Cost of Sales 34,200Profit on Bar 18,730
52,930 52,930
3. Equipment AccountBalance b/d 56,000 Disposal 11,000Receipts and Payments 24,000 Balance c/d 69,000
80,000 80,000
4. Rent AccountBalance b/d (1/4 year) 600 Income and Expenditure 2,850
Receipts and Payments (1 year) 3,000 Balance c/d (1/4 of 3,000) 750
3,600 3,600
(b) Income and Expenditure Account for the year ended 31/12/-6Depreciation on Equipment (20% of 69,000)Rent (Note 4)Loss on Creche (2,900 – 5,000)Loss on Disposal (11,000 – 7,000)General Expenses (4,600 – 420)Loan Interest (1,800 – 1,500)Surplus
13,8002,8502,1004,0004,180
30031,200
Subscriptions (Note 1)Profit on Bar (Note 2)Annual GrantProfit on Raffle (2,800 – 800)Investment Interest
32,50018,7304,0002,0001,200
58,430 58,430
(c) Balance Sheet as at 31/12/-6
Fixed AssetsEquipment (Note 2)
Cost
69,000
Depr.
13,800
Value
55,2008% Government InvestmentsPrize Bonds (2,000 + 1,000)
15,0003,000
Current AssetsBar StockBar DebtorsBankRent Prepaid (Note 4)
3,800180
36,050750
73,200
Current LiabilitiesBar CreditorsSubscriptions Prepaid
2,500200
40,780
(2,700)38,080
111,280Financed ByAccumulated FundSurplus
34,58031,200
Levy Reserve (22,750 + 22,750)65,78045,500
111,280
Leaving Certificate Accounting
202
QUESTION 21.16 (HIGHER LEVEL)Poseidon Swimming Club
(a) Calculation of Accumulated Fund on 1/1/-7AssetsMotor VanEquipmentBuilding SocietyInvestment Interest DuePool Rental PrepaidStock of Swim GearBank Account7% Government Investments(560 – 140 = 420)7% = 420100% = 6,000Subscriptions Due (Note 1)
6,0003,0005,000
140200280
1,800
6,000105
LiabilitiesLife MembershipSubscriptions PrepaidLoanLoan Interest Due(4,864 – 4,000 = 864)11/2 years = 864
8 months =
= 384
Accumulated Fund
4,000210
4,000
384
13,93122,525 22,525
Notes 1. Subscriptions AccountBalance b/d (Discovered Figure)Income and Expenditure (54 x 35)Balance c/d (12 x 35)
1051,890
420
Balance b/dReceipts and PaymentsBalance c/d (2 x 35)
2102,135
702,415 2,415
2. Swimming Gear Trading AccountOpening StockPurchases
2801,900
Sales 3,260
Closing Stock2,180(310)
Cost of SalesProfit on Bar
1,8701,3903,260 3,260
3. Investment Interest AccountBalance b/dIncome and Expenditure
140420
Receipts and Payments 560
560 560
4. Life Membership AccountIncome and ExpenditureBalance c/d
1,2004,800
Balance b/dReceipts and Payments
4,0002,000
6,000 6,000
5. Pool Rental AccountBalance b/d (1/6 year)Receipts and Payments (1 year)
2001,800
Income and ExpenditureBalance c/d (1/6 of 1,800)
1,700300
2,000 2,000
(b) Income and Expenditure Account for the year ended 31/12/-7Pool Rental (Note 5)Coach’s Wages (7,000 + 300)Motor and Travel ExpensesLoan Interest (864 – 384)General ExpensesDepreciationEquipment (3,000 + 2,000 – 4,600)Motors (6,000 – 4,800)Surplus
1,7007,3001,100
4802,226
4001,2002,854
Subscriptions (Note 1)Profit on Swim Gear Sales (Note 2)Investment Interest (Note 3)Life Membership (Note 4)Profit on GalaSponsorshipBuilding Society Interest
1,8901,390
4201,2001,850
10,000510
17,260 17,260
86418-------- 8×
Solutions
203
QUESTION 21.17Red Pole Barbers Ltd
(c) Balance Sheet as at 31/12/-7
Fixed AssetsMotor VanEquipment
Cost
6,0005,000
Depr.
1,200400
Value
4,8004,600
7% Government InvestmentsBuilding Society Deposit Account (5,000 + 4,000 + 510)
11,000 1,600 9,4006,0009,510
Current AssetsStock of Swimming GearSubscriptions DuePool Rental PrepaidBank
31070
3002,715
24,910
Current LiabilitiesWages DueSubscriptions Prepaid
300420
3,395
(720)2,675
27,585Financed ByAccumulated FundSurplusLotto Grant
13,9312,8546,000
Life Membership (Note 4)22,7854,800
27,585
(a) Profit and Loss Account for the year ended 31/12/-6Insurance (1,100 – 275)Rent (8,000 – 2,000)Loan InterestLight and Heat (800 + 170)Rates (300 + 150)Advertising (3,500 + 500)WagesDepreciation on Equipment
8256,0002,160
970450
4,0009,0001,800
Fee Income
Net Loss
17,550
7,65525,205 25,205
Leaving Certificate Accounting
204
QUESTION 21.18 (HIGHER LEVEL)
Oriona Ltd
(b) Balance Sheet as at 31/12/-6
Fixed AssetsEquipment
Cost
18,000
Depr.
1,800
Value
16,200Current AssetsBankInsurance PrepaidRent Prepaid
850275
2,000
Current LiabilitiesESB Bill DueAdvertising DueRates Due
170500150
3,125
(820)2,305
18,505Financed ByShare Capital Authorised and Issued€1 Ordinary SharesReserves Profit and Loss AccountLong-Term LiabilitiesBank Loan (20,000 – 3,840)
10,000(7,655)
16,16018,505
Notes 1. Bank Loan AccountBank (10 x 80) 800 Bank 10,000Balance c/d 9,200
10,000 10,000
2. Interest on Bank Loan AccountBank (10 x 220) 2,200 Profit and Loss (11 x 220) 2,420Balance c/d 220
2,420 2,420
3. Fees AccountProfit and Loss 23,000 Bank (VAT Exclusive) 23,000
23,000 23,000
4. Beauty Products Trading AccountPurchases 2,700 Sales (VAT Exclusive) 4,703Closing Stock (500)Cost of Sales 2,200Profit 2,503
4,703 4,703
5. VAT AccountBank 3,800 Bank (VAT on Sales) 987Balance c/d 2,017 Bank (VAT on Fees) 4,830
5,817 5,817
Solutions
205
(a) Profit and Loss Account for the year ended 31/12/-8Interest on Loan (Note 2) 2,420 Fees Charged (Note 3) 23,000Insurance (840 – 70) 770 Profit on Beauty Products (Note 4) 2,503Equipment Rental 1,700Premises Rental 7,000Beauty Products (3,800 – 700) 3,100Light and Heat 1,200Wages 5,000Advertising 800Postage and Stationery 400Rates (600 + 300) 900Depreciation Equipment (11,000 – 9,500) 1,500Net Profit 713
25,503 25,503
(b) Balance Sheet as at 31/12/-8Cost Depr. Value
Fixed AssetsEquipment 11,000 1,500 9,500Current AssetsClosing Stock – Beauty Products Shop Stock 700– For Resale 500Bank 1,880Insurance Prepaid 70
3,150Current LiabilitiesLoan Interest Due (Note 2) 220VAT Due (Note 5) 2,017Rates Due 300
(2,537)613
10,113Financed ByShare Capital (€1 Shares) 200Reserves – Profit and Loss Account 713Long Term LiabilitiesBank Loan (Note 1) 9,200
10,113
206
Incomplete Records I(Cash Book Method): Solutions22
QUESTION 22.1D. Jarvis (Items marked * are discovered items)
Note 1 Calculation of Opening Capital 1/1/-0AssetsPremisesMotorsStockDebtorsCash
65,00027,0007,0003,4001,420
LiabilitiesGeneral Expenses DueCreditors
Capital *
4504,700
98,670103,820 103,820
Note 2 Cash AccountBalance b/dReceipts
1,42092,800
PaymentsBalance c/d
92,9001,320
94,220 94,220
Note 3 Debtors Control AccountBalance b/dCredit Sales *
3,40024,800
CashBalance c/d
24,3003,900
28,200 28,200
Note 4 Sales Account
Trading Account * 93,300Debtors (Note 3)Cash
24,80068,500
93,300 93,300
Note 5 Creditors Control AccountCashBalance c/d
27,0006,300
Balance b/dCredit Purchases *
4,70028,600
33,300 33,300
Note 6 Purchases AccountCreditors (Note 5)Cash
28,60039,400 Trading Account * 68,00068,000 68,000
Note 7 General Expenses AccountCashBalance c/d
14,700350
Balance b/dProfit and Loss Account *
45014,600
15,050 15,050
(a) Trading, Profit and Loss Account for the year ended 31/12/-0Sales (Note 4)Less Cost of SalesOpening StockPurchases (Note 6)
7,00068,000
93,300
Closing Stock75,000(8,000)
(67,000)Gross Profit– ExpensesGeneral Expenses (Note 7)
26,300
(14,600)Net Profit 11,700
Solutions
207
QUESTION 22.2
N. Purdy (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-0Fixed AssetsPremises 65,000Motors 27,000Equipment 6,000
98,000Current AssetsStock 8,000Debtors 3,900Cash (Note 2) 1,320‘ 13,220Current LiabilitiesCreditors 6,300General Expenses Due 350
(6,650)6,570
104,570Financed ByCapital (Note 1) 98,670Net Profit 11,700
110,370Drawings (5,800)
104,570
Note 1 Calculation of Opening Capital 1/1/-1Assets LiabilitiesBuildings 43,000 Creditors 3,700Furniture and Fittings 3,400 General Expenses Due 300Debtors 2,800Stock 6,400Cash 1,700 Capital * 53,300
57,300 57,300
Note 2 Cash AccountBalance b/d 1,700 Payments 67,300Receipts 66,600 Balance c/d * 1,000
68,300 68,300Note 3 Debtors Control AccountBalance b/d 2,800 Cash 26,900Credit Sales * 27,800 Balance c/d 3,700
30,600 30,600
Note 4 Sales AccountDebtors (Note 3) 27,800
Trading Account * 67,500 Cash 39,70067,500 67,500
Note 5 Creditors Control AccountCash 27,000 Balance b/d 3,700Balance c/d 3,100 Credit Purchases * 26,400
30,100 30,100
Leaving Certificate Accounting
208
Note 6 Purchases AccountCreditors (Note 5) 26,400Cash 19,400 Trading Account * 45,800
45,800 45,800
Note 7 General Expenses AccountCash 8,100 Balance b/d 300Balance c/d 400 Profit and Loss Account 8,200
8,500 8,500
(a) Trading, Profit and Loss Account for the year ended 31/12/-1Sales (Note 4) 67,500Less Cost of SalesOpening Stock 6,400Purchases (Note 6) 45,800
52,200Closing Stock (6,700)
(45,500)Gross Profit 22,000– ExpensesGeneral Expenses (Note 7) (8,200)Net Profit 13,800
(b) Balance Sheet as at 31/12/-1Fixed AssetsBuildings 43,000Furniture and Fittings 3,400Motor Van 4,300
50,700Current AssetsStock 6,700Debtors 3,700Cash (Note 2) 1,000
11,400Current LiabilitiesCreditors 3,100General Expenses Due 400
(3,500)7,900
58,600Financed ByCapital (Note 1) 53,300Net Profit 13,800
67,100Drawings (8,500)
58,600
Solutions
209
QUESTION 22.3
P. Yardley (Items marked * are discovered items)
Note 1 Calculation of Opening Capital 1/1/-3AssetsPremisesEquipmentDebtorsStockCommission DueBank
125,00018,0008,7007,200
6001,800
LiabilitiesCreditors
Capital
2,700
158,600161,300 161,300
Note 2 Bank AccountBalance b/dReceipts LodgedBalance c/d *
1,80069,1009,200
Cheque Payments 80,100
80,100 80,100
Note 3 Debtors Control AccountBalance b/dCredit Sales *
8,70027,300
BankBalance c/d
28,2007,800
36,000 36,000
Note 4 Sales Account
Trading Account * 67,000Debtors (Note 3)Bank
27,30039,700
67,000 67,000
Note 5 Creditors Control AccountBankBalance c/d
21,6002,900
Balance b/dCredit Purchases *
2,70021,800
24,500 24,500
Note 6 Purchases AccountCreditors (Note 5)Bank
21,80027,800 Trading Account * 49,60049,600 49,600
Note 7 Commission Receivable AccountBalance b/dProfit and Loss Account *
600600
Bank 1,200
1,200 1,200
Note 8 Wages and General Expenses AccountBankBalance c/d
19,600300 Profit and Loss Account * 19,900
19,900 19,900
Note 9 Equipment AccountBalance b/d 18,000 Depreciation *
Balance c/d2,000
16,00018,000 18,000
Leaving Certificate Accounting
210
QUESTION 22.4
C. O Reilly (Items marked * are discovered items)
(a) Trading, Profit and Loss Account for the year ended 31/12/-3Sales (Note 4)Less Cost of SalesOpening StockPurchases (Note 6)
7,20049,600
67,000
Closing Stock56,800(6,520)
(50,280)Gross Profit+ IncomeCommission (Note 7)
16,720
600
– ExpensesWages and General Expenses (Note 8)Depreciation on Equipment (Note 9)
19,9002,000
17,320
(21,900)Net Loss (4,580)
(b) Balance Sheet as at 31/12/-3Cost Depr Value
Fixed AssetsPremisesEquipment (Note 9)Delivery Van
125,00018,0006,900
–2,000
–
125,00016,0006,900
149,900 2,000 147,900Current AssetsStockDebtors
6,5207,800
Current LiabilitiesCreditorsWages DueBank Overdraft (Note 2)
2,900300
9,200
14,320
(12,400)1,920
149,820Financed ByCapital (Note 1)Net LossDrawings
158,600(4,580)(4,200)
149,820
Note 1 Calculation of Opening Capital 1/1/-4Assets LiabilitiesPremises 90,000 Advertising Due 400Vans 15,000 Creditors 6,900Furniture 18,800Stock 8,500Debtors 5,200Bank 2,600 Capital * 132,800
140,100 140,100
Note 2 Bank AccountBalance b/dReceipts Lodged
2,600116,100
Cheque PaymentsBalance c/d *
113,6005,100
118,700 118,700
Solutions
211
Note 3 Debtors Control AccountBal b/d 5,200 Bank 21,600Credit Sales * 21,700 Balance c/d 5,300
26,900 26,900
Note 4 Sales AccountDebtors (Note 3) 21,700
Trading Account * 109,000 Bank 87,300109,000 109,000
Note 5 Creditors Control AccountBank 24,100 Balance b/d 6,900Balance c/d 7,100 Credit Purchases * 24,300
31,200 31,200
Note 6 Purchases AccountCreditors (Note 5) 24,300Bank 49,200 Trading Account * 73,500
73,500 73,500
Note 7 Rent Receivable AccountProfit and Loss Account * 6,600 Bank 7,200Balance b/d 600
7,200 7,200
Note 8 Wages and General Expenses AccountBank 21,400 Balance b/d 400Balance c/d 500 Profit and Loss Account * 21,500
21,900 21,900
Note 9 Furniture AccountBalance b/d 18,800 Depreciation * 3,000Bank 12,200 Balance c/d 28,000
31,000 31,000
Note 10 Vans AccountBalance b/d 15,000 Depreciation * 1,000
Balance c/d 14,00015,000 15,000
(a) Trading, Profit and Loss Account for the year ended 31/12/-4Sales (Note 4)Less Cost of SalesOpening StockPurchases (Note 6)
8,50073,500
109,000
Closing Stock82,000(9,200)
(72,800)Gross Profit+ IncomeRent (Note 7)
36,200
6,600
– ExpensesWages and General Expenses (Note 8)Depreciation on Furniture (Note 9)Depreciation on Vans (Note 10)
21,5003,0001,000
42,800
(25,500)Net Profit 17,300
Leaving Certificate Accounting
212
QUESTION 22.5
D. Keane (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-4Cost Depr Value
Fixed AssetsPremises 90,000 – 90,000Equipment (Note 10) 15,000 1,000 14,000Furniture (Note 9) 31,000 3,000 28,000
136,000 4,000 132,000Current AssetsStock 9,200Debtors 5,300Bank (Note 2) 5,100
19,600Current LiabilitiesCreditors 7,100Wages Due 500Rent Receivable Prepaid 600
(8,200)11,400
143,400Financed ByCapital (Note 1) 132,800Net Profit 17,300
150,100Drawings (6,700)
143,400
Note 1 Calculation of Opening Capital 1/1/-5Assets LiabilitiesPremises 110,000 Wages Due 1,000Vans 25,000 Creditors 7,400Equipment 24,000Rates Prepaid 300Debtors 4,600Stock 9,400Bank 860 Capital * 165,760
174,160 174,160
Note 2 Bank AccountBalance b/d 860 Cheque Payments 115,960Receipts Lodged 109,100Balance c/d 6,000
115,960 115,960
Note 3 Debtors Control AccountBalance b/d 4,600 Bank 14,800Credit Sales * 15,400 Balance c/d 5,200
20,000 20,000
Note 4 Sales AccountDebtors (Note 3) 15,400
Trading Account * 105,100 Bank 89,700105,100 105,100
Solutions
213
Note 5 Creditors Control AccountBank 27,060 Balance b/d 7,400Balance c/d 6,600 Credit Purchases * 26,260
33,660 33,660
Note 6 Purchases AccountCreditors (Note 5) 26,260Bank 15,200 Trading Account * 41,460
41,460 41,460
Note 8 Rent Receivable AccountBank 3,500
Profit and Loss Account * 4,000 Balance c/d 5004,000 4,000
Note 9 Wages and General Expenses AccountBalance b/d 300 Balance b/d 1,000Bank 24,000 Profit and Loss Account * 23,300
24,300 24,300
Note 10 Equipment AccountBalance b/d 24,000 Depreciation * 4,000Bank 40,000 Balance c/d 60,000
64,000 64,000
Note 11 Vans AccountBalance b/d 25,000 Depreciation * 2,000
Balance c/d 23,00025,000 25,000
(a) Trading, Profit and Loss Account for the year ended 31/12/-5Sales (Note 4) 105,100Less Cost of SalesOpening Stock 9,400Purchases (Note 6) 41,460
50,860Closing Stock (10,700)
(40,160)Gross Profit 64,940+ IncomeRent (Note 8) 4,000Commission 1,100
70,040– ExpensesWages and General Expenses (Note 9) 23,300Depreciation on Equipment (Note 10) 4,000Depreciation on Vans (Note 11) 2,000
(29,300)Net Profit 40,740
Leaving Certificate Accounting
214
QUESTION 22.6 (HIGHER LEVEL)
P. Wilson (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-5Cost Depr Value
Fixed AssetsPremises 110,000 – 110,000Vans (Note 11) 25,000 2,000 23,000Equipment (Note 10) 64,000 4,000 60,000
199,000 6,000 193,000Current AssetsStock 10,700Debtors 5,200Rent Receivable Due 500
16,400Current LiabilitiesCreditors 6,600Bank Overdraft (Note 2) 6,000
(12,600)3,800
196,800Financed ByCapital (Note 1) 165,760Net Profit 40,740
206,500Drawings (9,700)
196,800
Note 1 Opening Balance Sheet 1/1/-6AssetsPremisesStockDebtors
41,0004,5009,500
LiabilitiesCreditorsWages DueRent PrepaidCapital *
3,800400800
50,00055,000 55,000
Note 2 Cash AccountCash Sales * 72,570 Purchases
Salaries and WagesLodgementsDrawings (60 x 52)Balance c/d
20,40017,60031,0003,120
45072,570 72,570
Note 3 Bank AccountCashLoanDebtorsRent
31,00024,00014,3001,600
EquipmentMotor VanCreditorsInsuranceDrawingsLight and HeatBalance c/d *
15,00019,00014,1001,2003,5003,800
14,30070,900 70,900
Note 4 Debtors Control AccountBalance b/dCredit Sales *
9,50014,900
BankBalance c/d
14,30010,100
24,400 24,400
Solutions
215
Note 5 Sales Account
Trading Account * 87,470Debtors (Note 4)Cash (Note 2)
14,90072,570
87,470 87,470
Note 6 Creditors Control AccountBankBalance c/d
14,1003,700
Balance b/dCredit Purchases *
3,80014,000
17,800 17,800
Note 7 Purchases AccountCreditors (Note 6)Cash
14,00020,400
Drawings (50 x 52)Trading Account *
2,60031,800
34,400 34,400
Note 8 Rent Receivable Account
Profit and Loss Account * 2,400Balance b/dBank
8001,600
2,400 2,400
Note 9 Salaries and Wages AccountCash 17,600 Balance b/d
Profit and Loss Account *400
17,20017,600 17,600
Note 10 Insurance AccountBank 1,200 Drawings (1/4 of 1,200)
Profit and Loss Account *Balance c/d
300600300
1,200 1,200
Note 11 Light and Heat AccountBankBalance c/d
3,800200
Drawings (1/5 of 4,000) Profit and Loss Account *
8003,200
4,000 4,000
Note 12 Drawings AccountCash (Note 2)Bank (Note 3)Stock (Note 7)Insurance (Note 10)Light and Heat (Note 11)
3,1203,5002,600
300800 Capital * 10,320
10,320 10,320
(a) Trading, Profit and Loss Account for the year ended 31/12/-6Sales (Note 5)Less Cost of SalesOpening StockPurchases (Note 7)
4,50031,800
87,470
Closing Stock36,300(3,900)
(32,400)Gross Profit+ IncomeRent Receivable (Note 8)
55,070
2,400
– ExpensesSalaries and Wages (Note 9)Insurance (Note 10)Light and Heat (Note 11)Loan Interest (1/4 of 10% of 24,000)
17,200600
3,200600
57,470
(21,600)Net Profit 35,870
Leaving Certificate Accounting
216
QUESTION 22.7P. Ronaldo (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-6Fixed AssetsPremisesEquipmentMotor Van
41,00015,00019,000
Current AssetsStockDebtorsBank (Note 3)CashInsurance Prepaid
3,90010,10014,300
450300
75,000
Current LiabilitiesCreditorsESB Bill DueLoan Interest DueLoan Instalment Due
3,700200600
3,000
29,050
(7,500)21,55096,550
Financed ByCapital (Note 1)+ Net Profit
50,00035,870
– Drawings (Note 11)85,870
(10,320)
Long Term LiabilitiesLoan (24,000 – 3,000)
75,550
21,00096,550
Note 1 Balance Sheet as at 1/1/-7AssetsPremisesStockDebtorsInsurance PrepaidGoodwill *
85,00012,20018,000
5002,870
LiabilitiesCreditorsESB Bill DueCapital
16,300270
102,000
118,570 118,570
Note 2 Cash AccountCash Sales * 136,900 Salaries and Wages
LodgementsPurchasesDrawingsBalance c/d
31,70065,00037,4802,000
720136,900 136,900
Note 3 Bank AccountCashDebtorsCapitalLoan
65,00019,6002,800
80,000
CreditorsInsuranceVanLight and HeatInterestDrawingsPremisesInvestment FundBalance c/d *
36,2001,200
21,0004,8304,0003,900
80,0007,2009,070
167,400 167,400
Solutions
217
Note 4 Debtors Control AccountBalance b/dCredit Sales *
18,00012,900
BankBalance c/d
19,60011,300
30,900 30,900
Note 5 Sales Account
Trading Account * 149,800Debtors (Note 4)Cash (Note 2)
12,900136,900
149,800 149,800
Note 6 Creditors Control AccountBankBalance c/d
36,20016,400
Balance b/dCredit Purchases *
16,30036,300
52,600 52,600
Note 7 Purchases AccountCreditors (Note 6)Cash
36,30037,480
DrawingsTrading Account *
3,00070,780
73,780 73,780
Note 8 Insurance AccountBalance b/dBank
5001,200
Profit and Loss Account *Balance c/d
1,100600
1,700 1,700
Note 9 Light and Heat AccountBankBalance c/d
4,830240
Balance b/dDrawings (1/5 of 4,800) Profit and Loss Account *
270960
3,8405,070 5,070
Note 10 Interest AccountBankBalance c/d
4,000800
Drawings (1/4 of 4,800) Profit and Loss Account *
1,2003,600
4,800 4,800
Note 11 Drawings AccountCash (Note 2)Stock (Note 7)Bank (Note 3)Light and Heat (Note 9)Interest (Note 10)
2,0003,0003,900
9601,200 Capital * 11,060
11,060 11,060
(a) Trading, Profit and Loss Account for the year ended 31/12/-7Sales (Note 5)Less Cost of SalesOpening StockPurchases (Note 7)
12,20070,780
149,800
Closing Stock82,980
(12,700)(70,280)
Gross Profit+ IncomeInterest on Investment Fund
79,520
72
– ExpensesInsurance (Note 8)Light and Heat (Note 9)Interest (Note 10)Salaries and Wages
1,1003,8403,600
31,700
79,592
(40,240)Net Profit 39,352
Leaving Certificate Accounting
218
QUESTION 22.8 (HIGHER LEVEL)
J. Mooney (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-7Fixed AssetsPremises (85,000 + 80,000)VanGoodwill (Note 1)Investment Fund (7,200 + 72)
165,00021,0002,8707,272
Current AssetsStockDebtorsCashInsurance PrepaidBank (Note 3)
12,70011,300
720600
9,070
196,142
Current LiabilitiesCreditorsESB Bill DueInterest Due (Note 10)
16,400240800
34,390
(17,440)16,950
213,092Financed ByCapital (102,000 + 2,800)Net Profit
104,80039,352
Drawings (Note 11) 144,152(11,060)
Long-Term LiabilitiesLoan (12%)
133,092
80,000213,092
Note 1 Balance Sheet 1/1/-8Assets LiabilitiesPremises 115,200 Creditors 4,000Stock 12,600 Wages Due 1,000Rates Prepaid 400Debtors 6,500Cash 300 Capital 130,000
135,000 135,000
Note 2 Cash AccountBalance b/d 300 Purchases 38,500Cash Sales * 107,880 Wages and General Expenses 24,200
Lodgements 43,000Drawings (40 x 52) 2,080Balance c/d 400
108,180 108,180
Note 3 Bank AccountCash 43,000 Van 48,000Debtors 27,100 Rates 3,600Capital 5,000 Creditors 18,900Term Loan 48,000 Insurance 3,800
