Purchased goodwill is calculated as the difference between the fair value of the consideration paid for an acquired business and the total fair value of that business's identifiable assets and liabilities. Leased land and buildings are depreciated in equal annual installments over the periods of the leases with a minimum annual provision of 1% of the cost price or the revalued amounts. The costs of complaints under warranty are set off in the income statement for the year in which the damages are settled.
The majority of the group's freehold and long-term leasehold properties were revalued during year 5 by independent valuers. The book values of the properties were adjusted to the revaluations, and the resulting net profit was allocated to the revaluation reserve.
Cash flow from operating activities
Information on acquisitions (extract)
Cash and cash equivalents
Contingent liabilities
Five-year summary
Operating and Financial Review (extract) CHIEF EXECUTIVE’S REVIEW OF OPERATIONS
Organisation
Strategy
Disposal and recycling
Security and cleaning
FINANCE DIRECTOR’S REVIEW OF THE POSITION OF THE BUSINESS
Profits
Cash flow
Capital expenditure
Taxation
Future development and performance
Directors’ report (extract)
Solutions to numerical and technical questions in Financial Accounting
Application
Yes for everything, except for a rental building, where the risks and benefits are mainly for the owners, not for the users. The letter from the owner of the business, the transaction is between the owner and the bank, is not addressed to the head of the bank, who promises to be with the business. The advantage of using a development The future benefit exists, but is not measurable with an engineer with a high degree of sufficient reliability of knowledge and experience.
Note that the ownership interest at the beginning of the year is entered as a missing item.
ApplicationTest your
It is wise to measure the inventory of goods at cost, rather than at sales price, because valuing at sales price would anticipate a sale that may not occur. This is an essay that demonstrates the student's understanding of the issues in the chapter and thinking about their ability in the context of a variety of user needs. It requires the student to connect the information from Chapter 4 to the ideas from Section 1.5. a) The owner puts cash into the business. Increase^ Increase.
Buy spare parts on credit terms Increase Increase. i) Pay your van garage service bills using cash Abatement^ Abatement*. j) Fill the van with petrol, using the credit account in Local Growth*. garage, to be paid early next month. k) Carry out repairs for cash Increase^ Increase*. l) Carry out repairs with loan terms Increase Increase*. m) Pay wages to an employee Decrease^ Decrease*. n) Owner receives money for personal use Decrease^ Decrease. Items with an asterisk will collectively change the retained earnings which will increase the ownership interest reported on the balance sheet.
Test your understanding
When the 60 items are sold for £1,500, there is an increase in cash assets and an increase in equity reported as revenue. Question C7.1 requires you to show that you have thought about all the material in the first seven chapters of the book. Removal of an asset results in a decrease in ownership through an additional expense of £8,000 in the income statement. one).
Problem solving and evaluation
Have you provided examples of the type of information that would be relevant to the Framework. Income statement (profit and loss account) for the year ended 31 December Year 4. c) There appears to be a gain on disposal because the cash collected is greater than the net book value of the asset. At the end of the year Depreciation of the year Total depreciation Net book value of the asset.
The effect on the accounting equation is that the power of the machine decreases by £1,000, while the power of cash increases by £2,500, so that the ownership interest increases by £1,500 in total. d) The net book value at the end of year 5 is £1,000 and therefore disposal at a scrap value of zero produces an apparent loss of £1,000, which is best described as caused by undervaluation in previous years. The debtor's asset (trade receivable) will be reduced by £154,000 and the ownership interest will be reduced by £154,000 (reported as an expense of bad debt costs). a) The FIFO approach to the issuance of units offered for sale, where: i) the calculation is carried out on the date of sale; And. ii) the calculation is performed at the end of the month, regardless of the date of sale. When the entry was made, it was treated as an increase in the ownership interest and an increase in the debtor's assets.
Then the correct entry must be made, which is a decrease in the ownership share and an increase in the liability to the lessor. The goal of the calculation is to show the cost of the phone used during the year. Assets Liabilities Equity: Profit for the period Date Transactions with security company Cash Security Security costs.
