ACFI1301 Financial Accounting
ACFI1301
Financial Accounting
ONLINE ASSESSMENT – OPEN BOOK EXAM
This assessment replaces the end of year examination. It is a pre-seen open book assessment and you may complete it in your own time, at any point up to the submission date.
Please follow all instructions carefully.
- You may either type your answers into a word document or write your answers by hand.
- If you write by hand, please either scan or take photos of your work for submission. These should be saved as a single document for submission.
- Please save the document in the style “ACFIXXXX – Pnumber” e.g. “ACFI1301 – P1234567”
- Submit your document by Turnitin if you have access. If you do not have access, please contact your module leaders cvrobertson@dmu.ac.uk, sheppard@dmu.ac.uk for approval to submit by alternative means. (note that your answer will still be uploaded to Turnitin by your module leader)
- You may submit your answers at any time up to the submission date, but you may not resubmit once your answers have been uploaded.
Submission date and time – Saturday 16th May 2020 12 noon GMT
There are three (3) questions, question 1 and 2 are worth 20 marks each and question 3 is worth 60 marks. Answer ALL questions.
Maximum word count is listed against each question part where applicable. This does not include any calculations.
Question 1
Cushy, a car rental business, has a financial year of 1 January to 31 December 2019.
The company has the following motor vehicles at its Birmingham branch:
| Date Purchased | Cost (each) | Residual Value (each) | |
| 3 x Sub-compact cars | 01 August 2017 | £13,000 | £2,000 |
| 5 x Compact cars | 01 September 2018 | £14,000 | £3,000 |
| 2 x Family cars | 01 February 2019 | £19,000 | £2,500 |
Cushy disposed of all the Sub-compact cars on 31 August 2019 for a total of £24,000.
Cushy replaced these with 4 new Sports cars on 1 September 2019 at a total cost of £98,000 with a total residual value of £26,000.
Cushy operates a 20% reducing balance depreciation policy and depreciation is calculated on a monthly basis.
REQUIREMENTS:
Please show all your workings.
- Calculate the total accumulated depreciation on all the Sub-compact cars that were disposed of on 31 August 2019.
(7 marks)
- Calculate the profit or loss on disposal of the Sub-compact cars by drawing up the disposal account.
(5 marks)
- Calculate the net book value (carrying amount) at 31 December 2019 for each group of cars: the Compact cars, the Family cars and the Sports cars.
(8 marks)
TOTAL 20 MARKS
Question 2
Perfect Pizza Limited is a fast-food delivery restaurant that sells pizza. Provided below are their Statements of Profit or Loss and Statements of Financial Position for the years ended 31 December 2019 and 31 December 2018.
| Statement of Profit or Loss for the year ended 31 December | ||
| 2019 | 2018 | |
| £m | £m | |
| Revenue | 115.0 | 95.0 |
| Cost of sales | 71.0 | 58.0 |
| Gross Profit | 44.0 | 37.0 |
| Distribution costs | 9.0 | 8.0 |
| Administration expenses | 17.0 | 15.0 |
| Operating profit | 18.0 | 14.0 |
| Finance income | 0.5 | 0.4 |
| Finance cost | 0.6 | 0.5 |
| Profit before taxation | 17.9 | 13.9 |
| Taxation | 4.5 | 3.5 |
| Profit for the year | 13.4 | 10.4 |
| Statement of Financial Position as at 31 December | ||
| 2019 | 2018 | |
| £m | £m | |
| Non-current assets: | ||
| Land and buildings | 92.5 | 89.0 |
| Plant and equipment | 26.0 | 25.0 |
| Total non-current assets | 118.5 | 114.0 |
| Current assets: | ||
| Trade receivables | 10.5 | 9.7 |
| Inventories | 4.0 | 2.9 |
| Prepayments | 1.7 | 1.1 |
| Bank and cash | 13.6 | 10.2 |
| Total current assets | 29.8 | 23.9 |
| Total assets | 148.3 | 137.9 |
| Current liabilities: | ||
| Trade payables | 18.1 | 13.4 |
| Financial liabilities | 6.8 | 6.8 |
| Tax liabilities | 2.5 | 2.4 |
| Total current liabilities | 27.4 | 22.6 |
| Non-current liabilities (loans) | 11.0 | 10.5 |
| Net assets | 109.9 | 104.8 |
| Equity | 109.9 | 104.8 |
REQUIRED
- Calculate the Return on Capital Employed for both 2019 and 2018.