Term Loan Repayment 8,400Balance c/d * 40,400
123,100 123,100
Solutions
219
Note 4 Debtors Control AccountBalance b/d 6,500 Bank 27,100Credit Sales * 29,200 Balance c/d 8,600
35,700 35,700
Note 5 Sales AccountDebtors (Note 4) 29,200
Trading Account * 137,080 Cash (Note 2) 107,880137,080 137,080
Note 6 Creditors Control AccountBank 18,900 Balance b/d 4,000Balance c/d 3,800 Credit Purchases * 18,700
22,700 22,700
Note 7 Purchases AccountCreditors (Note 6) 18,700 Drawings (70 x 52) 3,640Cash 38,500 Trading Account * 53,560
57,200 57,200
Note 8 Wages and General Expenses AccountCash 24,200 Balance b/d 1,000
Profit and Loss Account * 23,20024,200 24,200
Note 9 Rates AccountBalance b/d 400 Profit and Loss Account * 3,400Bank 3,600 Balance c/d 600
4,000 4,000
Note 10 Insurance AccountBank 3,800 Drawings 1,400
Profit and Loss Account * 1,800Balance c/d (1/4 of 2,400) 600
3,800 3,800
Note 11 Term Loan AccountBank (8 x 800) 6,400 Bank 48,000Balance c/d * 41,600
48,000 48,000
Note 12 Loan Instalment AccountBank (7 x 800) 5,600 Term Loan (8 x 800) 6,400Balance c/d * 800
6,400 6,400
Note 13 Loan Interest AccountBank (7 x 400) 2,800 Profit and Loss Account (8 x 400) 3,200Balance c/d * 400
3,200 3,200
Note 14 Drawings AccountCash (Note 2) 2,080Stock (Note 7) 3,640Insurance (Note 10) 1,400 Capital 7,120
7,120 7,120
Leaving Certificate Accounting
220
(a) Trading, Profit and Loss Account for the year ended 31/12/-8Sales (Note 5) 137,080Less Cost of SalesOpening Stock 12,600Purchases (Note 7) 53,560
66,160Closing Stock (13,000)
(53,160)Gross Profit 83,920– ExpensesWages and General Expenses (Note 8) 23,200Rates (Note 9) 3,400Insurance (Note 10) 1,800Loan Interest (Note 13) 3,200
(31,600)Net Profit 52,320
(b) Balance Sheet as at 31/12/-8Fixed AssetsPremises 115,200Vans 48,000
163,200Current AssetsStock 13,000Debtors 8,600Cash 400Bank (Note 3) 40,400Rates Prepaid 600Insurance Prepaid (Note 10) 600
63,600Current LiabilitiesCreditors 3,800Loan Instalment Due (Note 12) 800Loan Interest Due (Note 13) 400
(5,000)58,600
221,800Financed ByCapital (130,000 + 5,000) 135,000Net Profit 52,320
187,320Drawings (Note 14) (7,120)
180,200Long-Term Liabilities10% Term Loan (Note 11) 41,600
221,800
Solutions
221
QUESTION 22.9 (HIGHER LEVEL)
J. Cremen (Items marked * are discovered items)
Note 1 Opening Balance Sheet 1/1/-9Assets LiabilitiesBuildings 80,000 Wages Due 500Stock 16,500Debtors 13,000Stock of Oil 250Cash 350Creditor 60 Capital * 109,660
110,160 110,160
Note 2 Cash AccountBalance b/d 350 Purchases 26,500Cash Sales * 92,600 Wages and General Expenses 29,300
Lodgements 34,000Drawings (50 x 52) 2,600Balance c/d 550
92,950 92,950
Note 3 Bank AccountDebtors 19,300 Vans 30,000Dividends (Capital) 1,200 Creditors 18,700Cash 34,000 Interest 5,625Rent 600 Light, Heat and Fuel 2,620Loan 50,000 Drawings 2,800
Premises 45,000Balance c/d * 7,645 Investment Fund (800 x 10) 8,000
112,745 112,745
Note 4 Debtors Control AccountBalance b/d 13,000 Bank 19,300Credit Sales * 13,200 Balance c/d 6,900
26,200 26,200
Note 5 Sales AccountDebtors (Note 4) 13,200
Trading Account * 105,800 Cash (Note 2) 92,600105,800 105,800
Note 6 Creditors Control AccountBalance b/d 60Bank 18,700Balance c/d 2,800 Credit Purchases * 21,560
21,560 21,560
Note 7 Purchases AccountCreditors (Note 6) 21,560 Drawings (80 x 52) 4,160Cash 26,500 Trading Account * 43,900
48,060 48,060
Leaving Certificate Accounting
222
Note 8 Wages and General Expenses AccountCash 29,300 Balance b/d 500
Profit and Loss Account * 28,80029,300 29,300
Note 9 Interest AccountBank 5,625 Drawings (1/5 of 6,250) 1,250
Balance c/d 625 Profit and Loss Account * 5,0006,250 6,250
Note 10 Light, Heat and Fuel AccountBalance b/d 250 Drawings (1/3 of 2,760) 920
Bank 2,620 Profit and Loss Account * 1,840Balance c/d 200 Balance c/d 310
3,070 3,070
Note 11 Drawings AccountCash (Note 2) 2,600Stock (Note 7) 4,160Bank (Note 3) 2,800Interest (Note 9) 1,250Light, Heat, Fuel (Note 10) 920 Capital * 11,730
11,730 11,730
(a) Trading, Profit and Loss Account for the year ended 31/12/-9Sales (Note 5) 105,800Less Cost of SalesOpening Stock 16,500Purchases (Note 7) 43,900
60,400Closing Stock (18,200)
(42,200)Gross Profit 63,600+ IncomeRent receivable 600Investment Income 760
64,960– ExpensesWages and General Expenses (Note 8) 28,800Interest (Note 9) 5,000Light, Heat, Fuel (note 10) 1,840
(35,640)Net Profit 29,320
Solutions
223
QUESTION 22.10
P. Cleary (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-9Fixed AssetsBuildings (80,000 + 45,000) 125,000Vans 30,000Investment Fund 8,760
163,760Current AssetsStock 18,200Stock of Oil 310Debtors 6,900Cash 550
25,960Current LiabilitiesCreditors 2,800ESB Bill Due 200Interest (Note 9) 625Bank Overdraft (Note 3) 7,645
(11,270)14,690
178,450Financed ByCapital (Note 1) 109,660Capital Introduced 1,200Net Profit 29,320
140,180Drawings (Note 11) (11,730)
128,450Long Term Liabilities15% Loan 50,000
178,450
Note 1 Opening Balance Sheet on 1/1/-0Assets LiabilitiesPremises 160,000 Creditors 12,900Stock 14,200 Rent Prepaid 250Debtors 12,000 Wages Due 5007% Investments 6,000 Capital 195,000Investment Interest Due 140Goodwill * 16,310
208,650 208,650
Note 2 Cash AccountCash Sales * 171,780 Lodgements 98,000
Wages and General Expenses 23,700Purchases 47,500Drawings (40 x 52) 2,080Balance c/d 500
171,780 171,780
Leaving Certificate Accounting
224
Note 3 Bank AccountDebtors 37,000 Vans 22,000Cash 98,000 Creditors 33,100Investment Interest 560 Light and Heat 6,500Rent 1,200 Loan Payment 3,200Loan 60,000 Advertising 6,000
Furniture 12,000Drawings 2,7006% Investments 50,000Premises 50,000Balance c/d * 11,260
196,760 196,760
Note 4 Debtors Control AccountBalance b/d 12,000 Bank 37,000Credit Sales * 40,900 Balance c/d 15,900
52,900 52,900
Note 5 Sales AccountDebtors (Note 4) 40,900
Trading Account * 212,680 Cash (Note 2) 171,780212,680 212,680
Note 6 Creditors Control AccountBank 33,100 Balance b/d 12,900Balance c/d 11,200 Credit Purchases * 31,400
44,300 44,300
Note 7 Purchases AccountCreditors (Note 6) 31,400 Drawings (70 x 52) 3,640Cash 47,500 Trading Account * 75,260
78,900 78,900
Note 8 7% Investment Interest AccountBalance b/d * 140 Bank 560Profit and Loss Account 420
560 560
Note 9 6% Investment Interest AccountProfit and Loss Account 1,500 Balance c/d * 1,500
1,500 1,500
Note 10 Rent Received AccountProfit and Loss Account * 1,150 Balance b/d 250Balance c/d 300 Bank 1,200
1,450 1,450
Note 11 Wages and General Expenses AccountCash 23,700 Balance b/d 500
Profit and Loss Account * 23,20023,700 23,700
Note 12 Light and Heat AccountBank 6,500 Drawings (1/4 of 6,900) 1,725Balance c/d 400 Profit and Loss Account * 5,175
6,900 6,900
Solutions
225
Note 13 Loan Instalment AccountBank (2 x 1,000) 2,000 Loan Account (3 x 1,000) 3,000Balance c/d 1,000
3,000 3,000
Note 14 Loan Interest AccountBank (2 x 600) 1,200 Drawings (1/5 of 1,800) 360Balance c/d 600 Profit and Loss Account * 1,440
1,800 1,800
Note 15 Advertising AccountBank 6,000 Profit and Loss Account * 5,000
Balance c/d 1,0006,000 6,000
Note 16 Drawings AccountCash (Note 2) 2,080Bank (Note 3) 2,700Stock (Note 7) 3,640Light and Heat (Note 12) 1,725Loan Interest (Note 14) 360Furniture 4,000 Capital * 14,505
14,505 14,505
(a) Trading, Profit and Loss Account for the year ended 31/12/-0Sales (Note 5) 212,680Less Cost of SalesOpening Stock 14,200Purchases (Note 7) 75,260
89,460Closing Stock (17,600)
(71,860)Gross Profit 140,820+ Income7% Investment Interest (Note 8) 4206% Investment Interest (Note 9) 1,500Rent Receivable (Note 10) 1,150
3,070– Expenses 143,890Wages and General Expenses (Note 11) 23,200Light and Heat (Note 12) 5,175Loan Interest (Note 14) 1,440Advertising (note 15) 5,000
(34,815)Net Profit 109,075
Leaving Certificate Accounting
226
QUESTION 22.11 (HIGHER LEVEL)
O. Connaughton (Items marked * are discovered items)
(b) Balance Sheet as at 31/12/-0Fixed AssetsPremises (160,000 + 50,000) 210,000Vans 22,000Furniture (12,000 – 4,000) 8,000Goodwill (Note 1) 16,3107% Investments 6,0006% Government Investments 50,000
312,310Current AssetsStock 17,600Debtors 15,900Cash 500Advertising Prepaid 1,0006% Investment Interest Due (Note 9) 1,500Bank (Note 3) 11,260
47,760Current LiabilitiesCreditors 11,200ESB Bill Due 400Rent Receivable Prepaid 300Loan Instalment Due (Note 13) 1,000Loan Interest Due (Note 14) 600
(13,500)34,260
346,570Financed ByCapital 195,000Net Profit 109,075
304,075Drawings (Note 16) (14,505)
289,570Loan (60,000 – 3,000) 57,000
346,570
Note 1 Opening Balance Sheet on 1/1/-1Assets LiabilitiesBuildings 90,000 Advertising Due 200Stock 20,000 Creditors 12,000Debtors 14,000Insurance Prepaid 600Cash 100 Capital * 112,500
124,700 124,700
Note 2 Cash AccountBalance b/d 100 Lodgements 73,000Cash Sales * 161,740 Purchases 43,700
Advertising 800General Expenses 37,200Rates 1,800Drawings (100 x 52) 5,200Balance c/d 140
161,840 161,840
Solutions
227
Note 3 Bank AccountCash 73,000 Light and Heat 4,620Debtors 56,900 Insurance (Annual Premium) 2,800Lotto Win (Capital) 5,000 Loan Interest 1,400Loan 70,000 Creditors 43,800
Motor Vehicles 45,000Drawings 1,200Buildings 65,000Rent 4,380Balance c/d * 36,700
204,900 204,900
Note 4 Debtors Control AccountBalance b/d 14,000 Bank 56,900Credit Sales * 65,900 Balance c/d 23,000
79,900 79,900
Note 5 Sales AccountDebtors (Note 4) 65,900
Trading Account * 227,640 Cash (Note 2) 161,740227,640 227,640
Note 6 Creditors Control AccountBank 43,800 Balance b/d 12,000Balance c/d 11,000 Credit Purchases * 42,800
54,800 54,800
Note 7 Purchases AccountCreditors (Note 6) 42,800 Drawings (50 x 52) 2,600Cash 43,700 Trading Account * 83,900
86,500 86,500
Note 8 Advertising AccountCash 800 Balance b/d 200Balance c/d 700 Profit and Loss Account * 1,300
1,500 1,500
Note 9 Light and Heat AccountBank 4,620 Drawings (1/5 of 5,145) 1,029
Balance c/d 525 Profit and Loss Account * 4,1165,145 5,145
Note 10 Insurance AccountBalance b/d 600 Profit and Loss Account * 2,700Bank 2,800 Balance c/d (1/4 of 2,800) 700
3,400 3,400
Note 11 Loan Interest AccountBank 1,400 Profit and Loss Account * 2,800Balance c/d 1,400
2,800 2,800
Note 12 Rent AccountBank 4,380 Drawings (1/5 of 4,380) 876
Profit and Loss Account * 584Balance c/d (10/12 of 3,504) 2,920
4,380 4,380
Leaving Certificate Accounting
228
Note 13 Drawings AccountCash (Note 2)Bank (Note 3)Stock (Note 7)Light and Heat (Note 9)Rent (Note 12)
5,2001,2002,6001,029
876 Capital * 10,90510,905 10,905
(a) Trading, Profit and Loss Account for the year ended 31/12/-1Sales (Note 5)Less Cost of SalesOpening StockPurchases (Note 7)
20,00083,900
227,640
Closing Stock103,900(19,000)
(84,900)Gross Profit– ExpensesAdvertising (Note 8)Light and Heat (Note 9)Insurance (Note 10)Loan Interest (Note 11)Rent (Note 12)General ExpensesRates
1,3004,1162,7002,800
58437,2001,800
142,740
(50,500)Net Profit 92,240
(b) Balance Sheet as at 31/12/-1Fixed AssetsBuildings (90,000 + 65,000)Motor Vehicles
155,00045,000
Current AssetsStockDebtorsCashBank (Note 3)Insurance Prepaid (Note 10)Rent Prepaid (Note 12)
19,00023,000
14036,700
7002,920
200,000
Current LiabilitiesCreditorsESB Bill DueAdvertising DueLoan Interest Due (Note 11)Loan Instalment Due
11,000525700
1,4003,500
82,460
(17,125)65,335
265,335Financed ByCapital (Note 1)Additional Capital
112,5005,000
Net Profit117,50092,240
Drawings (Note 13)209,740(10,905)
Long-term LiabilitiesLoan (70,000 – 3,500)
198,835
66,500265,335
Solutions
229
QUESTION 22.12 (HIGHER LEVEL)
T. Healy (Items marked * are discovered items)
Note 1 Opening Balance Sheet 1/10/-2AssetsBuildingsMotorsStockStock of FuelRates Prepaid11% Investments
100,00016,00010,000
200150
10,000
LiabilitiesDebtorCreditorsWages Due
Capital *
1,2003,7001,100
130,350136,350 136,350
Note 2 Cash AccountCash Sales * 54,450 Lodgements
PurchasesWagesDrawings (200 x 12)Balance c/d
23,00021,0008,0002,400
5054,450 54,450
Note 3 Bank AccountCashDebtorsInvestment InterestLoan
23,00017,0001,000
50,000
Light, Heat and FuelCreditorsInterestRatesDrawings (Car Repairs)WagesVanDrawings (Holidays)BuildingsInvestment FundBalance c/d *
1,74017,5002,500
660300
4,00012,00010,00030,0001,800
10,50091,000 91,000
Note 4 Debtors Control Account
Credit Sales * 40,200
Balance b/dBankBalance c/d
1,20017,00022,000
40,200 40,200
Note 5 Sales Account
Trading Account * 94,650Debtors (Note 4)Cash (Note 2)
40,20054,450
94,650 94,650
Note 6 Creditors Control AccountBankBalance c/d
17,5002,800
Balance b/dCredit Purchases *
3,70016,600
20,300 20,300
Note 7 Purchases AccountCreditors (Note 6)Cash
16,60021,000
Drawings (50 x 52)Trading Account *
2,60035,000
37,600 37,600
Note 8 11% Investment AccountProfit and Loss Account 1,100 Bank
Balance c/d1,000
1001,100 1,100
Leaving Certificate Accounting
230
Note 9 Wages AccountCash 8,000 Balance b/d 1,100Bank 4,000 Drawings (1/4 of 12,000) 3,000
Balance c/d 900 Profit and Loss Account * 8,80012,900 12,900
Note 10 Light, Heat and Fuel AccountBalance b/d 200 Drawings (1/3 of 1,710) 570
Bank 1,740 Profit and Loss Account * 1,140Balance c/d 230
1,940 1,940
Note 11 Loan Interest AccountBank 2,500 Profit and Loss Account * 3,000Balance c/d 500
3,000 3,000
Note 12 Rates AccountBalance b/d 150 Profit and Loss Account 645Bank 660 Balance c/d (1/4 of 660) 165
810 810
Note 13 Motors AccountBalance b/d 16,000 Profit and Loss Account (Depreciation) * 3,000Bank 12,000 Balance c/d 25,000
28,000 28,000
Note 14 Drawings AccountCash (Note 2) 2,400Bank (Note 3) 300Bank (Note 3) 10,000Stock (Note 7) 2,600Wages (Note 9) 3,000Light, Heat and Fuel (Note 10) 570 Capital * 18,870
18,870 18,870
(a) Trading, Profit and Loss Account for the year ended 30/9/-2Sales (Note 5) 94,650Less Cost of SalesOpening Stock 10,000Purchases (Note 7) 35,000
45,000Closing Stock (15,000)
(30,000)64,650
+ Income11% Investment Interest (Note 8) 1,100Investment Fund Interest 10
65,760– ExpensesWages (Note 9) 8,800Light, Heat and Fuel (Note 10) 1,140Loan Interest (Note 11) 3,000Rates (Note 12) 645Depreciation on Motors (Note 13) 3,000
(16,585)Net Profit 49,175
Solutions
231
(b) Balance Sheet as at 30/9/-2Fixed Assets Cost Depr. ValueBuildings (100,000 + 30,000) 130,000 – 130,000Motors (Note 13) 28,000 3,000 25,00011% Investments 10,000Investment Fund (1,800 +10) 1,810
166,810
Current AssetsStock 15,000Debtors 22,000Bank 10,500Stock of Fuel 230Investment Interest Due (Note 8) 100Rates Prepaid (Note 12) 165Cash 50
48,045Current LiabilitiesCreditors 2,800Wages Due 900Loan Interest Due (Note 11) 500
(4,200)43,845
210,655Financed ByCapital (Note 1) 130,350Net Profit 49,175
179,525Drawings (Note 14) (18,870)
160,655Long-Term Liabilities12% Loan 50,000
210,655
232
Incomplete Records II(Balance Sheet Method): Solutions23
QUESTION 23.1
O. Thomas
QUESTION 23.2
R. Brown
(a) Opening Balance Sheet (Statement of Affairs) on 1/1/-0Assets LiabilitiesBuildings 61,000 Bank Overdraft 2,500Motor Vehicles 17,000 Wages Due 400Equipment 8,000 Creditors 9,500Stock 9,000Debtors 13,000Rates Prepaid 250 Capital (Net Worth) 95,850
108,250 108,250
(b) Balance Sheet as at 31/12/-0Assets 127,000Less Liabilities (13,700)Net Worth 31/12/-0 113,300Financed ByCapital 1/1/-0 95,850+ Capital Introduced 4,000
99,850– Drawings (700 + 5,200) (5,900)
93,950Net Profit (Balancing Figure) 17,350
111,300
(a) Opening Balance Sheet (Statement of Affairs) on 1/1/-1Assets LiabilitiesBuildings 72,000 Bank Overdraft 2,700Motor Vehicles 41,000 Wages Due 200Equipment 10,000 Creditors 6,400Stock 11,000Debtors 12,500Rates Prepaid 400 Capital (Net Worth) 137,600
146,900 146,900
Solutions
233
QUESTION 23.3
R. Cash
(b) Balance Sheet as at 31/12/-1Assets 178,500– Depreciation on Motor Vehicles (8,200)
170,300Less Liabilities (10,300)Net Worth 31/12/-1 160,000Financed ByCapital 1/1/-1 137,600+ Capital Introduced 2,800
140,400– Drawings (5,000 + 5,600) (10,600)
129,800Net Profit (Balancing Figure) 30,200
160,000
(a) Opening Balance Sheet (Statement of Affairs) on 1/1/-2Assets LiabilitiesPremises 94,000 Creditors 17,900Fixtures and Fittings 19,000 Expenses Due 700Motor Vehicles 27,000 Bank Overdraft 3,400Stock 17,200Debtors 14,300Advertising Prepaid 1,200 Capital (Net Worth) 150,700
172,700 172,700
(b) Balance Sheet as at 31/12/-2Assets 210,400– Depreciation on Motor Vehicles (5,400)
205,000Less Liabilities 24,500+ Expenses Due 500
(25,000)Net Worth 31/12/-2 180,000Financed ByCapital 1/1/-2 150,700+ Capital Introduced 6,000
156,700– Drawings (600 + 2,600) (3,200)
153,500Net Profit (Balancing Figure) 26,500
180,000
Leaving Certificate Accounting
234
QUESTION 23.4
K. Moon
QUESTION 23.5
L. Todd
Balance Sheet as at 31/12/-3Fixed Assets Cost Depr. ValuePremises 82,000 – 82,000Motor Vehicles 46,000 18,400 27,600
128,000 18,400 109,600Current AssetsStock 14,000Debtors 19,000Rates Prepaid 300
33,300Current LiabilitiesCreditors 13,500Bank Overdraft 3,000Expenses Due 500
(17,000)16,300
125,900Financed ByCapital 1/1/-3 90,000+ Capital Introduced 5,000
95,000– Drawings (2,080 + 2,600 + 3,000) (7,680)
87,320Net Profit (Balancing Figure) 38,580
125,870
(a) Opening Balance Sheet (Statement of Affairs) on 1/1/-4Assets LiabilitiesStock 13,400 Creditors 14,000Debtors 16,500 Expenses Due 900Advertising Prepaid 1,100Bank 2,400Premises 79,000Fixtures and Fittings 24,000Vans (50,000 – 20,000) 30,000 Capital (Net Worth) 151,500
166,400 166,400
Solutions
235
QUESTION 23.6
W. Boyer
(b) Balance Sheet as at 31/12/-4Assets 186,580– Depreciation on Fixtures and Fittings 4,800– Depreciation on Vans 10,000 (14,800)+ Rates Prepaid 220
172,000Less Liabilities (32,000)
140,000Financed ByCapital 1/1/-4 151,500+ Capital Introduced 9,000
160,500– Drawings (6,000 + 5,200) (11,200)
149,300Net Loss (Balancing Figure) (9,300)
140,000
(a) Opening Balance Sheet (Statement of Affairs) on 1/1/-5Assets LiabilitiesStock 18,000 Creditors 24,300Debtors 23,200 Wages Due 700Rates Prepaid 1,900 Bank Overdraft 3,500Premises 110,000Equipment (14,000 – 4,000) 10,000Delivery Vans 30,000 Capital (Net Worth) 164,600
193,100 193,100
(b) Balance Sheet as at 31/12/-5Assets 221,600– Depreciation on Equipment 2,800– Depreciation on Vans 3,000
(5,800)+ Rates Prepaid 2,200
218,000Less Liabilities 32,700+ Interest Due on Overdraft 300
(33,000)Net Worth 31/12/-5 185,000Financed ByCapital 1/1/-5 164,600+ Capital Introduced 6,000
170,600– Drawings (3,000 + 2,600 + 2,400) (8,000)
162,600Net Loss (Balancing Figure) 22,400
185,000
Leaving Certificate Accounting
236
QUESTION 23.7
F. Woolworth
QUESTION 23.8 (HIGHER LEVEL)
F. Devitt
Balance Sheet as at 31/12/-6Fixed Assets Cost Depr. ValueBuildings 180,000 – 180,000Equipment 60,000 15,000 45,000Vans 60,000 30,000 30,000
300,000 45,000 255,000Goodwill 9,00010% Investments 10,000
274,000Current AssetsStock 21,000Debtors 19,500Bank 3,800Rates Prepaid 150
44,450Current LiabilitiesCreditors 14,000ESB Bill Due 200Loan Interest Due 250
(14,450)30,000
304,000Financed ByCapital 1/1/-6 271,000+ Capital Introduced 5,000
276,000– Drawings (3,800 + 3,120 + 4,160) (11,080)
264,92015% Loan 12,000
276,920Net Profit (Balancing Figure) 27,080
304,000
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-7Assets LiabilitiesPremises 53,000 Creditors 11,900Stock 15,000 Expenses Due 1,100Debtors 18,400Cash 900Insurance Prepaid 700Equipment 25,000 Capital 100,000
113,000 113,000
Solutions
237
Notes (Items marked * are discovered items)
(a) Closing Balance Sheet as at 31/12/-7Fixed AssetsPremises 53,000Equipment 25,000Vans 17,000
95,000Current AssetsStock 17,000Debtors 17,200Cash 1,200Bank 5,200Insurance Prepaid 800Advertising Prepaid 400
41,800Current LiabilitiesCreditors 12,300ESB Bill Due 280
(12,580)29,220
124,220Financed ByCapital 1/1/-7 100,000+ Capital Introduced 10,000
110,000– Drawings (Note 2) (14,050)
95,950Net Profit (Balancing Figure) 28,270
124,220
Note 2 Drawings AccountStock (90 x 52) 4,680Cash (50 x 52) 2,600Holiday 3,000Light and Heat (Note 3) 2,170Insurance (Note 4) 1,600 Capital * 14,050
14,050 14,050
Note 3 Light and Heat AccountBank 8,400 Drawings (1/4 of 8,680) 2,170
Balance c/d 280 Profit and Loss Account * 6,5108,680 8,680
Note 4 Insurance AccountBalance b/d 700 Drawings (1/3 of 4,800) 1,600
Bank 4,800 Profit and Loss Account * 3,100Balance c/d 800
5,500 5,500
Note 5 Wages and General Expenses AccountBank 27,000 Balance b/d 1,100
Profit and Loss Account * 25,90027,000 27,000
Leaving Certificate Accounting
238
(c) Statement of Advice for DevittDevitt should keep an analysed cash book and a ledger, supported by appropriate books of first entry. Thiswould allow for more accurate record-keeping and less reliance on estimates.
