in italy a company that does not report under ifrss must still present treasury shar 611489

Aug 29, 2021 | Uncategorized

In Italy, a company that does not report under IFRSs must still present treasury shares as assets. In addition, a purchase of own shares requires a transfer from reserves to an distributable “treasury stock” reserve within equity. Once treasury shares are resold or retired, such a reserve becomes free to the extent of the excess of purchase value over par value per share, and is reversed to the equity reserves from which it was originally sourced. On first-time adoption of IFRSs, such companies have to reclassify treasury stock from asset to equity and to reverse the treasury stock reserve to the equity reserves from which it was originally sourced or to the beginning balance of retained earnings in the opening IFRS statement of financial position.

most of the debate on pension accounting is related to alternative recognition metho 611508

Aug 29, 2021 | Uncategorized

Most of the debate on pension accounting is related to alternative recognition methods. Deferred recognition is the accounting model for pensions under pre-2011 IAS 19. The pre-2007 version of IAS 19 adopted an election of immediate recognition in income directly in equity, as opposed to net income. Pre-2011 IAS 19 uses a model that recognizes certain gains and losses in other comprehensive income but with immediate transfer to retained earnings. IAS 19 (2011) goes to immediate recognition in profit or loss but recognition of the measurement component in other comprehensive income with no subsequent recycling. Topic 715 (FASB Statement No. 158) continues the past practice of delaying recognition of actuarial gains and losses as a component of net periodic benefit cost but recognizes the entire funded status of a plan in other comprehensive income.

a french foreign private issuer replied to the sec staff 611511

Aug 29, 2021 | Uncategorized

A French foreign private issuer replied to the SEC Staff, in the context of the review of Form 20-F for the fiscal year ended December 31, 2005 containing financial statements prepared for the first time on the basis of IFRSs. The company applied the treatment under FASB Statement No. 130 (based on which prior period adjustments that would affect other comprehensive income must not be displayed in comprehensive income for the period as they recast the comprehensive income of prior periods) to the IFRS financial report. At the time of these letters, the 2007 Revision of IAS 1 was not yet issued.

for example on initial recognition a temporary difference may exist if the tax basis 611519

Aug 29, 2021 | Uncategorized

For example, on initial recognition a temporary difference may exist if the tax basis of the convertible debt includes the entire amount of the instrument, while split accounting requires the recognition of both a liability and an equity component. An entity must recognize a deferred tax liability at the time of the transaction because the initial recognition of the instrument affects taxable profit or loss and therefore the transaction does not fall within the IAS 12 exception for recognition of deferred taxation on initial recognition of an asset or liability. From the perspective of the income statement, the deferred tax liability at the end of each period corresponds to the aggregate income tax deduction on the difference between the nominal interest expense and the imputed interest expense for the remaining life of the instrument.

the exemption has been applied to refinery assets located in eastern canada and cert 611663

Aug 29, 2021 | Uncategorized

Suncor Energy Inc (2011)

Notes to the consolidated financial statements [extract]

Note 6. First-Time Adoption of IFRS [extract]

Explanation of Significant Adjustments [extract]

(9) Fair Value as Deemed Cost [extract]

The company has applied the IFRS 1 election to record certain assets of property, plant and equipment at fair value on the Transition Date. The exemption has been applied to refinery assets located in Eastern Canada and certain natural gas assets in Western Canada. When estimating fair value, market information for similar assets was used, and where market information was not available, management relied on internally generated cash flow models using discount rates specific to the asset and long-term forecasts of commodity prices and refining margins. The aggregate of these fair values was $1.370 billion, resulting in a reduction of the carrying amount of property, plant and equipment as at January 1, 2010. Under Previous GAAP, impairment losses were recorded in the third quarter of 2010 for certain of these natural gas properties. There were no impairment losses recognized during 2010 under IFRS, as these properties were adjusted to fair value at the Transition Date. The impacts on the financial statements were as follows:

finally a first time adopter that applies the deemed cost exemption for oil and gas 611665

Aug 29, 2021 | Uncategorized

Deemed cost of property, plant and equipment

Entity A used to revalue items of property, plant and equipment to fair value under its previous GAAP, but changed its accounting policy on 1 January 2006 when it adopted a different accounting policy. Under that accounting policy, Entity A did not depreciate the asset and only recognized the maintenance costs as an expense. Entity A”s date of transition to IFRSs is 1 January 2012.

In its balance sheet under previous GAAP the carrying amount of the asset is £80 at the date of transition to IFRSs, which is equal to the last revaluation. Entity A can use the last revalued amount as the deemed cost of the asset on 1 January 2006. However, Entity A will need to apply IAS 16 to the period after 1 January 2006 because the accounting policy under its previous GAAP is not permitted under IFRSs. Assuming that the economic life of the asset is 40 years and that the residual value is nil, Entity A would account for the asset at £68 in its opening IFRS statement of financial position, which represents the deemed cost minus 6 years of depreciation.

C Summary

At its date of transition to IFRSs, a first-time adopter is allowed under IFRS 1 to measure each item of property, plant and equipment, investment properties and intangible assets at an amount based on:

• historical cost determined in accordance with IAS 16, IAS 38 and IAS 40;
• fair value at the date of transition to IFRSs;
• a previous GAAP revaluation amount that is equal to:
• fair value at the date of revaluation;
• cost adjusted for changes in a general or specific index; or
• an event-driven fair value, for example, at the date of an initial public offering or privatization.
• in the case of an item acquired in a business combination:
• carrying amount under previous GAAP immediately after acquisition; or
• if the item was not recognised under previous GAAP, the carrying amount on the basis that IFRSs would require in the separate balance sheet of the acquiree.
• in the case of oil and gas assets at deemed cost ;or
• in the case of assets used or previously used in operations subject to rate regulation .

The fact that IFRS 1 offers so many different bases for measurement does not disturb the IASB as it reasons that ‘cost is generally equivalent to fair value at the date of acquisition. Therefore, the use of fair value as the deemed cost of an asset means that an entity will report the same cost data as if it had acquired an asset with the same remaining service potential at the date of transition to IFRSs. If there is any lack of comparability, it arises from the aggregation of costs incurred at different dates, rather than from the targeted use of fair value as deemed cost for some assets. The Board regarded this approach as justified to solve the unique problem of introducing IFRSs in a cost-effective way without damaging transparency. [IFRS 1.BC43]. Although this is valid, it still means that an individual first-time adopter can greatly influence its future reported performance by carefully selecting a first-time adoption policy for the valuation of its assets. Users of the financial statements of a first-time adopter should therefore be mindful that historical trends under the previous GAAP might no longer be present in an entity”s IFRS financial statements.

5.5.2 Event-driven fair value measurement as deemed cost

A first-time adopter may use fair value measurements that arose from an event such as a privatisation or initial public offering as deemed cost for IFRSs at the date of that measurement. [IFRS 1 Appendix D8].

IFRS 1 describes these revaluations as ‘deemed cost in accordance with previous GAAP. Therefore, to the extent that they related to an event that occurred prior to its date of transition or during the comparative period presented under IFRS, they can only be used as the basis for deemed cost if they were recognised in the first-time adopter”s previous GAAP financial statements. See below for an extension of the scope of this deemed cost exemption to events that occurred subsequent to the first-time adopter”s date of transition to IFRSs but during the period covered by the first IFRS financial statements.

The ‘fair value or revaluation as deemed cost exemption discussed at above, only applies to items of property, plant and equipment, investment property and certain intangible assets. [IFRS 1 Appendix D5-7]. The event-driven deemed cost exemption is broader in scope because it states when a first-time adopter ‘established a deemed cost in accordance with previous GAAP for some or all of its assets and liabilities [emphasis added] by measuring them at their fair value at one particular date … It may use such event-driven fair value measurements as deemed cost for IFRSs at the date of that measurement. [IFRS 1 Appendix D8, IFRS 1.BC46].

There are two important limitations in the scope of this exemption:

• While it applies, in principle, to all assets and liabilities of an entity, it does not override the recognition criteria in IFRSs. [IFRS 1.10]. Consequently, a first-time adopter should derecognise goodwill, assets (e.g. certain intangible assets such as brand names and research) and liabilities that do not qualify for recognition under IFRSs in the balance sheet of the entity; and
• The exemption cannot be used if the event-driven revaluation did not result in a remeasurement to full fair value (i.e. it cannot be used in the case of a partial step-up towards fair value).

Finally, although a first-time adopter may use the event-driven fair value measurements as deemed cost for any asset or liability, it does not have to use them for all assets and liabilities. [IFRS 1 Appendix D8].

A ‘Push down accounting

Under some previous GAAPs an entity may have prepared its financial statements using ‘push down accounting, that is, the carrying amount of its assets and liabilities is based on their fair value at the date it became a subsidiary of its parent. If such a subsidiary subsequently adopts IFRSs, it will often require a very significant effort to determine the carrying amount of those assets and liabilities on a historical costs basis at the date of transition.

The event-driven deemed cost exemption applies to events ‘such as a privatisation or initial public offering. [IFRS 1 Appendix D8]. This list of events is clearly not meant to be exhaustive, but rather describes events that result in re-measurement of some or all assets and liabilities at their fair value. An acquisition that results in an entity becoming a subsidiary is a change of control event similar to a privatisation or an initial public offering. In our view, the application of ‘push down accounting results in event-driven fair value measurements that may be used as deemed cost for IFRSs at the date of that measurement.

The exemption can only be used if ‘push down accounting resulted in recognising assets and liabilities at their fair value. For example, previous GAAP may not have required remeasurement to full fair value in the case of a partial acquisition or a step-acquisition, or if there was a bargain purchase that was allocated, for example, to reduce the fair values of long-lived assets.

B ‘Fresh start accounting

Some previous GAAPs require an entity that emerges from bankruptcy to apply ‘fresh start accounting, which involves recognition of assets and liabilities at their fair value at that date.

In our view, the application of ‘fresh start accounting results in an event-driven fair value measurement that may be used as deemed cost for IFRSs at the date of that measurement. [IFRS 1 Appendix D8]. The use of the exemption is limited to instances that resulted in the recognition of the related assets and liabilities at their full fair value (i.e. it cannot be used in the case of a partial step-up towards fair value).

Exemption for event-driven revaluations after the date of transition

The event-driven exemption includes events whose measurement date is after the date of transition to IFRSs but during the periods covered by the first IFRS financial statements. The ‘event-driven fair value measurements may be used as deemed cost when the event occurs. An entity shall recognise the resulting adjustments directly in retained earnings (or if appropriate, another category of equity) at the measurement date. [IFRS 1 Appendix D8(b)].