(2 marks)
- Calculate the Operating Profit Margin for both 2019 and 2018.
(2 marks)
- Using your answers to (a) and (b) above and any other information you feel appropriate, comment on the profitability of Perfect Pizza Limited in 2019 (maximum word count 80 words)
(4 marks)
- Calculate the Trade Payables Days for both 2019 and 2018.
(2 marks)
- Calculate the Trade Receivables Days for both 2019 and 2018.
(2 marks)
- Calculate the Inventory Days for both 2019 and 2018.
(2 marks)
- Using your answers for part (d) and (e) above and any other information you feel appropriate, comment on how the liquidity of Perfect Pizza Limited has changed.(maximum word count 120 words)
(6 marks)
Show all your workings and give your answers to 2 decimal places.
TOTAL 20 marks
Question 3
The following balances were taken from the books of ABC Ltd as 31 March 2020.
| £ | £ | |
| Ordinary shares of £1 each | 200,000 | |
| 6% debentures | 30,000 | |
| Share premium | 9,500 | |
| Revaluation reserve at 1st April 2019 | 10,000 | |
| General reserve at 1st April 2019 | 2,000 | |
| Retained earnings at 1st April 2019 | 20,676 | |
| Motor vehicles at cost | 210,000 | |
| Accumulated depreciation on motor vehicles at 1st April 2019 | 19,000 | |
| Buildings at cost | 70,000 | |
| Accumulated depreciation on buildings at 1st April 2019 | 50,000 | |
| Land at cost | 82,000 | |
| Inventories at 1st April 2019 | 14,167 | |
| Trade receivables | 11,500 | |
| Trade payables | 10,512 | |
| Allowance for irrecoverable receivables | 324 | |
| Bank | 9,731 | |
| Purchases | 186,000 | |
| Sales revenue | 271,700 | |
| Wages & salaries | 16,362 | |
| General expenses | 5,552 | |
| Directors’ remuneration | 15,500 | |
| Debenture interest | 900 | |
| Ordinary dividend paid | 2,000 | |
| 623,712 | 623,712 |
The following information should also be taken into account:
- The inventory held at 31 March 2020 has been counted and valued at £23,400.
- The balance of trade receivables has been reviewed: One customer is known to have gone out of business and so it has been decided to write off this debt of £500 as irrecoverable. Furthermore, the allowance for irrecoverable receivables is to be adjusted to 5% of the remaining trade receivables balance.
- Depreciation should be provided for at the following rates:
- Motor vehicles: 10% reducing balance
- Buildings: 5% reducing balance
Land is not to be depreciated; the directors have decided to revalue the land at £132,000.
No non-current assets were acquired or disposed of during the year.
- Some debenture interest is outstanding at the end of the year.
- The corporation tax payable on the year’s profits is estimated to be £10,821.
- General expenses include rent of £4,500 for the period 1 October 2019 to 30 June 2020.
- £5,000 is to be transferred from retained earnings into a General reserve.
REQUIREMENTS:
- Prepare a Statement of Profit or Loss (Income Statement) for ABC Ltd for the year ended 31 March 2020 and a Statement of Financial Position (Balance Sheet) at that date.
(45 marks)
- Identify and explain advantages and disadvantages of financial statements such as the Statement of Profit or Loss (Income Statement) and Statement of Financial Position (Balance Sheet).(maximum word count 300 words)
(15 marks)
TOTAL 60 MARKS
TOTAL PAPER 100 MARKS
Show all workings.
Marks will be awarded for layout and workings as well as the prepared accounting information.