QUESTION 23.9 (HIGHER LEVEL)
T. Barr
Note 6 Advertising AccountBank 1,600 Profit and Loss Account * 1,200
Balance c/d 4001,600 1,600
(b) Profit and Loss Account for the year ended 31/12/-7Gross Profit (Net Profit + Expenses) 64,980ExpensesLight and Heat (Note 3) 6,510Insurance (Note 4) 3,100Wages and General Expenses (Note 5) 25,900Advertising (Note 6) 1,200
(36,710)Net Profit (From Closing Balance Sheet) 28,270
Trading Account for the year ended 31/12/-7Sales 259,920 (100%)Less Cost of SalesOpening Stock 15,000Purchases (201,620 – 4,680) 196,940
211,940Closing Stock (17,000)
(194,940)Gross Profit (From Profit and Loss Account) 64,980 (25%)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-8Assets LiabilitiesPremises 120,000 Creditors 12,000Stock 21,000 Wages Due 1,800Debtors 18,000 Capital 150,000Insurance Prepaid 600Advertising Prepaid 300Goodwill * 3,900
163,800 163,800
Solutions
239
Notes (Items marked * are discovered items)
(a) Balance Sheet as at 31/12/-8Fixed AssetsPremises (120,000 + 50,000) 170,000Equipment (24,000 – 8,000) 16,000Goodwill (Note 1) 3,900
189,900Current AssetsStock 24,000Debtors 16,000Bank 4,000Cash 300Insurance Prepaid 700Advertising Prepaid 400
45,400Current LiabilitiesCreditors 9,000ESB Bill Due 300Loan Interest Due (Note 2) 500Loan Instalment Due (Note 2) 1,000
(10,800)34,600
224,500Financed ByCapital 1/1/-9 150,000+ Capital Introduced 5,000
155,000– Drawings (Note 2) (20,375)
134,625Loan (60,000 – 8,000) 52,000
186,625Net Profit (Balancing Figure) 37,875
224,500
Note 2 Loan Interest AccountBank (500 x 7) 3,500 Drawings (1/5 of 4,000) 800
Balance c/d * 500 Profit and Loss Account * 3,200Interest Payable (500 x 8) 4,000 4,000
Note 3 Loan Instalment AccountBank (1,000 x 7) 7,000 Loan Account (1,000 x 8) 8,000Balance c/d * 1,000
8,000 8,000
Note 4 Drawings AccountHoliday 4,000Cash (200 x 12) 2,400Stock (300 x 12) 3,600Light and Heat (Note 5) 1,575Equipment 8,000Loan Interest (Note 2) 800 Capital * 20,375
20,375 20,375
Leaving Certificate Accounting
240
QUESTION 23.10 (HIGHER LEVEL)
B. Dack
Note 5 Light and Heat AccountBank 6,000 Drawings (1/4 of 6,300) 1,575
Balance c/d 300 Profit and Loss Account * 4,7256,300 6,300
Note 6 Insurance AccountBalance b/d 600 Profit and Loss Account * 4,100Bank 4,200 Balance c/d 400
4,800 4,800
Note 7 Advertising AccountBalance b/d 300 Profit and Loss 2,600Bank 2,700 Balance c/d 400
3,000 3,000
Note 8 Wages and General Expenses AccountBank 28,000 Balance b/d 1,800
Profit and Loss Account * 26,20028,000 28,000
(b) Profit and Loss Account for the year ended 31/12/-8Gross Profit (Gross Profit + Expenses) 78,700ExpensesLoan Interest (Note 2) 3,200Light and Heat (Note 5) 4,725Insurance (Note 6) 4,100Advertising (Note 7) 2,600Wages and General Expenses (Note 8) 26,200
(40,825)Net Profit (From Closing Balance Sheet) 37,875
Trading Account for the year ended 31/12/-8Sales 196,750 (100%)Less Cost of SalesOpening Stock 21,000Purchases (124,650 – 3,600) 121,050
142,050Closing Stock (24,000)
(118,050)Gross Profit (From Profit and Loss Account) 78,700 (40%)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-9Assets LiabilitiesPremises 100,000 Wages Due 500Stock 1,000 Creditors 13,000Debtors 12,000 Capital 120,000Bank (120,000 – 110,000) 10,000Goodwill * 10,500
133,500 133,500
Solutions
241
(a) Balance Sheet as at 31/12/-9Fixed Assets Cost Depr. ValuePremises 100,000 – 100,000Machinery 18,000 1,000 17,000Motor Van 5,000 500 4,500Computer (11,000 – 2,200) 8,800 – 8,800
131,800 130,300Goodwill (Note 1) 10,500
140,800Current AssetsStock 1,500Debtors 13,500Bank 8,000Rates Prepaid 100
23,100Current LiabilitiesCreditors 12,000ESB Bill Due 300Loan Interest Due (Note 2) 200
(12,500)10,600
151,400Financed ByCapital 1/1/-9 120,000+ Capital Introduced 10,000
130,000– Drawings (Note 3) (14,240)
115,760Loan (20,000 – 2,000) 18,000
133,760Net Profit (Balancing Figure) 17,640
151,400
Note 2 Loan Interest AccountBank 300 Drawings (1/5 of 500) 100
Balance c/d 200 Profit and Loss Account * 400500 500
Note 3 Drawings AccountStock (500 x 12) 6,000Cash (300 x 12) 3,600Holiday 2,000Light and Heat (Note 4) 340Interest (Note 2) 100Computer 2,200 Capital * 14,240
14,240 14,240
Note 4 Light and Heat AccountBank 1,400 Drawings (1/5 of 1,700) 340
Balance c/d 300 Profit and Loss Account * 1,3601,700 1,700
Leaving Certificate Accounting
242
(c) Statement of Advice for DackDack should keep an analysed cash book and a ledger, supported by appropriate books of first entry. Thiswould enable Dack to prepare final accounts accurately and avoid relying on estimates.
QUESTION 23.11 (HIGHER LEVEL)
J. Bolton
Note 5 Rates AccountBank 600 Profit and Loss Account * 500
Balance c/d 100600 600
Note 6 Wages AccountBank 12,000 Balance b/d 500
Profit and Loss Account * 11,50012,000 12,000
(b) Profit and Loss Account for the year ended 31/12/-9Gross Profit (Net Profit + Expenses) 32,900ExpensesLoan Interest (Note 2) 400Light and Heat (Note 4) 1,360Rates (Note 5) 500Wages (Note 6) 11,500Depreciation – Machinery 1,000
– Motor Van 500(15,260)
Net Profit (From Closing Balance Sheet) 17,640
Trading Account for the year ended 31/12/-9Sales (Gross Profit + Cost of Sales) 115,150Less Cost of SalesOpening Stock 1,000Purchases (88,750 – 6,000) 82,750
83,750Closing Stock (1,500)
(82,250) (100%)Gross Profit (From Profit and Loss Account) 32,900 (40%)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-0Assets LiabilitiesPremises 90,000 Creditors 15,900Motors 20,000 Advertising Due 1,000Rates Prepaid 500 Capital 160,000Debtors 24,100Stock 10,500Bank (160,000 – 140,000) 20,000Goodwill * 11,800
176,900 176,900
Solutions
243
Notes (Items marked * are discovered items)
(a) Balance Sheet as at 31/12/-0Fixed AssetsPremises (90,000 + 45,000) 135,000Motors 20,000Equipment (12,000 – 4,000) 8,000
163,000Goodwill (Note 1) 11,800Investment Fund (2,000 + 120) 2,120
176,920Current AssetsStock 16,400Debtors 23,800Bank 27,200Rates Prepaid (Note 2) 600
68,000Current LiabilitiesCreditors 12,200ESB Bill Due 650Advertising Due 500Interest Due (Note 3) 500
(13,850)54,150
231,070Financed ByCapital 1/1/-0 160,000+ Capital Introduced 4,000
164,000– Drawings (Note 4) (19,665)
144,335Loan 60,000
204,335Net Profit (Balancing Figure) 26,735
231,070
Note 2 Rates AccountBalance b/d 500 Profit and Loss Account * 2,300Bank 2,400 Balance c/d (1/4 of 2,400) 600
2,900 2,900
Note 3 Loan Interest AccountBank 2,000 Drawings (1/4 of 2,500) 625
Balance c/d 500 Profit and Loss Account * 1,8752,500 2,500
Note 4 Drawings AccountStock (90 x 52) 4,680Cash (70 x 52) 3,640Light and Heat (Note 5) 1,470Equipment 4,000Interest (Note 3) 625Education Fees (Note 6) 5,250 Capital * 19,665
19,665 19,665
Leaving Certificate Accounting
244
(c) Statement of Advice for BoltonBolton should keep an analysed cash book and a ledger, supported by appropriate books of first entry. Thiswould facilitate the preparation of final accounts and do away with the need for estimates.
Note 5 Light and Heat AccountBank 6,700 Drawings (1/5 of 7,350) 1,470
Balance c/d 650 Profit and Loss Account * 5,8807,350 7,350
Note 6 Education Fees AccountBank 7,000 Drawings (3/4 of 7,000) 5,250
Profit and Loss Account * 1,7507,000 7,000
Note 7 Advertising AccountBank 3,000 Balance b/d 1,000Balance c/d 500 Profit and Loss Account * 2,500
3,500 3,500
(b) Profit and Loss Account for the year ended 31/12/-0Gross Profit (Net Profit + Expenses – Income) 91,920IncomeInvestment Fund Interest 120
92,040ExpensesRates (Note 2) 2,300Loan Interest (Note 3) 1,875Light and Heat (Note 5) 5,880Education Fees (Note 6) 1,750Advertising (Note 7) 2,500Wages and General Expenses 51,000
(65,305)Net Profit (From Closing Balance Sheet) 26,735
Trading Account for the year ended 31/12/-0Sales 306,400 (100%)Less Cost of SalesOpening Stock 10,500Purchases (225,060 – 4,680) 220,380
230,880Closing Stock (16,400)
(214,480)Gross Profit (From Profit and Loss Account) 91,920 (30%)
Solutions
245
QUESTION 23.12 (HIGHER LEVEL)
M. Nevin
Notes (Items marked * are discovered items)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-1Assets LiabilitiesPremises 80,000 Creditors 12,500Stock 11,200 Wages Due 300Debtors 19,000 Bank Overdraft 9,800Motor Vehicles 24,00011% Investments 10,000Investment Interest Due 150Rates Prepaid 250Cash 100 Capital * 122,100
144,700 144,700
(a) Balance Sheet as at 31/12/-1Fixed Assets Cost Depr. ValuePremises 80,000 – 80,000Motor Vehicles 24,000 3,000 21,000Equipment (16,000 – 12,000) 4,000 – 4,000
108,000 3,000 105,00011% Investments 10,000
115,000Current AssetsStock 12,100Debtors 18,400Rates Prepaid 300Bank 12,900Cash 100Insurance Prepaid 600Investment Interest Due (Note 2) 500
44,900Current LiabilitiesCreditors 13,200Wages Due 200ESB Bill Due 200Rent Receivable Prepaid (Note 3) 4,000
(17,600)27,300
142,300Financed ByCapital 1/1/-1 (Note 1) 122,100– Drawings (Note 4) (22,470)
99,630Net Profit (Balancing Figure) 42,670
142,300
Note 2 11% Investment Interest AccountBalance b/d 150 Bank 750Profit and Loss Account 1,100 Balance c/d * 500
1,250 1,250
Leaving Certificate Accounting
246
Note 3 Rent Receivable AccountProfit and Loss Account (2/12) 800 Bank 4,800
Balance c/d (10/12) * 4,000
4,800 4,800
Note 4 Drawings AccountStock (60 x 52) 3,120Cash (40 x 52) 2,080Light and Heat (Note 5) 1,250College Fees (Note 6) 3,500Insurance (Note 7) 520Equipment 12,000 Capital * 22,470
22,470 22,470
Note 5 Light and Heat AccountBank 4,800 Drawings (1/4 of 5,000) 1,250
Balance c/d 200 Profit and Loss Account * 3,7505,000 5,000
Note 6 College Fees AccountBank 7,000 Drawings (1/2 of 7,000) 3,500
Profit and Loss Account * 3,5007,000 7,000
Note 7 Insurance AccountBank 2,600 Drawings (1/5 of 2,600) 520
Profit and Loss Account * 1,480Balance b/d 600
2,600 2,600
Note 8 Wages and General Expenses AccountBank 19,600 Balance b/d 300Balance c/d 200 Proift and Loss Account * 19,500
19,800 19,800
Note 9 Rates AccountBalance b/d 250 Profit and Loss Account * 3,550Bank 3,600 Balance c/d 300
3,850 3,850
Solutions
247
QUESTION 23.13 (HIGHER LEVEL)
S. Healy
(b) Profit and Loss Account for the year ended 31/12/-1Gross Profit (Net Profit + Expenses – Income) 75,550Income11% Investment Interest (Note 2) 1,100Rent Receivable (Note 3) 800
1,90077,450
ExpensesLight and Heat (Note 5) 3,750College Fees (Note 6) 3,500Insurance (Note 7) 1,480Wages and General Expenses (Note 8) 19,500Rates (Note 9) 3,550Depreciation on Motors 3,000
(34,780)Net Profit (From Closing Balance Sheet) 42,670
Trading Account for the year ended 31/12/-1Sales 302,200 (100%)Less Cost of SalesOpening Stock 11,200Purchases (230,670 – 3,120) 227,550
238,750Closing Stock (12,100)
(226,650)Gross Profit (From Profit and Loss Account) 75,550 (25%)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-2Assets LiabilitiesPremises 80,000 Creditors 11,000Motor Van 10,000 AIB Loan 5,000Equipment 19,000 ESB Bill Due 4008% Investments 12,000 Wages Due 1,500Stock 15,000Debtors 10,000Rates Prepaid 684Insurance Prepaid 300 Capital * 129,084
146,984 146,984
Leaving Certificate Accounting
248
Notes (Items marked * are discovered items)
(a) Balance Sheet as at 31/12/-2Fixed AssetsPremises 80,000Motor Van (10,000 + 10,000) 20,000Equipment (19,000 + 40,000) 59,000Furniture (6,000 – 1,200) 4,800
163,8008% Investments 12,000Investment Fund (4,200 + 125) 4,325
180,125Current AssetsStock 12,000Debtors 6,000Bank 7,000Rates Prepaid (Note 2) 744Insurance Prepaid (Note 3) 375
26,119Current LiabilitiesCreditors 9,000ESB Bill Due 500Wages Due 600Loan Interest Due (Note 4) 1,000
(11,100)15,019
195,144Financed ByCapital 1/1/-2 129,084– Drawings (Note 5) (12,940)
116,144National Irish Bank Loan 50,000
166,144Net Profit (Balancing Figure) 29,000
195,144
Note 2 Rates AccountBalance b/d (1/2 year) 684 Profit and Loss Account * 1,428
Bank (Full Year) 1,488 Balance c/d * 7442,172 2,172
Note 3 Insurance AccountProfit and Loss Account (1/4 year) 300 Drawings (1/5 of 1,500) 300
Bank (Full Year) 1,500 Profit and Loss Account * 1,125Balance c/d (1/4 of 1,500) 375
1,800 1,800
Note 4 Loan Interest (National Irish Bank) AccountBank 2,000 Profit and Loss Account * 3,000Balance b/d 1,000
3,000 3,000
Solutions
249
Note 5 Drawings AccountFamily Holiday 4,400Light and Heat (Note 6) 920Insurance (Note 3) 300Furniture 1,200Cash (60 x 52) 3,120Stock 3,000 Capital * 12,940
12,940 12,940
Note 6 Light and Heat AccountBank 4,600 Balance b/d 400
Drawings (1/5 of 4,600) 920
Balance c/d 500 Profit and Loss Account * 3,7805,100 5,100
Note 7 AIB Loan AccountBank 5,600 Balance b/d 5,000
Profit and Loss Account * 6005,600 5,600
Note 8 Wages AccountBank 38,000 Balance b/d 1,500Balance c/d 600 Profit and Loss Account * 37,100
38,600 38,600
(b) Profit and Loss Account for the year ended 31/12/-2Gross Profit (Net Profit + Expenses – Income) 86,948IncomeInvestment Fund Interest 1258% Investment Interest 960
1,08588,033
ExpensesRates (Note 2) 1,428Insurance (Note 3) 1,125Loan Interest National Irish Bank (Note 4) 3,000Light and Heat (Note 6) 3,780Loan Interest AIB (Note 7) 600Wages (Note 8) 37,100Advertising 12,000
(59,033)Net Profit (From Closing Balance Sheet) 29,000
Trading Account for the year ended 31/12/-2Sales 217,370 (100%)Less Cost of SalesOpening Stock 15,000Purchases (130,422 – 3,000) 127,422
142,422Closing Stock (12,000)
(130,422)Gross Profit (From Profit and Loss Account) 86,948 (40%)
Leaving Certificate Accounting
250
(c) Record KeepingHealy’s record keeping is unsatisfactory because it relies on estimates. A better system would be to keep ananalysed cash book and ledger, supported by appropriate books of first entry.