The Board explicitly considered whether or not to allow a first-time adopter that uses a revaluation subsequent to the date of transition to ‘work back the deemed cost on the date of transition to IFRSs using the revaluation amounts subsequently obtained on the date of measurement, adjusted to exclude any depreciation, amortisation or impairment between the date of transition to IFRSs and the date of that measurement. [IFRS 1.BC46B]. The Board rejected this approach ‘because making such adjustment would require hindsight and the computed carrying amounts on the date of transition to IFRSs would be neither the historical costs of the revalued assets nor their fair values on that date. [IFRS 1 Appendix D8B, BC46B]. This restriction seems to limit the usefulness of the exemption for first time adopters; however, it should provide relief from the need to keep two sets of books subsequent to the event.

5.5.3 Deemed cost for oil and gas assets

It is common practice in some countries to account for exploration and development costs for properties in development or production in cost centres that include all properties in a large geographical area, e.g. under the ‘full cost accounting method. However, this method of accounting generally uses a unit of account that is much larger than is acceptable under IFRSs. Applying IFRSs fully retrospectively would pose significant problems for first-time adopters because it would also require amortisation ‘to be calculated (on a unit of production basis) for each year, using a reserves base that has changed over time because of changes in factors such as geological understanding and prices for oil and gas. In many cases, particularly for older assets, this information may not be available. [IFRS 1.BC47A]. Even when such information is available the effort and cost to determine the opening balances at the date of transition would usually be very high.

For these entities, use of the fair value or revaluation as deemed cost exemption , however, was not considered to be suitable because: [IFRS 1.BC47B]

‘…Determining the fair value of oil and gas assets is a complex process that begins with the difficult task of estimating the volume of reserves and resources. When the fair value amounts must be audited, determining significant inputs to the estimates generally requires the use of qualified external experts. For entities with many oil and gas assets, the use of this fair value as deemed cost alternative would not meet the Board”s stated intention of avoiding excessive cost …

The IASB, therefore, decided to grant an exemption for first-time adopters that accounted under their previous GAAP for ‘exploration and development costs for oil and gas properties in the development or production phases … in cost centres that include all properties in a large geographical area. [IFRS 1 Appendix D8A]. Under the exemption, a first-time adopter may elect to measure oil and gas assets at the date of transition to IFRSs on the following basis: [IFRS 1 Appendix D8A]

(a) exploration and evaluation assets at the amount determined under the entity”s previous GAAP; and

(b) assets in the development or production phases at the amount determined for the cost centre under the entity”s previous GAAP. This amount should be allocated to the cost centre”s underlying assets pro rata using reserve volumes or reserve values as of that date.

For this purpose, oil and gas assets comprise only those assets used in the exploration, evaluation, development or production of oil and gas.

A first-time adopter that uses the exemption under (b) should disclose that fact and the basis on which carrying amounts determined under previous GAAP were allocated. [IFRS 1.31A].

To avoid the use of deemed costs resulting in an oil and gas asset being measured at more than its recoverable amount, the Board also decided that oil and gas assets that were valued using this exemption should be tested for impairment at the date of transition to IFRSs as follows: [IFRS 1 Appendix D8A]

• exploration and evaluation assets should be tested for impairment under IFRS 6; and
• assets in the development and production phases should be tested for impairment under IAS 36.

The deemed cost amounts should be reduced to take account of any impairment charge.

Finally, a first-time adopter that applies the deemed cost exemption for oil and gas assets should also apply the IFRIC 1 – Changes in Existing Decommissioning, Restoration and Similar Liabilities – exemption for oil and gas assets at deemed cost.

the company elected under ifrs 1 to deem the canadian gaap carrying value of its oil 611667

Aug 29, 2021 | Uncategorized

Zargon Oil & Gas Ltd. (2011)

Notes to Consolidated Financial Statements [extract]

27 Reconciliation of Transition from Canadian GAAP to IFRS [extract]

Explanatory notes [extract]

(b) The Company elected under IFRS 1 to deem the Canadian GAAP carrying value of its oil and gas assets accounted for under the full cost method as at January 1, 2010 as their deemed cost under IFRS as at that date. As such, the Canadian GAAP full cost pool was reallocated upon transition to IFRS and the 2010 comparatives were restated to reflect the new IFRS accounting policies as follows:

i. In accordance with IAS 16, IAS 38 and IFRS 6 on January 1, 2010 the Company reallocated costs of $24.37 million relating to unproved properties from property, plant and equipment to exploration and evaluation assets.

ii. Under Canadian GAAP, all costs incurred prior to having obtained licence rights and lease expiries were included within property, plant and equipment. Under IFRS, such expenditures are expensed as incurred. There was no impact on adoption of IFRS due to the full cost as deemed cost exemption. However, the comparative 2010 balances were restated at December 31, 2010 resulting in a reduction in property, plant and equipment and retained earnings of $2.81 million, and an increase in exploration and evaluation expenses for the year of the same amounts.

iii. The remaining full cost pool was allocated to the developed and producing assets pro rata using reserve values.

iv. Under IFRS, impairment tests must be performed at a more lower reporting level than was required under Canadian GAAP. The Canadian GAAP “ceiling test” incorporated a 2-step approach for testing impairment, while IFRS uses a 1-step approach. Under Canadian GAAP, a discounted cash flow analysis was not required if the undiscounted cash flows from proved reserves exceeded the carrying amount (step 1). If the carrying amount exceeded the undiscounted future cash flows, then a prescribed discounted cash flow test was performed (step 2). Under IFRS, impairment testing is based on discounted cash flows and is calculated at the CGU level. Impairment tests are required to be performed at the transition date, and as at January 1, 2010 no impairment was identified. At December 31, 2010 an impairment test was performed and four of the Company”s CGUs were found to have impairment.

entities that hold items of property plant and equipment or intangible assets that a 611668

Aug 29, 2021 | Uncategorized

Deemed cost for assets used in operations subject to rate regulation

Entities that hold items of property, plant and equipment or intangible assets that are used, or were previously used, in operations subject to rate regulation might have capitalised, as part of the carrying amount, amounts that do not qualify for capitalisation in accordance with IFRSs. For example, when setting rates, regulators often permit entities to capitalise, an allowance for the cost of financing the asset”s acquisition, construction or production. This allowance typically includes an imputed cost of equity. IFRSs do not permit an entity to capitalise an imputed cost of equity. [IFRS 1.BC47F]. The IASB decided to permit a first-time adopter with operations subject to rate regulations to elect to use the previous GAAP carrying amount of such an item at the date of transition to IFRSs as deemed cost. [IFRS 1 Appendix D8B]. In the Board”s view, this exemption is consistent with other exemptions in IFRS 1 in that it ‘avoids excessive cost while meeting the objectives of the IFRS. [IFRS 1.BC47I].

Operations are subject to rate regulation if they provide goods or services to customers at prices (i.e. rates) established by an authorised body empowered to establish rates that bind the customers and that are designed to recover the specific costs the entity incurs in providing the regulated goods or services and to earn a specified return. The specified return could be a minimum or range and need not be a fixed or guaranteed return. [IFRS 1 Appendix D8B].

Without this exemption, a first-time adopter with operations subject to rate regulations would have had either to restate those items retrospectively to remove the non-qualifying amounts, or to use fair value as deemed cost both alternatives, the Board reasoned, pose significant practical challenges and the cost of which can outweigh the benefits. [IFRS 1.BC47G]. Typically, once amounts are included in the total cost of an item of property, plant and equipment, they are no longer tracked separately. Therefore, their removal would require historical information that, given the age of some of the assets involved, is probably no longer available and would be difficult to estimate. For many of these assets, it may be impractical to use the fair value exemption as such information may not be readily available.

therefore a first time adopter is required to classify leases as operating or financ 611670

Aug 29, 2021 | Uncategorized

IFRS 1 does not include any specific exemption from the retrospective application of IAS 17 Leases and SIC-15 Operating Leases Incentives. Therefore, a first-time adopter is required to classify leases as operating or finance leases under IAS 17 based on the circumstances existing at the inception of the lease and not those existing at the date of transition to IFRSs. [IFRS 1.IG14]. However, if ‘at any time the lessee and the lessor agree to change the provisions of the lease, other than by renewing the lease, in a manner that would have resulted in a different classification of the lease … if the changed terms had been in effect at the inception of the lease, the revised agreement is regarded as a new agreement over its term. [IAS 17.13]. In other words, an entity classifies a lease based on the lease terms that are in force at its date of transition to IFRSs; the lease classification is not based on lease terms that are no longer in force.

determining whether an arrangement contains a lease contains specific transitional p 611671

Aug 29, 2021 | Uncategorized

Determining whether an Arrangement contains a Lease – contains specific transitional provisions for existing IFRS-reporting entities that address the practical difficulties of going back potentially many years and making a meaningful assessment of whether the arrangement satisfied the criteria at that time. First-time adopters may apply the same transitional provisions, which allow them to apply IFRIC 4 to arrangements existing at their date of transition on the basis of facts and circumstances existing at that date. [IFRS 1 Appendix D9]. The example below based on the implementation guidance in IFRS 1 illustrates this exemption. [IFRS 1 IG Example 202].

entity a presents its consolidated first ifrs financial statements in 2008 its forei 611673

Aug 29, 2021 | Uncategorized

Parent adopts IFRSs before subsidiary

Entity A presents its (consolidated) first IFRS financial statements in 2008. Its foreign subsidiary B, wholly owned by Entity A since formation, prepares information under IFRSs for internal consolidation purposes from that date, but Subsidiary B will not present its first IFRS financial statements until 2013.

If Subsidiary B applies option (a), the carrying amounts of its assets and liabilities are the same in both its opening IFRS statement of financial position at 1 January 2012 and Entity A”s consolidated balance sheet (except for adjustments for consolidation procedures) and are based on Entity A”s date of transition.

Alternatively, Subsidiary B may apply option (b) and measure all its assets or liabilities based on its own date of transition to IFRSs (1 January 2012). However, the fact that Subsidiary B becomes a first-time adopter in 2013 does not change the carrying amounts of its assets and liabilities in Entity A”s consolidated financial statements.

Under option (b) a subsidiary would prepare its own IFRS financial statements, completely ignoring the IFRS reports that its parent uses in preparing its consolidated financial statements.

