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:

.

(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

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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

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

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Statement of Financial Position as at 30 September 2015

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 30^th 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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