QUESTION 23.14 (HIGHER LEVEL)
S. O’Rourke
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-3Assets LiabilitiesPremises 104,000 Wages Due 500Stock 14,400 ESB Bill Due 200Insurance Prepaid 240 Creditors 11,400Debtors 14,700 Capital 140,000Bank (140,000 – 130,000) 10,000Goodwill 8,760
152,100 152,100
(a) Balance Sheet as at 31/12/-3Fixed Assets Cost Depr. ValuePremises (104,000 + 70,000) 174,000 – 174,000Furniture (12,000 – 6,000) 6,000 6,000Equipment 20,000 2,000 18,000
200,000 2,000 198,000Goodwill (Note 1) 8,760Investment Fund (6,000 + 470) 6,470
213,230Current AssetsStock 12,300Debtors 17,500Bank 26,500Rates Prepaid 200Insurance Prepaid (Note 2) 270
56,770Current LiabilitiesCreditors 14,200ESB Bill Due 160Interest Due (Note 3) 800
(15,160)41,610
254,840Financed ByCapital 1/1/-3 140,000+ Capital Introduced (650 + 2,000) 2,650
142,650– Drawings (Note 4) (15,032)
127,618Loan 80,000Net Profit (Balancing Figure) 47,222
254,840
Solutions
251
Notes (Items marked * are discovered items)
Note 2 Insurance AccountBalance b/d (1/4 year) 240 Profit and Loss Account * 1,050
Bank (full year) 1,080 Balance c/d (1/4 of 1,080) 270
1,320 1,320
Note 3 Loan Interest AccountBank 3,200 Drawings (1/4 of 4,000) 1,000
Balance c/d 800 Profit and Loss Account * 3,0004,000 4,000
Note 4 Drawings AccountStock (70 x 52) 3,640Cash (65 x 52) 3,380Light and Heat (Note 5) 412Interest (Note 3) 1,000Furniture 6,000Rates (note 6) 600 Capital * 15,032
15,032 15,032
Note 5 Light and Heat AccountBank 2,100 Balance b/d 200
Drawings (1/5 of 2,060) 412
Balance c/d 160 Profit and Loss Account * 1,6482,260 2,260
Note 6 Rates AccountBank 1,800 Drawings (1/3 of 1,800) 600
Profit and Loss Account * 1,000Balance c/d 200
1,800 1,800
Note 7 Wages and General Expenses AccountBank 38,500 Balance b/d 500
Profit and Loss Account * 38,00038,500 38,500
Leaving Certificate Accounting
252
QUESTION 23.15 (HIGHER LEVEL)
R. Foster
(b) Profit and Loss Account for the year ended 31/12/-3Gross Profit (Net Profit + Expenses – Income) 93,450IncomeInvestment Interest 470
93,920ExpensesInsurance (Note 2) 1,050Loan Interest (Note 3) 3,000Light and Heat (Note 5) 1,648Rates (Note 6) 1,000Wages and General Expenses (Note 7) 38,000Depreciation on Equipment 2,000
(46,698)Net Profit (From Closing Balance Sheet) 47,222
Trading Account for the year ended 31/12/-3Sales (Gross Profit + Cost of Sales) 327,075Less Cost of SalesOpening Stock 14,400Purchases (235,165 – 3,640) 231,525
245,925Closing Stock (12,300)
(233,625) (100%)Gross Profit (From Profit and Loss Account) 93,450 (40%)
Note 1 Opening Balance Sheet (Statement of Affairs) on 1/1/-4Assets LiabilitiesLand 200,000 Creditors 14,000Stock 9,000 Wages Due 1,200Rates Prepaid 375 Capital 250,000Debtors 16,000Investment Interest Due 7008% Investments 17,500Bank (250,000 – 237,375) 12,625Goodwill * 9,000
265,200 265,200
Solutions
253
Notes (Items marked * are discovered items)
(a) Balance Sheet as at 31/12/-4Fixed Assets Cost Depr. ValueLand and Buildings (200,000 + 50,000) 250,000 – 250,000Equipment (Note 2) 80,000 8,000 72,000
330,000 8,000 322,000Goodwill (Note 1) 9,0008% Investments 17,500
348,500Current AssetsStock 8,000Debtors 14,000Advertising Prepaid 2,000Rates Prepaid (Note 3) 405Investment Interest Due (Note 4) 900
25,305Current LiabilitiesCreditors (15,000 – 1,000) 14,000Loan Interest Due (Note 5) 1,000Wages Due 1,800ESB Bill Due 460Bank Overdraft 40,287
(57,547)(32,242)316,258
Financed ByCapital 1/1/-4 250,000– Drawings (Note 6) (25,717)
224,283Loan (80,000 – 4,000) 76,000
300,283Net Profit (Balancing Figure) 15,975
316,258
Note 2 Equipment AccountLoan 65,000 Profit and Loss Account (Depreciation)* 8,000Bank 15,000 Balance c/d 72,000
80,000 80,000
Note 3 Rates AccountBalance b/d (1/4 year) 375 Profit and Loss Account * 1,590
Bank (full year) 1,620 Balance c/d (1/4 of 1,620) 405
1,995 1,995
Note 4 8% Investment Interest AccountBalance b/d 700 Bank 1,200Profit and Loss Account * 1,400 Balance c/d * 900
2,100 2,100
Note 5 Loan Interest AccountBank 4,000 Drawings (1/4 of 5,000) 1,250
Balance c/d 1,000 Profit and Loss Account * 3,7505,000 5,000
Leaving Certificate Accounting
254
Note 6 Drawings AccountBoat 12,000Stock (500 x 12) 6,000Cash (50 x 52) 2,600Light and Heat (Note 7) 1,742Interest (Note 5) 1,250General Expenses (Note 8) 2,125 Capital * 25,717
25,717 25,717
Note 7 Light and Heat AccountBank 8,250 Drawings (1/5 of 8,710) 1,742
Balance c/d 460 Profit and Loss Account * 6,9688,710 8,710
Note 8 General Expenses AccountBank 17,000 Drawings (1/8 of 8,710) 2,125
Profit and Loss Account * 14,87517,000 17,000
(b) Profit and Loss Account for the year ended 31/12/-4Gross Profit (Net Profit + Expenses – Income) 74,358IncomeInvestment Interest 1,400
75,758ExpensesDepreciation on Equipment (Note 2) 8,000Rates (Note 3) 1,590Loan Interest (Note 5) 3,750Light and Heat (Note 7) 6,968General Expenses (Note 8) 14,875Wages (20,000 – 1,200 + 1,800) 20,600Advertising (6,000 – 2,000) 4,000
(59,783)Net Profit (From Closing Balance Sheet) 15,975
Trading Account for the year ended 31/12/-4Sales (Gross Profit + Cost of Sales) 260,253Less Cost of SalesOpening Stock 9,000Purchases (190,895 – 6,000) 184,895
193,895Closing Stock (8,000)
(185,895) (100%)Gross Profit (From Profit and Loss Account) 74,358 (40%)
Solutions
255
QUESTION 23.16 (HIGHER LEVEL)
R. Savage
(a) Balance Sheet as at 31/12/-5Cost Depr. Value
Fixed Assets 280,000 28,000 252,000Current AssetsStock 30,000
Debtors (300,000 ÷ 12) x 1 25,000
Bank 5,00060,000
Current LiabilitiesCreditors 30,000
30,000282,000
Financed ByCapital 1/1/-5 265,000– Drawings (15,000)
250,000Net Profit (Balancing Figure) 32,000
282,000
(b) Trading and Profit and Loss Account for the year ended 31/12/-5Sales (Cash Sales €148,000, Credit Sales €300,000) 448,000 (100%)Less Cost of SalesPurchases 366,000Closing Stock (30,000)
(336,000)Gross Profit 112,000 (25%)ExpensesDepreciation 28,000Sundry Other Expenses 52,000
(80,000)Net Profit (From Closing Balance Sheet) 32,000
Leaving Certificate Accounting
256
QUESTION 23.17 (HIGHER LEVEL)
M. Ryan
(a) Balance Sheet as at 31/12/-6Cost Depr. Value
Fixed Assets 120,000 6,000 114,000Current AssetsStock 45,000
Debtors (282,000 ÷ 12) x 1 23,500
Bank 6,50075,000
Current LiabilitiesCreditors 20,000Bank Overdraft 10,000
(30,000)45,000
159,000Financed ByCapital 1/1/-6 118,000– Drawings (14,000)
104,000Net Profit (Balancing Figure) 55,000
159,000
(b) Trading, Profit and Loss Account for the year ended 31/12/-6Sales (Cash Sales €38,000, Credit Sales €282,000) 320,000 (100%)Less Cost of SalesPurchases (291,000 – 6,000) 285,000Closing Stock (45,000)
(240,000)Gross Profit 80,000 (25%)ExpensesDepreciation 6,000Sundry Other Expenses 19,000
(25,000)Net Profit (From Closing Balance Sheet) 55,000
Solutions
257
QUESTION 23.18 (HIGHER LEVEL)
M. Lyle
(a) Balance Sheet as at 31/12/-7Cost Depr. Value
Fixed Assets 140,000 7,000 133,000Current AssetsStock 20,000
Debtors (270,000 ÷ 12) x 2 45,000
Bank 15,00080,000
Current LiabilitiesCreditors 28,000Bills Payable 12,000
(40,000)40,000
173,000Financed ByCapital 142,000Capital Introduced 15,000
157,000– Drawings (18,000)
139,000Net Profit (Balancing Figure) 34,000
173,000
(b) Trading, Profit and Loss Account for the year ended 31/12/-7Sales (Cash Sales €30,000, Credit Sales €270,000) 300,000Less Cost of SalesPurchases (267,200 – 7,200) 260,000Closing Stock (20,000)
240,000 (100%)Gross Profit 60,000 (25%)+ IncomeDiscount Received 1,000
61,000– ExpensesDepreciation 7,000Sundry Other Expenses 20,000
(27,000)Net Profit (From Closing Balance Sheet) 34,000
Leaving Certificate Accounting
258
QUESTION 23.19 (HIGHER LEVEL)
R. Daly
(a) Balance Sheet as at 31/12/-8Cost Depr. Value
Fixed Assets 100,000 10,000 90,000Current AssetsStock 7,500
Debtors (240,000 ÷ 12) x 11/2 30,000
Bank 7,50045,000
Current Liabilities
Creditors (175,500 ÷ 12) x 1 14,625
Loan Interest Due 375(15,000)
30,000120,000
Financed ByCapital 1/1/-8 42,500– Drawings (12,500)
30,0005 year loan 50,000
80,000Net Profit (Balancing Figure) 40,000
120,000
(b) Trading and Profit and Loss Account for the year ended 31/12/-8Sales (All on Credit) 240,000 (100%)Less Cost of SalesPurchases (All on Credit) 177,500Closing Stock (7,500)
168,000Gross Profit 72,000 (30%)+ IncomeRent Received 1,000
73,000– ExpensesDepreciation 10,000Sundry Other Expenses 23,000
(33,000)Net Profit (From Closing Balance Sheet) 40,000
259
Farm Accounts: Solutions24QUESTION 24.1
QUESTION 24.2
Analysed Receipts and Payments Account R. BeattyReceiptsDetails Total Cattle and Milk Sales Sheep Sales Government
GrantsBalance b/d 1,200 – – –Milk Sales 17,000 17,000 – –Beef Premium 2,100 – – 2,100Sheep Sales 14,000 – 14,000 –Cattle Sales 25,000 25,000Ewe Premium 6,000 – – 6,000Wool Sales 1,500 1,500Total Receipts 66,800 42,000 15,500 8,100
PaymentsDetails Total Cattle and Milk Sheep Sundry DrawingsDairy Wages 4,000 4,000 – – –General Wages 12,000 – – 12,000 –Light and Heat 700 – – 700 –Cattle Feed 5,000 5,000 – – –Sheep Feed 2,000 – 2,000 – –Conacre 1,200 1,200Cattle 9,000 9,000 – – –Drawings 5,500 – – – 5,500Sheep 4,000 – 4,000 – –Repairs 300 – – 300 –Fertilizer 1,200 – – 1,200 –Total Payments 44,900 18,000 6,000 15,400 5,500Balance c/d 21,900
N. Power: Analysed Receipts and Payments Account ReceiptsDetails Total Cattle Sales Poultry Sales Grain Sales Government
GrantsBalance b/d 3,500 – – – –Cattle 21,000 21,000 – – –Poultry 14,000 – 14,000 – –Grain 6,500 – – 6,500 –Beef Premium 3,000 – – – 3,000Headage 4,000 – – – 4,000Total Receipts 52,000 21,000 14,000 6,500 7,000
Leaving Certificate Accounting
260
QUESTION 24.3
The McMahon Family
PaymentsDetails Total Cattle Poultry Grain Sundry DrawingsCattle 9,000 9,000 – – – –Poultry 7,000 – 7,000 – – –Seed 1,500 – – 1,500 – –Wages 6,000 – – 6,000 – –Wages 13,500 – – – 13,500 –Drawings 7,000 – – – – 7,000Feed 1,500 1,500 – – – –Feed 300 – 300 – – –Fencing 900 – – – 900 –Repairs 100 – – – 100 –Fertilizer 1,200 – – – 1,200 –Light and Heat 700 – – – 700 –Insurance 900 – – – 900 –Total Payments 49,600 10,500 7,300 7,500 17,300 7,000Balance c/d 2,400
(a) Enterprise Analysis Account for the year ended 31/12/-5 – Cattle and MilkSales – Milk 17,000
– Cattle 26,000Drawings (700 + 2,500) 3,200Beef Premium 4,500Closing Stock of Cattle 21,000
71,700Less Expenses
Opening Stock of Cattle 22,000Purchases 9,000Feed 3,000Dairy Wages 6,500
General Wages (1/2 of 15,000) 7,500
Haulage (1/2 of 2,000) 1,000 (49,000)
Gross Profit (Contribution) 22,700
Enterprise Analysis Account for the year ended 31/12/-5 – Grain CropsSales 13,500Closing Stock 8,500
22,000Less Expenses
Opening Stock 4,000Seeds 1,200Sowing Wages 3,800Reaping Wages 4,200
General Wages (1/2 of 15,000) 7,500
Haulage (1/2 of 2,000) 1,000 (21,700)
Gross Profit (Contribution) 300
Solutions
261
QUESTION 24.4
The O’Reilly Family
(a) General Profit and Loss Account for the year ended 31/12/-5Contribution from Cattle and Milk 22,700Contribution from Grain Crops 300Conacre 1,200
24,200Less Expenses
Fencing 200Light and Heat 1,700Repairs 2,500Insurance 700
(5,100)Net Profit 19,100
(a) Enterprise Analysis Account for the year ended 31/12/-6 – Cattle and MilkSales – Milk 140,000
– Cattle 280,000Drawings (700 + 3,800) 4,500Closing Stock of Cattle 85,000
509,500Less Expenses
Opening Stock of Cattle 90,000Purchases 210,000Feedstuffs 25,000Dairy Wages 14,000Veterinary Fees 5,700Milking Parlour Repairs 2,100
Fertilizer Costs (1/2 of 1,500 + 4,800 – 2,400) 1,950
General Wages (1/2 of 24,000) 12,000
Haulage (1/2 of 6,000) 3,000 (363,750)
Gross Profit (Contribution) 145,750
Enterprise Analysis Account for the year ended 31/12/-6 – Grain CropsSales 62,600Closing Stock 15,000
77,600Less Expenses
Opening Stock 12,000Purchases of Seed 13,000Pesticides (700 + 5,300 – 300) 5,700Sowing Wages 5,500Reaping Wages 8,200
Fertilizer Costs (1/2 of 1,500 + 4,800 – 2,400) 1,950
General Wages (1/2 of 24,000) 12,000
Haulage (1/2 of 6,000) 3,00061,350
Gross Profit (Contribution) 16,250
Leaving Certificate Accounting
262
QUESTION 24.5
The Doyle Family
(b) General Profit and Loss Account for the year ended 31/12/-6Contribution from Cattle and Milk 145,750Contribution from Grain Crops 16,250
162,000Less Expenses
Electricity and Diesel Oil (300 + 3,200 – 400) 3,100Insurance 700Bank Charges 200General Expenses 2,200
(6,200)Net Profit 155,800
(a) Enterprise Analysis Accounts for the year ended 31/12/-7Cattle Sheep Pigs
Sales 301,000 74,000 94,000Premium 12,000 4,000 –Drawings 2,700 1,700 900Closing Stocks 95,000 32,000 23,000
410,700 111,700 117,900Less ExpensesOpening Stock 98,000 28,000 21,000Purchases 212,000 39,000 72,000
Wages (1/3 of 65,000 + 1,000) 22,000 22,000 22,000
Haulage (1/3 of 19,000 + 2,000) 7,000 7,000 7,000
Veterinary Fees (1/3 of 3,500 + 400) 1,300 1,300 1,300
(340,300) (97,300) (123,300)Gross Profit (Contribution) 70,400 144,400 (5,400)
(b) General Profit and Loss Account for the year ended 31/12/-7Contribution from Cattle 70,400Contribution from Sheep 14,400Contribution from Pigs (5,400)Conacre 9,000
88,400Less Expenses
Light and Heat (7,000 – 1,400) 5,600Bank Charges 500Accountancy Fees 2,000Insurance (7,000 – 1,400) 5,600Repairs (4,000 – 800) 3,200Bank Interest 1,500General Expenses (6,500 – 1,300) 5,200Depreciation – Farm Machinery 7,000
– Tractors 10,000(40,600)
Net Profit 47,800
Solutions
263
QUESTION 24.6
(c) Balance Sheet as at 31/12/-7Cost Depr Value
Fixed AssetsLand and Buildings 300,000 – 300,000Farm Machinery 70,000 7,000 63,000Tractors 50,000 10,000 40,000
420,000 17,000 403,000Current Assets
Stock – Cattle 95,000– Sheep 32,000– Pigs 23,000
150,000Debtors 17,000
167,000Current Liabilities
Creditors 21,000Bank Overdraft 15,000
Vet Fees Due 400Haulage Due 2,000Wages Due 1,000
(39,400)127,600530,600
Financed byCapital 500,000+ Net Profit 47,800
547,800– Drawings (7,000 + 2,700 + 1,700 + 900 + 1,400 + 1,400 + 800 + 1,300) (17,200)
530,600
The Galvin Family
(a) Statement of Capital on 1/1/-1Assets LiabilitiesFarm Land and Buildings 400,000 ESB Bill Due 320Equipment 120,000 Due to Vet. 4,500Cattle Stock 70,000 Loan 10,000Pigs Stock 40,000 Loan Interest Due 1,890Horses Stock 65,000 21/2 year = 2,700
Diesel Oil Stock 700 13/4 year = 1,890
Due from Goffs 14,700Due from Creamery 5,600Insurance Prepaid 480Bank 3,800 Capital on 1/1/- 703,570
720,280 720,280
Leaving Certificate Accounting
264
(b) Enterprise Analysis Account for the year ended 31/12/-1 – Cattle and Milk
Sales to Creamery (84,000 – 5,600 + 6,500) 84,900Cattle Sales 127,000 Beef Premium 13,000Drawings 500Closing Stock of Cattle 60,000
285,400Less Expenses
Opening Stock of Cattle 70,000Dairy Wages 17,000Cattle Purchases 82,000Vet. Fees (40% of 19,500 – 4,500) 6,000Farm Repairs (40% of 11,000) 4,400General Farm Expenses (40% of 6,500) 2,600Depreciation on Equipment(1/3 of 120,000 + 95,000 – 15,000 – 191,000) 3,000
Insurance (1/3 of 4,800 + 1,800 – 600 – 336) 448Light Heat and Fuel(20% of 700 + 3,000 – 320 – 600 – 695) 417
(185,865)Gross Profit (Contribution) 99,535
Enterprise Analysis Account – Pigs
Pig Sales 76,000Closing Stock of Pigs 7,000
83,000Less Expenses
Opening Stock of Pigs 40,000Pig Purchases 29,000Vet. Fees (20% of 19,500 – 4,500) 3,000Farm Repairs (20% of 11,000) 2,200General Farm Expenses (20% of 6,500) 1,300Depreciation on Equipment(1/3 of 120,000 + 95,000 – 15,000 – 191,000) 3,000
Insurance (1/3 of 4,800 + 1,800 – 600 – 336) 448Light Heat and Fuel(40% of 700 + 3,000 – 320 – 600 – 695) 834
(79,782)Gross Profit (Contribution) 3,218
Enterprise Analysis Account – Horses
Horse Sales (26,250 – 14,700) 11,550Annual Grant from Bord na gCapaill 12,000Closing Stock of Horses 18,000
41,550Less Expenses
Opening Stock of Horses 65,000Horse Purchases 21,000Vet. Fees (40% of 19,500 – 4,500) 6,000Farm Repairs (40% of 11,000) 4,400General Farm Expenses (40% of 6,500) 2,600Depreciation on Equipment(1/3 of 120,000 + 95,000 – 15,000 – 191,000) 3,000
Insurance (1/3 of 4,800 + 1,800 – 600 – 336) 448Light Heat and Fuel(40% of 700 + 3,000 – 320 – 600 – 695) 834
(103,282)Gross Profit (Contribution) (61,732)
Solutions
265
(e) Advice for the GalvinsThe margin on cattle and milk is 47%, on pigs 4%, and there is a loss on horses. Depending on the acreagedevoted to each enterprise, it would appear that Galvin should specialise in cattle and milk and end the othertwo enterprises. There may be expensive shut down costs involved. The farm’s liquidity situation is such thatthe money that is presently tied up in current assets, especially stocks and cash, could be more profitablyutilised in fixed assets which would generate profits.
(c) General Profit and Loss Account for the year ended 31/12/-1
Contribution from Cattle and Milk 99,535Contribution from Pigs 3,218Contribution from Horses (61,732)Profit on Model Farm Exhibition (24,000 – 15,000) 9,000
50,021Less Expenses
Loss on Disposal 7,000Loan interest (2,700 – 1,890) 810Bank Charges 500
(8,310)Net Profit 41,711
(d) Balance Sheet as at 31/12/-1Cost Depr Value
Fixed AssetsLand and Buildings 400,000 – 400,000Equipment 200,000 9,000 191,000
600,000 9,000 591,000Current Assets
Stock – Cattle 60,000– Pigs 7,000– Horses 18,000– Diesel Fuel 600
85,600Due from Creamery 6,500Insurance Prepaid (4 months) 600Deposit Account 40,000Current Account 12,050
144,750735,750
Financed byCapital 1/1/-1 703,570+ Net Profit 41,711
745,281– Drawings (8,000 + 336 + 695 + 500) (9,531)
735,750
Leaving Certificate Accounting
266
QUESTION 24.7
Brian and Mary McArdle
(a) Enterprise Analysis Account for the year ended 31/12/-9 – Cattle and Milk
Sales – Cattle 43,000 – Milk (29,500 + 1,800) 31,300
Beef Premium 4,500Drawings (600 + 2,100) 2,700Closing Stock of Cattle 79,000
160,500Less Expenses
Opening Stock of Cattle 75,000Purchases 29,000Feedstuffs 9,000Dairy Wages 5,300Veterinary Fees (1,200 – 240) 960Barley Fed to Cattle 1,900Repairs to Milking Parlour 2,800Haulage (70% of 5,800) 4,060Depreciation – Machinery (70% of 3,000) 2,100– Equipment (70% of 9,000) 6,300Diesel Oil (70% of 200 + 1,800 – 500) 1,050
(137,470)Gross Profit (Contribution) 23,030
Enterprise Analysis Account for the year ended 31/12/-9 – Barley
Sales – Barley 19,000 – Straw 2,600
EU Barley Subsidies (1,300 + 1,200) 2,500Barley fed to Cattle 1,900Closing Stock 6,000
32,000Less Expenses
Opening Stock 7,000Seeds 900Pesticides 3,000Crop Spraying 2,000Sowing and Harvesting Wages 5,600Fertiliser (2,500 + 4,500 – 3,000) 4,000Haulage (30% of 5,800) 1,740Depreciation – Machinery (30% of 3,000) 900– Equipment (30% of 9,000) 2,700Diesel Oil (30% of 200 + 1,800 – 500) 450
(28,290)Gross Profit (Contribution) 3,710
(b) General Profit and Loss Account for the year ended 31/12/-9
Contribution from Cattle and Milk 23,030Contribution from Barley 3,710Conacre 1,800
28,540Less Expenses
Insurance (700 – 140) 560Light and Heat (1,300 – 260) 1,040Loan Interest 2,000
(3,600)Net Profit 24,940
Solutions
267
(d) Advice to the McArdle FamilyThe farm made a profit of €24,940 during the year. This represents a return on capital employed of justunder 5%. This would have to be compared with previous years and returns from similar enterprises. The peracreage contribution of cattle and milk was €164.50 per acre (23,030/140) and the per acreage contributionof barley was €61.83 per acre (3,710/60).The return on the cattle and milk enterprise is superior to that on barley so a higher concentration on cattleand milk is desirable but may not be possible due to suitability of land, milk quotas available etc.
