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Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with

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Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with International Accounting Standards (IASs)

Task 1: Understand the regulatory framework for financial reporting (LO 1: 1.1, 1.2, 1.3, 1.4 ) – Due Week 5

 

1.1.        Explain who the different users of financial statements are; their need

 

1.2.        Write a report as how regulatory bodies like (ASBs, IASB, IASC and IPSAS) influences on the preparation of financial statements. Students are required to mention companies act, stock exchange rules, and EU directives.

 

1.3.        Assess the implication for users in the conceptual framework.

 

1.4.        Explain  reporting  standards  are  dealing  with  regulatory  requirements.  Students  are  required to

 

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explain qualitative characteristics, underlying assumptions and capital maintenance concept in the light of these regulations.

 

 

 

Task 2: Be able to prepare financial statements from complete or incomplete records (LO 2: 2.1, 2.2, 2.3 and M1, M2) – Due Week 10

 

2.1.            The trial balance for Tor enterprise as at 30 September 2015 is as follows:

 

 

£000

£000

Revenue

 

72,900

 

 

 

Purchases

31,220

 

Inventory 1 October 2014

6,650

 

Distribution costs

3,240

 

Administration costs

7,480

 

 

 

 

Land at valuation (note (iv))

32,000

 

Property at cost (note (iii))

42,000

 

Property accumulated

 

7,410

depreciation as at 1

 

 

October 2014

 

 

Plant and equipment at cost

56,260

 

(note (iii))

 

 

Plant and equipment

 

10,920

accumulated depreciation

 

 

as at 1 October 2014

 

 

Trade receivables

18,740

 

Trade payables

 

9,860

Bank

14,060

 

Ordinary issued 50p shares

 

65,000

Share premium account

 

15,000

Revaluation reserve as at 1

 

11,500

October 2014

 

 

Retained earnings as at 1

 

11,560

October 2014

 

 

8% loan redeemable 2112

 

7,500

(note (ii))

 

 

 

211,650

211,650

 

 

 

 

 

 

.

 

(Note that figures in the above table are in £000s - thousands)

 

The following notes are applicable:

 

(i) Inventory as at 31 September 2015 amounted to £6,240,000 at cost. A review of inventory revealed the following:

 

(a) Items costing £320,000 that had been included in the inventory at 30 September

 

2015 were found to have deteriorated, after remedial work of £80,000, these items could only be sold for £360,000.

 

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(ii)  The interest on the loan has not been paid for the year ended 30 September 2015 and must be accrued.

 

(iii)  Depreciation is to be calculated for the year ended 31 December 2014 as follows:

(a)  Property 2% per annum on cost

 

(b)  Plant and equipment 15% per annum on cost

 

(iv) Land is to be revalued to £40,000,000 as at 30 September 2015.

 

(v) Tax for the year ended 31 December 2014 is chargeable at 20% of profits for the year before receiving or paying dividends.

 

(vi) Adjustments for accruals and prepayments are required as follows:

Accruals                        Prepayments

 

Distribution costs                                         £26,000

 

Administration costs                                                                              £22,000

 

Required:

 

Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with International Accounting Standards (IASs)

 

 

Task 2.2

 

Sajid is running Corner shop due to the fire in the office some of the accounting records has been burned you are required to prepare the income statement and balance sheet from given information for the year ended 31-12-2014

 

The balance sheet of Sajid’s a trader, on 1 January 2014 was as follows:

 

BALANCE SHEET AS AT 01 JAN 2014

 

Assets

£

Non-Current Assets

 

Property Plant and Equipment

126,000

Current assets

 

Closing Stock

10,360

Trade receivables

21,360

Bank

13,690

 

171,410

Equity & Liabilities

 

Capital

150,000

 

 

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Current liabilities

 

Trade Payables

21,410

 

 

171,410

     

 

Sajid pays all his takings into his bank account and draws cheque for all business payments. The following transactions incurred during the year 2014:

 

RECEIPTS AND PAYMENTS

 

 

£

Salaries and wages paid

6,532

Repair and maintenance

4,560

General Expenses paid

4,361

Receipts from Trade receivables

130,130

Payment to Trade payables

124,356

 

 

 

 

Additional information:

 

Closing Balances

 

At December 2014 trade receivables amounted £ 45,650 and trade payables amounted to £ 13,654. Closing stock is valued at £ 4,560.

 

There are no transactions other than those which can be ascertained from the information given above.

 

Depreciation on Property, plant and equipment is to be charged at the rate of 10% per annum on the value at 01 January each year.

 

Required: Prepare the Income Statement and Balance sheet for the year ended 31-12-2014 according to format explained in the class.

