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MGT6153 MOCK EXAM

SOLUTIONS TO NUMERICAL QUESTIONS

Question A1

(a) Aberdeen Ltd Statement of Comprehensive Income for the Year Ended 31

December 2021

Revenue

Cost of Sales (W1)

Gross Profit

Distribution costs (W2)

Administrative expenses (W3)

Profit/Loss before interest

Finance costs (250,000x6%)

Profit/Loss for the year


£

2,347,000

(1,977,000)

370,000

(130,000)

(273,000)

(33,000)

(15,000)

(48,000)


Other comprehensive income

Revaluation gains 250,000

Total comprehensive income 202,000

(b) Aberdeen Ltd Statement of Financial Position as at 31 December 2021

Assets £

Non-current assets

Land                                                                                     1,000,000

Buildings (3500k – 420k –70k)                                            3,010,000

Vehicles (42k– 10k – 8k) 24,000

4,034,000

Current assets

Inventory                                                                                 497,000

Trade receivables (230k-10k- 11k)                                          209,000

Bank (22k +240k) 262,000

968,000

Total assets 5,002,000


Equity and liabilities

Equity

Share capital (550k + 100k (W4))

650,000

Share premium (800k + 140k (W4))

940,000

Revaluation reserve (W5)

250,000

Retained earnings (2,710k – 48k)

2,662,000

Total equity

4,502,000

Non-current liabilities

6% loan

250,000

Current liabilities

Trade payables

235,000

Interest payables

15,000

Total current liabilities

250,000

Total equity and liabilities

5,002,000


Aberdeen Ltd Statement of Changes in Equity for the year ended 31 December 2021


Beg.

Balance

Share

capital/premium

Profit

Revaluation

Total


Ordinary

Shares

550,000

100,000

-


650,000


Revolution

Reserve

-


-


-

250,000

250,000


Share

Premium

800,000

140,000

-


940,000


Retained

earnings

2,710,000


-

(48,000)


2,662,000


Total

4,060,000

240,000

(48,000)

250,000

4,502,000


Workings:


W1:

Cost of Sales

Opening inventory

Purchases

Closing inventory (500k – 23k + 20k)


£

542,000

1,932,000

2,474,000

(497,000)

1,977,000


W2:

Depreciations (£000)

Vehicles: (42,000 – 10,000) x 25% = 8,000

Building: 3,500,000 /50 = 70,000



Distribution Cost

£

Depreciation of buildings

35,000

Depreciation of Vehicles

8,000

Distribution costs

87,000 130,000

W3: Administrative Expenses

£

Provision for doubtful debts

11,000

[5% x (230,000- 10,000)]

Directors’ salary

65,000

Discount allowed

32,000

Bad debt written off

10,000

Depreciation of buildings

35,000

Administrative expenses

120,000 273,000

W4: Rights issue

Number of shares at the beginning of the year: £550,000 share capital / £0.50 = 1,100,000

New shares issued: 1,100,000 x 2 / 11 = 200,000

Share capital: 200,000 x £0.5 = £100,000, share premium: 200,000 x £(1.2 – 0.5) = £140,000 Cash of £240,000 has been raised and needs to be recorded.

W5: revaluation reserve

Increase carrying amount of land on statement of financial position by £250,000 to £1,000,000. Create a revaluation reserve under equity of £250,000, and other comprehensive income £250,000.


Question B1

a) Workings:


W1: Adjustment for depreciation

Depreciation: At 31/12/2018

Less: On disposals


At 31/12/2019

Charge for year


£

7,700,000

(1,180,000)

6,520,000

7,800,000

1,280,000



W2: Adjustment on disposal

Disposals at cost

Less; Accumulated depreciation Net book value

Disposal proceeds

Loss on disposal


W3: Taxation

Opening balance

Charge for year


Less: closing balance

Taxation paid


W4: Trade and other payables

At 31/12/2018

At 31/12/2019

Less:  Interest accrued

Decrease in payables


2,900,000

(160,000)


£

2,400,000

(1,180,000)

1,220,000

1,130,000

90,000


£

2,300,000

1,340,000

3,640,000

(1,640,000)

2,000,000


£

3,100,000



2,740,000

360,000


Bristol plc Statement of Cash Flows for the year ended 31 December 2021


Cash flows from operating activities

Profit before taxation

Adjustments for:

Finance costs

Operating profit

Adjust for

Depreciation (W1)

Loss on sale of equipment (W2)

Increase in inventories

Increase in trade receivables

Decrease in trade payables (W4)


£000


600



1,280

90

(570)

(600)

(360)


£000


2,150


2,750


Cash generated from operations

Interest paid (280 + 320/2)

Taxation paid (W3)

Net cash from operating activities

Cash flow from investing activities

Payments to acquire non-current assets       Receipts from the sale of non-current assets

Net cash used in investing activities

Cash flows from financing activities

Increase in debentures

Increase in share capital (2,300 – 2,000)

Dividends paid

Net cash from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at 1 Jan 2021 (1,000 – 3,000)

Cash and cash equivalents at 31 Dec 2021 (320 – 3,500)


2,590

(440)

(2,000)

150


(6,400)

1,130

(5,270)


4,000

300

(360)

3,940

(1,180)

(2,000)

(3,180)