The Association of Business Executives

QCF
Financial Accounting
Tuesday 4 June 2013, Morning
1. Time allowed: 3 hours.
2. Read the instructions at the top of each section carefully.
The number of questions you have to answer is marked clearly at the top of each section.
Do not answer more questions than instructed.
3. The number of marks per question may vary. Marks for subdivisions of questions and the
total marks for each question are shown in brackets after the question.
4. No books, dictionaries, notes or any other written materials are allowed in this
examination.
5. Calculators, including scientic calculators, are allowed providing they are not
programmable and cannot store or recall information. Electronic dictionaries and
personal organisers are NOT allowed. All workings must be shown.
6. Note that 1 = 100 pence (p).
7. Candidates who break ABE Examination Regulations, or commit any misconduct, will be
disqualied from the examinations.
8. Question papers must not be removed from the Examination Hall.
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STRUCTURE OF PAPER: Answer ALL THREE sections
SECTION A: Answer ALL FOUR questions Q1
Q2
Q3
Q4
24 marks
17 marks
12 marks
12 marks
SECTION B: Answer ONE question Either Q5 or Q6 20 marks
SECTION C: Answer ONE question Either Q7 or Q8 15 marks
TOTAL MARKS AVAILABLE FOR THE PAPER 100 marks
5FA0613 ABE 2013 M/502/4796
5FA0613 2
This paper consists of THREE SECTIONS.
Follow the instructions at the top of EACH section.
SECTION A
You must answer ALL FOUR questions in this section.
Questions do not carry equal marks; the mark allocation is shown after each question.
Section A is worth 65% of the total marks available for the paper.
Q1 The trial balance for XYZ enterprise as at 31 December 2012 is as follows:
Dr Cr
000 000
Revenue 92,382
Purchases 58,125
Inventory as at 1 January 2012 3,973
Distribution expenses 5,210
Salaries and wages 6,573
Administration expenses 2,110
Interest paid on loan 225
Property at valuation 72,000
Property accumulated depreciation as at 1 January 2012 7,110
Plant and equipment at cost 10,170
Plant and equipment accumulated depreciation as at 1 January 2012 2,975
Motor vehicles at cost 1,110
Motor vehicles accumulated depreciation as at 1 January 2012 230
Trade receivables 4,780
Trade payables 3,620
Cash 391
Ordinary issued 1 shares 30,000
Dividends paid for the year 3,000
Bank 10,000
Revaluation reserve as at 1 January 2012 15,000
Retained earnings as at 1 January 2012 2,350
Share premium 9,000
3% loan redeemable 2020 15,000
177,667 177,667
(Note that gures in the above table are in 000s - thousands)
The following notes are applicable:
1. Tax charge for the year ended 31 December 2012 is estimated at 8,500,000.
2. Loan interest has only been paid for the rst 6 months of the year ended 31 December
2012.
3. An item of plant had been sold during the year for 75,000. Entries made for the sale
were to debit bank and credit revenue. The item of plant sold had originally been
bought for 150,000 and accumulated depreciation as at 1 January 2012 was 60,000.
4. Depreciation for the year 31 December 2012 is to be calculated as follows:

Property 2% on valuation

Plant and equipment 20% per annum straight line assuming no residual value

Motor vehicles 25% per annum reducing balance.