 

 

2.3  On 1st October 2014, Parent enterprise acquired 80% of Subsidiary enterprise’s ordinary shares paying £3.20 per share. At the date of acquisition, the retained earnings of Sabine were £600,000. The draft Income statement and Statement of Financial Position of the two enterprises as at 30th September 2015 were as follows:

 

Income Statement for the year ended 30 September 2015

 

 

 

Parent

Subsidiary

 

 

 

£000

£000

 

 

Revenue

92,500

45,000

 

 

Cost of Sales

70,500

36,000

 

 

 

 

 

 

 

Gross Profit

22,000

9,000

 

 

Distribution Cost

2,500

1,200

 

 

Administrative Expenses

5,500

2,400

 

 

Finance Cost

1,000

 

 

 

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Profit before Tax

13,900

5,400

 

 

Income Tax Expense

3,900

1,500

 

 

 

 

 

 

 

Profit for the Year

10,000

3900

 

 

 

Statement of Financial Position as at 30 September 2015

 

 

Parent

Subsidiary

Assets

£000

£000

Non-current assets

 

 

Land

5,500

3,900

Plant and equipment

20,000

10,000

Investment in Subsidiary

12,800

 

38,300

13,900

Current assets:

 

 

 

 

 

Inventory

4,925

1,295

Trade receivables (debtors)

5,710

1,105

Cash

1,865

 

 

 

Total assets

50,800

16,300

 

 

 

Equity and liabilities

 

 

Equity:

 

 

 

 

 

Ordinary shares £1

13,000

5,000

Revaluation reserve

2,500

-

Retained Earnings

12,300

4,500

 

27,800

9,500

Non-current liabilities:

 

 

 

 

 

10% loans

13,000

-

Current liabilities:

 

 

Trade payables (creditors)

7,000

5,000

Bank overdraft

875

Tax

3,000

925

Total equity and liabilities

50,800

16,300

 

 

 

 

The following information is also relevant:

 

  1. The fair value of Subsidiary’s land at the date of acquisition was £1.2million, in excess of the carrying values. Subsidiary’s Statement of Financial Position has not taken account of these fair values. Group depreciation policy is land not depreciated.

 

  1. An impairment review has been carried out on the consolidated goodwill as at 30th September 2015 and it has been found that the goodwill has been impaired by £1,000,000 during the year.

 

Required

 

Prepare the Consolidated Income statement and Statement of Financial Position of the Parent group as at 30th September 2015.

 

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For M1: An effective approach of study is required to solve the complex problem (Task 2.1)

 

For M2: Appropriate learning methods/technique should have to apply (Task 2.3)

 

NOTE: 2.2 will be assessed by a time constraint assessment in the class. Student will be required to prepare the financial statements from incomplete records.

 

Task 3: Be able to present financial information in accepted formats for publication (LO 3: 3.1, 3.2 and M3

& D2) – Due Week 14

 

3.1.            Identify the different users of financial statements and analyse the fact that every user groups have different information need which need to be served by the financial reporting.

 

3.2.            Students are required to prepare the financial statements for sole traders, partnerships and limited companies. Student should also highlight the difference between financial statements in a separate paragraph for different business organisations.

 

 

For D2: Autonomy / Independence should be presented (Task 3.1)

 

For M3: Appropriate structure and approach should have been used (Task 3.2)

 

Task 4: Be able to interpret financial statements (LO 4: 4.1, 4.2 and D1, D3) - Due 5th Jan 2015

 

Alpha Ltd is a construction firm and Beta Ltd is a property company which specialises in letting property to professional firms. The following information is relevant:

 

 

 

Alpha Ltd £

Beta Ltd £

 

£1 ordinary shares

600,000

150,000

 

£1 preference shares (10%)

15,000

450,000

 

Retained profits

600,000

75,000

 

8% debentures

75,000

450,000

 

Operating profit for the year

300,000

300,000

 

Current market price per

£3.65

£10.20

 

ordinary share

 

 

The rate of corporation tax is 25%

 

 

Required:

 

 

4.1:

 

 

 

 

(a)  (i) What do you understand by the term gearing?

(ii)  Calculate the gearing ratios for both Alpha Ltd and Beta Ltd.

 

(b)  Prepare a schedule for each company in which you indicate the profit remaining after allowing for debenture interest, taxation and the preference dividend.

 

(c)  Calculate the earnings per share for each company.

 

 

(d)  Calculate the price earnings ratio for each company. 


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  • Title: Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with International Accounting Standards (IASs)
  • Price: £ 79
  • Post Date: 2018-11-10T11:45:30+00:00
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Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with International Accounting Standards (IASs) Prepare the Income Statement for the year ended 31 December 2014 and the Balance Sheet as at that date for Tor in accordance with International Accounting Standards (IASs)
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