ACCA F7 JUNE 2011 Q2

W1: EQUITY DIVIDEND

NO OF OS: 112,000 X 0.05 = 5,600 OR take the value of share $56,000 x 0.05/0.50 = 5,600

SOCIE Equity shares Optio RR n to conve rt xx RE total

Bal b/f xxx Compre hensive income Dividen

xx 1,400 Xxx Xxx Gain on Profit for revaluati the year on (5,600)

W2: convertible loan note

DCF method: to calculate liability portion Year Cashflow 1 2 3 Int = 2,400 Int= 2,400 Int + principal = 2,400+ 30,000 Discount factor (10%) 0.91 0.83 0.75 Present value 2,184 1,992 24,300

total liability portion28,476 Option to convert1,524 Total proceeds30,000

Liability portion: AC Method Year Liability at I/S (eff int cashflowLiability at start 10%) (8% end nominal)

28,476

2,848

(2,400)

28,924(SOFP )

W3: revaluation of land

cost Revalued to So, profit on revaluation 25,000 30,000 5,000 (DR Land CR RR)

W4: revaluation of property

cost Less: acc dep b/f Carrying amount Revalued to So, profit on revaluation 50,000 (10,000) 40,000 50,000 10,000 (DR PPE CR RR)

W5: depreciation on property

Revalued amount/remaining useful life = 50,000/20 years = 2,500p.a

W6: dep on P & E (RB)

(74,500-24,500) x 20% = 10,000

W7: PPE
Land, revalued Building, revalued Less: dep for the year P & E: Cost Less: Acc dep b/f Less: Dep for the year TOTAL: SOFP 30,000 50,000 (2,500) 74,500 (24,500) (10,000) 117,500

W8: deferred tax

Temporary diff of 27m (include revaluation profit of 15,000) Def tax charge to I/S= 27-15 = 12m x 25% =3m DR I/S CR Prov for def tax 3m Def tax on revaluation, charge to RR = 15m x 25% = 3.75m DR RR CR Prov for def tax 3.75 SOFP NCL: Def tax prov 6.75 CL: Current tax 19.4 RR (15-3.75) 11.25

W9: tax charged to I/S

Tax estimated for current 19,400 year (over) prov from previous yr (800) Increase in def tax(charge to 400 I/s) b/f 2,600 + 400 = 3,000 Tax charge to I/S 19,00 0

W10.closing inventory
Inventory at 4 April 2011 Reversal of transaction between 31 Mar and 4 apr Delivery Sales(cost price 7.8 x100/130) Inventory at 31 march 2011 (FS) DR Inventory 3,300 (+) CR Cost of sales 3,300 (-) 36,000

(2,700) +6,000 39,300

W10: cost of sales

As per TB Depreciation of property 207,750 2,500

Depreciation of P & E 10,000 Inventory adjustement (3,300) (W) Adjusted for I/S 216,950