5. Inventory as at 31 December 2012 was valued at 4,112,000.
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Required:
(a) Prepare the Statement of Comprehensive Income (Prot and Loss Account) for the
year ended 31 December 2012 for XYZ enterprise in accordance with International
Accounting Standards. (13 marks)
(b) Prepare the Statement of Financial Position (Balance Sheet) as at 31 December 2012
for XYZ enterprise in accordance with International Accounting Standards. (11 marks)
(Total 24 marks)
Q2 The following information is available in respect of two enterprises A and B in the same
business sector for the year ended 31 December 2012:
A B
000 000
Sales 37,200 44,000
Cost of sales 20,460 28,600
Operating prot before interest 5,440 3,280
Share capital 4,000 8,000
Retained prots including for the current year 9,440 6,680
Inventory 3,600 5,280
Long term liabilities 2,000 6,000
Current assets including inventory 8,080 10,216
Current liabilities 4,280 7,056
(Note that gures in the above table are in 000s - thousands)
Required:
(a) Calculate the following ratios for A and B as at 31 December 2012:
(i) Gross prot percentage
(ii) Current ratio
(iii) Acid test ratio (Quick ratio)
(iv) Return on Capital Employed
(v) Operating prot percentage
(vi) Sales to Capital Employed
(12 marks)
(b) Comment on the performance of both A and B for the year ended 31 December 2012.
(5 marks)
(Total 17 marks)
5FA0613 4
Q3 Choose any two of the following International Accounting standards and for each standard,
explain the accounting requirements:

IAS 2 Inventories

IAS 10 Events after the reporting period

IAS 23 Borrowing costs

IAS 24 Related party disclosures

IAS 38 Intangible assets (12 marks)

Q4 Explain the differences between internal audit and external audit within a business.
(12 marks)
END OF SECTION A
MAXIMUM MARKS FOR SECTION A: 65
BLANK PAGE
5FA0613 5 [Turn over
BLANK PAGE
Turn over to Sections B and C
5FA0613 6
SECTION B
You must answer ONE question in this section. DO NOT answer BOTH Q5 AND Q6.
Each question carries 20 marks.
Section B is worth 20% of the total marks available for the paper.
EITHER:
Q5 P enterprise acquired a 65% share in Q enterprise on 1 January 2009. Q has not issued any
additional share capital since the acquisition by P. The draft Statements of Financial Position
(Balance Sheets) for P and Q as at 31 December 2012 are as follows:
P Q
000 000
ASSETS
Non-current assets
Intangible assets 270 56
Tangible assets 10,630 3,980
Investment in Q 2,680
13,580 4,036
Current assets
Inventory 920 103
Trade receivables 545 176
Bank 72 10
1,537 289
TOTAL ASSETS
15,117 4,325
EQUITY AND LIABILITIES
Equity
Ordinary shares 50p 6,790
Ordinary shares 1 3,100
Share premium 850 80
Retained earnings 1,230 130
8,870 3,310
Non-current liabilities
Debentures 4,500 750
Current liabilities 1,747 265
TOTAL EQUITY AND LIABILITIES 15,117 4,325
(Note that gures in the above table are in 000s - thousands)
The following information is also available:
1. The fair value of the tangible assets of Q at the date of acquisition was 4,300,000.
This fair value has not been entered in Qs statement above. All other assets and
liabilities of Q were equal to book value at the acquisition date.
2. The retained earnings of Q at the acquisition date were 90,000.
Required:
Prepare the Consolidated Statement of Financial Position for the P group as at
31 December 2012. (20 marks)
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OR:
Q6 IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements
describe the accounting requirements when one business acquires another. Explain each of
the following terms as used in the standards:
(i) Goodwill on consolidation (5 marks)
(ii) Non-controlling interest (5 marks)
(iii) Unrealised group prots (5 marks)
(iv) Control (5 marks)
(Total 20 marks)
END OF SECTION B
MAXIMUM MARKS FOR SECTION B: 20
Turn over to Section C
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SECTION C
You must answer ONE question in this section. DO NOT answer BOTH Q7 AND Q8.
Each question carries 15 marks.
Section C is worth 15% of the total marks available for the paper.
EITHER:
Q7 Explain the advantages and disadvantages of each of the following short term sources of
nance available to a business:

(i) Debt factoring (5 marks)
(ii) Bank overdraft (5 marks)
(iii) Bank loans (5 marks)
(Total 15 marks)
OR:
Q8 Explain the term gearing as used in business, using examples to support your answer.
(15 marks)
END OF SECTION C
MAXIMUM MARKS FOR SECTION C: 15
TOTAL MAXIMUM MARKS: 100
END OF QUESTION PAPER