ACCA FR Question Bank Part 2 questions: 11: Preparation of single company accounts 241

No depreciation has yet been charged on plant and equipment which should be charged to cost
of sales on a straight-line basis over a five-year life (including leased plant). No plant is more
than four years old.
(iv) The investments through profit or loss are those held at 31 March 20X5 (after the sale below).
They are carried at their fair value as at 1 April 20X4, however, they had a fair value of
$6.5 million on 31 March 20X5. During the year an investment which had a carrying amount of
$1.4 million was sold for $1.6 million. Investment income in the trial balance above includes the
profit on the sale of the investment and dividends received during the year.
(v) A provision for current tax for the year ended 31 March 20X5 of $3.5 million is required. The
balance on current tax in the trial balance above represents the under/over provision of the tax
liability for the year ended 31 March 20X4. At 31 March 20X5, the tax base of Clarion’s net
assets was $12 million less than their carrying amounts. The income tax rate of Clarion is 25%.
Required:
(a) Prepare the statement of profit or loss for Clarion for the year ended 31 March 20X5. (10 marks)
(b) Prepare the statement of changes in equity for Clarion for the year ended 31 March 20X5.
(3 marks)
(c) Prepare the statement of financial position for Clarion as at 31 March 20X5. (10 marks)
Notes to the financial statements are not required.
(d) Calculate the basic earnings per share of Clarion for the year ended 31 March 20X5. (3 marks)
(e) Prepare extracts from the statement of cash flows for Clarion for the year ended 31 March 20X5
in respect of cash flows from investing (ignore investment income) and financing activities.
(4 marks)

(Total = 30 marks)

4 QUINCY (Q3, SPECIMEN 2014)

The following trial balance relates to Quincy as at 30 September 20X4.
$000 $000
Revenue (note (a)) 213,500
Cost of sales 136,800
Distribution costs 17,500
Administrative expenses (note (b) 19,000
Loan note interest paid (note (b)) 1,500
Investment income 400
Equity shares of 25 cents each 60,000
6% loan note (note (b)) 25,000
Retained earnings at 1 October 20X3 4,300
Land and buildings at cost (land element $10 million) (note (c)) 50,000
Plant and equipment at cost (note (c)) 83,700
Accumulated depreciation at 1 October 20X3: buildings 8,000
plant and equipment 33,700
Equity financial asset investments (note (d)) 17,000
Inventory at 30 September 20X4 24,800
Trade receivables 28,500
Bank 2,900
Current tax (note (e)) 1,100
Deferred tax (note (e)) 1,200
Trade payables 36,700
382,800 382,800
242 P a r t 2 q u e s t i o n s : 1 1 : P r e p a r a t i o n o f s i n g l e c o m p a n y a c c o u n t s ACCA FR Question Bank

The following notes are relevant.

(a) On 1 October 20X3, Quincy sold one of its products for $10 million (included in revenue in the
trial balance). As part of the sale agreement, Quincy is committed to the ongoing servicing of
this product until 30 September 20X6 (i.e. three years from the date of sale). The value of this
service has been included in the selling price of $10 million. When this type of servicing is
supplied separately, the normal selling price is $960,000 per annum. The normal selling price of
the product (when supplied separately) is $9,120,000.
(b) Quincy issued a $25 million 6% loan on 1 October 20X3. Issue costs were $1 million and these
have been charged to administrative expenses. Interest is paid annually on 30 September each
year. The loan will be redeemed on 30 September 20X6 at a premium which gives an effective
interest rate on the loan of 8%.
(c) Non-current assets:
Quincy had been carrying land and buildings at depreciated cost, but due to a recent rise in
property prices, it decided to revalue its property on 1 October 20X3 to market value.
An independent valuer confirmed the value of the property at $60 million (land element
$12 million) as at that date and the directors accepted this valuation. The property had a
remaining life of 16 years at the date of its revaluation. Quincy will make a transfer from the
revaluation reserve to retained earnings in respect of the realisation of the revaluation. Ignore
deferred tax on the revaluation.
On 1 October 20X3, Quincy had a processing plant installed at a cost of $10 million which is
included in the trial balance figure of plant and equipment at cost. The process the plant performs
will cause immediate contamination of the nearby land. Quincy will have to decontaminate (clean
up) this land at the end of the plant’s ten-year life (straight-line depreciation). The present value
(discounted at a cost of capital of 10% per annum) of the decontamination is $6 million. Quincy
has not made any accounting entries in respect of this cost.
All other plant and equipment is depreciated at 12½% per annum using the reducing balance
method.
No depreciation has yet been charged on any non-current asset for the year ended 30
September 20X4. All depreciation is charged to cost of sales.
Other than referred to above, there were no acquisitions or disposals of non-current assets.
(d) The investments had a fair value of $15.7 million as at 30 September 20X4. There were no
acquisitions or disposals of these investments during the year ended 30 September 20X4.
(e) The balance on current tax represents the under/over provision of the tax liability for the year
ended 30 September 20X3. A provision for income tax for the year ended 30 September 20X4 of
$7.4 million is required. At 30 September 20X4, Quincy had taxable temporary differences of
$5 million requiring a provision for deferred tax. Any deferred tax adjustment should be
reported in profit or loss. The income tax rate of Quincy is 20%.
Required:
(a) Prepare the statement of profit or loss and other comprehensive income for Quincy for the year
ended 30 September 20X4. (12 marks)
(b) Prepare the statement of changes in equity for Quincy for the year ended 30 September 20X4.
(3 marks)
(c) Prepare the statement of financial position of Quincy as at 30 September 20X4. (12 marks)