QUESTION 24.8 (HIGHER LEVEL)
(c) Balance Sheet as at 31/12/-9Cost Depr Value
Fixed AssetsFarm Land and Buildings 450,000 – 450,000Farm Machinery 55,000 28,000 27,000Farm Equipment 45,000 26,000 19,000
550,000 54,000 496,000Current Assets
Stock – Cattle 79,000– Fertiliser 3,000– Barley 6,000– Diesel Oil 500
88,500Debtors (1,900 + 1,800 + 1,200) 4,900Cash 100
93,500Current Liabilities
Creditors 16,400Bank 1,700
(18,100)75,400
571,400Financed byCapital (524,800 + 2,800) 527,600+ Net Profit 24,940
552,540– Drawings (2,800 + 600 + 2,100 + 240 + 140 + 260) (6,140)
546,400ACC Loan 25,000
571,400
The Lynch Family(a) Statement of Capital on 1/1/-0
Assets LiabilitiesFarm Land and Buildings 200,000 Creditors for Cattle 12,000Farm Equipment 15,000Farm Machinery 25,000Due from Creamery 1,500Stock of Cattle 29,000Stock of Grain 4,000Prize Bonds 5,000Due from Meat Factory 9,500Insurance Prepaid 320Bank 3,500 Capital on 1/1/-0 280,820
292,280 292,820
Leaving Certificate Accounting
268
(b) Enterprise Analysis Account for the year ended 31/12/-0 – Cattle and Milk
Sales to Meat Factory (23,800 – 9,500 + 10,800) 25,100Sales at Market 19,000Sales of Milk (27,200 – 1,500 + 2,800) 28,500 Beef Premium 3,900Drawings (1,000 + 3,000) 4,000Closing Stock 32,000
112,500Less Expenses
Opening Stock of Cattle 29,000Purchases (23,000 – 12,000 + 11,500) 22,500Feedstuffs 11,100Grain Fed to Cattle 1,900Veterinary Fees (3,000 – 600) 2,400Dairy Wages 11,700General Farm Expenses (1/2 of 2,300) 1,150Machinery Repairs (1/2 of 3,200) 1,600Haulage (1/2 of 5,500) 2,750
(84,100)Gross Profit (Contribution) 28,400
Enterprise Analysis Account for the year ended 31/12/-0 – Grain Crops
Sales 15,300Grain Subsidy 2,800Grain fed to Cattle 1,900Closing Stock 7,000
27,000
Less ExpensesOpening Stock 4,000Seeds 2,900Sowing and Harvesting 3,900Pesticides 2,500Crop Spraying 2,900General Farm Expenses (1/2 of 2,300) 1,150Machinery Repairs (1/2 of 3,200) 1,600Haulage (1/2 of 5,500) 2,750
(21,700)Gross Profit (Contribution) 5,300
(c) General Profit and Loss Account for the year ended 31/12/-0
Contribution from Cattle and Milk 28,400Contribution from Grain Crops 5,300Conacre 3,500
37,200Less Expenses
Insurance (320 + 2,040 – 340) 2,020Water Rates (160 – 32) 128 Depreciation – Equipment (15,000 + 17,000 – 30,000) 2,000
– Machinery (25,000 – 21,000) 4,000(8,148)
Net Profit 29,052
Solutions
269
QUESTION 24.9
The McGimpsey Family
(d) Balance Sheet as at 31/12/-0Cost Depr Value
Fixed AssetsFarm Land and Buildings 200,000 – 200,000Farm Equipment 32,000 2,000 30,000Farm Machinery 25,000 4,000 21,000
257,000 6,000 251,000Prize Bonds 5,000
256,000Current Assets
Stock – Cattle 32,000– Grain 7,000
39,000Debtors – Creamery 2,800
– Meat Factory 10,800Bank 1,800Insurance Prepaid (two months) 340
54,740Current Liabilities
Creditors for Cattle (11,500)43,240
299,240Financed byCapital 1/1/-0 280,820+ Net Profit 29,052
309,872– Drawings (6,000 + 1,000 + 3,000 + 600 + 32) 10,632
299,240
(a) Enterprise Analysis Account for the year ended 31/12/-8 – Cattle and Milk
Sales – Cows 190,000 – Calves 45,000 – Milk (118,000 + 5,000) 123,000
Beef Premium 4,000Drawings (2,200 + 800) 3,000Closing Stock of Cattle 102,000
467,000Less Expenses
Opening Stock of Cattle 98,000Purchases 140,000Feedstuffs 11,000Dairy Wages (24,000 + 1,000) 25,000Repairs to Milking Parlour 1,500Veterinary Fees (7,000 + 300) 2 3,650Haulage (5,000 + 2,500) 3 2,500Cattle Pen Repairs 3,000
(284,650)Gross Profit (Contribution) 182,350
÷÷
Leaving Certificate Accounting
270
Enterprise Analysis Account for the year ended 31/12/-8 – Sheep
Sales – Sheep 124,000 – Wool 3,000
Ewe Premium 5,000Drawings 1,900Closing Stock 33,000
166,900Less Expenses
Opening Stock 37,000Purchases 101,000Feedstuffs 3,000Sheep Dip Expenses 700Sheep Shearing 700Veterinary Fees (7,000 + 300) 2 3,650Haulage (5,000 + 2,500) 2,500
(148,550)Gross Profit (Contribution) 18,350
Enterprise Analysis Account – Grain Crops
Sales – Grain 21,000Closing Stock 18,000
39,000Less Expenses
Opening Stock 10,000Pesticides (1,500 + 4,000 – 2,000) 3,500Purchases of Seeds 9,000Repairs to Harvester 1,200Sowing Wages 5,000Harvesting Wages 7,000Crop Spraying 2,000Haulage (5,000 + 2,500) 3 2,500
(40,200)Gross Profit (Contribution) (1,200)
(b) General Profit and Loss Account for the year ended 31/12/-8
Contribution from Cattle and Milk 182,350Contribution from Sheep 18,350Contribution from Grain Crops (1,200)Conacre 12,000Rent of Land for Annual Ploughing Championships 39,000
250,500Less Expenses
Diesel Oil (2,000 + 5,000 – 1,800 – 1,300) 3,900Light and Heat (4,000 + 200 – 1,050) 3,150General Wages (40,000 – 10,000) 30,000Depreciation – Farm Machinery 27,000
– Farm Equipment 14,000 – Tractors 13,500
Bank Interest 1,000Accountancy Fees 3,000
(95,550)Net Profit 154,950
÷
÷
Solutions
271
(c) Balance Sheet as at 31/12/-8Cost Depr Value
Fixed AssetsFarm Land and Buildings 450,000 – 450,000Farm Machinery 120,000 57,000 63,000Farm Equipment 70,000 44,000 36,000Tractors 90,000 43,500 46,500
730,000 144,500 585,500Current Assets
Stock – Pesticides 2,000– Diesel Oil 1,800– Cattle 102,000– Sheep 33,000– Grain 18,000
156,800Debtors (27,100 + 5,000) 32,100Cash 500
189,400Less Current Liabilities
Creditors 35,000Bank 3,000Dairy Wages Due 1,000Haulage Due 2,500ESB Bill Due 200Vet Fees Due 300
(42,000)147,400732,900
Financed byCapital 600,000+ Net Profit 154,950
754,950– Drawings (4,800 + 2,200 + 1,900 + 800 + 1,300 + 1,050 + 10,000) (22,050)
732,900
272
Tabular Statements: Solutions25QUESTION 25.1
QUESTION 25.2
Lassiter Ltd1/1/-4 Jan Feb Mar Apr June July Aug 31/12/-4
Buildings 120,000 20,000 140,000Machinery 25,000 5,000 30,000Stock 35,000 (10,000) 8,000 33,000Debtors 21,000 (1,000) 12,000 32,000Bills Receivable 10,000 10,000
211,000 – – (1,000) 20,000 2,000 8,000 5,000 245,000Share Capital 130,000 70,000 200,000General Reserve 20,000 20,000Profit and Loss Account 38,000 100 (700) 2,000 (3,000) 36,400Creditors 18,000 (1,100) 8,000 24,900Bank Overdraft 5,000 1,000 (70,000) (300) 8,000 (56,300)TSB Loan 20,000 20,000
211,000 – – (1,000) 20,000 2,000 8,000 5,000 245,000
Mitchell Ltd1/1/-5 Jan Feb Mar May July Oct Dec 31/12/-5
Buildings 60,000 40,000 100,000Equipment 40,000 6,000 46,000Motor Vans 20,000 20,000Stock 44,000 (8,000) 1,000 37,000Debtors 21,000 (3,000) 4,800 (1,200) 21,600Bills Receivable 8,000 8,000
193,000 – – (3,000) (3,200) 6,000 40,000 (200) 232,600Share Capital 150,000 50,000 200,000Share Premium 10,000 10,000 20,000Profit and Loss 12,000 300 (1,800) 1,600 (2,000) (200) 9,900Creditors 17,500 (2,800) 14,700Bank Overdraft 3,500 (60,000) 2,500 (1,200) (4,800) 8,000 (52,000)Revaluation Reserve 40,000 40,000
193,000 – – (3,000) (3,200) 6,000 40,000 (200) 232,600
Solutions
273
QUESTION 25.3 (HIGHER LEVEL)
Notes (1) June – A payment of €1,440 annual premium brings insurance prepaid to 31/3/-7. Thus 3 months at €120 per month = €360 prepaid.
QUESTION 25.4 (HIGHER LEVEL)
Quantum Ltd1/1/-6 Jan Feb March April May June1 July Aug Oct Dec 31/12/-6
Buildings 110,000 60,000 170,000Equipment 60,000 9,000 69,000Stock 62,000 (12,000) 300 4,500 (800) 54,000Debtors 27,000 14,400 (360) 1,200 42,240Insurance Prepaid 300 60 360
259,300 60,000 2,400 (60) – 1,200 60 – 4,500 (800) 9,000 335,600Share Capital 170,000 15,000 185,000Share Premium 34,000 5,000 39,000Profit and Loss Account 21,000 2,400 (60) 2,000 (1,380) 200 (80) 2,000 26,080Creditors 29,000 4,500 (720) 32,780Bank Overdraft 3,300 (20,000) (800) 1,440 1,800 7,000 (7,260)Bills Payable 2,000 (2,000) –Revaluation Reserve 60,000 60,000
259,300 60,000 2,400 (60) – 1,200 60 – 4,500 (800) 9,000 335,600
Jones Ltd1/1/-7 Jan Feb March April May June August Sept. Dec. 31/12/-7
Land and Buildings 260,000 260,000– Accumulated Depreciation (20,000) (6,000) (26,000)Motor Vehicles 90,000 50,000 140,000– Accumulated Depr. (30,000) (28,000) (58,000)Goodwill 40,000 5,000 45,000Stock 50,000 12,000 4,900 (7,200) 688 60,388Debtors 41,000 20,000 (2,000) 9,000 (774) 67,226Insurance Prepaid 220 40 260
431,220 87,000 40 – – (2,000) 4,900 1,800 (86) (34,000) 488,874Share Capital 250,000 50,000 300,000General Reserve 50,000 50,000Share Premium 50,000 15,000 65,000Profit and Loss Account 28,220 (1,520) 13,800 (15,000) (1,200) 1,800 (86) (34,000) (7,986)Creditors 35,000 22,000 4,900 61,900Bank Overdraft 15,000 1,560 (14,400) 15,000 (800) 16,360Rent Rec. Prepaid 3,000 600 3,600
431,220 87,000 40 – – (2,000) 4,900 1,800 (86) (34,000) 488,874
Leaving Certificate Accounting
274
QUESTION 25.5 (HIGHER LEVEL)
QUESTION 25.6 (HIGHER LEVEL)
ROI Ltd1/1/-8 January May August Sept Dec 31/12/-8
Buildings 180,000 40,000 220,000– Accumulated Depreciation (20,000) (5,000) (25,000)Plant and Machinery 90,000 30,000 120,000– Accumulated Depreciation (30,000) (4,000) (34,000)Motors 50,000 (5,000) 45,000– Accumulated Depreciation (10,000) 7,000 (3,000) (6,000)Stock 28,000 16,000 (20,000) 34,000Debtors 32,000 30,000 62,000– Bad Debts Provision (2,000) 1,000 (1,000)Bank 4,000 (800) (5,000) (1,800)Insurance Prepaid 1,050 150 1,200Goodwill 14,000 14,000
323,050 100,000 (650) (3,000) 10,000 (11,000) 418,400Share Capital 200,000 80,000 280,000General Reserve 60,000 60,000Profit and Loss Account 34,200 (1,150) (3,000) 4,000 (11,000) 23,050Creditors 25,000 25,000VAT 3,850 6,000 9,850Share Premium 20,000 20,000Rent Receivable Prepaid 500 500
323,050 100,000 (650) (3,000) 10,000 (11,000) 418,400
Westward Ltd1/1/-9 Jan Feb March May June July Dec 31/12/-9
Land and Buildings 300,000 100,000 80,000 480,000– Accumulated Depreciation (20,000) 20,000 (7,600) (7,600)Motor Vans 90,000 10,000 (20,000) 80,000– Accumulated Depreciation (30,000) 11,000 (16,000) (35,000)Stock 72,000 10,000 (3,000) 79,000Debtors 40,000 (3,200) 36,800– Bad Debts Provision (2,000) 160 (1,840)Insurance Prepaid 360 30 390Goodwill 10,000 10,000Equipment 40,000 40,000
450,360 120,000 150,000 (3,000) (3,170) – (9,000) (23,440) 681,750Share Capital 250,000 100,000 350,000General Reserve 50,000 50,000Share Premium 50,000 25,000 75,000Profit and Loss Account 72,000 (300) (1,730) 300 2,000 (23,440) 48,830Creditors 25,000 25,000 (2,700) (3,100) 44,200Bank 1,360 (1,440) 2,800 (11,000) (8,280)Bills Payable 2,000 2,000Revaluation Reserve 120,000 120,000
450,360 120,000 150,000 (3,000) (3,170) – (9,000) (23,440) 681,750
Solutions
275
QUESTION 25.7
QUESTION 26.1
(i) Management (ii) Financial (iii) Management(iv) Financial (v) Financial (vi) Management
(vii) Financial (viii) Financial (ix) Management(x) Management (xi) Financial (xii) Management
(xiii) Financial (xiv) Financial
QUESTION 26.2
See textbook page 384.
QUESTION 26.3
See textbook page 385.
Flagpole Ltd1/1/-0 Jan. Feb. March April June Sept Dec 31/12/-0
Land and Buildings 200,000 100,000 300,000– Accumulated Depr. (10,000) 10,000 (3,600) (3,600)Motor Vans 50,000 (15,000) 35,000– Accumulated Depr. (20,000) 8,000 (7,000) (19,000)Goodwill 16,000 16,00010% Investments 20,000 20,000Stock 35,000 5,000 (7,500) (300) 32,200Debtors 30,000 9,900 39,900Bank 6,000 8,100 6,000 20,100Investment Income Due 500 500Bad Debts Provision (1,995) (1,995)
327,000 5,000 2,400 (300) 8,600 110,000 (1,000) (12,595) 439,105Share Capital 200,000 200,000Share Premium 50,000 50,000Profit and Loss Account 45,000 1,500 (33) 8,400 (1,000) (12,595) 41,272Creditors 27,000 5,500 (297) 32,203VAT 3,000 (500) 900 30 3,430Rent Receivable Prepaid 2,000 200 2,200Revaluation Reserve 110,000 110,000
327,000 5,000 2,400 (300) 8,600 110,000 (1,000) (12,595) 439,105
Introduction to Management Accounting: Solutions26
276
Cost Classification: Solutions27QUESTION 27.1
Tabula Ltd
QUESTION 27.2
Goona Ltd
QUESTION 27.3
Finneogue Ltd
QUESTION 27.4
QUESTION 27.5
Odeplex Cinema Ltd
Step 1:Customers Costs
High 51,000 €91,500Low 16,000 €39,000Difference 35,000 €52,500
Variable Cost = €52,500
Step 2: Variable cost per unit = €52,500/35,000 = €1.50 per customer
Step 3:High Low
Total Cost €91,500 €39,000– Variable cost €76,500(51,000 x €1.50) €24,000 (16,000 x €1.50)= Fixed cost €15,000 €15,000
Step 4: At 54,000 customers, maintenance costs will be €15,000 fixed plus €81,000 (54,000 x €1.50) = €96,000
Situation Graph Number(a) 5(b) 1(c) 4(d) 3(e) 2
Manufacturing Costs(i)(iv)(v)(vi)(ix)(x)
-------------------------------------------------- Non-Manufacturing Costs(ii)(iii)(vii)(viii)
--------------------------------------------------------------
Direct Costs of Production(i)(iii)(iv)(viii)(ix)
-------------------------------------------------------------- Indirect Costs of Production(ii)(v)(vi)(vii)(x)
------------------------------------------------------------------
Fixed Costs(ii)(iii)(vii)(ix)-------------------------- Variable Costs
(i)(iv)(v)(x)--------------------------------- Mixed Costs
(vi)(vii)----------------------------
Solutions
277
QUESTION 27.6
Pelo Car Sales Ltd
Step 1:Sales Costs
High €730,000 €85,000Low €510,000 €63,000Difference €220,000 €22,000
Variable Cost = €22,000
Step 2: Variable cost per unit = €22,000/€220,000 = 10%
Step 3:High Low
Total Cost €85,000 €63,000– Variable cost €73,000 (10% of €730,000) €51,000 (10% of €510,000)= Fixed cost €12,000 €12,000
Step 4: At sales of €680,000, salesforce earnings will be €12,000 fixed plus €68,000 (10% of €680,000) =€80,000
QUESTION 27.7
Wringo Ltd
Step 1:Spools of wire produced Costs
High 13,000 €34,890Low 10,000 €29,550Difference 3,000 €5,340
Variable Cost = €5,340
Step 2: Variable cost per unit = €5,340/€3,000 = €1.78
Step 3:High Low
Total Cost €34,890 €29,550– Variable cost €23,140 (13,000 x 1.78) €17,800 (10,000 x 1.78)= Fixed cost €11,750 €11,750
Step 4: At production of 16,000 spools of wire, production overheads will be €11,750 fixed + €28,480 (16,000 x€1,78) = €40,230.
QUESTION 27.8
Avora Ltd
QUESTION 27.9
Bawbogue Ltd
Controllable by the Marketing Manager(i)(ii)(iii)(v)(vi)(viii)(ix)(x)
------------------------------------------------------------------------------------------------ Uncontrollable by the Marketing Manager(iv)(vii)
------------------------------------------------------------------------------------------------------
Product Cost(i)(iii)(v)(vi)(vii)(ix)(x)---------------------------------------- Period Cost
(i)(iv)(viii)---------------------------
278
Product Costing: Solutions28QUESTION 28.1
Alpha Ltd
QUESTION 28.2
Beta Ltd
Overhead Analysis SheetOverhead Basis of
ApportionmentTotal Machining Assembly Polishing
Supervisors’ Salaries Number of Employees 42,000 7,000 21,000 14,000Rent and Rates Floor Space 7,000 3,500 1,750 1,750Light and Heat Floor Space 21,000 10,500 5,250 5,250Equipment Insurance Book Value 2,500 1,000 1,000 500Equipment Depreciation Book Value 10,000 4,000 4,000 2,000Buildings Depreciation Book Value 7,000 3,000 2,000 2,000Buildings Insurance Book Value 14,000 6,000 4,000 4,000Canteen Costs Number of Employees 15,000 2,500 7,500 5,000
118,500 37,500 46,500 34,500
Overhead Analysis SheetOverhead Basis of
ApportionmentTotal Casting Polishing Administration Maintenance
Rent and Rates Floor Space 2,520 1,260 840 210 210Light and Heat Floor Space 12,000 6,000 4,000 1,000 1,000Machinery Insurance Book Value 18,000 9,600 8,400 – –Canteen Costs No. of Employees 50,000 22,500 18,750 3,750 5,000Buildings Depr. Book Value 4,000 1,400 1,700 500 400Machinery Power Machine Hours 33,600 25,200 8,400 – –Supervisors’ Salaries No. of Employees 104,000 46,800 39,000 7,800 10,400Machine Depr. Book Value 13,500 7,200 6,300 – –
237,620 119,960 87,390 13,260 17,010Reapportion. Admin. Machine Hours 9,945 3,315 (13,260)Reapportion. Maint. Machine Hours 12,758 4,252 (17,010)
237,620 142,663 94,957
Solutions
279
QUESTION 28.3
Gamma Ltd
(b) Overhead Absorption Rates
(i) Department A
=
(ii) Department B
=
(iii) Department C
=
(c)Cost of Production of Job No. 73X (€).Direct Materials 20,000Direct Wages 1,750OverheadsDepartment A – 200 x €3.86 772Department B – 4,000 x €0.28 1,120Department C – 150 x €3.52 528Cost of Production 24,170
QUESTION 28.4
Delta Ltd
(a) Overhead Absorption RatesDepartment 1
=
Department 2
=
Department 3
=
(a) Overhead Analysis SheetOverhead Basis of
ApportionmentTotal Dept A Dept B Dept C
Supervisors’ Salaries Direct Wages 60,000 32,000 8,000 20,000Rent and Rates Floor Space 12,000 7,200 2,400 2,400Repairs to Building Book Value 3,150 1,350 900 900Canteen Costs Number of employees 4,000 1,600 1,600 800Materials Handling Direct Materials 7,000 2,800 2,800 1,400Equipment Depreciation Book Value 4,000 1,500 1,300 1,200Machinery Maintenance Machine Hours 9,800 1,960 5,880 1,960Machinery Insurance Machine Hours 2,600 520 1,560 520Buildings Insurance Book Value 4,900 2,100 1,400 1,400Light and Heat Floor Space 8,000 4,800 1,600 1,600Administration Costs Number of employees 15,000 6,000 6,000 3,000
130,450 61,830 33,440 35,180
Total Department OverheadsDepartment Labour Hours
---------------------------------------------------------------------- 61,83080,000/5-------------------- 61,830
16,000--------------- €3.86 per labour hour= = =
Total Department OverheadsDepartment Machine Hours
---------------------------------------------------------------------- 33,440120,000------------------ €0.28 per machine hour= =
Total Department OverheadsDepartment Labour Hours
---------------------------------------------------------------------- 35,18050,000/5-------------------- 35,180
10,000--------------- €3.52 per labour hour= = =
Total Department OverheadsDepartment Labour Hours
---------------------------------------------------------------------- 17,00020,000---------------- €0.85 per labour hour= =
Total Department OverheadsDepartment Machine Hours
---------------------------------------------------------------------- 52,000400,000------------------- €0.13 per machine hour= =
Total Department OverheadsDepartment Machine Hours--------------------------------------------------------------------- 108,000
400,000------------------- €0.27 per machine hour= =
Leaving Certificate Accounting
280
Department 4
=
(b) Selling Price of Job No. 1974Raw Materials – 3,000 kgs at €3.90 per Kg. = 11,700Direct WagesDept 1 – 400 hours at €5 = 2,000Dept 2 – 100 hours at €6 = 600Dept 3 – 90 hours at €5 = 450Dept 4 – 200 hours at €8 = 1,600
4,650OverheadsDept 1 – 400 hours at €0.85 = 340Dept 2 – 4,000 hours at €0.13 = 520Dept 3 – 3,500 hours at €0.27 = 945Dept 4 – 200 hours at €1.13 = 226
2,031Cost of Production (75%) 18,381Expected Profit (25%) 6,127Selling Price (100%) 24,508
QUESTION 28.5
Epsilon Ltd
(a) Overhead Absorption Rates(i) Cutting Department
=
(ii) Assembly Department
=
(iii) Finishing Department
=
(b) Under/over-absorption of Overheads
Notes: Absorbed overheads = actual hours at predetermined rates
(i) Cutting Department190,000 machine hours at €0.15 = €28,500
(ii) Assembly Department73,000 labour hours at €1.20 = €87,600
(iii) Finishing Department79,000 labour hours at €1.32 = €104,280
Cutting Assembly Finishing TotalActual Overhead 30,000 86,000 106,000 222,000Absorbed Overhead 28,500 (i) 87,600 (ii) 104,280 (iii) 220,380(Under)/Over Absorbed (1,500) 1,600 (1,720) (1,620)
Total Department OverheadsDepartment Labour Hours
---------------------------------------------------------------------- 13,56012,000---------------- €1.13 per labour hour= =
Budgeted OverheadBudgeted Machine Hours------------------------------------------------------------- 27,000
180,000------------------- €0.15 per machine hour= =
Budgeted OverheadBudgeted Labour Hours--------------------------------------------------------- 84,000
70,000---------------- €1.20 per labour hour= =
Budgeted OverheadBudgeted Labour Hours--------------------------------------------------------- 105,600
80,000------------------- €1.32 per labour hour= =
Solutions
281
QUESTION 28.6
Zeta Ltd
(a) Overhead Absorption Rates
(i) Department AFixed Variable
= €2.80 = €3.25
(ii) Department BFixed Variable
= €1.25 = €2.92
(iii) Department CFixed Variable
= €0.85 = €2.87
(b) Selling price of Job No. 219Raw Materials – 18,000 metres at €1.40 per metre = 25,200
Direct WagesDept A – 200 hours at €18 per hour = 3,600Dept B – 100 hours at €16 per hour = 1,600Dept C – 500 hours at €14 per hour = 7,000
12,200Variable OverheadsDept A – 900 hours at €3.25 = 2,925Dept B – 700 hours at €2.92 = 2,044Dept C – 500 hours at €2.87 = 1,435
6,404Fixed OverheadsDept A – 900 hours at €2.80 = 2,520Dept B – 700 hours at €1.25 = 875Dept C – 500 hours at €0.85 = 425
3,820Cost of Production (80%) 47,624Expected Profit (20%) 11,906Selling Price (100%) 59,530
(c) See textbook page 393.
