CHAPTER 11 Sample Question € 100 Marks


Cassidy plc has authorised capital of €800,000 divided into 600,000 Ordinary Shares at €1 each and 200,000 9% Preference Shares at €1 each. The following Trial Balance was extracted from its books on 31/12/2012:


€ Vehicles at Cost


Vehicles – Accumulated Dep. on 01/01/2012 Investment Income Buildings at cost


Buildings – Accumulated Dep. on 01/01/2012 Debtors and Creditors 10% Investments


Stock on 01/01/2012 Patent on 01/01/2012 Administration Expenses Purchases and Sales Rental Income


8% Debentures 2015/2016 Distribution Costs


Profit on Sale of Land Bank VAT


Dividends Paid P & L on 01/01/2012


Issued Capital Ordinary Shares Preference Shares


Provision for Bad Debts Debenture Interest Paid Discount


17,000 14,000 3,389,000 3,389,000


The following information is relevant: (i) Stock on 31/12/2012 is €85,000. (ii) The patent was acquired on 01/01/2009 for €80,000. It is being amortised over 8 years in equal installments. The amortisation is to be included in costs of sales.


(iii) Provide for debenture interest due, investment interest due, auditor’s fees €10,000, director’s fees €45,000 and corporation tax €48,000.


(iv) Depreciation is to be provided for on buildings at a rate of 5% Straight Line and is to be allocated 20% on distribution costs and 80% on administration expenses. There was no purchase or sale of buildings during the year. Vehicles are to be depreciated at the rate of 10% of cost.


(v) During the year, land adjacent to the company’s premises which had costs of €70,000 was sold for €120,000. At the end of the year, the company revalued its buildings at €800,000. The company wishes to incorporate this value into this year’s accounts.


(vi) Included in administration expenses is the receipt of €10,000 for patent royalties.


You are required to: (a) Prepare the published Profit and Loss Accounts for the year 31/12/2012 and a Balance Sheet as at that date, in accordance with the Companies Acts and appropriate accounting standards, showing the following notes: 1 Accounting policy note for Tangible Fixed Assets and Stock 2 Operating Profit 3 Interest Payable 4 Dividends 5 Tangible Fixed Assets [85 Marks]


(b) What regulations must an accountant observe when preparing financial statements for publication? [15 Marks]


155 11 250,000


25,000 10,000


700,000 35,000


270,000 250,000 150,000 70,000 50,000


170,000


1,400,000 2,000,000 50,000


240,000 50,000 22,000


250,000 50,000 48,000 30,000


400,000 200,000 27,000


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