Mark Scheme

April 2019

Pearson LCCI Certificate in Financial

Accounting Level 4
(ASE20101)
Edexcel and BTEC Qualifications

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April 2019
Publications Code 63800_MS
All the material in this publication is copyright
© Pearson Education Ltd 2019
ASE20101
2 April 2019
General Marking Guidance

 All candidates must receive the same treatment. Examiners must mark the
first candidate in exactly the same way as they mark the last.

 Mark schemes should be applied positively. Candidates must be rewarded

for what they have shown they can do rather than penalised for omissions.

 Examiners should mark according to the mark scheme not according to their
perception of where the grade boundaries may lie.

 There is no ceiling on achievement. All marks on the mark scheme should

be used appropriately.

 All the marks on the mark scheme are designed to be awarded. Examiners
should always award full marks if deserved, i.e. if the answer matches the
mark scheme. Examiners should also be prepared to award zero marks if
the candidate’s response is not worthy of credit according to the mark
scheme.

 Where some judgement is required, mark schemes will provide the

principles by which marks will be awarded and exemplification may be
limited.

 When examiners are in doubt regarding the application of the mark scheme
to a candidate’s response, the team leader must be consulted.

 Crossed out work should be marked UNLESS the candidate has replaced it
with an alternative response.

 Where marks are awarded for own figure answers, these marks can only be
awarded if evidence of how the candidate arrived at their values has been
provided (their workings).

 If candidate's fail to provide their workings when instructed in the paper, it may
not be possible to achieve all marks associated with the question, even if the final
answer is correct.

 For calculation questions full marks can be awarded where correct answer is seen
with no workings shown, unless question states that candidate must provide
workings.

ASE20101
3 April 2019
Abbreviations

of Own Figure rule

Accuracy marks can be awarded where the candidates’ answer does not match
the mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidates’ answer is correct,
and in line with the mark scheme.

ASE20101
4 April 2019
Question Answer (AO2) 4 Mark
1(a) Award marks as indicated.

$458 000 (4) W

W
$
485 000
(20 000) (1)
28 000 (1)
(35 000) (1)
458 000 (1of) (4)

Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

Question Answer (AO2) 6 Mark

1(b) Award marks for each correct row as indicated.

Share Share Retained

capital premium earnings Total
$000 $000 $000 $000
Balance at 1 April 2018 2 000 390 1 240 3 630

Rights issue 200 120 320

(1)
Final dividend (220) (220)
(1)
Bonus issue 550 (510) (40) -
(1)
Interim dividend (55) (55)
(1)
Profit for the year 458 458
(1of)
Balance at 31 March 2 750 - 1 383 4 133
2019 (1of)
(6)

ASE20101
5 April 2019
Question Answer (AO2) 4 Mark
1(c)(i) Award 1 mark for correct figures as indicated plus 1 mark for all
correct labels and dates.

Ordinary Share Capital Account

Date Details $000 Date Details $000

2019 2018 Balance b/d 2 000
Apr 1
30 Bank 200
(1)
Oct 31 Share * 510
premium
Mar 31 Balance c/d 2 750 Retained * 40
earnings (1 for both)
2 750 2 750
2019 Balance b/d 2 750
Apr 1 (1of) (4)

Question Answer (AO2) 3 Mark

1(c)(ii) Award 1 mark for correct figures as indicated plus 1 mark for all
correct labels and dates.

Share Premium Account

Date Details $000 Date Details $000

2018 Ordinary 510 2018 Balance 390
Oct 31 share (1) Apr 1 b/d
capital
30 Bank 120
(1)
510 510 (3)

ASE20101
6 April 2019
Question Answer (AO1) 2 Mark
1(d) Award marks as indicated. Maximum 2 marks

Provide an opinion as to the validity of the financial statements (1)

Obtain sufficient evidence to form an opinion (1)
Maintain independence from the company (1)
Undertake risk assessment of the company (1)
(2)
Accept any other appropriate responses.

Question Answer (AO1) 2 Mark

1(e) Award marks as indicated.

Event Adjusting Non-

event adjusting
event
A credit customer owing $2 000 is
declared bankrupt one week after the  (1)
supplying company’s financial year-end.

A company declares a final dividend six

weeks after the financial year-end.  (1)

(2)

(Total for Question 1 = 21 marks)

ASE20101
7 April 2019
Question Answer (AO2) 4 Mark
2(a) Award marks for correct figures as indicated.