QUESTION 28.7 (HIGHER LEVEL)
ETA Ltd
(a) Overhead Absorption RatesDesign Department
Fixed Variable
= €2.75 = €3.20
OverheadsMachine Hours------------------------------------= 126,000
45,000------------------ 146,250
45,000------------------
OverheadsMachine Hours------------------------------------= 50,000
40,000---------------- 116,800
40,000------------------
OverheadsLabour Hours--------------------------------= 17,000
20,000---------------- 57,400
20,000---------------
OverheadsLabour Hours----------------------------------= 1,100
400------------- 1,280
400-------------
Leaving Certificate Accounting
282
Machine ShopFixed Variable
= €1.90 = €2.10Finishing Department
Fixed Variable
= €1.75 = €4.20
(b) General Administration Overhead Absorption Rate
(c) Selling price of Job No. 77RRaw Materials – 5,200 sq. m at €0.17 per sq. m. = 884.00
Direct WagesDesign Department – 10 hours at €10= 100.00Machine Shop – 8 hours at €8 = 64.00Finishing Department – 24 hours at €7 = 189.00
353.00Variable OverheadsDesign Department – 10 hours at €3.20 = 32.00Machine Shop – 20 hours at €2.10 = 42.00Finishing Department – 24 hours at €4.20 = 100.80
174.80Fixed OverheadsDesign Department – 10 hours at €2.75 = 27.50Machine Shop – 20 hours at €1.90 = 38.00Finishing Department – 24 hours at €1.75 = 42.00
107.50General Administration Overhead42 hours at €1.05 = 44.10
Cost of Production (80%) 1,563.40Expected Profit (20%) 390.85Selling Price (100%) 1,954.25
QUESTION 28.8 (HIGHER LEVEL)
Theta Ltd
(a) Overhead Analysis SheetOverhead Basis of
ApportionmentTotal Machining Assembly Finishing
Supervisors’ Salaries Direct labour 104,500 25,080 37,620 41,800Machinery Maintenance Machine hours 15,400 11,550 2,310 1,540General Administration Number of Employees 18,000 4,320 6,480 7,200Materials Handling Direct Materials 30,000 20,000 6,000 4,000Canteen Costs Number of Employees 27,000 6,480 9,720 10,800Plant Insurance Plant Valuation 6,400 3,600 2,400 400Plant Depreciation Plant Valuation 8,000 4,500 3,000 500Light and Heat Floor Space 18,000 6,000 6,000 6,000Rent and Rates Floor Space 24,000 8,000 8,000 8,000Employee Benefits Number of Employees 12,000 2,880 4,320 4,800Power and Steam Kilowatt Hours 50,000 34,000 12,000 4,000
313,300 126,410 97,850 89,040
OverheadsMachine Hours------------------------------------= 950
500-------- 1,050
500------------
OverheadsLabour Hours--------------------------------= 2,800
1,600------------ 6,720
1,600------------
OverheadTotal Budgeted Labour Hours----------------------------------------------------------------------- 2,268
2,160------------ €1.05= =
Solutions
283
(b) Overhead Absorption Rates
(i) Machining Department
=
(ii) Assembly Department
=
(iii) Finishing Department
=
(c) Selling Price of Job No. 819ZDirect Materials – (70,000 + 23,000 + 5,000) = 98,000Direct Labour (6,650 + 21,850 + 38,000) = 66,500OverheadsMachining Department – 5,000 x €0.84 = 4,200Assembly Department – 2,300 x €2.72 = 6,256Finishing Department – 4,000 x €2.23 = 8,920
Cost of Production (80%) 183,876Expected Profit (20%) 45,969Selling Price (100%) 229,845
QUESTION 28.9 (HIGHER LEVEL)
Iota Ltd
(b) Overhead Absorption Rates(i) Production Department 1
=
(ii) Production Department 2
=
(a) Overhead Analysis SheetOverhead Basis of Apportionment Total Production Departments Service Departments
1 2 1 2Machinery Insurance Valuation 13,300 7,000 6,300 – –Machinery Depreciation Valuation 5,890 3,100 2,790 – –Administration No. of Employees 19,000 6,080 3,800 3,800 5,320Supervision No. of Employees 50,000 16,000 10,000 10,000 14,000Rent and Rates Floor Space 7,800 2,600 1,950 1,950 1,300Light and Heat Floor Space 6,960 2,320 1,740 1,740 1,160Canteen No. of Employees 30,000 9,600 6,000 6,000 8,400Materials Handling Direct Materials 8,890 6,350 2,540 – –General Repairs Floor Space 4,200 1,400 1,050 1,050 700Buildings Insurance Floor Space 6,480 2,160 1,620 1,620 1,080
152,520 56,610 37,790 26,160 31,960Reapportion Machine Hours 17,440 8,720 (26,160)Reapportion Machine Hours 21,307 10,653 (31,960)
152,520 95,357 57,163
Total OverheadsMachine Hours
--------------------------------------- 126,410150,000------------------- €0.84 per machine hour= =
Total OverheadsLabour Hours
--------------------------------------- 97,850342,000/9.50------------------------------ €2.72 per labour hour= =
Total OverheadsLabour Hours
--------------------------------------- 89,040380,000/9.50------------------------------ €2.23 per labour hour= =
Total OverheadsMachine Hours
--------------------------------------- 95,357400,000------------------ €0.24 per machine hour= =
Total OverheadsMachine Hours
--------------------------------------- 57,163200,000------------------- €0.29 per machine hour= =
Leaving Certificate Accounting
284
(c) Selling price of Product No. 23–194 Prime Cost 16.90OverheadsProduction Department 1 – 13 x €0.24 = 3.12Production Department 2 – 18 x €0.29 = 5.22
Cost of Production (80%) 25.24Expected Profit (20%) 6.31(100%) 31.55
(d) Under/over-absorption of OverheadsActual overheads 8.32 per unitOverheads absorbed (14 x 0.24 + 17 x 0.29) = 8.29 per unit
Under absorption (0.03) per unit
QUESTION 28.10 (HIGHER LEVEL)
Kappa Ltd
(a) High/Low method – Budgeted Overheads Output Dept A Dept B Dept C
High 15,000 38,750 30,000 20,750Low 9,000 25,250 19,200 13,250Difference 6,000 13,500 10,800 7,500
Variable Cost per unit
= 2.25 1.80 1.25Fixed Costs (Total costs – Variable costs) 5,000 3,000 2,000
(b) High/Low Method – Actual Overheads Output Dept A Dept B Dept C
High 15,000 36,500 31,500 19,250Low 9,000 23,900 20,100 12,350Difference 6,000 12,600 11,400 6,900
Variable Cost per unit
= 2.10 1.90 1.15Fixed Costs (Total costs – variable costs) 5,000 3,000 2,000
(c) Under/over-absorption of Variable Overheads for the First Six Months
QUESTION 28.11 (HIGHER LEVEL)
Lambda Ltd
(a) Overhead Absorption Rates(i) Design Department
Fixed Variable
= €2 per hour = €5 per hour(ii) Machining Department
Fixed Variable
= €6 per hour = €7.50 per hour
Dept A Dept B Dept C TotalActual 147,000 133,000 80,500 360,500Budgeted 157,500 126,000 87,500 371,000(Under)/Over Absorbed 10,500 (7,000) 7,000 10,500
13,5006,000--------------- 10,800
6,000--------------- 7,500
6,000------------
12,6006,000--------------- 11,400
6,000--------------- 6,900
6,000------------
Total Budgeted OverheadsDirect Labour Hours
----------------------------------------------------------------= 12,0006,000--------------- 30,000
6,000----------------
Total Budgeted OverheadsMachine Hours
----------------------------------------------------------------= 60,00010,000---------------- 75,000
10,000----------------
Solutions
285
(iii) Finishing DepartmentFixed Variable
= €1.25 per hour = €6.25 per hour
(b) Selling price of Job No. 731/TDirect Materials Machining Department – 3,800 metres at €25 (640,000/25,600) = 95,000Finishing Department – 650 metres at €20 (110,000/5,500) = 13,000
Direct LabourDesign Department – 60 hours at €20 (120,000/6,000)= 1,200Machining Department – 15 hours at €8 (20,000/2,500)= 120Finishing Department – 12 hours at €5 (40,000/8,000) = 60Variable OverheadsDesign Department – 60 hours at €5 = 300Machining Department – 150 hours at €7.50 = 1,125Finishing Department – 12 hours at €6.25 = 75Fixed OverheadsDesign Department – 60 hours at €2 = 120Machining Department – 150 hours at €6 = 900Finishing Department – 12 hours at €1.25 = 15
Cost of Production (90%) 111,915Expected Profit (10%) 12,435Selling Price (100%) 124,350
(c) Actual selling price 121,241.25 (124,350 – 21/2%)Actual cost of production 117,510.75 (111,915 + 5%)Actual Profit 3,730.50
QUESTION 28.12 (HIGHER LEVEL)
Mu Ltd
Note 1 Note 2100 at 1.15 = 115.00 130 at 1.18 = 153.4020 at 1.18 = 23.60 95 at 1.21 = 114.95
138.60 268.35
Note 3 Note 4205 at 1.21 = 248.05 70 at 1.25 = 87.505 at 1.25 = 6.25
254.30
(a) Stores Ledger CardDate Receipts Issued to Production Balance
Quantity Price Value Quantity Price Value Quantity ValueJuly 1 100 115.00July 1 150 1.18 177.00 250 292.00July 4 120 Note 1 138.60 130 153.40July 9 300 1.21 363.00 430 516.40July 15 225 Note 2 268.35 205 248.05July 21 110 1.25 137.50 315 385.55July 22 210 Note 3 254.30 105 131.25July 27 300 1.27 381.00 405 512.25July 29 70 Note 4 87.50 335 424.75July 31 50 1.26 63.00 385 487.75
Total Budgeted OverheadsDirect Labour Hours
----------------------------------------------------------------= 10,0008,000---------------- 50,000
8,000---------------
Leaving Certificate Accounting
286
(b) Closing Stock Valuation at 31 July 35 at 1.25 = 43.75300 at 1.27 = 381.0050 at 1.26 = 63.00
487.75
QUESTION 28.13 (HIGHER LEVEL)
Nu Ltd
(i) Credit Sales for the year (€) (ii) Credit purchases for the year (€)50 at €28 = 1,400 200 at €20 = 4,000300 at €30 = 9,000 500 at €22 = 11,000180 at €40 = 7,200 400 at €22 = 8,800600 at €45 = 27,000 500 at €24 = 12,000
44,600 35,800Add V.A.T. at 10% 4,460 Add VAT at 10% 3,850Sales to Debtors 49,060 Purch. From Creds. 39,650
(a) Debtors Control AccountBalance b/d 5,600 Bank 49,860Sales 49,060 Balance c/d 4,800
54,660 54,660Balance b/d 4,800
Creditors Control AccountBank 38,580 Balance b/d 3,400Balance c/d 4,200 Purchases 39,380
42,780 42,780Balance b/d 4,200
(b) Stores Ledger CardDate Receipts Issues Balance
Units Value (€)
Units Value (€)
Units Value (€)
1/1/-1 55 99015/1/-1 200 4,000 155 4,9908/2/-1 50 900 205 4,0907/3/-1 500 11,000 705 15,090
22/4/-1 20 390 685 14,7001/5/-1 300 6,230 385 8,470
21/6/-1 400 8,800 785 17,27020/7/-1 180 3,960 605 13,31011/8/-1 40 880 565 12,430
1/9-1 100 2,200 465 10,23012/10/-1 500 12,000 965 22,23019/11/-1 600 13,470 365 8,760
Notes:
8/2/-1 – (50 x 18) = 90022/4/-1 – (5 x 18 + 15 x 20) = 3901/5/-1 – (185 x 20 +115 x 22) = 6,23020/7/-1 – (180 x 22) = 3,96011/8/-1 – (40 x 22) = 8801/9/-1 – (100 x 22) = 2,20019/11/-1 – (65 x 22 + 400 x 22 + 135 x 24) = 13,470
Solutions
287
Cash sales for the year (€)20 at £28 = 56040 at £28 = 1,120100 at £30 = 3,000100 at £40 = 4,000
Total 8,680VAT at 10% 868Cash Sales 9,548
(c) Trading Account for the year ended 31/12/-1 (€)Sales – Credit 44,600
– Cash 8,68053,280
Less Cost of SalesOpening Stock 990+ Purchases 35,800
36,790– Closing Stock 6,360
(30,430)Gross Profit 22,850
(d) VAT AccountPurchases 3,580 Sales on Credit 4,460Bank 1,248 Sales for Cash 868Balance c/d 500
5,328 5,328Balance b/d 500
288
Cost Volume Profit Analysis(Marginal Costing): Solutions29
QUESTION 29.1
Soprano Ltd
(a) Sales price per Unit = €18 (b) Variable cost per Unit = €12.60 (c) Contribution per Unit = 18 – 12.60 = 5.40 (d) Break-even point
=
QUESTION 29.2
Tenor Ltd
(a) Contribution per Unit25 – 15 = 10
(b) Break-even point
=
QUESTION 29.3
Alto Ltd
(a) Break-even Point in Sales Revenue
=
(b) Break-even Point in Units
(c) Marginal Costing Statement (33,000 units)Sales (33,000 x 25) 825,000
– Variable Costs (33,000 x 15) 495,000= Contribution 330,000– Fixed Costs 275,000= Profits 55,000
(c) Marginal Costing Statement at 14,000 unitsSales (14,000 x 45) 630,000
– Variable Costs (58%) 365,400= Contribution (42%) 264,600– Fixed Costs 264,600= Profits Nil
(d) Marginal Costing Statement at 18,000 unitsSales (18,000 x 45) 810,000
– Variable Costs (58%) 469,800= Contribution (42%) 340,200– Fixed Costs 264,600= Profits 75,600
Fixed CostsCPU
------------------------- 135,0005.40
----------------- 25,000 units x €18 = €450,000= =
Fixed CostsCPU
------------------------- 275,00010
------------------ 27,500 units €25× €687,500= = =
Fixed CostsC/S Ratio
------------------------- 264,60042%
----------------- 264,600 100×42
-------------------------------- £630,000= = =
630,000 45 = 14,000 units÷
Solutions
289
QUESTION 29.4
Arco Ltd
(a) Contribution per Unit= Sales price – Variable cost= 62 – 39.06= €22.94
(b) Break-even Point in Units
=
(c) Break-even Point in Sales Revenue
=
(d) Target Profit
=
= = 10,360 units
(e) Margin of Safety Percentage
=
=
QUESTION 29.5
Tremolo Ltd
(a) C/S Ratio
=
=
(b) Break-even point in Sales Revenue
=
(c) Target Profit
=
= = €580,951
(f) Marginal Costing Statement (i) 4,000 (ii) 6,000 (iii) 8,000 (iv) 20,000
Sales 248,000 372,000 496,000 1,240,000
– Variable Costs 156,240 234,360 312,480 781,200
= Contribution 91,760 137,940 183,520 458,800
– Fixed Costs 137,640 137,640 137,640 137,640
= Profits (Losses) (45,88) Nil 45,880 321,160
(d) Marginal Costing StatementSales 750,000
– Variable Costs (59%) 442,500= Contribution (41%) 307,500– Fixed Costs 188,190= Profits 119,310
Fixed CostsCPU
------------------------- 137,64022.94
----------------- 6,000 units= =
Fixed CostsC/S Ratio
------------------------- 137,64037%
----------------- €372,000˜= =
Fixed Costs + Target ProfitCPU
------------------------------------------------------------
137,640 100,000+22.94
----------------------------------------
Actual Sales B/E Sales 100×–Actual Sales
--------------------------------------------------------------------
10,000 6,000 100×–10,000
----------------------------------------------- 40%=
Contribution 100×Sales
-------------------------------------------
Profit Fixed Costs 100×+Sales
------------------------------------------------------------ 34,850 188,190+544,000
--------------------------------------- 100× 41%= =
Fixed CostsC/S Ratio
------------------------- 188,19041%
----------------- €459,000= =
Fixed Costs + Target ProfitC/S Ratio
------------------------------------------------------------
188,190 50,000+41%
--------------------------------------
Leaving Certificate Accounting
290
QUESTION 29.6Sharp Ltd
(a) Contribution per Unit= Sales price – Variable cost= 8.20 – 5.33= 2.87
(b) Break-even Point
=
(c) Margin of Safety Percentage
=
=
(d) Target Profit
=
= = 23,969 units
(e) Sales – Variable Costs – Fixed Costs = Profits((21,000 + 2,100) x 8.20) – ((21,000 + 2,100)) x 5.33) – (48,790 + 7,000) = Profits189,420 – 123,123 – 55,790 = €10,507.
QUESTION 29.7 (HIGHER LEVEL)
Crescendo Ltd
(a) Break-even Point
=
(f) Marginal Costing StatementSales (16,000 x 9) 144,000
– Variable Costs (16,000 x 5.33) 85,280= Contribution 58,720– Fixed Costs 48,790= Profits 9,930
Cost ClassificationCost Fixed VariableDirect Materials – 210,000Direct Labour – 195,000Factory Overheads 15,000 60,000Administration 59,000 –Distribution 52,500 52,500Totals 126,500 517,500
Marginal Costing Statement at 15,000 unitsTotal Per Unit
Sales 690,000 46.00– Variable Costs 517,500 34.50= Contribution 172,500 11.50– Fixed Costs 126,500= Profits 46,000
Fixed CostsCPU
------------------------- 48,7902.87
--------------- 17,000 units x €8.20 €139,400= = =
Actual Sales B/E Sales 100×–Actual Sales
--------------------------------------------------------------------
21,000 17,000 100×–21,000
--------------------------------------------------- 19%=
Fixed Costs + Target ProfitCPU
------------------------------------------------------------
48,790 20,000+2.87
-----------------------------------
Fixed CostsCPU
------------------------- 126,50011.50
----------------- 11,000 units= =
Solutions
291
Margin of Safety Percentage
=
=
(b) Profit Target
=
=
= 15,800 units(c) Let S = Sales Price
Sales – Variable Costs – Fixed Costs = Profits15,000 S – (15,000 x 34.50) – 139,150 = 46,00015,000 S – 517,500 – 139,150 = 46,00015,000 S = 702,650S = €46.84
QUESTION 29.8 (HIGHER LEVEL)
Collegno LtdNote: Number of units omitted from question (6,500 units)
(a) Break-even Point = 4,000 unitsMargin of Safety = 2,500 units (42%)
(b) See textbook page 418
(d) Marginal Costing Statement at 18,750 unitsSales (18,750 x 41.40) 776,250
– Variable Costs (18,750 x 34.50) 646,875= Contribution 129,375– Fixed Costs 151,800= Profits 22,425
Actual Sales B/E Sales 100×–Actual Sales
--------------------------------------------------------------------
15,000 11,000 100×–15,000
--------------------------------------------------- 27%=
Fixed Costs + Profit TargetCPU
------------------------------------------------------------
126,500 55,200+11.50
--------------------------------------
Leaving Certificate Accounting
292
QUESTION 29.9 (HIGHER LEVEL)Forzato Ltd
(a) Break-even Point
=
(b) Profit Target
= = = 3,589 units
(c) Let number of units = NSales – Variable Costs – Fixed Costs = Profits45N – 24N – 34,100 = 40,00021N = 74,100N = 3,529 Units
(e) See textbook page 418
QUESTION 29.10 (HIGHER LEVEL)
Fortissimo Ltd(a) Break-even Point in Sales Revenue
=
(b) Profit Target
= = = €477,778
(c) Let x = Sales Revenue
45%x = 170,000 + 11%x34%x = 170,000x = €500,000
(d) Variable costs are 55% of sales.A 5% increase brings variable costs up to 57.75% of sales and the C/S ratio down to 42.25%
Break-even Point in sales revenue =
Cost ClassificationCost Fixed VariableManufacturingSelling and DistributionAdministration
24,5002,0004,500
45,50038,000
500Totals 31,000 84,000
Marginal Costing Statement at 3,000 unitsTotal Per Unit
–SalesVariable Costs
135,00084,000
4528
=–
ContributionFixed Costs
51,00031,000
17
= Profits 20,000
(d) Marginal Costing Statement at 3,450 units
–Sales (3,450 x 40)Variable Costs (3,450 x 25)
138,00086,250
=–
ContributionFixed Costs (31,000 + 6,200)
51,75037,200
= Profits 14,550
Fixed CostsCPU
------------------------- 31,00017
--------------- 1,824 units x €45 €82,080= = =
Fixed Costs + Profit TargetCPU
------------------------------------------------------------ 31,000 + 30,00017
-----------------------------------
Fixed CostsC/S Ratio
------------------------- 170,00045%
----------------- €377,778= =
Fixed Costs + Profit TargetC/S Ratio
------------------------------------------------------------ 170,000 + 45,00045%
--------------------------------------
170,000 + 11%x45%
------------------------------------ x=
Fixed CostsC/S Ratio
------------------------- 161,50042.25%----------------- €382,249= =
Solutions
293
QUESTION 29.11
Rubato Ltd
(a) Break-even Point
=
Margin of safety Percentage
=
=
(b) Profit Target
=
=
= 2,190 units(c) Let N = number of units
Sales – Variable Costs – Fixed Costs = Profits620N – 415.40N – 245,520 = 0.15(620N)204.60N – 245,520 = 93N111.6N = 245,520N = 2,200 units
(d) Let S = sales priceSales – Variable Costs – Fixed Costs = Profits3,000S – (3,000 x 415.40) – 245,520 = 184,1403,000S – 1,246,200 – 245,520 = 184,1403,000S = 1,246,200 + 245,520 + 184,140S = €558.62
(e) Let N = number of unitsSales – Variable Costs – Fixed Costs = Profits(N x (620 + 62)) – (N x 425) – 245,520 = 500,000682N – 425N – 245,520 = 500,000257N = 500,000 + 245,520 \ N = 2,901 unitsMaximum Capacity = 3,000 units
∴
Cost Fixed VariableDirect Materials – 441,000Direct Labour 199,920Production Overheads 99,270 136,920Administration Expenses 118,250 –Distribution Costs 28,000 94,500Totals 245,520 872,340
Marginal Costing Statement at 2,100 unitsTotal Per Unit
Sales 1,302,000 620.00– Variable Costs 872,340 415.40= Contribution 429,660 204.60– Fixed Costs 245,520= Profits 184,140
Fixed CostsCPU
------------------------- 245,520204.60----------------- 1,200 units= =
Actual Sales Breakeven Sales 100×–Actual Sales
-------------------------------------------------------------------------------------
2,100 1,200–2,100
----------------------------- 43%=
Fixed Costs + Profit TargetCPU
------------------------------------------------------------
245,520 202,554+204.60
----------------------------------------
2,9013,000------------ 100× 96.7% of capacity=
Leaving Certificate Accounting
294
QUESTION 29.12 (HIGHER LEVEL)
Harmonic Ltd
Variable cost per unit =
High LowTotal Cost 65,600 58,100– Variable Cost 40,000 32,500= Fixed Costs 25,600 25,600
(a) Break-even Point
=
Margin of Safety Percentage
= =
(b) Profit Target
= = = 18,600 units
(c) Let N = number of unitsSales – Variable Costs – Fixed Costs = Profits30N – 20N – 150,000 = 0.2(30N)10N – 15,000 = 6N4N = 150,000N = 37,500 units
Cost Classification – Production OverheadsOutput Costs
High 16,000 65,600Low 13,000 58,100Difference 3,000 7,500
Cost ClassificationCost Fixed VariableDirect Materials – 162,000Direct Labour – 99,000Production Overheads 25,600 45,000Administration Expenses 28,000 –Distribution Costs 96,400 54,000
150,000 360,000
Marginal Costing Statement at 18,000 unitsTotal Per Unit
Sales 540,000 30– Variable Costs 360,000 20= Contribution 180,000 10– Fixed Costs 150,000= Profits 30,000
(d) Marginal Costing StatementSales (19,800 x 27) 534,600
– Variable Costs (19,800 x 21) 415,800= Contribution 118,800– Fixed Costs 157,500= Profits 61,300
7,5003,000------------ €2.50=
Fixed CostsCPU
------------------------- 150,00010
----------------- 15,000 units= =
Actual Sales B/E Sales 100×–Actual Sales
-------------------------------------------------------------------- 18,000 15,000 100×–18,000
-------------------------------------------------- 17%=
Fixed Costs + Profit TargetCPU
------------------------------------------------------------ 150,000 + 36,00010
--------------------------------------
Solutions
295
(e) After-tax Profit
=
=
=
= 20,000 units
QUESTION 29.13 (HIGHER LEVEL)
Tralagh Ltd
Variable cost per unit= 18,000/3,000 = €6 per hourHigh Low
Total Cost 106,000 88,000– Variable Costs 42,000 24,000= Fixed Costs 64,000 64,000
(a) Break-even Point
=
Margin of Safety Percentage
Cost Classification – Indirect CostsOutput Costs
High 7,000 106,000Low 4,000 88,000Difference 3,000 18,000
Cost ClassificationCost Fixed VariableDirect Costs – 300,000Indirect Costs 64,000 36,000Administration Expenses 12,000 48,000Distribution Costs 20,000 60,000
96,000 444,000
Marginal Costing Statement at 6,000 unitsTotal Per Unit
Sales 720,000 120– Variable Costs 444,000 74= Contribution 276,000 46– Fixed Costs 96,000= Profits 180,000
Fixed Costs + (Target Profit 1 – Tax Rate)÷CPU
-------------------------------------------------------------------------------------------------
150,000 + (45,000 90%)÷10
-----------------------------------------------------------
150,000 + 50,00010
--------------------------------------
Fixed CostsCPU
------------------------- 96,00046
--------------- 2,087 units= =
6,000 2,087 100×–6,000
--------------------------------------------- 65%=
Leaving Certificate Accounting
296
(b) Break-even Chart
(c) Profit Target
=
= = = 6,998 units
(e) After-tax Profit Target
=
=
=
= 6,041 units(f) A constant product mix is only a valid assumption in the short term, i.e. over a very small range of output.