Under option (a) the numbers in a subsidiary”s IFRS financial statements will be as close to those used by its parent as possible. However, differences other than those arising from business combinations will still exist in many cases, for example:

• a subsidiary may have hedged an exposure by entering into a transaction with a fellow subsidiary. Such transaction could qualify for hedge accounting in the subsidiary”s own financial statements but not in the parent”s consolidated financial statements; or
• a pension plan may have to be classified as a defined contribution plan from the subsidiary”s point of view, but is accounted for as a defined benefit plan in the parent”s consolidated financial statements.

The IASB seems content with the fact that the exemption will ease some practical problems, [IFRS 1.BC62], though it will rarely succeed in achieving more than a moderate reduction of the number of reconciling differences between a subsidiary”s own reporting and the numbers used by its parent.

More importantly, the choice of option (a) prevents the subsidiary from electing to apply all the other voluntary exemptions offered by IFRS 1, since the parent had already made the choices for the group at its date of adoption. Therefore, option (a) may not be appropriate for a subsidiary that prefers to use a different exemption (i.e. fair value as deemed cost) for property, plant and equipment due, for example, to a tax reporting advantage. Also, application of option (a) would be more difficult when a parent and its subsidiary have different financial years. In that case, IFRS 1 would seem to require the IFRS information for the subsidiary to be based on the parent”s date of transition to IFRSs, which may not even coincide with an interim reporting date of the subsidiary; the same applies to any joint venture or associate.

A subsidiary may become a first-time adopter later than its parent, because it previously prepared a reporting package under IFRSs for consolidation purposes but did not present a full set of financial statements under IFRSs. The above election may be ‘relevant not only when a subsidiary”s reporting package complies fully with the recognition and measurement requirements of IFRSs, but also when it is adjusted centrally for matters such as review of events after the reporting period and central allocation of pension costs. [IFRS 1.IG31]. Adjustments made centrally to an unpublished reporting package are not considered to be corrections of errors for the purposes of the disclosure requirements in IFRS 1. However, a subsidiary is not permitted to ignore misstatements that are immaterial to the consolidated financial statements of its parent but material to its own financial statements.

If a subsidiary was acquired after the parent”s date of transition to IFRSs then it cannot apply option (a) because there are no carrying amounts included in the parent”s consolidated financial statements, based on the parent”s date of transition. Therefore, the subsidiary is unable to use the values recognised in the group accounts when it was acquired.

The exemption is also available to associates and joint ventures. This means that in many cases an associate or joint venture that wants to apply option (a) will need to choose which shareholder it considers its ‘parent for IFRS 1 purposes and determine the IFRS carrying amount of its assets and liabilities by reference to that parent”s date of transition to IFRSs.

Parent becomes a first-time adopter later than its subsidiary

If an entity becomes a first-time adopter later than its subsidiary the entity should in its consolidated financial statements, measure the subsidiary”s assets and liabilities at the carrying amounts that are in the subsidiary”s financial statements, after adjusting for consolidation and for the effects of the business combination in which the entity acquired the subsidiary. The same applies for associates or joint venture, substituting equity accounting adjustments. [IFRS 1 Appendix D17].

Unlike other first-time adoption exemptions, this exemption does not offer a choice between different accounting alternatives. In fact, while a subsidiary that adopts IFRS later than its parent can choose to prepare its first IFRS financial statements by reference to its own date of transition to IFRSs or that of its parent, the parent itself must use the IFRS measurements already used in the subsidiary”s financial statements, adjusted as appropriate for consolidation procedures and the effects of the business combination in which it acquired the subsidiary. [IFRS 1.BC63]. This exemption does not preclude the parent from adjusting the subsidiary”s assets and liabilities for a different accounting policy, e.g. cost or revaluation for accounting for property, plant and equipment. The exemption, however, limits the choice of exemptions (e.g. the deemed cost exemption) with respect to the accounts of the subsidiary in the transition date consolidated accounts.

The following example, which is based on the guidance on implementation of IFRS 1, illustrates how an entity should apply these requirements.

the promoters of proposed prosperity ltd purchased a running business on 1 april 200 618328

Aug 29, 2021 | Uncategorized

The promoters of proposed Prosperity Ltd. purchased a running business on 1 April 2009 from Mr. Alphonse and was incorporated on 1 August 2009. The combined P&L A/c of the company prior to and after the date of incorporation is as under:

Further information:

1. Sales up to 31 July 2009 were Rs.9,00,000 out of total sales of Rs.45,00,000 of the year.
2. Purchases up to 31 July 2009 were Rs.9,00,000 out of the total purchases of Rs.27,00,000.
3. Interest paid to vendors on 1 February 2010 (@12% p.a. on Rs.3,00,000 being purchase consideration).

From the above information, prepare P&L A/c for the year ended 31 March 2010, showing the profit earned prior to and after incorporation and also show the transfer of the same to the appropriate accounts.

from the following particulars supplied by the personnel department of a firm calcul 618342

Aug 29, 2021 | Uncategorized

From the following particulars supplied by the personnel department of a firm, calculate labour turnover

calculate the labour turnover by applying three methods 618345

Aug 29, 2021 | Uncategorized

Raghavendra Metal Company gives the following information:

Calculate the labour turnover by applying three methods

the time not booked was because of power failure allocate his weekly wages to the di 618346

Aug 29, 2021 | Uncategorized

A machinist employed in a factory which works for six days in a week is paid Rs. 50 per day. Plus DA at 60% of the basic wages. He is allowed to take 30 minutes off for lunch during his 8-hour shift. During a week, his card showed that his time was chargeable to:

The time not booked was because of power failure. Allocate his weekly wages to the different jobs and other appropriate accounts.

from the following particulars find the amount of cash required for the payment of w 618350

Aug 29, 2021 | Uncategorized

From the following particulars, find the amount of cash required for the payment of wages in a factory for a particular month:

assume that the employee worked for 9 hours a day without any overtime 618368

Aug 29, 2021 | Uncategorized

Calculate the amount of wages and bonus earned by this worker under Halsey–Weir plan:

Assume that the employee worked for 9 hours a day without any overtime.

the worker is entitled to a fixed da of rs 100 per week of 48 hours and basic wages 618370

Aug 29, 2021 | Uncategorized

Calculate the total wages payable to a worker under Rowan system from the following particulars:

The worker is entitled to a fixed DA of Rs. 100 per week of 48 hours and basic wages of Rs. 10 per hour.

hourly rate of wages re 1 per hour a da 50 paise per hour worked 618375

Aug 29, 2021 | Uncategorized

Calculate the earnings of a worker under the following methods:

Hourly rate of wages Re 1. per hour + a DA @ 50 paise per hour worked.

differential piece rate 80 of piece rate when the output is below standard and 120 w 618376

Aug 29, 2021 | Uncategorized

From the following particulars, work out the earnings for the week of a worker under

1. Straight piece rate
2. Differential piece rate
3. Halsey premium system
4. Rowan system

Number of working hours per week = 48

Wage per hour = Rs. 3.75

Normal time per piece = 20 minutes

Rate per piece = Rs. 1.50

Normal output per week = 120 pieces

Actual output for the week = 150 pieces

Differential piece rate: 80% of piece rate when the output is below standard and 120% when above standard.

prepare journal entries general ledgers income statement and balance sheet 611398

Aug 29, 2021 | Uncategorized

Prepare journal entries, general ledgers, income statement, and balance sheet.

a company wishes to evaluation a division which has the following profit and loss ac 611404

Aug 29, 2021 | Uncategorized

A company wishes to evaluation a division which has the following profit and loss account and balance sheet:

What is the residual income for the division if the company has a cost of capital of 18%?

A £3000

B £21 600

C £83 000

D £117 000

bollon uses residual income to appraise its division using a cost of capital of 10 611405

Aug 29, 2021 | Uncategorized

Bollon uses residual income to appraise its division using a cost of capital of 10%. It gives the managers of these division considerable autonomy although it retains the cash control function at head office.

The following information was available for one of the divisions:

A £36 600

B £56 500

C £58 600

D £60 700

division q makes a single product information for the division for the year just end 611406

Aug 29, 2021 | Uncategorized

Division Q makes a single product. Information for the division for the year just ended it:

Head office assesses divisional performance by the residual income achieved. It uses a cost of capital of 12% a year.

Division Q’s average contribution per unit was

A £14.82

B £22.81

C £28.06

D £31.06

E £32.81

a company has obtained the following information regarding costs and revenue for the 611407

Aug 29, 2021 | Uncategorized

Flexible budgets and variance analysis

A company has obtained the following information regarding costs and revenue for the past financial year:

Original budget:

Standard cost per unit:

Selling price

Actual result:

There were no opening stocks.

Required:

(a) Produce a flexed budget statement showing the flexed budget and actual result. Calculate the variances between the actual and flexed figures for the following:

• Sales;
• Materials;
• Labour; and
• Fixed production overhead.

(b) Explain briefly how the sales and materials variances calculated in (a) may have arisen.

fixed and flexible budgets 611408

Aug 29, 2021 | Uncategorized

Fixed and flexible budgets

(a) Explain what is meant by the terms ‘fixed budget’ and ‘flexible budget’, and state the main objective of preparing flexible budgets.

(b) (i) prepare a flexible budget for 20X5 for the overhead expenses of a production department at the activity levels of 80%, 90% and 100% using the information listed below.

1. The direct labour hourly rate is expected to be £3.75.
2. 100% activity represents 60 000 direct labour hours.
3. Variable costs:

1. Semi-variable cost are expected to correlate with the direct labour hours in the same manner as for the last five years, which was:

1. Fixed cost:

1. Inflation is to be ignored.

(i) Calculate the budgets cost allowance for 20X5 assuming that 57 000 direct labour hours are worked.

comments on a performance report 611409

Aug 29, 2021 | Uncategorized

Comments on a performance report

The victoria Hospital is located in a holiday resort that attracts visitors to such an extent the population of the area is trebled for the summer months of June. July and August. From past experience, this influx of visitors doubles the activity of the hospital these months. The annual budget for the hospital’s laundry department is broken down into four quarters, namely April-June, July-September, October-December and January-March, by dividing the annual budgeted figures by four. The budgeting work has been done for the current year by the secretary of the hospital by the Hospital Authority that management information for control purposes needs to be improved, and have been recruited to help to introduce a system of responsibility accounting.