$
Profit from operations 112 150 (1of)
Finance costs (7 750) (1)
Profit before tax 104 400 (1of)
Tax (17 400) (1)
Profit for the year 87 000
(4)

Question Answer (AO2) 14 Mark

2(b) Award marks for correct figures against appropriate label.
Raplay Ltd
Reconciliation of profit from operations to net cash flow
from operating activities for the year ended 31 December 2018

$ $
Profit from operations 112 150 (1of)
Depreciation plant and machinery 25 850 (4)
W1
Amortisation development 4 500 (1)
expenditure
Profit on disposal (1 500) (1)
Increase in inventories (2 900)
Decrease in trade receivables 1 300 (1)
Increase in trade payables 4 800
Cash generated from operating 144 200 (1)
activities
Taxation paid W2 (8 700) (2)
Interest paid W3 (6 500) (2)
(15 200)
Net cash flow from operating 129 000 (1of)
activities

W1 $6 500 (1) + $5 750 (1) + $13 600 (1) = $25 850 (1of)

W2 $6 700 + $2 000 (1) = $8 700 (1of)

W3 $750 + $7 750 (1) - $2 000 = $6 500 (1of) (14)

ASE20101
8 April 2019
Question Answer (AO1) 2 Mark
2(c) Award marks as indicated. Max 2 marks.

Share capital increase (1)

Repayment of debentures (1) (2)
Issue of debentures (1)
Equity dividend paid (1)

Accept any other appropriate responses.

Question Answer (AO1) 2 Mark

2(d) Award marks as indicated. Maximum 2 marks

Seller has transferred risks and rewards of ownership to the buyer (1)
Amount of revenue can be accurately measured (1)
Seller retains no control over the goods sold (1)
Probable that economic benefit will flow to the seller (1)
Costs incurred in the transaction can be measured reliably (1) (2)

(Total for Question 2 = 22 marks)

ASE20101
9 April 2019
Question Answer (AO3) 2 Mark
3(a) Award 1 mark for identification plus 1 mark for relevant
development

Fair value shows a more accurate current market value of property,

plant and equipment reflecting current market value (1) which ensures
that the financial statements show a true and fair view and do not
mislead readers (1). (2)

Question Answer (AO2) 8 Mark

3(b) Award marks for correct figures with correct labels as indicated.
Mallax plc
Consolidated statement of profit or loss for the
year ended 31 December 2018

$000
Revenue 2 950 (1)
Cost of sales (1 570) (1)
Gross profit 1 380
Operating expenses (908) (1)
Profit from operations 472
Finance costs (42) (1)
Profit before tax 430
Tax (55) (1)
Profit for the year 375 (1of)
Attributable to
Equity shareholders of parent company 355 (1of)
Non-controlling interest 20 (1)
375
(8)

ASE20101
10 April 2019
Question Answer (AO2) 2 Mark
number
3(c)(i) Award marks as indicated

$40 000 (2) W

W
$000 $000
Price paid 188
Share capital 100
Revaluation 60
Retained earnings 70
230
X
60% 138
50 (2)
Less: impairment 10 (1of)
Goodwill 40 (1of)
Additional guidance
Correct answer only scores 2 marks.
No specific format required.

Question Answer (AO2) 3 Mark

3(c)(ii) Award marks as indicated

$210 200 (3) W

W
$000
Mallax plc 195.0
Haplet Ltd post-acquisition 25.2 (1) (3)
Less: goodwill impairment (1of)
(10.0)
210.2 (1 of)
Additional guidance
Correct answer only scores 3 marks.
No specific format required.

ASE20101
11 April 2019
Question Answer (AO2) 2 Mark
3(d)(i) Award marks as indicated

$108 800 (2)

W
$
Share capital 100 000
Revaluation 60 000
Retained earnings 70 000
Post acquisition profits 42 000
272 000 (1)
x 40% (2)
108 800 (1 of)
Additional guidance
Correct answer only scores 2 marks.
No specific format required.

Question Answer (AO3) 2 Mark

3(d)(ii) Award 1 mark for identification plus 1 mark for linked

justification.

The minority interest whereby shareholders own less than 50% of

share capital (1) and therefore have no control over decisions (1).

Accept any other appropriate responses.