Most firms would vary their product mix to maximize the firm’s profits in varying market circumstances.
QUESTION 29.14 (HIGHER LEVEL)
Ponticello Ltd
(d) Marginal Costing Statement at 5,700 unitsSales (5,700 x 140) 798,000
– Variable Costs (5,700 x 81.40) 463,980= Contribution 334,020– Fixed Costs (96,000 + 19,200) 115,200
218,820
Cost ClassificationCost Fixed VariableManufacturing 32,564 289,560Non-Manufacturing 42,654 36,040Total 75,218 325,600
Marginal Costing Statement at 800 unitsTotal Per Unit
Sales 440,000 550– Variable Costs 325,600 407= Contribution 114,400 143– Fixed Costs 75,218= Profits 39,182
Fixed Costs + Profit TargetCPU
------------------------------------------------------------
96,000 + 200,00046 – 3.70
-------------------------------------- 296,00042.30
-----------------
Fixed Costs + (Target Profit 1 – Tax Rate)÷CPU
-------------------------------------------------------------------------------------------------
96,000 + (180,000 90%)÷46 + 3
-----------------------------------------------------------
96,000 + 200,00049
--------------------------------------
Solutions
297
(a) Break-even Point
=
Margin of Safety Percentage
= =
(b) Let S = Sales PriceSales – Variable Costs – Fixed Costs = Profits800S – (800 x 400) – 82,740 = 39,182800S = 320,000 + 82,740 + 39,182800S = 441,922S = €552.40
(c) Let N = Number of unitsSales – Variable Costs – Fixed Costs = Profits550N – 407N – 75,218 = 0.15(550N)143N – 75,218 = 82.5N60.5N = 75,218N = 1,244
QUESTION 29.15 (HIGHER LEVEL)
Pitch Ltd
(d) Marginal Costing StatementSales (800 x 550) 440,000
– Variable Costs (800 x (407 – 20)) 309,600= Contribution 130,400– Fixed Costs (75,218 + 20,000) 95,218= Profits 35,182
(e) Marginal Costing StatementSales (880 x 525) 462,000
– Variable Costs (880 x (407 + 12)) 368,720= Contribution 93,280– Fixed Costs 75,218= Profits 18,062
Cost ClassificationCost Fixed VariableDirect Materials – 240,000Direct Labour – 160,000Production Overheads 45,400 52,000Administration Expenses 92,000 16,000Distribution Costs 45,300 43,200
182,700 511,200
Marginal Costing Statement at 1,600 unitsTotal Per Unit
Sales 720,000 45.00– Variable Costs 511,200 31.95= Contribution 208,800 13.05– Fixed Costs 182,700= Profits 26,100
Fixed CostsCPU
------------------------- 75,218143
--------------- 526 units= =
Actual Sales B/E Sales 100×–Actual Sales
-------------------------------------------------------------------- 800 526 100×–800
------------------------------------ 34%=
Leaving Certificate Accounting
298
(a) Break-even Point
=
Margin of Safety Percentage
= =
(b) Let S = Sales PriceSales – Variable Costs – Fixed Costs = Profits16,000S – (16,000 x 31.95) – 182,700 = 0.1(16,000S)16,000S – 511,200 – 182,700 = 1,600S14,400S = 693,900S = €48.19
(c) Plan (A) Marginal Costing StatementSales (19,200 x €42.75) 820,800
– Variable Costs (19,200 x €31.95) 613,440= Contribution 207,360– Fixed Costs 182,700= Profits 24,660
Plan (B) Marginal Costing StatementSales (18,400 x €45) 828,000
– Variable Costs (18,400 x €32.22) 592,848= Contribution 235,152– Fixed Costs 194,700= Profits 40,452
Plan (C) Marginal Costing StatementSales (16,000 x €45) 720,000
– Variable Costs (16,000 x €26.95) 431,200= Contribution 288,800– Fixed Costs 202,700= Profits 86,100 Optimum
Fixed CostsCPU
------------------------- 182,70013.05
----------------- 14,000 units= =
Actual Sales B/E Sales 100×–Actual Sales
-------------------------------------------------------------------- 16,000 14,000 100×–16,000
-------------------------------------------------- 12.5%=
299
Budgeting andBudgetary Control: Solutions30
QUESTION 30.1
QUESTION 30.2
Rocklom Ltd
(a) Sales BudgetSuper Excell
Budgeted Quantities 8,000 3,500Expected Sales Price €20 €30Budgeted Sales €160,000 €105,000
(b) Unit Production Budget Super Excell
Budgeted Sales 8,000 3,500+ Budgeted Closing Stock 800 250– Opening Stock (700) (300)= Budgeted Production 8,100 units 3,450 units
Hiform Ltd(a) Sales Budget
Quantum MagnumBudgeted Quantities 7,000 5,000Expected Sales Price €15 €20Budgeted Sales €105,000 €100,000
(b) Unit Production Budget Quantum Magnum
Budgeted Sales 7,000 5,000+ Budgeted Closing Stock 1,000 500– Opening Stock (900) (600)= Budgeted Production 7,100 units 4,900 units
(c) Raw Materials Usage Budget Material A Material B
Quantum (7,100 x 6) 42,600(7,100 x 14) 99,400
Magnum (4,900 x 9) 44,100(4,900 x 11) 53,900
Budgeted Materials Usage 86,700 kgs 153,300 kgs
(d) Raw Materials Purchases Budget Material A Material B
Budgeted Materials Usage 86,700 153,300+ Budgeted Closing Stock 7,000 13,500– Opening Stock (6,500) (11,000)= Budgeted Materials Purchased (kgs) 87,200 155,800
Leaving Certificate Accounting
300
QUESTION 30.3
QUESTION 30.4
Inkprop Ltd(a) Sales Budget
Asterisk CommaBudgeted Quantities 11,000 14,000Expected Sales Price 120 130Budgeted Sales €1,320,000 €1,820,000
(b) Unit Production Budget Asterisk Comma
Budgeted Sales 11,000 14,000+ Budgeted Closing Stock 4,500 4,000– Opening Stock (3,000) (5,500)= Budgeted Production 12,500 units 12,500 units
(c) Direct Labour Budget Asterisk Comma
Budgeted Production 12,500 units 12,500 unitsx Labour Hours per unit 4 hours 6 hours= Budgeted Labour Hours 50,000 hours 75,000 hoursx Labour rate per hour €11 €11= Budgeted Direct Labour Costs €550,000 €825,000
Fonplus Ltd(a) Sales Budget
Red BlueBudgeted Quantities 4,500 3,000Expected Sales Price €150 €180Budgeted Sales €675,000 €540,000
(b) Unit Production Budget Red Blue
Budgeted Sales 4,500 3,000+ Budgeted Closing Stock 750 800– Opening Stock (1,000) (400)= Budgeted Production 4,250 units 3,400 units
(c) Direct Labour Budget Dept. X Dept. Y
Red (4,250 x 7) 29,750 hours(4,250 x 9) 38,250 hours
Blue (3,400 x 4) 13,600 hours(3,400 x 12) 40,800 hours
Budgeted Labour Hours 43,350 hours 79,050 hoursx Labour rate per hour €9 €9= Budgeted Direct Labour Costs €390,150 €790,500
Solutions
301
QUESTION 30.5
Deprints Ltd(a) Sales Budget
Basic DeluxeBudgeted Quantities 5,000 7,000Expected Sales Price 150 200Budgeted Sales €750,000 €1,400,000
(b) Unit Production Budget Basic Deluxe
Budgeted Sales 5,000 7,000+ Budgeted Closing Stock 600 900– Opening Stock (500) (7,000)= Budgeted Production 5,100 units 7,200 units
(c) Raw Materials Usage Budget Material C Material D
Basic (5,100 x 4) 20,400(5,100 x 7) 35,700
Deluxe (7,200 x 6) 43,200(7,200 x 6) 43,200
Budgeted Materials Usage 63,600 mtrs 78,900 mtrs
(d) Raw Materials Purchases Budget Material C Material D
Budgeted Materials Usage 60,300 78,900+ Budgeted Closing Stock 12,000 14,500– Opening Stock (10,000) (13,000)= Budgeted Material Purchases 65,600 mtrs 80,400 mtrsx Expected Prices €3 €5= Budgeted Material Purchases (€) €196,800 €402,000
(e) Direct Labour Budget Basic Deluxe
Budgeted Production 5,100 units 7,200 unitsx Labour Hours per unit 6 hours 10 hours= Budgeted Labour Hours 30,600 hours 72,000 hoursx Labour Rate per hour €12 €12= Budgeted Direct Labour Costs €367,200 €864,000
Leaving Certificate Accounting
302
QUESTION 30.6
Bankfort Ltd
QUESTION 30.7
Chinblon Ltd
Cash BudgetReceipts from Sales Jan Feb Mar Apr May June TotalDebtors on 1 January 7,200 – – – – – 7,200Jan Sales 1,600 6,400 – – – – 8,000Feb Sales – 2,000 8,000 – – – 10,000Mar Sales – – 2,000 8,000 – – 10,000Apr Sales – – – 2,400 9,600 – 12,000May Sales – – – – 2,600 10,400 13,000June Sales – – – – – 2,800 2,800Total Receipts = 8,800 8,400 10,000 10,400 12,200 13,200 63,000Payments for PurchasesCreditors on 1 January 3,600 – – – – – 3,600Jan Purchases 2,400 3,600 – – – – 6,000Feb Purchases – 2,800 4,200 – – – 7,000Mar Purchases – – 3,600 5,400 – – 9,000Apr Purchases – – – 3,600 5,400 – 9,000May Purchases – – – – 3,600 5,400 9,000Jun Purchases – – – – – 4,000 4,000
6,000 6,400 7,800 9,000 9,000 9,400 47,600Expenses 3,000 3,000 3,000 3,500 3,500 3,500 19,500Total Payments = 9,000 9,400 10,800 12,500 12,500 12,900 67,100Net Cash Inflow (Outflow) (200) (1,000) (800) (2,100) (300) 300 (4,100)Opening Balance 5,300 5,100 4,100 3,300 1,200 900 5,300Closing Balance 5,100 4,100 3,300 1,200 900 1,200 1,200
Cash BudgetReceipts from Sales Jan Feb Mar Apr May June TotalNov Sales 15,200 – – – – – 15,200Dec Sales 16,000 16,000 – – – – 32,000Jan Sales 8,000 16,000 16,000 – – – 40,000Feb Sales – 9,000 18,000 18,000 – – 45,000Mar Sales – – 10,000 20,000 20,000 – 50,000Apr Sales – – – 11,000 22,000 22,000 55,000May Sales – – – – 12,000 24,000 36,000Jun Sales – – – – – 14,000 14,000Total Receipts = 39,200 41,000 44,000 49,000 54,000 60,000 287,200Payments for PurchasesCreditors on 1 January 20,000 – – – – – 20,000Jan Purchases 16,000 16,000 – – – – 32,000Feb Purchases – 18,000 18,000 – – – 36,000Mar Purchases – – 20,000 20,000 – – 40,000Apr Purchases – – – 22,000 22,000 – 44,000May Purchases – – – – 24,000 24,000 48,000Jun Purchases – – – – – 28,000 28,000
36,000 34,000 38,000 42,000 46,000 52,000 248,000Expenses 4,000 4,000 4,000 5,000 5,000 5,000 27,000Total Payments = 40,000 38,000 42,000 47,000 51,000 57,000 275,000Net Cash Inflow (Outflow) (800) 3,000 2,000 2,000 3,000 3,000 12,200Opening Balance (5,200) (6,000) (3,000) (1,000) 1,000 4,000 (5,200)Closing Balance (6,000) (3,000) (1,000) 1,000 4,000 7,000 7,000
Solutions
303
QUESTION 30.8
Rafton Ltd
(a)
Cash BudgetReceipts from Sales Jan Feb Mar Apr May Jun TotalDebtors on 1 January 21,000 – – – – – 21,000Jan Sales 10,000 40,000 – – – – 50,000Feb Sales – 12,000 48,000 – – – 60,000Mar Sales – – 14,000 56,000 – – 70,000Apr Sales – – – 14,000 56,000 – 70,000May Sales – – – – 18,000 72,000 90,000Jun Sales – – – – – 19,200 19,200Total Receipts = 31,000 52,000 62,000 70,000 74,000 91,200 380,200Payments for PurchasesCreditors on 1 January 14,500 – – – – – 14,500Jan Purchases 15,000 15,000 – – – – 30,000Feb Purchases – 18,000 18,000 – – – 36,000Mar Purchases – – 21,000 21,000 – – 42,000Apr Purchases – – – 22,000 22,000 – 44,000May Purchases – – – – 27,000 27,000 54,000Jun Purchases – – – – – 28,800 28,800
29,500 33,000 39,000 43,000 49,000 55,800 249,300Rent 300 300 300 300 300 300 1,800Wages 7,000 7,000 7,000 7,000 7,000 7,000 42,000Other Expenses 400 400 400 400 400 400 2,400Machinery – – – – 60,000 – 60,000Total Payments = 37,200 40,700 46,700 50,700 116,700 63,500 355,500Net Cash Inflow (Outflow) (6,200) 11,300 15,300 19,300 (42,700) 27,700 24,700Opening Balance 1,500 (4,700) 6,600 21,900 41,200 (1,500) 1,500Closing Balance (4,700) 6,600 21,900 41,200 (1,500) 26,200 26,200
(b) Budgeted Balance Sheet as at 30 JuneFixed Assets (90,000 + 60,000) 150,000Current Assets – Stock 13,800
– Debtors (80% of June Sales) 76,800– Bank 26,200
116,800Current Liabilities – Creditors (50% of June Purchases) (28,800)
88,000238,000
Financed By:Share Capital 110,000Profit and Loss Balance 128,000
238,000
Leaving Certificate Accounting
304
QUESTION 30.9
Quinset Ltd
(a)
Cash BudgetReceipts from Sales Jan Feb Mar Apr May Jun TotalDebtors on 1 January 18,000 – – – – – 18,000Jan Sales 16,800 25,200 – – – – 42,000Feb Sales – 19,200 28,800 – – – 48,000Mar Sales – – 18,400 27,600 – – 46,000Apr Sales – – – 20,800 31,200 – 52,000May Sales – – – – 20,000 30,000 50,000Jun Sales – – – – – 22,400 22,400Total Receipts = 34,800 44,400 47,200 48,400 51,200 52,400 278,400Payments for PurchasesCreditors on 1 January 16,000 – – – – – 16,000Jan Purchases 16,800 16,800 – – – – 33,600Feb Purchases – 19,200 19,200 – – – 38,400Mar Purchases – – 21,600 21,600 – – 43,200Apr Purchases – – – 23,500 23,500 – 47,000May Purchases – – – – 23,000 23,000 46,000Jun Purchases – – – – – 23,000 23,000
32,800 36,000 40,800 45,100 46,500 46,000 247,200Wages 2,000 2,000 2,000 2,000 2,000 2,000 12,000Rent 400 400 400 400 400 400 2,400Other Expenses 600 600 600 600 600 600 3,600Delivery Van – – – 15,000 – – 15,000Total Payments 35,800 39,000 43,800 63,100 49,500 49,000 280,200Net Cash Inflow (Outflow) (1,000) 5,400 3,400 (14,700) 1,700 3,400 (1,800)Opening Balance 9,000 8,000 13,400 16,800 2,100 3,800 9,000Closing Balance 8,000 13,400 16,800 2,100 3,800 7,200 7,200
(b) Budgeted Trading and Profit and Loss Account for six months ended 30 JuneSales 294,000Less Cost of SalesOpening Stock 19,000+ Purchases 254,200
273,200– Closing Stock (20,000)
(253,200)Gross Profit 40,800Less ExpensesWages 12,000Rent 2,400Other Expenses 3,600
(18,000)Net Profit 22,800
Solutions
305
QUESTION 30.10
Quaestor Ltd
(c) Budgeted Balance Sheet as at 30 JuneFixed Assets (120,000 + 15,000) 135,000Current Assets
Stock 20,000Debtors (60% of June Sales) 33,600Bank 7,200
60,800Current Liabilities Creditors (50% of June Purchases) (23,000)
37,800172,800
Financed ByShare Capital 150,000Profit and Loss Balance 22,800
172,800
(a) Sales BudgetProduct 1 Product 2
Budgeted Quantities 10,000 16,000Expected Sales Price €440 €400Budgeted Sales €4,400,000 €6,400,000
(b) Unit Production Budget Product 1 Product 2
Budgeted Sales 10,000 16,000+ Budgeted Closing Stock 600 400– Opening Stock (700) (500)= Budgeted Production 9,900 units 15,900 units
(c) Raw Materials Usage Budget Material A Material B Material C
Product 1 (9,900 x 4) 39,600(9,900 x 6) 59,400(9,900 x 10) 99,000
Product 2 (15,900 x 6) 95,400(15,900 x 4) 63,600(15,900 x 8) 127,200
Budgeted Materials Usage 135,000 kgs 123,000 kgs 226,000 kgs
(d) Raw Materials Purchases Budget Material A Material B Material C
Budgeted Usage 135,000 123,000 226,200+ Budgeted Closing Stock 5,000 6,000 10,000– Opening Stock (6,000) (7,000) (9,000)
134,000 kgs 122,000 kgs 227,200 kgsx Expected Prices €3 €7 €4= Budgeted Material Purchases €402,000 €854,000 €908,800
Leaving Certificate Accounting
306
(e) Direct Labour Budget Dept X Dept Y
Product 1 (9,900 x 10) 99,000 hours(9,900 x 12) 118,800 hours
Product 2 (15,900 x 4) 63,600 hours(15,900 x 16) 254,400 hours
Budgeted Labour Hours 162,600 hours 373,200 hoursx Labour Rate per hour €8 €10= Budgeted Labour Costs €1,300,800 €3,732,000
(f) Variable Overhead BudgetProduct 1 Product 2
Budgeted Labour Hours 162,600 373,200x Overhead Rate per hour €2 €2= Budgeted Variable Overheads €325,200 €746,400
(g) Budgeted Manufacturing Account for the year€ €
Opening Stock Raw MaterialsA – 6,000 kgs at €2 per kg = 12,000B – 7,000 kgs at €6 per kg = 42,000C – 9,000 kgs at €4 per kg = 36,000
90,000+ Purchases of Raw MaterialsA – 402,000B – 854,000C – 908,800 2,164,800
2,254,800– Closing Stock of Raw MaterialsA – 5,000 kgs at €3 per kg = 15,000B – 6,000 kgs at €7 per kg = 42,000C – 10,000 kgs at €4 per kg = 40,000
(97,000)= Cost of Raw Materials Consumed 2,157,800+ Direct Labour CostsDept X – 1,300,800Dept Y – 3,732,000 5,032,800= Prime Cost 7,190,600+ OverheadsVariableProduct 1 – 325,200Product 2 – 746,400 1,071,600Fixed 527,000
1,598,600= Cost of Production 8,789,200
Solutions
307
QUESTION 30.11 (HIGHER LEVEL)
Martella Ltd
(h) Budgeted Trading Account for the yearSalesProduct 1 4,400,000Product 2 6,400,000
10,800,000Less Cost of SalesOpening Stock of Finished GoodsProduct 1 – 700 units at €310 per unit = 217,000Product 2 – 500 units at € 298 per unit = 149,000
366,000+ Cost of Production 8,789,200
9,155,200Closing Stock of Finished GoodsProduct 1 – 600 units at €339 per unit = 203,400Product 2 – 400 units at €311 per unit = 124,400
(327,800)(8,827,400)
Gross Profit 1,972,600
(a) Sales BudgetRegular High Spec
Budgeted Quantities 3,000 1,800Expected Sales Price 310 450Budgeted Sales €930,000 €810,000
(b) Unit Production Budget Regular High Spec
Budgeted Sales 3,000 1,800+ Budgeted Closing Stock 300 144– Opening Stock (250) (120)= Budgeted Production 3,050 1,824
(c) Raw Materials Usage Budget Material G Material H
Regular (3,050 x 3) 9,150(3,050 x 6) 18,300
High Spec (1,824 x 5) 9,120(1,824 x 4) 7,296
Budgeted Materials Usage 18,270 kgs 25,596 kgs
(d) Raw Materials Purchases Budget Material G Material H
Budgeted Usage 18,270 25,596+ Budgeted Closing Stock 2,400 3,600– Opening Stock (2,000) (3,000)
18,670 kgs 29,196 kgsx Expected Prices €4 €2= Budgeted Material Purchases €74,680 €52,392
Leaving Certificate Accounting
308
(e) Direct Labour Budget Regular High Spec
Budgeted Production 3,050 units 1,824 unitsx Labour Hours per Unit 12 hours 18 hours= Budgeted Labour Hours 36,600 hours 32,832 hoursx Labour Rate per hour €12 €12= Budgeted Direct Labour Costs €439,200 €393,984
(f) Variable Production Overhead BudgetRegular High Spec
Budgeted Labour Hours 36,600 32,832x Overhead Rate per hour €4 €4= Budgeted Overhead Costs €146,400 €131,328
(g) Budgeted Manufacturing Account for the year€ €
Opening Stock of Raw MaterialsMaterial G – 2,000 kgs at €3.50 per kg = 7,000Material H – 3,000 kgs at €1.50 per kg = 4,500 11,500+ Purchases of Raw MaterialsMaterial G – 74,680Material H – 52,392 127,072
138,572– Closing Stock of Raw MaterialsMaterial G – 2,400 kgs at €4 per kg = 9,600Material H – 3,600 kgs at €2 per kg = 7,200 (16,800)= Cost of Raw Materials Consumed 121,772+ Direct Labour CostsRegular – 439,200High Spec – 393,984 833,184= Prime Cost 954,956+ Overheads:VariableRegular – 146,400High Spec – 131,328 277,728Fixed 173,580 451,308= Cost of Production 1,406,264
(h) Budgeted Trading Account for the yearSalesRegular – 930,000High Spec – 810,000 1,740,000Less Cost of SalesOpening Stock of Finished GoodsRegular – 250 units at €210 = 52,500High Spec – 120 units at €315 = 37,800 90,300+ Cost of Production 1,406,264
1,496,564Closing Stock of Finished Goods (Note 1)Regular – 300 units at €246 = 73,800High Spec – 144 units at €361 = 51,984
(125,784)(1,370,780)
Gross Profit 369,220
Solutions
309
*
QUESTION 30.12 (HIGHER LEVEL)
Frictex Ltd
Note 1 Valuation of Closing Stock of Finished GoodsRegular High Spec
Material G (€4 per kg) 12 20Material H (€2 per kg) 12 8Direct Labour (€12 per hour) 144 216Variable Overheads (€4 per hour) 48 72Fixed Overheads (€2.50 per hour)* 30 45Total Unit Cost 246 361
(a) Sales BudgetNormal Extra
Budgeted Quantities 12,000 5,000Expected Sales Price €400 €570Budgeted Sales €4,800,000 €2,850,000
(b) Unit Production Budget Normal Extra
Budgeted Sales 12,000 5,000+ Budgeted Closing Stock 1,980 540– Opening Stock (2,200) (600)= Budgeted Production 11,780 units 4,940 units
(c) Raw Materials Usage Budget Material P Material Q
Normal (11,780 x 10) 117,800(11,780 x 5) 58,900
Extra (4,940 x 6) 29,640(4,940 x 12) 59,280
Budgeted Materials Usage 147,440 kgs 118,180 kgs
(d) Raw Materials Purchases Budget Material P Material Q
Budgeted Usage 147,440 118,180+ Budgeted Closing Stock 27,000 21,600– Opening Stock (30,000) (24,000)
144,440 kgs 115,780 kgsx Expected Prices €5 €8= Budgeted Material Purchases €722,200 €926,240