You are required, from the information gives, to:

(a) Comment on the way in which the quarterly budgets have been prepared and to suggest improvements that could be introduced when preparing the budgets for 2001/2002;

(b) State what information you would like to flow from the actual against budget comparison (not that calculated figures are not required);

(c) State the amendments that would be needed to the current practice of budgeting and reporting to enable the report shown below to be used as a measure of the efficiency of the laundry manager.

flexible budgets and the motivational role of budgets 611410

Aug 29, 2021 | Uncategorized

Flexible budgets and the motivational role of budgets

Club Atlantic is an all-weather holiday complex providing holidays throughout the year. The fee charged to guests is fully inclusive of accommodation and meals. However, because the holiday industry is so competitive. Club Atlantic is only able to generate profits by maintaining strict financial control of all activities. The club’s restaurant is one area where is a constant need to monitor cost. Susan Green is the manager of the restaurant. At the beginning of each year she is given an annual budget which is then broken down into month. Each month she receive a statement monitoring actual costs against the annual budget and highlighting any variances. The statement for the month ended 31 October is reproduced below along with a list of assumption:

Assumptions:

(a) The budget has been calculated on the basis of a 30-day calendar month with the cost of rents, insurance and depreciation begin an apportionment of the fixed annual charge.

(b) The budgeted catering wages assume that:

(i) There is one member of the catering staff for every 40 guests staying at the complex;

(c) All other budgeted costs are variable costs based on the number of guest days,

Task 1

Using the data above, prepare a revised performance statement using flexible budgeting. Your statement should show both the revised and the revised variances. Club Atlantic uses the existing budgets and performance statements to motivate its managers as well as for financial control. If manages keep expenses below budget they receive a bonus in addition to their salaries. A colleague of Susan is Brian Hilton. Brian is in charge of the swimming pool and golf course, both of which have high level of fixed costs. Each month he manages to keep expenses below budget and in return enjoys regular bonuses. Under the current reporting system, Susan Green only rarely receives a bonus. At a recent meeting with Club Atlantic’s directors Susan Green expressed concern that the restaurant. You are currently employed by Hall and Co., the club’s auditors, and the directors of Club Atlantic have asked you to advice them whether there is any justification for Susan Green’s concern.

At the meeting with the Club’s directors, you were asked the following questions:

(a) Do budgets motivate managers to achieve objectives?

(b) Does motivating managers lead to improved performance?

(c) Does the current method of reporting performance motivate Susan Green and Brian Hilton to be more efficient?

Task 2

Write a brief letter to the directors of Club Atlantic addressing their question and justifying your answers.

Note: You should make use of the data given in this task plus your findings in Task 1.

the following information relates to labour costs for the past month 611418

Aug 29, 2021 | Uncategorized

The following information relates to labour costs for the past month:

There was no idle time.

What were the labour rate and efficiency variances?

standard direct labour cost of one unit of product q 0 25 hours x 12 00 per hour is 611419

Aug 29, 2021 | Uncategorized

Standard direct labour cost of one unit of product Q (0.25 hours x $12.00 per hour) is $3.00 The eight employees who make product Q work a seven-hour day. In a recent three-day period, result were as follows:

During this period, there was a power failure. This meant that all work had to stop for 2 hours.

(a) If the company reports idle time separately, the labour efficiency variance for the period is

(i) $258 (A)

(ii) $126 (A)

(iii) $42 (F)

(iv) $126 (F)

(b) The labour rate variance for the period is

(i) $451 (A)

(ii) $259 (A)

(iii) $266 (F)

(iv) $375 (F)

g ltd repairs electronic calculators 611420

Aug 29, 2021 | Uncategorized

G Ltd repairs electronic calculators. The wages budget for the last period was bases on a standard repair time of 24 minutes per calculator and a standard wage rate of $10.60 per hour.

Following the end of the budget period, it was reported that:

Based on the above information, the actual wage rate during the period was

A $10.35 per hour

B $10.60 per hour

C $10.85 per hour

D $11.10 per hour

below are two balance sheets for throup ltd for the most recent and the previous yea 611352

Aug 29, 2021 | Uncategorized

Below are two balance sheets for Throup Ltd for the most recent and the previous year’s trading periods.

The folioing extract from the income statement is available:

In addition, the following information is available:

•Dividends of £2,500 were paid during the year.

•There were no sales of non-current assets during the year.

From the above information, construct a statement of cash flows for the year ended 31 December 2016.

prepare journal entries general ledgers trial balance and balance sheet 611377

Aug 29, 2021 | Uncategorized

Prepare Journal entries, general ledgers, trial balance, and balance sheet.

calculate journal entries general ledgers trial balance income statement and balance 611378

Aug 29, 2021 | Uncategorized

Calculate Journal entries, general ledgers, trial balance, income statement, and balance sheet.

calculate the journal entries general ledgers trial balance income statement and als 611387

Aug 29, 2021 | Uncategorized

Calculate the Journal entries, general ledgers, trial balance, income statement, and also balance sheet.

prepare journal entries general ledgers trial balance income statement and balance s 611388

Aug 29, 2021 | Uncategorized

Prepare Journal entries, general ledgers, trial balance, income statement, and balance sheet.

average monthly sales during the first 4 months of the year were twice the average m 618294

Aug 29, 2021 | Uncategorized

Model: Time ratio, adjusted time ratio, weighted sales ratio and preparation of statement Kapur Ltd. was incorporated on 1 May 2009 to take over the running business of Sunil & Bros. with effect from 1 January 2009. From the following details for the year ended 31 December 2009, you are required to prepare a statement showing profit or loss made during the pre- and post-incorporation periods:

Additional data:

1. Average monthly sales during the first 4 months of the year were twice the average monthly sales during each of the remaining 8 months.
2. 30% of the underwriting commission is to be written off
3. Commission to partners was paid for their work before incorporation
4. Salaries include salary paid to a director of a company Rs.12,000.

you are required to prepare trading and profit and loss account for the year ended 3 618295

Aug 29, 2021 | Uncategorized

Model: Comprehensive Bright Ltd. was incorporated on 1 July 2009 with on authorized capital consisting of 1,00,000 equity shares of Rs.10 each to take over the running business from White Bros. from 1 April 2009. The following is the summarized profit and loss account for the year 3 ended 31 March 2010:

Further information:

1. Stock on 31 March 2010 Rs.30,000
2. Purchase consideration Rs.3,00,000 to be paid by the issue of 3,000 equity shares of 100 each
3. Gross profit percentage is fixed, turnover is double in April, November and December
4. Preliminary expenses are to be written off
5. Carriage outward and travelling commission vary in direct proportion to sales

You are required to prepare trading and profit and loss account for the year ended 31 March 2010 appropriating between pre- and post-incorporation periods and a balance sheet as on 31 March 2010.

you are required to prepare p amp l a c for the year ended 31 march 2010 apportionin 618296

Aug 29, 2021 | Uncategorized

Model: Computation of pre- and post-incorporation profit through columnar P&L A/c Mr. Raj formed a private limited company under the name and style of Raj Pvt. Ltd. to take over his existing business as from 1 April 2009, but the company was not incorporated until 1 July 2009. No entries relating to transfer of the business are entered in the books. This was carried on without a break until 31 March 2010. The following balances were extracted from the books on 31 March 2010:

You are also given that:

1. Stock on 31 March 2010 was Rs.20,000.
2. The gross profit ratio is constant and monthly sales in April 2009, February 2010 and March 2010 are double the average monthly sales for the remaining months of the year.
3. The purchase consideration was agreed to be satisfied by the issue of 50,000 equity shares of Rs.10 each.
4. The preliminary expenses are to be written off.
5. You are to assume that carriage outwards and traveller’s commission vary in direct proportion to sales.

You are required to prepare P&L A/c for the year ended 31 March 2010 apportioning the profit or loss of the periods before and after incorporation. Depreciation is to be provided @ 20% p.a. on fixed assets.

state whether the following statements are true or false1 profit prior to incorporat 618297

Aug 29, 2021 | Uncategorized

State whether the following statements are True or False
1.Profit prior to incorporation forms part of P & L A/c.
2.Capital profit is not utilized for payment of dividend to shareholders.
3.Unutilized part of capital reserve appears on the assets side of the balance sheet.
4.Capital loss should be shown on the assets side of the balance sheet.
5.Capital loss may also be treated as Goodwill.
6.The date of Certificate of Commencement of business is not taken into account for ascertaining prior incorporation profit.7. Basis of apportionment of stationery expenses is sales ratio.
8.Gross profit is apportioned on the basis of sales ratio.
9.Basis of apportionment of “bad debts” is time ratio.
10.Director’s remuneration is not at all connected with pre-incorporation period.
11.Basis of apportionment of “insurance premium” is sales ratio.
12.Vendor’s salary is to be apportioned on the basis of adjusted time ratio.
13.Debenture interest is wholly allocated to post-incorporation period.
14.Formation expenses written off shall be allocated only to pre-incorporation period. Profit prior to incorporation is always to be adjusted against Goodwill.

kamala ltd was incorporated on 1 april 2010 to take over the business of vikas broth 618315

Aug 29, 2021 | Uncategorized

Kamala Ltd. was incorporated on 1 April 2010 to take over the business of Vikas Brothers from 1 January 2010. From the following information, calculate sales ratio and gross profit:

1. Sales during the period January to December 2010 amounted to Rs.3,60,000.

The trend of the sales was as follows:

January and February: half the average sales in each month

May, June and July: average sales in each month

October: average sale

November and December: half the average sales in each month

1. Cost of goods sold: Rs.90,000.

a company was incorporated on 1 august 2010 in order to purchase a running business 618316

Aug 29, 2021 | Uncategorized

A company was incorporated on 1 August 2010 in order to purchase a running business from 1 April 2010. The following particulars are available from its records:

You are required to calculate profit prior to incorporation and after incorporation by preparing profit and loss account.

lalli ltd was incorporated on 1 july 2010 which took over a running concern with eff 618317

Aug 29, 2021 | Uncategorized

Lalli Ltd. was incorporated on 1 July 2010 which took over a running concern with effect from 1 January 2010. The sales for the period up to 1 July 2010 was Rs.10,80,000 and the sales from 1 July 2010 to 31 December 2010 amounted to Rs.13,20,000. The expenses debited to profit and loss account included:

You are required to compute profit prior to incorporation.

a company was incorporated on 30 june 2010 to acquire the business of veer singh as 618318

Aug 29, 2021 | Uncategorized

A company was incorporated on 30 June 2010 to acquire the business of Veer Singh as from 1 January 2010. The accounts for the year ended 31 December 2010 disclosed the following:

1. There was a gross profit of Rs.14,40,000
2. The sales for the year amounted to Rs.72,00,000, of which Rs.32,40,000 were for the first 6 months.
3. The expenses debited to profit and loss account included:

You are required to prepare a statement showing profit made before and after incorporation

x ltd was registered on 1 january 2010 to buy the business of m s y brothers as on 1 618319

Aug 29, 2021 | Uncategorized

X Ltd. was registered on 1 January 2010 to buy the business of M/s Y Brothers as on 1 October 2009 and the Certificate of Commencement of Business on 1 February 2010. The accounts of the company for the period of 12 months ended 30 September 2010 disclosed the net profit of Rs.1,25,000 after having charged the following amounts:

Salary: Rs.30,000 (There were four employees in the pre-incorporation period and seven in the post-incorporation period)

Wages: Rs.10,920 (There were four workers in the pre-incorporation period and five in the post-incorporation period and the rate of wages were Rs.160 and Rs.200 per month per worker in the pre- and post-incorporation periods, respectively)

Sales: Rs.4,80,000 of which Rs.80,000 relates to pre-incorporation period.