The tax burden reduces the ownership interest and is shown as an expense of £8,000 in the profit and loss account. 6 Telephone bill dated December 26 showing 90 Nothing recorded - this is an expense of the advance rent due for the period January to the following year. The subsidy will initially be recorded as an increase in cash assets and an increase in the liability item on the balance sheet entitled 'deferred income'.
ApplicationApplication
The profit and loss account would show a provision of £8,000 in year 1 and an expense of £8,000. The actual amount of expenditure, as reflected in the question, would be set against the provision on the balance sheet. Date of Income Statement Balance Sheet Actual Cost Provision Repair Cost Provision in total compared to remaining balance before cost provision.
The actual cost in year 3 is £5,000, but there is only £4,500 of provisions left, so an extra £500 must be charged to the income statement as a windfall. Note that the total amount charged to the profit and loss account is £17,500 and the total amount paid for the repair is also £17,500. The accounting items in the income statement are an attempt to allocate expenses based on reconciliation with revenues, but the total must be the same over a three-year period, regardless of the reconciliation approach.
Date of repair Profit and loss costs on a provision basis Profit and loss costs on a provision basis approximate the actual repair amount paid. If the directors decide they want to include the revaluation in the balance sheet, the asset is reported at £380,000. This concerns an increase in the ownership interest and will be reported as a revaluation reserve as part of the total ownership interest.
It is a reduction in the value of the asset and a reduction in the ownership claim. As a precaution, the loss should be reported immediately in the profit and loss account and the recorded book value of the asset should be reduced. Dividend coverage is relatively high, indicating a policy of retaining new assets to finance expansion.
ApplicationProblem solving
Comment: The company has exceeded its annual earnings growth target of 20% in every year for which calculations can be made. The company is likely to be attractive to investors if future prospects resemble the historical trend. If yes, add it back to arrive at: 20 Operating profit before deducting interest and taxes due 137 Is there interest received/receivable or dividends received in this figure.
Taxes paid = tax expense for the period £35 million plus liability at the beginning £7 million less liability at the end. This increases by the cost of the period £39 million and decreases by the accumulated depreciation of vehicles sold £12 million, leaving a balance of £79 million. Turnover in profit and loss account £320 million plus receivables at the beginning of the period £21 million less receivables at the end of the period £23 million.
Purchases = cost of goods sold £143m plus ending inventory £26m less opening inventory. Payment to suppliers and employees = = £149m plus payables at the beginning £13m less payables at the end £18m.
Solutions to numerical and technical questions in Management Accounting
Statement of the production costs of 5,000 golf bags:. a) The use of a machine hour rate is appropriate for Department 1, which is highly dependent on machine hours, but not for Department 2, which is more dependent on labor hours. The end-of-year receivables are calculated as half of the turnover of one month (one twenty-fourth of the total annual turnover if this is evenly spread over the year). Once the production plan has been established, the costs of the various inputs to production can be calculated.
The plan is to maintain sufficient inventory at the end of the period to meet 60% of the next month's production (see T 3). The number of units to be purchased is equal to the planned production for the period, plus the planned stock of raw materials at the end of the period (shown in the opening balance sheet at T 5), minus the planned stock of raw materials at the end of the period. end of the period (calculated in T 8). The direct materials cost of goods sold is based on the materials used in the period's production (all of which, in this example, are sold during the period).
For cash with customers, accounts receivable must be included in the calculation at the beginning and end of the period. When paying cash to suppliers, accounts payable at the beginning and end of the period must be taken into account. The initial inventory of 500 units is paid for at the beginning of month 2, along with one-third of the units needed for month 1 production.
Cash received from customers equals the year's sales plus receivables at the beginning of the year minus receivables at the end of the year. Production overhead budget Year 1 Year 2 Year 3 Year 4. Cash budgets for each of the four years. If so, the budget must be revised to reflect the new price, and the variance for the period will be £8,000 adverse.
One explanation for the negative cost variance could be inefficient work in the production department. So the budgeted cost must be recalculated to 75% of the expected cost and compared to the actual.