(e) Direct Labour Budget Dept. 1 Dept. 2
Normal (11,780 x 4) 47,120 hours(11,780 x 7) 82,460 hours
Extra (4,940 x 6) 29,640 hours(4,940 x 10) 49,400 hours
Budgeted Labour Hours 76,760 hours 131,860 hoursx Labour Rate per hour €14 €14= Budgeted Labour Costs €1,074,640 €1,846,040
Total Fixed OverheadsTotal Labour Hours
-------------------------------------------------- 173,58036,600 32,832+----------------------------------- 173,580
69,432----------------- €2.50= = =
Leaving Certificate Accounting
310
(f) Variable Production Overhead Budget
Normal ExtraBudgeted Labour Hours 76,760 131,860x Overhead Rate per hour €5 €5= Budgeted Overhead Costs €383,800 €659,300
(g) Budgeted Manufacturing Account for the year€ €
Opening Stock of Raw MaterialsMaterial P – 30,000 kgs at €4 per kg = 120,000Material Q – 24,000 kgs at €7 per kg = 168,000 288,000+ Purchases of Raw MaterialsMaterial P – 722,200Material Q – 926,240 1,648,440
1,936,440– Closing Stock of Raw MaterialsMaterial P – 27,000 kgs at €5 per kg = 135,000Material H – 21,600 kgs at €8 per kg = 172,800 (307,800)= Cost of Raw Materials Consumed 1,628,640+ Direct Labour CostsDept 1 – 1,074,640Dept 2 – 1,846,040 2,920,680= Prime Cost 4,549,320+ Overheads:VariableNormal – 383,800Extra – 659,300 1,043,100Fixed 625,860 1,668,960= Cost of Production 6,218,280
(h) Budgeted Trading Account for the yearSalesNormal – 4,800,000Extra – 2,850,000 7,650,000Less Cost of SalesOpening Stock of Finished GoodsNormal – 2,200 units at €298 per unit = 655,600Extra – 600 units at €428 per unit = 256,800 912,400+ Cost of Production 6,218,280
7,130,680Closing Stock of Finished Goods (Note 1)Normal – 1,980 units at €332 per unit = 657,360Extra – 540 units at €478 per unit = 258,120 (915,480)
(6,215,200)Gross Profit 1,434,800
Solutions
311
*
QUESTION 30.13 (HIGHER LEVEL)
Famteb Ltd
Note 1 Valuation of Closing Stock of Finished GoodsNormal Extra
Material P (€5 per kg) 50 30Material Q (€8 per kg) 40 96Direct Labour (€14 per hour)Dept. 1 56 84Dept. 2 98 140Variable Overheads (€5 per hour) 55 80Fixed Overheads (€3 per hour)* 33 48Total Unit Cost 332 478
(a) Sales BudgetJAN FEB MAR TOTAL
Budgeted Quantities 12,000 13,000 15,000 40,000Expected Sales Prices 50 50 55Budgeted Sales (€) 600,000 650,000 825,000 2,075,000
(b) Unit Production BudgetJAN FEB MAR TOTAL
Budgeted Sales 12,000 13,000 15,000 40,000+ Budgeted Closing Stock 6,500 7,500 7,500 21,500– Opening Stock (6,000) (6,500) (7,500) (20,000)= Budgeted Production (Units) 12,500 14,000 15,000 41,500
(c) Raw Materials Usage BudgetJAN FEB MAR TOTAL
Budgeted Production 12,500 14,000 15,000 41,500x Usage in kgs 8 8 8 8= Budgeted Usage (kgs) 100,000 112,000 120,000 332,000
(d) Raw Materials Purchases BudgetJAN FEB MAR TOTAL
Budgeted Usage 100,000 112,000 120,000 332,000+ Budgeted Closing Stock 22,400 24,000 24,800 71,200– Opening Stock (21,000) (22,400) (24,000) (67,400)
101,400 113,600 120,800 335,800x Expected Price €2.50 €2.50 €2.50 2.50= Budgeted Materials Purchases (€) 253,500 284,000 302,000 839,500
Total Fixed OverheadsTotal Labour Hours
-------------------------------------------------- 625,86076,760 131,860+-------------------------------------- 625,860
208,620----------------- €3.00= = =
Leaving Certificate Accounting
312
QUESTION 30.14 (HIGHER LEVEL)
Acrod Ltd
(e) Cash BudgetReceipts from Sales JAN FEB MAR TOTALDebtors on 1 January 290,000 – – 290,000Jan Sales 240,000 360,000 – 600,000Feb Sales – 260,000 390,000 650,000Mar Sales – – 330,000 330,000Total Receipts = 530,000 620,000 720,000 1,870,000Payments for PurchasesCreditors on 1 January 198,000 – – 198,000Jan Purchases 48,165 202,800 – 250,965Feb Purchases – 53,960 227,200 281,160Mar Purchases – – 57,380 57,380
246,165 256,760 284,580 787,505Wages 15,000 15,000 15,000 45,000Variable Overheads 25,000 28,000 30,000 83,000Fixed Overheads 4,000 4,000 4,000 12,000Administration Expenses 2,000 2,000 2,000 6,000Distribution Costs 12,000 13,000 15,000 40,000Total Payments = 304,165 318,760 350,580 973,505Total Cash Inflow 225,835 301,240 369,420 896,495Opening Balance (305,645) (79,810) 221,430 (305,645)Closing Balance (79,810) 221,430 590,850 590,850
(a) Sales BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Quantities 500 1,000 2,000 3,000 5,000 6,000 17,500Expected Sales Prices 20 20 22 23 23 23Budgeted Sales 10,000 20,000 44,000 69,000 115,000 138,000 396,000
(b) Unit Production BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Sales 500 1,000 2,000 3,000 5,000 6,000 17,500+ Budgeted Closing Stock 250 500 750 1,250 1,500 1,500 5,750– Opening Stock – (250) (500) (750) (1,250) (1,500) (4,250)= Budgeted Production 750 1,250 2,250 3,500 5,250 6,000 19,000
(c) Raw Materials Usage BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Production 750 1,250 2,250 3,500 5,250 6,000 19,000x Usage in kgs 5 5 5 5 5 5 5= Budgeted Usage (kgs) 3,750 6,250 11,250 17,500 26,250 30,000 95,000
(d) Raw Materials Purchases BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Usage 3,750 6,250 11,250 17,500 26,250 30,000 95,000+ Budgeted Closing Stock 3,125 5,625 8,750 13,125 15,000 15,625 61,250– Opening Stock – (3,125) (5,625) (8,750) (13,125) (15,000) (45,625)
6,875 8,750 14,375 21,875 28,125 30,625 110,625x Expected Price (€) 2 2 2 2 2 2 2= Budgeted Materials Purchases (€) 13,750 17,500 28,750 43,750 56,250 61,250 221,250
Solutions
313
QUESTION 30.15 (HIGHER LEVEL)
Grantar Ltd
(e) Cash BudgetReceipts from Sales JAN FEB MAR APR MAY JUNE TOTALJan SalesFeb SalesMar SalesApr SalesMay SalesJun Sales
1,900–––––
4,0003,800––––
4,0008,0008,360
–––
–8,000
17,60013,110
––
––
17,60027,60021,850
–
–––
27,60046,00026,220
9,90019,80043,56068,31067,85026,220
Total Receipts = 1,900 7,800 20,360 38,710 67,050 99,820 235,640Payments for PurchasesJan PurchasesFeb PurchasesMar PurchasesApr PurchasesMay PurchasesJun Purchases
––––––
6,875–––––
6,8758,750
––––
–8,750
14,375–––
––
14,37521,875
––
–––
21,87528,125
–
13,75017,50028,75043,75028,125
–
WagesVariable OverheadsFixed Overheads (– 9,000)Administration ExpensesDistribution CostsEquipmentLoan Interest
5,0001,5002,0001,000
250––
6,8755,0002,5002,0001,000
500100,000
–
15,6255,0004,5002,0001,0001,000
–1,000
23,1255,0007,0002,0001,0001,500
–1,000
36,2505,000
10,5002,0001,0002,500
–1,000
50,0005,000
12,0002,0001,0003,000
–1,000
131,87530,00038,00012,0006,0008,750
100,0004,000
Total Payments = 9,750 117,875 30,125 40,625 58,250 74,000 330,625Net Cash Inflow (Outflow)Opening BalanceLoan
(7,850)5,000
–
(110,075)(2,850)
100,000
(9,765)(12,925)
–
(1,915)(22,690)
–
8,800(24,605)
–
25,820(15,805)
–
(94,985)5,000
100,000Closing Balance (2,850) (12,925) (22,690) (24,605) (15,805) 10,015 10,015
(a) Purchases BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Sales (at 60%)+ Budgeted Closing Stock– Opening Stock
12,0002,640
–
13,2003,120(2,640)
15,6003,000(3,120)
15,0003,360(3,000)
16,8003,600(3,360)
18,0003,840(3,600)
90,60019,560(15,720)
= Budgeted Purchases (€) 14,460 13,680 15,480 15,360 17,040 18,240 94,440
(b) Schedule of Receipts from SalesJAN FEB MAR APR MAY JUNE TOTAL
Jan SalesFeb SalesMar SalesApr SalesMay SalesJun Sales
7,600–––––
8,0008,360––––
3,6008,8009,880–––
–3,960
10,4009,500––
––
4,68010,00010,640
–
–––
4,50011,20011,400
19,20021,12024,96024,00021,84011,400
7,600 16,360 22,280 23,860 25,320 27,100 122,520
(c) Schedule of Payments for PurchasesJAN FEB MAR APR MAY JUNE TOTAL
Jan PurchasesFeb PurchasesMar PurchasesApr PurchasesMay PurchasesJun Purchases
1,464–––––
10,2481,368––––
2,9289,5761,548–––
–2,736
10,8361,536––
––3,096
10,7521,704–
–––3,072
11,9281,824
14,64013,68015,48015,36013,6321,824
1,464 11,616 14,052 15,108 15,552 16,824 74,616
Leaving Certificate Accounting
314
QUESTION 30.16Blinstap Ltd
* Calculation of Interest Payable on the Loan€7,000 at 12% for 5 months (Jan 31st⇒ June 30th) =
(a) Purchases BudgetJAN FEB MAR APR MAY JUNE TOTAL
Budgeted Sales (at 80%)+ Budgeted Closing Stock– Opening Stock
8,0006,400(4,000)
12,8007,200(6,400)
14,4006,000(7,200)
12,0005,600(6,000)
11,2004,800(5,600)
9,6004,000(4,800)
68,00034,000(34,000)
= Budgeted Purchases (€) 10,400 13,600 13,200 11,600 10,400 8,800 68,000
(b) Cash BudgetReceipts from Sales JAN FEB MAR APR MAY JUNE TOTALDebtors on 1 JanuaryJan SalesFeb SalesMar SalesApr SalesMay SalesJun Sales
5,0006,000
–––––
–4,0009,600
––––
––
6,40010,800
–––
–––
7,2009,000
––
––––
6,0008,400
–
–––––
5,6007,200
5,00010,00016,00018,00015,00014,0007,200
Total Receipts = 11,000 13,600 17,200 16,200 14,400 12,800 85,200Payments for PurchasesCreditors on 1 JanuaryJan PurchasesFeb PurchasesMar PurchasesApr PurchasesMay PurchasesJun Purchases
6,0001,040
–––––
–9,3601,360
––––
––
12,2401,320
–––
–––
11,8801,160
––
––––
10,4401,040
–
–––––
9,360880
6,00010,40013,60013,20011,60010,400
880
RentWagesMotor Van
7,040–400
10,000
10,720240400–
13,560–400–
13,040240400–
11,480–400–
10,240240400
–
66,080720
2,40010,000
Total Payments = 17,440 11,360 13,960 13,680 11,880 10,880 79,200Net Cash Inflow (Outflow)Opening Balance
(6,440)1,800
2,2402,360
3,2404,600
2,5207,840
2,52010,360
1,92012,880
6,0001,800
LoanLoan Repaid
(4,640)7,000
–
4,600––
7,840––
10,360––
12,880––
14,800–
(7,350)*
7,8007,000(7,350)
Closing Balance 2,360 4,600 7,840 10,360 12,880 7,450 7,450
(c) Budgeted Trading and Profit and Loss Account for six months ended 30 JuneSalesLess Cost of SalesOpening Stock+ Purchases
4,00068,000
85,000
– Closing Stock72,000(4,000)
(68,000)= Gross Profit– ExpensesRent (720 + 200 – 240)WagesLoan Interest Depreciation on EquipmentDepreciation on Motors
6802,400
3501,0001,000
17,000
(5,430)= Net Profit 11,570
€84012
------------ 5× €350.=
Solutions
315
QUESTION 30.17 (HIGHER LEVEL)Corden Ltd
(d) Budgeted Balance Sheet as at 30 JuneFixed Assets Cost Depr Value
Equipment 20,000 1,000 19,000Motor Van 10,000 1,000 9,000
30,000 2,000 28,000Current Assets
Stock 4,000Debtors (40% of June Sales) 4,800Bank 7,450Rent Prepaid 240
16,490Current Liabilities
Creditors (90% of June Purchases) (7,920)8,570
36,570
Financed ByShare Capital 25,000Profit and Loss Account 11,570
36,570
(a) Purchases BudgetJAN FEB MAR TOTAL
Budgeted Sales Units 450 500 600 1,550+ Budgeted Closing Stock 250 300 275 825– Opening Stock (225) (250) (300) (775)= Budgeted Purchases Units 475 550 575 1,600x Expected Prices €25 €25 €30= Budgeted Purchases (€) 11,875 13,750 17,250 42,875
(b) Cash BudgetReceipts from Sales JAN FEB MAR TOTALDebtors on 1 January 16,000 – – 16,000Jan Sales 4,275 18,000 – 22,275Feb Sales – 4,750 20,000 24,750Mar Sales – – 6,840 6,840Total Receipts = 20,275 22,750 26,840 69,865Payments for PurchasesCreditors on 1 January 6,150 – – 6,150Jan Purchases 4,275 7,125 – 11,400Feb Purchases – 4,950 8,250 13,200Mar Purchases – – 6,210 6,210
10,425 12,075 14,460 36,960Wages 9,000 9,000 9,000 27,000Rent 500 – – 500Other Expenses 600 600 600 1,800Equipment 60,000 – – 60,000Total Payments = 80,525 21,675 24,060 126,260Net Cash Inflow (Outflow) (60,250) 1,075 2,780 (56,395)Opening Balance 2,000 2,750 3,825 2,000
(58,250) 3,825 6,605 (54,395)Loan 61,000 – – 61,000Closing Balance 2,750 3,825 6,605 6,605
Leaving Certificate Accounting
316
(c) Budgeted Trading and Profit and Loss Account for three months ended 31 MarchSales (450 x 50) + (500 x 50) + (600 x 60) 83,500Less Cost of SalesOpening Stock 4,500+ Purchases 42,875
47,375– Closing Stock (275 x 30) (8,250)
(39,125)= Gross Profit 44,375+ IncomeDiscount Received ((42,875 x .4) x .1) 1,715
46,090– ExpensesWages 27,000Rates 300Other Expenses 1,800Discount Allowed ((83,500 x .2) x .05) 835Depreciation on Motors 1,800Depreciation on Equipment 3,000Loan Interest (61,000 at 12% for two months) 1,220
(35,955)Net Profit 10,135+ Profit and Loss Balance b/f 5,850Profit and Loss Balance c/d 15,985
(d) Budgeted Balance Sheet as at 31 MarchFixed Assets Cost Depr Value
Buildings 100,000 – 100,000Motors 40,000 1,800 38,200Equipment 60,000 3,000 57,000
200,000 4,800 195,200Current Assets
Stock 8,250Debtors (80% of March Sales) 28,800Bank 6,605
43,655Current Liabilities
Creditors (60% of March Purchases) 10,350Rates Due 300Loan Interest Due 1,220
(11,870)31,785
226,985Financed ByShare Capital 150,000Profit and Loss Account 15,985
165,985Loan 61,000
226,985
Solutions
317
QUESTION 30.18 (HIGHER LEVEL)
Slimpton Ltd
QUESTION 30.19 (HIGHER LEVEL)
Marthan Ltd
QUESTION 30.20 (HIGHER LEVEL)
Fedusa Ltd
(a) Classification of Costs (i) Direct Materials
These are variable costs as they vary directly with activity:
(ii) Direct LabourThese are variable costs as they vary directly with activity:
(iii) Variable production overheads are variable as they vary directly with activity:
(a) Comparison of Actual Costs with Static BudgetCosts Actual Budgeted VarianceDirect Materials 320,000 300,000 20,000 AdverseDirect Labour 231,000 220,000 11,000 AdverseVariable Production Overheads 141,000 130,000 11,000 AdverseFixed Production Overheads 80,000 70,000 10,000 Adverse
772,000 720,000 52,000 Adverse
(b) Comparison of Actual Costs with Budget flexed to 22,000 unitsCosts Actual Budgeted VarianceDirect Materials 320,000 330,000 10,000 FavourableDirect Labour 231,000 242,000 11,000 FavourableVariable Production Overheads 141,000 143,000 2,000 FavourableFixed Production Overheads 80,000 70,000 10,000 Adverse
772,000 785,000 13,000 Favourable
(a) Comparison of Actual Costs with Static BudgetCosts Actual Budgeted VarianceDirect Materials 466,990 469,000 2,010 FavourableDirect Labour 351,750 360,500 8,750 FavourableVariable Production Overheads 261,300 269,500 8,200 FavourableFixed Production Overheads 158,000 159,000 1,000 Favourable
1,238,040 1,258,000 19,960 Favourable
(b) Comparison of Actual Costs with Static Budget flexed to 67,000 unitsCosts Actual Budgeted VarianceDirect Materials 466,990 448,900 18,090 AdverseDirect Labour 351,750 345,050 6,700 AdverseVariable Production Overheads 261,300 257,950 3,350 AdverseFixed Production Overheads 158,000 159,000 1,000 Favourable
1,238,040 1,210,900 27,140 Adverse
56,2509,000--------------- 81,250
13,000--------------- 100,000
16,000----------------- €6.25 per unit= = =
47,7009,000--------------- 68,900
13,000--------------- 84,800
16,000--------------- €5.30 per unit= = =
26,1009,000--------------- 37,700
13,000--------------- 46,400
16,000--------------- €2.90 per unit= = =
Leaving Certificate Accounting
318
(iv) Fixed production overheadsTotally fixed at €13,000 regardless of activity
(v) Administrative expensesThese are mixed costs as they vary indirectly with activity:
Using the high-low method to separate into fixed and variable:Activity Cost
High 16,000 38,600Low 9,000 25,650Difference 7,000 €12,950
Variable Cost per unit = €12,950/7,000 = €1.85 per unitHigh Low
Total Cost 38,600 25,650– Variable Cost 29,600 16,650= Fixed Costs €9,000 €9,000Administration expenses are €9,000 fixed and €1.85 per unit variable
(vi) Distribution costsThese are mixed costs as they vary indirectly with activity:
Using the high-low method to separate into fixed and variable:Activity Cost
High 16,000 54,800Low 9,000 35,200Difference 7,000 €19,600
Variable Cost per unit = €19,600/7,000 = €2.80 per unitHigh Low
Total Cost 54,800 35,200– Variable Cost 44,800 25,200= Fixed Costs €10,000 €10,000Distribution costs are €10,000 fixed and €2.80 per unit variable
QUESTION 30.21 (HIGHER LEVEL)
Weargo Ltd
(a) Classification of CostsDirect materials and direct labour are variable costs.Administrative expenses are fixed costs.Production overheads and distribution costs are mixed costsDirect material costs are €4.50 per unit (and 1.50 per kg)Direct labour costs are €10 per unit (and €5 per hour)Production overheads are €45,000 fixed and €1.80 per unit variableAdministration expenses are fixed at €77,000Distribution costs are €60,000 fixed and €0.25 per unit variable
(b) Budget Flexed to 14,000 units
Direct Materials (14,000 x €6.25) 87,500Direct Labour (14,000 x €5.30) 74,200Variable Production Overheads (14,000 x €2.90) 40,600Fixed Production Overheads 13,000Administration Expenses (€9,000 + 14,000 x €1.85) 34,900Distribution Costs (€10,000 + 14,000 x €2.80) 49,200Total Cost €299,400
25,6509,000---------------- 33,050
13,000---------------- 38,600
16,000----------------≠ ≠
35,2009,000--------------- 46,400
13,000--------------- 54,800
16,000---------------≠ ≠
Solutions
319
QUESTION 30.22 (HIGHER LEVEL)Cobstand Ltd
(a) Classification of CostsSales are variable at €35.15 per unitDirect materials are variable at €15.85 per unitDirect labour costs are variable at €7.62 per unitProduction overheads are €7,000 fixed and €3.14 variable per unitAdministration expenses are fixed at €5,000Distribution costs are €11,000 fixed and €2.79 variable per unit
Break-even Point
=
(b) Budget Flexed to 75,000 units (€)Direct Materials (75,000 x €4.50) 337,500Direct Labour (75,000 x €10.00) 750,000Production Overheads (45,000 + 75,000 x €1.80) 180,000Administration Expenses 77,000Distribution Costs (€60,000 + 75,000 x €0.25) 78,750Total Cost 1,423,250
(c) Comparison of Actual Costs with Budget flexed to 75,000 unitsCosts Actual Budgeted VarianceDirect Materials 435,000 337,500 97,500 AdverseDirect Labour 618,750 750,000 131,250 FavourableProduction Overheads 195,000 180,000 15,000 AdverseAdministration Expenses 80,000 77,000 3,000 AdverseDistribution Costs 85,250 78,750 6,500 Adverse
1,414,000 1,423,250 9,250 Favourable
(d) Direct Materials Variance = €97,500 AdversePrice Variance = (€150 – €1.45) x 300,000 kgs. = €15,000 FavourableUsage Variance = (225,000 kgs – 300,000 kgs) x €150 = €112,500 AdverseTotal Direct Materials variance = €97,500 Adverse
Direct Labour Variance = €131,250 FavourablePrice Variance = (€5.00 – €5.50) x 112,500 hours = €56,250 AdverseUsage Variance = (112,500 hours – 150,000 hours) x €50 = €187,500 FavourableTotal Direct Labour variance = €131,250 Favourable
(b) Budget Flexed to 7,000 units (€)Sales Revenue 246,050Direct Materials (7,000 x €15.85) 110,950Direct Labour (7,000 x €7.62) 53,340Production Overheads (€7,000 + 7,000 x €3.14) 28,980Administration Expenses 5,000Distribution Costs (€11,000 + 7,000 x €2.79) 30,530Total Cost 228,800Profits 17,250
(c) Marginal Costing Statement at 7,000 unitsTotal Per unit
Sales 246,050 35.15– Variable Costs 205,800 29.40= Contribution 40,250 5.75– Fixed Costs 23,000= Profit 17,250
Fixed CostsContribution per Unit------------------------------------------------- 23,000
5.75--------------- 4,000 units(€140,600)= =