Director’s fees: Rs.16,000

You are required to calculate profit for pre- and post-incorporation periods separately.

you are required to prepare a statement apportioning the balance of profit between t 618320

Aug 29, 2021 | Uncategorized

Riddhima Co. Ltd. was incorporated on 30 September 2009 to take over the business of M/s Parul & Co. as from 1 April 2009. The financial accounts of the business for the year ended 31 March 2010 disclosed the following information:

You are required to prepare a statement apportioning the balance of profit between the periods prior to and after incorporation and show the profit and loss appropriation account for the year ended 31 March 2010.

byhagya ltd was incorporated on 1 march 2010 and received the certificate of commenc 618322

Aug 29, 2021 | Uncategorized

Byhagya Ltd. was incorporated on 1 March 2010 and received the Certificate of Commencement of Business on 1 April 2010. The company acquired the business of Viswas with effect from 1 November 2009. From the following figures relating to the year ending October 2010, find out the profits available for dividend.

1. Sales for the year were Rs.30,00,000; Out of which sales up to 1 March 2010 were Rs.12,50,000.
2. Gross profit for the year was Rs.9,00,000.
3. The expenses debited to profit and loss account were:

the unit cost of sales was reduced by 10 in the post incorporation period as compare 618323

Aug 29, 2021 | Uncategorized

X Ltd. was incorporated on 1 April 2010 with an authorized capital of 20,000 equity shares of Rs.100 each to take over the running business of Y Ltd. from 1 January 2010. The following is the summarized profit and loss account for the year ended 31 December 2010.

The company deals with one type of product. The unit cost of sales was reduced by 10% in the post-incorporation period as compared to the pre-incorporation period. Apportion the net profit between pre-incorporation and post-incorporation periods showing the basis of apportionment.

jasemine company ltd was formed to take over a running business with effect from 1 a 618325

Aug 29, 2021 | Uncategorized

Jasemine Company Ltd. was formed to take over a running business with effect from 1 April 2009. The company was incorporated on 1 August 2009, and the Certificate of Commencement of Business was received on 1 October 2009. The following profit and loss account has been prepared for the year ended 31 March 2010.

Profit and Loss Account for the Year Ended 31 March 2010

Additional information:

1. Total sales for the year, which amounted to Rs.48,00,000 arose evenly up to the date of the Certificate of Commencement of Business, where after they spurted to record an increase of two-thirds during the rest of the year.
2. Rent of office building was paid @ Rs.5,000 per month up to September 2009 and thereafter it was increased by Rs.1,000 per month.
3. Travelling expenses include Rs.12,000 towards sales promotion.
4. Depreciation includes Rs.1,500 for assets acquired in the post-incorporation period.
5. Consideration was discharged by the company on 30 September 2009, by issuing equity shares of Rs.10 each.

You are required to prepare the profit and loss account in columnar form showing distinctly the allocation of profits between pre-incorporation and post- incorporation periods, indicating the basis of allocation regarding each item.

a public limited was incorporated on 1 october 2009 to take over a business as a goi 618326

Aug 29, 2021 | Uncategorized

A public limited was incorporated on 1 October 2009 to take over a business as a going concern as from 1 April 2009. The purchase price of the business for such acquisition was fixed on the basis of the balance sheet of the firm as at 31 March 2009 but the agreement provided that the vendors would get 80% of the profits earned prior to 1 October 2009 as compensation. The company’s accounts were made up to 31 March each year and the summarized trading and profit and loss accounts for the year ended 31 March 2010, disclosed the following results:

Further information available was that sales made by the company amounted to Rs.2,32,000. Bad debts amounting to Rs.2,200 were written off prior to 1 October 2009.

Prepare a statement showing the profits earned prior to and after incorporation. State also the amount of profits prior to 1 October 2009 payable to the vendors. How should the company deal with its share of profits in the year ending 31 March 2010.

prepare p amp l a c showing separately pre incorporation and post incorporation prof 618327

Aug 29, 2021 | Uncategorized

Ramkumar Industries Pvt. Ltd. was incorporated on 1 May 2009. It took over Ramkumar’s sole proprietary business with effect from 1 April 2009. Ramkumar’s balance sheet as at 31 March 2010 is as follows:

It was agreed to pay Rs.22,50,000 in the form of equity shares of the company. The company decided to close its books of account for the first time as at 31 March 2010. The following further details are furnished to you:

Depreciation is to be provided @ 10% on assets including additions.

Make a provision for income tax @ 35%

The company requests you to:

1. pass journal entries for the take over
2. prepare P&L A/c showing separately pre-incorporation and post-incorporation profits

moorcroft ltd manufactures one product the production budget for june 2016 shows the 611304

Aug 29, 2021 | Uncategorized

Moorcroft Ltd manufactures one product. The production budget for June 2016 shows the following costs per unit:

Budgeted sales for the month were 5,000 units at £100 each. In July 2016, the management accountants compared the actual performance for the previous month and produced the following information based on actual sales of 5,000 at £80.

calculate the materials variances from the following data again there is no need to 611306

Aug 29, 2021 | Uncategorized

Calculate the materials variances from the following data. Again, there is no need to flex any data.

thompson plc manufactures a single product the budgeted costs per unit for the month 611307

Aug 29, 2021 | Uncategorized

Thompson plc manufactures a single product. The budgeted costs per unit for the month of April 2014 were:

Anticipated production for April 2014 was 10,000 units. The actual results for April 2014 were:

The actual costs were based on production of 9,000 units. Calculate the labour and materials variances.

ian sharp is a sole trader who buys and sells electrical goods the following data ar 611308

Aug 29, 2021 | Uncategorized

Ian Sharp is a sole trader who buys and sells electrical goods. The following data are forecast for the six-month period between 1 January and 30 June 2017:

Other information relating to cash flow is as follows:

•Sharp employs a part-time assistant whom he pays £500 each month.

•Overhead expenses are £800 per month and are paid when they are incurred.

•Sales are all on credit and customers take one month’s credit.

•Half of the purchases are cash purchases and the other half are paid for one month later.

•A replacement van is to be purchased for £8,000 in March. A customer has been found for the old van, who will pay £1,500 for it in April.

•The balance at the bank on 1 January 2017 was £1,000 overdrawn.

Based on these data, the cash budget for the six-month period would be.

this example is based on the financial statements and budgets for a sole trader ndas 611310

Aug 29, 2021 | Uncategorized

This example is based on the financial statements and budgets for a sole trader – I Yates – for the six months to 30 June 2018. Here is the balance sheet at the end of December 2017:

Additional information:

1Sales and purchases are all on credit – with one month’s credit being allowed by us and by our suppliers.

2Expected sales and purchases are as follows:

3The owner takes personal cash drawings each month of £500.

4Wages and salaries amount to £2,400 each month.

5Insurance of £100 is paid each month.

6Overheads are £300 per month and are paid when they are due.

7New equipment is purchased on 1 March 2007 for £6,000. Equipment is to be depreciated at 10% on cost – one month’s ownership equals one month’s depreciation.

8Rent of £400 is received each quarter on 1 January and 1 April.

9Inventory in trade on 30 June 2018 was valued at £5,700.

i yates cash budget for six months ended 30 june 2018 611311

Aug 29, 2021 | Uncategorized

Points to note:

•The opening balance of cash at the start of January is taken from the balance sheet’s cash at bank figure. The closing balance will then appear on the budgeted balance sheet as at 30 June.

•The receipts from trade receivables for January will be December’s sales as seen on the balance sheet as at 31 December 2017.

•Likewise, the payment for trade payables in January will be found on December’s balance sheet.

•The sales and purchases figures for June will not appear in the cash budget but will appear as trade receivables and trade payables on the balance sheet as at 30 June.

•Drawings appear in the cash budget but not in a budgeted profit and loss account.

The forecast set of final accounts willbe.

odejayi ltd produces computer desks the production manager has collected the followi 611313

Aug 29, 2021 | Uncategorized

Odejayi Ltd produces computer desks. The production manager has collected the following information in order to produce a production budget for the next four months:

(i)Demand is expected to be 320 desks in April 2018. This should increase by 25% in May and by 20% in the following two months, based on the demand for desks in the previous month.

(ii)Stock at the end of each month is to be maintained at a level of 25% of the following month’s forecast sales.

(iii)The stock at the start of April is 200 desks.

(iv)Sales in August are expected to be 600 desks.

Produce a production budget for the period ending 31 July 2018. Round up, if necessary, to the nearest desk.

bruno produces go karts which he sells to local retailers he has decided to produce 611314

Aug 29, 2021 | Uncategorized

Bruno produces go-karts which he sells to local retailers. He has decided to produce a sales and debtors budget to help him plan ahead. The following data are available for January to June 2014.

•Each go-kart will be sold for £50 for the first four months, then the selling price will rise to £60.

•He gives two months’ credit to the retailers.

Produce a sales budget and a trade receivables budget for the six months ending 30 June 2014.

from the following data construct a cash budget for the six months ending 31 decembe 611315

Aug 29, 2021 | Uncategorized

From the following data, construct a cash budget for the six months ending 31 December 2016:

(a)Purchases and sales are expected to be as follows:

(b)The selling price of each unit is £50.

(c)The purchase price of each unit is £20, but this will rise by 20% on 1 October 2016.

(d)Purchases are paid for one month in arrears.

(e)Twenty-five per cent of sales are for cash, with each sale receiving a 4% cash discount. The remainder will delay payment by one month.

(f)Trade debtors as at 30 June 2006 amounted to £4,500.

(g)Trade creditors as at 30 June 2006 amounted to £2,800.

(h)A new van is expected to be purchased in September, which would cost £18,000. The old van would be traded in at a value of £5,000. However, only half of the net purchase price would be paid then. The remainder would be paid in 2017.

(i)Wages and salaries amount to £3,000 per month, paid in the month incurred.

(j)Overhead expenses will be £900 per month, paid when incurred.