(2)

(Total for Question 3 = 19 marks)

ASE20101
12 April 2019
Question Answer (AO2) 11 Mark
4(a) Award marks as indicated

Parlot plc
Schedule of non-current assets at 31 December 2018

Land and Plant and Motor

buildings machinery vehicles Total
$ $ $ $
Cost /
valuation
At 1 January 1 150 000 740 000 280 000 2 170 000
2018
Revaluation 100 000 100 000
(1 row)
Additions 62 000 62 000
(1 row)
Disposals (50 000) (40 000) (90 000)
(1 row)
At 31 December 1 250 000 752 000 240 000 2 242 000
2018 (1of row)

Accumulated
depreciation
At 1 January 140 000 380 000 112 500 632 500
2018
Charge for the 20 000 75 200 34 375 129 575
year (1) (1) (1)
Revaluation (140 000) (140 000)
(1 row)
Disposals (18 000) (10 000) (28 000)
(1 row)
At 31 December 20 000 437 200 136 875 594 075
2018 (1of row)

Carrying value
At 31 December 1 230 000 314 800 103 125 1 647 925
2018 (1of row)
At 1 January 1 010 000 360 000 167 500 1 537 500 (11)
2018

ASE20101
13 April 2019
Questio Answer (AO2) 2 Mark
n
4(b) Award marks as indicated.

Increase Decrease No effect

Non-current assets carrying
value  (1)

Operating expenses  (1)

(2)

Questio Answer (AO3) 3 Mark

n
4(c) Award 1 mark for identification plus up to 2 marks for linked
justification.

A revaluation reserve is created when the market value of an asset is

greater than the carrying value (1). This surplus cannot be
transferred to the statement of profit or loss as it has not been
realised (1) so remains as part of the shareholders funds as a reserve
(1).
(3)

Questio Answer (AO1) 2 Mark

n
4(d) Award marks as indicated

Accounts have been prepared on an accruals basis (1)

Business is expected to continue as a going concern (1)
(2)

(Total for Question 4 = 18 marks)

ASE20101
14 April 2019
Question Answer (AO4) 3 Mark
5(a)(i) Award 1 marks for a valid assessment of each profitability ratio.

Gross profit margin has improved which may be due to selling at a

higher price relative to its cost of sales (1).

Operating profit margin has worsened indicating that control over

operating expenses has deteriorated (1).

Return on capital employed has worsened reflecting the fall in operating

profit margin and less efficient use of capital employed (1).

Accept any other appropriate responses.

(3)

Question Answer (AO4) 3 Mark

5(a)(ii) Award 1 marks for a valid assessment of each efficiency ratio.

Inventory turnover has worsened, indicating that Trapple Ltd is taking

almost one month longer to convert inventory into sales (1).

Trade receivables collection period has worsened, indicating poor credit

control procedures (1).

Trade payables payment period has shortened by two days indicating

that Trapple Ltd are having to pay suppliers 8 days before receiving
settlement from customers (1).

Accept any other appropriate responses.

(3)

ASE20101
15 April 2019
Question Answer (AO1) 2 Mark
5(b) Award marks as indicated. Maximum 2 marks.

Professional competence and due care (1)

Integrity (1)
Objectivity (1)
Confidentiality (1)
Professional behaviour (1)
Independence (1) (2)

Question Answer (AO3) 3 Mark

5(c) Award 1 mark for identification plus up to 2 marks for linked
justification.

The dividend yield ratio relates the cash return from a share to its
current market value (1) enabling the investor to assess potential
returns from the investment (1) and to compare returns with other
forms of investment (1). (3)

ASE20101
16 April 2019
Question Answer AO4 (4) AO5 (5) Mark
Number
5(d) Award 1 mark for any valid points of analysis up to maximum 4
marks.
Award 1 mark for any valid points of evaluation up to maximum
4 marks. Award 1 mark for any recommendation that is justified
using the outcome of the analysis and evaluation.

Indicator Analysis Evaluation

Return on Eff plc return on capital Eff plc is making better /
capital employed (12%) is better more profitable use of
employed than Gee plc (9%) (1) available capital employed
(ROCE) than Gee plc (1)
Gearing Eff plc has high/worse This indicates a high
gearing (52%) compared reliance by Eff plc on
to Gee plc (39%) (1) external borrowing and
may make future
borrowing more difficult to
arrange (1)
Interest Gee plc interest cover This indicates that Eff plc is
cover (2.8 times) is better than more vulnerable to
Eff plc (2.4 times) (1) increased finance costs.
(1)

Dividend Gee plc dividend cover This suggests that Gee plc
cover (3.5 times) is better than will be able to retain its
Eff plc (1.9 times) (1) level of dividend even if
there is a fall in profits
(1).

Recommendation:

Despite the higher return on capital employed (ROCE) of Eff

plc, all other ratios suggest that Gee plc is a more secure
investment for Binti’s savings (1).

Award 1 mark for any valid analysis or evaluation

statement that focuses on the opposite company from
the examples given.
(9)

(Total for Question 5 = 20 marks)

TOTAL FOR PAPER = 100 MARKS

ASE20101
17 April 2019