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ACCOUNTING III
Instructions to candidates:
a) Time allowed: Three
hours (plus an extra ten minutes’ reading time at the start – do not write
anything during this time)
b) Answer ALL questions
in Part A and any ONE question in Part B
c) Part A carries 85% of the marks and Part B carries 15% of the
marks. Marks for each question are shown in [ ]
d) Non-programmable calculators
are permitted in this exam
PART A
1.
The following trial
balance has been extracted from the books of Collumbo Ltd for the year ended 29
February 2016:
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DR
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CR
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£000
|
£000
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|
Bank
|
|
100
|
|
Administration expenses
|
760
|
|
|
Distribution costs
|
600
|
|
|
5% Debentures
|
|
1,000
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|
Interest paid
|
60
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|
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Non-current assets (net)
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1,550
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|
|
Retained earnings (01/03/15)
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|
420
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Purchases
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1,800
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|
|
Sales (all on credit)
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|
4,200
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|
Equity share capital (£1 ords.)
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|
500
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|
Inventory (stock) (01/03/15)
|
200
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|
|
Accounts receivable (debtors)
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1,400
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|
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Accounts payable (creditors)
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|
150
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--------
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---------
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6,370
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6,370
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|
|
=====
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=====
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NOTES at 29 February 2016:
•Stock (inventory) was valued at £220,000
•Corporation tax is estimated to be £210,000
•The directors have declared an ordinary dividend
of 50p per share
•The market price of a single equity (ordinary share) was £19.00
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TASKS
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|
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a)
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Prepare the income statement
(profit and loss account) for the year ended 29 February 2016.
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[3]
|
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b)
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Prepare the position statement
(balance sheet) as at 29 February 2016.
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[5]
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c) Calculate the
following ratios:
i. The gearing
percentage
ii. The operating profit
(PBIT) as a percentage of sales
iii. The EPS
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iv
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The PE ratio
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[4]
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|
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d)
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Comment on the financial
performance of Collumbo Ltd. Mention any weaknesses.
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[8]
|
|
2.
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a)
|
Describe the money
measurement concept and state its limitations.
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[7]
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b) Comment on the view that the prudence concept
results in financial statements that understate
|
Profits thereby understating the value for
capital.
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[8]
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Continued overleaf
2.
You are presented with
the following information from the ABC group of companies for the year to 29
February 2016:
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|
ABC
plc
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Odean
plc
|
Empire
plc
|
|
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£000
|
£000
|
£000
|
|
Tangible fixed assets
|
850
|
500
|
350
|
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Investments:
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|
|
|
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Shares in Odean plc
|
500
|
|
|
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Shares in Empire plc
|
350
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|
|
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Current assets
|
850
|
|
|
|
|
|
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Stocks
|
320
|
230
|
90
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Debtors
|
400
|
200
|
150
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Bank
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20
|
10
|
20
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Current liabilities
|
740
|
440
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260
|
|
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|
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Creditors
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(340)
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(240)
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(110)
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Net current assets
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400
|
200
|
150
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Total net assets
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2,100
|
700
|
500
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Capital and reserves
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=====
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=====
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=====
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Ordinary shares (£1)
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1,500
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500
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