(k)On 1 July 2016 the bank balance was £9,000.

the following is a worked example of a set of financial statements for a limited com 611335

Aug 29, 2021 | Uncategorized

The following is a worked example of a set of financial statements for a limited company produced for internal use

Shortland plc

Trial balance as at 31 Dec 2018

Additional information:

1Inventory at 31 Dec 2018: £8,950.

2Tax charge for the year: £7,740.

3Depreciation is to be provided for as follows:

aProperty: 1% on cost

bPlant and equipment: 20% on cost.

the directors decide to make a bonus issue of shares on the basis of one share for e 611337

Aug 29, 2021 | Uncategorized

The directors decide to make a bonus issue of shares on the basis of one share for every four shares held. The directors have decided to utilize all the company’s reserves equally.

This means that the company will be creating ¼ × 12,000,000 = 3,000,000 bonus shares of £1 each. It will also mean that the company has to reduce its reserves by an equivalent amount. After the bonus issue, the equity section of the balance sheet will be.

stoddard plc started in business on 1 january 2012 its issued share capital was 120 611338

Aug 29, 2021 | Uncategorized

Stoddard plc started in business on 1 January 2012. Its issued share capital was 120,000 ordinary shares of £1 each and 30,000 6% preference shares of £1 each. The following information is available:

•Net profits for the first two years of business were as follows: 2012 £58,911; 2013 £72,344.

•Corporation tax was as follows: 2012 £15,890; 2013 £26,750.

•Transfers were made to the general reserve: 2012 £5,000; 2013 £10,000.

•Preference dividends were always paid, whereas the ordinary dividends paid were 5% in 2012 and 7% in 2015.

Produce a balance sheet extract for each of the three years of trading, showing the equity section.

as at 1 january 2014 the equity of masters plc comprised the following 611340

Aug 29, 2021 | Uncategorized

As at 1 January 2014 the equity of Masters plc comprised the following:

During the year a further 100,000 £1 shares were issued at a premium of 75p. Profit for the year was £37,200 and the level of dividends paid totalled £12,000. The statement of changes in equity would be.

gibbon plc had the following fixed assets as at 31 december 2015 611341

Aug 29, 2021 | Uncategorized

Gibbon Plc had the following fixed assets as at 31 December 2015:

The depreciation policy of the firm is to provide for depreciation as follows:

•buildings: 10% per year straight line;

•plant and machinery: 20% per year straight line.

No depreciation is to be provided for freehold land. All depreciation is based on the values of assets held at the end of the financial year. During the year to 31 December 2016, the following events occurred:

1Land was revalued to £500,000.

2New buildings were purchased at a cost of £200,000.

3Plant and machinery which had cost £40,000 were sold for £30,000, which generated a profit on disposal of £10,000.

4Plant and machinery was purchased for £60,000.

The schedule of non-current assets at 31 December 2016 for inclusion in the notes to the accounts for the year end would be.

here is a worked example of the financial statements being produced from the trial b 611342

Aug 29, 2021 | Uncategorized

Here is a worked example of the financial statements being produced from the trial balance of a company. The principles applied in the construction of the statement are identical to those used to construct the statements of a sole trader. However, the requirements of IAS 1 mean that the format of the statement must comply with a prescribed layout.

Hallsworth plc Trial balance as at 31 December 2019

Additional information:

1The taxation due on the company’s profits for the year is £76,000.

2Distribution costs accrued at 31 Dec 2019 total £8,000.

3Administration costs prepaid at 31 Dec 2019 totalled £4,000.

4Only £10,000 of the interest due on the debentures had been paid by the end of the year.

5Inventory in trade at the year end totalled £76,000.

6The company engaged in a bonus issue of shares during the year which is not recorded in the trial balance. The bonus issue was made on the basis of one new share for every four already held. Reserves were to be mentioned in the most distributable form.

from the following data present an extract from the statement of cash flows showing 611346

Aug 29, 2021 | Uncategorized

From the following data, present an extract from the statement of cash flows showing the net cash flow from operating activities:

Net profits for the year ended 31.12.13 were £15,690 and depreciation charged that year amounted to £1,120.

an extract from the income statement for the year ended 31 december 2016 is presente 611347

Aug 29, 2021 | Uncategorized

An extract from the income statement for the year ended 31 December 2016 is presented below:

Extract from income statement for year ended 31 Dec 2016

The following information has also been made available:

•Dividends paid for the year amounted to £12,500.

•A vehicle which cost £14,000 and has accumulated depreciation of £9,200 was sold during the year for £5,000 cash – which was received on the date of the sale.

The statement of cash flows would be.

from the following data present an extract from the statement of cash flows showing 611348

Aug 29, 2021 | Uncategorized

From the following data, present an extract from the statement of cash flows showing the net cash flow from operating activities:

Net profits for the year ended 31.12.14 were £56,890 and depreciation charged that year amounted to £7,500.

the following are extracts from the balance sheets of a company 611349

Aug 29, 2021 | Uncategorized

The following are extracts from the balance sheets of a company:

•There were no purchases of land and property during the year.

•During the year, plant and equipment costing £60,000 and with a book value of £27,000 were sold for a loss of £5,000.

•Vans, which had cost £8,000, with a book value of £4,000, were sold for neither a profit nor a loss.

From the above data, calculate the amount to include in the statement of cash flows under the heading ‘cash flow from investing activities’.

the following extracts are taken from the balance sheet of surridge ltd 611350

Aug 29, 2021 | Uncategorized

The following extracts are taken from the balance sheet of Surridge Ltd:

The income statement for the year ended 31 December 2018 shows an entry for taxation as £187,000. Calculate the amount of taxation actually paid out by Surridge Ltd in the year to 31 December 2018.

the norton boys rsquo tennis club is a small local club the club is run for young pe 611276

Aug 29, 2021 | Uncategorized

The Norton Boys’ Tennis Club is a small, local club. The club is run for young people aged between 11 and 18. Although the club has been successful in the regional junior leagues, it is facing financial problems. The rent charged on the clubhouse and on the ground is set to rise by 20 per cent next year and it is felt that increasing subscription charges would only lead to a decline in the number of people playing.

The financial details for the 2015/16 season are as follows:

from the following data construct a manufacturing account for the year ended 31 dece 611277

Aug 29, 2021 | Uncategorized

From the following data construct a manufacturing account for the year ended 31 December 2015.

Additional information:

1Rent is to be apportioned between factory overheads and office expenses in a 3:1 ratio.

2Inventory as at 31 December 2015 was as follows:

aRaw materials £15,650

bWork-in-progress £38,700.

a kitchen fitter works a 45 week year and for 36 hours per week he estimates that hi 611278

Aug 29, 2021 | Uncategorized

A kitchen fitter works a 45-week year and for 36 hours per week. He estimates that his overheads for the year will be £9,000.

When billing customers, the fitter may wish to include a fraction of his overall overheads into the cost of each ‘job’ he performs for customers and he does this on the basis of the time of each job completed. This means that jobs that take longer will incur a higher proportion of overheads. For example, for a job that takes 25 hours he would want to include the following amount of overheads into the cost of the job:

Hours worked in one year = 45 × 36 = 1,620

Given that the job takes 18 hours, he would apportion (18/1,620) × £9,000 = £100 of overheads for this job on top of the direct materials and his direct labour. The selling price charged for this job would be based on both the direct costs of the job and this £100 share of the overheads.

using the oar data calculated for rand ltd we can calculate the following job an ord 611279

Aug 29, 2021 | Uncategorized

Using the OAR data calculated for Rand Ltd we can calculate the following job. An order was received for 500 steel pipes. The costing data for this order is as follows:

The job passes through each of the production departments as follows:

The cost of this particular job would then be calculated as follows:

nutt ltd produces clothing for the retail trade a small retail store lsquo fashion c 611280

Aug 29, 2021 | Uncategorized

Nutt Ltd produces clothing for the retail trade. A small retail store, ‘Fashion Craze’, has approached Nutt Ltd for a quotation to supply them with a bulk order for 50 pairs of leather trousers. The following information is estimated:

Each pair of trousers will require 1 hour of cutting, 2 hours of sewing and 30 minutes of processing. Overheads are apportioned on the basis of £10 per pair of trousers completed. A mark-up of 40% is added for profits. A batch of 50 pairs of trousers would be priced as follows:

Batch cost: 50 pairs of leather trousers

lamb ltd is constructing a new college building for a local authority the contact be 611281

Aug 29, 2021 | Uncategorized

Lamb Ltd is constructing a new college building for a local authority. The contact begins in 2014 and the price agreed for the college is £6 million. However, the college in unlikely to be completed until 2016 owing to extensive remedial work being necessary, and Lamb Ltd will incur the following costs:

The profit on the contract is estimated to be £1.2 million. This notional profit can be included as income if we make adjustments for the ongoing progress on the contract. Imagine that, in our example, by 2015 the value of the work certified had been £4 million and the cost of the work certified so far was £3.8 million. If the amount Lamb Ltd has received so far for work certified total £3.6 million, attributable profit would be calculated as follows:

Notional profit x (2/3) x (Cash received on account x value of work certified)

£200,000 x (2/3) x (£3 600 000/£4,000,000) = £120,000

flower ltd produces computer desks the cost of making one desk has been calculated a 611282

Aug 29, 2021 | Uncategorized

Flower Ltd produces computer desks. The cost of making one desk has been calculated as follows:

As at 31 December 2017, the business has 30 finished desks in stock, but also 20 desks which are estimated to be 75 per cent complete and 10 desks estimated to be 50 per cent complete. The cost value of these desks would be as follows:

jukes ltd bases its job estimates on the following formulae 611285

Aug 29, 2021 | Uncategorized

Jukes Ltd bases its job estimates on the following formulae:

Total cost = Prime cost plus 50% for overheads

Selling price = Total cost plus 30% for profit.

Estimates for job PW1 and for job JC2 are as follows:

Calculate the selling price for each job.

at low levels of output the firm incurs a loss as the revenue is not high enough to 611286

Aug 29, 2021 | Uncategorized

Simper Ltd produces a single product which sells for £20. The product itself costs £12 to produce and fixed costs for the business are £50,000 per year. The following is a schedule of the costs and revenue of the business for varying levels of output.

At low levels of output, the firm incurs a loss as the revenue is not high enough to generate sufficient contribution to cover the fixed costs of the business. However, we see that as output rises from 6,000 units to 7,000, the firm moves from making losses to generating profits, which rise as output increases. We can infer, therefore, that the break-even level of output is somewhere between 6,000 and 7,000 units.

emery ltd manufactures three models of garden greenhouse 611289

Aug 29, 2021 | Uncategorized

Emery Ltd manufactures three models of garden greenhouse:

•standard model

•economy model

•deluxe model

All three types include the same type of aluminium. The aluminium costs £5 per square metre. The following is a unit cost statement for each type:

Sales for May 2015 are expected to be:

•standard model: 1,000 greenhouses

•economy model: 1,200 greenhouses

•deluxe model: 1,000 greenhouses.

Owing to a shortage of aluminium, the suppliers have stated that they can only deliver 6,000 m²to cover production during May 2015. This means that the management will have to alter their production plans, which will influence the level of sales of the various types of greenhouse. All greenhouses produced in each month are sold.

lucas runs a small firm that makes dining room tables the tables are largely handmad 611290

Aug 29, 2021 | Uncategorized

Lucas runs a small firm that makes dining room tables. The tables are largely handmade and in a year the following costs are expected to be incurred in the production of 500 tables:

Each table is sold for £300. All of the administration costs are fixed, whereas it is estimated that 50 per cent of the selling and distribution costs are fixed. A supplier has offered Lucas the chance to buy in tables which would be made to Lucas’s specification but could be supplied to him for £200 each. This would give Lucas the chance to close down his production facilities and allow him to concentrate on the selling and marketing of the tables. Would you advise Lucas to accept the offer to buy in the tables or to continue production? Initially, the purchase of tables from the outside supplier might be look like a good idea. The average cost of a table is £212 (£106,000/500 tables). However, this decision requires us not to use the average total (or full) cost, but the marginal cost of each table. If the decision is to be made on financial grounds alone, we should be comparing the marginal cost of each table with the price offered by the outside supplier.

alec powell runs a small firm that produces ornate wine racks for customers these ar 611291

Aug 29, 2021 | Uncategorized

Alec Powell runs a small firm that produces ornate wine racks for customers. These are high-quality products and Powell has gradually built up a reputation for high-quality output. Each wine rack sells for £50. A Spanish buyer, Ramadal, wants to import the wine racks for sale in her domestic market. She believes that market conditions would dictate a lower selling price and has offered to buy 500 wine racks from Powell at a price of £35 each. Powell is unsure whether or not to accept this order as it is for a price significantly lower than his normal selling price. His data below are based on the planned production level of 10,000 wine racks per year:

Initially, the order looks, on financial grounds, an unwise one to accept. Each wine rack has a unit cost of £38, which implies that Powell would lose £3 on each wine rack sold to Ramadal. However, the £38 cost includes those costs that are not part of the marginal cost of producing a wine rack. Hence, we should look at the marginal cost of producing each wine rack.

fowler ltd manufactures a range of products one type of product is interactive white 611295

Aug 29, 2021 | Uncategorized

Fowler Ltd manufactures a range of products. One type of product is interactive whiteboards for schools and colleges. Data relating to the costs for October 2014 are as follows:

The fixed costs are factory specific and are not specially related to the output of whiteboards. Planned output for October is 500 whiteboards. Each whiteboard is sold for £300. A foreign supplier has offered to supply Fowler Ltd with the whiteboards for £150.

(a)Produce financial data which assess the case for discontinuing production and buying in the whiteboards from the foreign supplier.

(b)Outline three factors which would suggest thatFowlerLtd should continue to produce whiteboards regardless of any cost savings that could be made in the short term.

hinds ltd as part of its product range produces the lsquo silvto rsquo this product 611296

Aug 29, 2021 | Uncategorized

Hinds Ltd, as part of its product range, produces the ‘SILVTO’. This product normally sells for £160. The following costs are associated with its production:

The directors have recently received a request from a Latvian company offering to purchase 2,000 SILVTOs at a price of £140 each. Advise them as to whether they should accept or reject the Latvian offer.

hawkins ltd manufactures three types of wheelbarrow these wheelbarrows are designate 611297

Aug 29, 2021 | Uncategorized

Hawkins Ltd manufactures three types of wheelbarrow. These wheelbarrows are designated as A1, A2 and A3. All three types of wheelbarrow use the same grade of skilled labour and the wage rate of this labour is currently £6.50 per hour. The following is a unit cost statement for each type:

The company plans to produce 5,000 of each wheelbarrow in March 2014. However, owing to a shortage of skilled labour, there are only 15,000 hours of skilled labour available.

(a)Calculate the most profitable production pattern to follow, given to the shortage of skilled labour.

(b)Show the number of each type of wheelbarrow that should be manufactured.

in producing one unit of product a21 the following standard cost for materials has b 611298

Aug 29, 2021 | Uncategorized

In producing one unit of product A21, the following standard cost for materials has been set:

20 metres × £7.00 per metre = £140.00

However, recent production data show that the firm is using 24 metres @ £5.50 per metre in the production of one unit:

Total materials variance = Actual materials cost – Standard materials cost

data relating to standard labour cost of one unit of product bz5 is as follows 611299

Aug 29, 2021 | Uncategorized

Data relating to standard labour cost of one unit of product BZ5 is as follows:

800 hours @ £5.00 per hour = £4,000

The management have observed that the actual labour costs incurred in the production of one BZ5 are 750 hours at a wage rate of £6.00 per hour.

Total labour variance = Actual labour cost – Standard labour cost

the manager of a business has budgeted to produce 600 000 units of output in 2017 th 611300

Aug 29, 2021 | Uncategorized

The manager of a business has budgeted to produce 600,000 units of output in 2017. The standard quantities for this budgeted output level are as follows:

If actual output fell short of budgeted levels and was 40 per cent less than expected, at 360,000 units of output, we should ‘flex’ these standard quantities to match the actual output level. This will mean reducing the standard quantities by 40 per cent, which gives us the following:

for the following business the data relating to the production of one unit is as fol 611301

Aug 29, 2021 | Uncategorized

For the following business, the data relating to the production of one unit is as follows:

Standard materials cost = 4 kg at £3.00 per kg = £12 per unit

Standard labour cost = 2 hours at £5.00 per hour = £10 per unit

If the budgeted output level is 500 units, the standard cost would be as follows:

Details of actual production for the forecast period were as follows:

Actual output was 450 units. Although the total cost of £10,636 is lower than the standard cost of £11,000, the actual output was lower than the budgeted output, which means we will need to redraft the budgeted quantities in the light of the actual output. These are as follows:

Materials 450 units × 4 kg = 1,800 kg × £3 = £5,400

Labour 450 units × 2 hours = 900 hours × £5 = £4,500.

the following data are available for a firm which manufactures one type of product 611303

Aug 29, 2021 | Uncategorized

The following data are available for a firm which manufactures one type of product:

The OARs for the variable and fixed overheads were calculated on the basis of labour hours. Budgeted output for the period was 2,000 units. Actual data for the period were recorded as follows:

chase runs a sandwich shop she is compiling her end of year financial statements and 611271

Aug 29, 2021 | Uncategorized

Chase runs a sandwich shop. She is compiling her end-of-year financial statements and wants your advice on a number of items:

(a)She has a high degree of customer loyalty and wants to include this within the value of the business overall. She proposes including a value for goodwill on her balance sheet – in order to represent the estimated selling price of the business, which would be higher than the original cost of the business.

(b)She thinks she can boost her profits if she delays some of her payments.

(c)She uses her own car to make some deliveries to business customers. At present she includes none of these costs as business expenditure as it is her private car.

Advise Chase on whether her accounting treatment is correct. Refer to any relevant accounting concepts as part of your recommendations.

the company purchased buildings worth rs 4 80 000 pass journal entries in the books 618269

Aug 29, 2021 | Uncategorized

Ajay & Co. Ltd. was incorporated to acquire the business of Vivek whose balance sheet was as follows:

The purchase consideration was agreed at Rs.6,00,000 which was to be paid as:

1. 16,800 equity shares of Rs.20 each
2. Rs.2,04,000 in preference shares of Rs.100 each and
3. the balance in cash

The company raised further capital by issue of 45,000 equity shares of Rs.20 each payable 10 on application and Rs.10 on allotment. After receipt of all the money for shares issued, the company purchased buildings worth Rs.4,80,000. Pass journal entries in the books of the company and prepare the balance sheet.

which were forfeited and reissued at a discount of 20 give journal entries to record 618270

Aug 29, 2021 | Uncategorized

A company was formed with an authorized capital of Rs.30,00,000 divided into 1,50,000 equity shares of Rs.100 each, 15,000 9% preference shares of Rs.100 each to purchase the going concern of M/s Raju & Co. the balance sheet of which stood as follows:

The purchase price was agreed up on at Rs.10,50,000, payable as to Rs.3,00,000 in fully paid up equity shares, Rs.3,00,000 in fully paid preference shares,Rs.1,80,000 in redeemable debenture and the balance in cash.

The remaining shares were issued to and paid for by the public with the exception of Rs.30 per share on 360 equity shares which were forfeited and reissued at a discount of 20%. Give journal entries to record these transactions in the books of the company and prepare the initial balance sheet.

the company paid rs 10 000 for preliminary expenses pass the necessary journal entri 618271

Aug 29, 2021 | Uncategorized

The balance sheet of A, B and C stood as under when they sold off their concern to newly started joint stock company:

The joint stock company was started with a capital of Rs.20,00,000 divided into 10,000 shares of Rs.200 each. It also issues debentures for Rs.10,00,000 at a discount of 5%. The entire concern of A, B and C was taken up by the company on agreeing to pay them Rs.9,60,000 by the issue of 2,400 shares fully paid and Rs.4,80,000 in cash.

All the debentures and the remaining shares are issued to the public which are all taken up and paid for with the exception of 1,000 shares held by X on which he has not paid the final call of Rs.80 per share which were forfeited and reissued as fully paid at a discount of Rs.40 per share. The company paid Rs.10,000 for preliminary expenses. Pass the necessary journal entries in the books of the company and prepare its balance sheet.

however the company was forced to meet a contingent liability on bills discounted by 618273

Aug 29, 2021 | Uncategorized

On 1 January 2011, Vincent Ltd. acquired the business of Sagar taking all the assets with the exception of book debts which it undertook to collect on behalf of Sagar and out of the proceeds pay the liabilities owning at the date of transfer. At that date, the book debts amounted to Rs.2,70,000 and creditors Rs.1,85,000. The company agreed to do the job for vendors on 3% commission on amounts collected and 1% on amount paid. The company could not collect Rs.14,000 from the existing debtors and allowed Rs.1,500 as cash discount to the remaining debtors. The company could collect the time-barred debt (which was written off as bad by the vendors) of Rs.10,000. The company paid Rs.1,75,000 to creditors in satisfaction of total amount due. However, the company was forced to meet a contingent liability on bills discounted by the vendors of Rs.15,000. Give journal entries (including that of cash) in the books of Vincent Ltd.

accordingly on 31 march the vendors were paid the balance which the company holds to 618274

Aug 29, 2021 | Uncategorized

A and B are in partnership in computer components manufacturers. The balance sheet of A and B as on 31 December 2010 was as follows:

They decided to sell their business as from the above date to Chips Ltd. The Company acquires the stock, plant, Land & Buildings and goodwill for which the vendors receive Rs.15,00,000 in fully paid up equity shares of Rs.100 each. The Company agrees to pay creditors and collect the book debts on behalf o the vendors for a commission of 3% on cash collected and 2% on amounts paid. By March 2011, the creditors have all been paid and the amount so paid is Rs.2,76,300. Also, the book debts have all been collected or accounted for and have realized Rs.5,21,300. Accordingly on 31 March, the vendors were paid the balance which the company holds to credit. Pass the journal entries in the books of the company and show the vendor’s suspense account.

the company paid the balance due to the vendors on 1 march 2011 ignore the question 618275

Aug 29, 2021 | Uncategorized

M/s Anju & Manju carrying on business in partnership decided to dissolve the firm and sell off the business to a limited company, a newly floated one, on 31 December 2010, when the firm’s position was as follows:

The arrangement with the limited company was as follows:

1. Furniture and stock were purchased at balance sheet values less 10%.
2. Goodwill of the firm was valued at Rs.1,21,440.
3. The firm’s debtors, cash and creditors were not to be taken over by the company, but the company agreed to collect the book debts and discharge the liabilities of the vendor as agent, for which service the company was to be paid 3% on all collections from the vendor’s debtors and 2% cash paid to vendor’s creditors.
4. The purchase price was to be paid to the company in fully paid ordinary shares of Rs.50 each at a premium of Rs.10 per share

The company received Rs.5,76,000 from vendor’s debtors in full satisfaction during the first 2 months after purchase of business. The creditors were paid off, Rs.3,000 being allowed by them as discount. The company paid the balance due to the vendors on 1 March 2011. (Ignore the question of in term distribution of cash.)

Write up journal entries and balance sheet in the company’s books.

goodwill is valued at rs 12 50 000 car is taken up by a at an agreed value of rs 1 5 618276

Aug 29, 2021 | Uncategorized

AB & Co. is converted into a limited company but the same books of accounts are desired to be continued. The balance sheet with reference to which the conversion has taken place is given as follows:

Goodwill is valued at Rs.12,50,000. Car is taken up by A at an agreed value of Rs.1,50,000. Stock and machinery are valued at Rs.27,50,000 and 17,50,000, respectively.

The partners are issued required number of shares of Rs.100 each at par. Pass journal entries and draft the Balance Sheet of the Limited Company.

total purchase consideration was to be satisfied by the issue of fully paid equity s 618277

Aug 29, 2021 | Uncategorized

Sharma and Varma were carrying on business in partnership sharing profits and losses in the ratio 3:2. They sell their business to a limited company on 31 March 2011 and on that date their balance sheet stood as follows:

A limited company having an authorized capital of Rs.30,00,000 in equity shares of Rs.100 each purchased the above business under the following terms:

1. Goodwill was valued at Rs.2,40,000.
2. Depreciation on plant & machinery was @ 10% and appreciation of land & buildings was by 20%.
3. A provision of doubtful debts @ 5% on debtors was allowed.
4. Investment was taken over by Varma at an agreed value of Rs.96,000.
5. Total purchase consideration was to be satisfied by the issue of fully paid equity shares of Rs.100 each. Show the journal entries and the revised balance sheet assuming that the same set of books is continued.

stock on hand on 31 december 2010 rs 2 00 000 show the needed journal entries in the 618278

Aug 29, 2021 | Uncategorized

On 1 January 2010, Patel sells his business to Rao Ltd. The company took over the assets and liabilities for a purchase consideration of Rs.4,25,000 being paid equally in cash and shares of Rs.50 each fully paid up. Patel received Rs.75,000 on account in 2010 from the company but no other entries have been made. The balance sheet of Patel’s business on the date of sale was as follows:

Fixed assets and stock were to be revalued at Rs.1,25,000 and Rs.1,40,000, respectively. In addition to matters arising out of the above, there were the following balances in the books of Rao Ltd. as on 31 December 2010:

Stock on hand on 31 December 2010 Rs.2,00,000. Show the needed journal entries in the books of the company to give effect to the above arrangement and prepare the adjusted trial balance P&L A/c of the year ended 31 December 2010 and the balance sheet as at that date of Rao Ltd.

you are required to show the vendor rsquo s accounts in the company rsquo s ledger a 618279

Aug 29, 2021 | Uncategorized

M and N are proprietors of a competing business. In order to protect their business, they float a company called M&N Ltd. with an authorized capital of Rs.30,00,000 divided into 1,80,000 equity shares of Rs.10 each and 12,000 12% preference shares of Rs.100 each.

On the date of the transfer, M’s assets amount to Rs.7,96,050 excluding goodwill. His liabilities at the same time amount to Rs.97,800. On the same date, N’s assets amount to Rs.5,85,000 excluding goodwill and his liabilities to Rs.45,000. It is agreed that the company will take over the assets and liabilities of both M and N and will issue to each 45,000 equity shares fully paid up and pay the balance in cash. It is also agreed that fully paid up preference shares will be issued to them on account of goodwill which is to be valued on the basis of two years’ purchases of the last three year’s profits which are as follows:

In addition to the above, the public subscribe and pay in full for 60,000 equity shares and the remaining preference shares. The company also pays 45,000 as preliminary expenses. You are required to show the vendor’s accounts in the company’s ledger and prepare the balance sheet of the company after these transactions are completed.

the company decided to admit the claim out of the investments rs 24 000 worth are wo 618280

Aug 29, 2021 | Uncategorized

The following is the balance sheet of M/s P & Q as on 31 March 2011:

Profits were shared as two-thirds to P and one- thirds to Q. On 1 April 2011, PQ Ltd. purchased the business of M/s P & Q for a payment of Rs.12,00,000 to be made in the form of equity shares of Rs.100 each credited as Rs.80 paid. The company did not take over the investments and Mrs. P’s loan. The company also decided to revalue land and buildings as Rs.5,40,000, plant and machinery at Rs.2,80,000; and to create a provision of doubtful debts at 5% on debtors. There was a claim by a worker for Rs.12,000 for injuries in an accident. The company decided to admit the claim. Out of the investments, Rs.24,000 worth are worthless. Mrs. P. agrees to receive the remaining investments and 2,800 shares of PQ Ltd. in settlement of her loan. The company decides to retain the books of account of the firm. Journalise.

which were forfeited and reissued as fully paid as rs 20 per share the company paid 618281

Aug 29, 2021 | Uncategorized

The balance sheet of X, Y & Z stood as follows when they sold off the concern to a newly started joint stock company.

The joint stock company was started with a capital of Rs.12,00,000 divided into 12,000 shares of Rs.100 each. It also issued debentures for Rs.6,00,000 at a discount of 5%.

The entire concern of X, Y & Z was taken by the company on agreeing to pay them Rs.2,88,000 by the allotment of 2,880 shares fully paid and Rs.2,88,000 in cash.

All the debentures and the remaining shares are issued to the public which were all taken up and paid for with the exception of 1,200 shares held by Mr. C on which he did not pay the final call of Rs.40 per share which were forfeited and reissued as fully paid as Rs.20 per share. The company paid Rs.6,000 as preliminary expenses. Pass the necessary entries in the books of the company and prepare the balance sheet.

the total amount due to the vendor was settled by payment of rs 10 880 in cash and t 618282

Aug 29, 2021 | Uncategorized

X Ltd. was incorporated for taking over the business of Y from 1 April 2011. The following was the balance sheet of Y as on 31 March 2011:

The company took over the business with fixed assets and loans on the following terms:

1. The fixed assets should be depreciated at 10%.
2. The value of goodwill is estimated at Rs. 1,60,000.

The company realized Rs.1,60,000 from sundry debtors as the agent of the vendor in full settlement and discharged all the creditors by paying Rs.1,36,000 for a commission of 3% on the amount collected and 2% on the amount paid. The loan creditors accepted 10% preference shares of Rs.100 each in discharge of the loans. After realization of the debts and discharge of the liabilities, the total amount due to the vendor was settled by payment of Rs.10,880 in cash and the balance in the shape of fully paid equity shares of Rs.10 each. Show purchase consideration and pass journal entries in the books of the company. Also give the balance sheet of the company after taking over the business of Y.

you are required to prepare a statement showing profit earned by the company in the 618290

Aug 29, 2021 | Uncategorized

Model: Pre- and post-incorporation profits (statement method) time and sales ratios and allocation Thambu Ltd. was registered on 1 October 2009 to acquire the running business of Shetty & Co. with effect from 1 April 2009. The following was the profit and loss account of the company as on 31 March 2010:

You are required to prepare a statement showing profit earned by the company in the pre- and post-incorporation periods. The total sales for the year took place in the ratio of 1:2 before and after incorporation, respectively.

you are required to prepare a statement apportioning properly the net profit of the 618291

Aug 29, 2021 | Uncategorized

Model: Statement method. (Time and sales ratios; allocation and actual) Shiva Co. Ltd. was incorporated on 31 July 2009 to acquire the business of Bhagya & Co. as on 1 April 2009. The books of accounts disclosed the following on 31 March 2010:

1. Sales for the year were Rs.24,20,000 (From 1 April 2009 to 31 July 2009 6,05,000; from 1 August 2009 to 31 March 2010 Rs.18,15,000)
2. Gross profit for the year 2009–10: Rs.4,00,000
3. Preliminary expenses written off: Rs.12,000; Managing director’s salary: Rs.20,000; Company secretary’s salary: 60,000
4. Bad debts written off: Rs.12,520 (Prior to 31 July 3,020; after 31 July Rs.9,500)
5. Depreciation: Rs.18,000; General expenses: Rs.42,000; Advertising: Rs.6,000; Interest on debentures: Rs.20,000

You are required to prepare a statement apportioning properly the net profit of the company as between

1. Profits available for distribution
2. Profits prior to incorporation

model statement method and weighted sales ratio a company was incorporated on 18 may 618292

Aug 29, 2021 | Uncategorized

Model: Statement method and weighted sales ratio) A company was incorporated on 18 May 2010 to take over a business from the proceeding 1 January. The accounts were made up to 31 December 2010 as usual and the trading and profit and loss account gave the following results: