At the beginning of its financial year on 1 January 2018, Rotate Ltd had a balance on its fixtures & fittings account of €96,400 and a balance on its accumulated depreciation on fixtures & fittings account of €22,600. On 30 September 2018 the

Exam Duration: 3 hours

Instructions

Section A: This question is COMPULSORY

 Section B: Answer any FOUR questions

Section A

This question is compulsory

1

The following trial balance was extracted from the books of M Heather at 31 December 2018:

Additional Information

Inventory at 31 December 2018 was €22,900.

(ii)             At 31 December 2018 a bill for light & heat (administration office) of €325 was due but unpaid.

(iii)           At 31 December 2018 insurance on delivery trucks of €800 had been paid in advance.

During the year €600 spent on servicing delivery trucks was debited to delivery trucks and credited to bank.

(v)                  Depreciation is to be provided for, on all non-current assets on hand at the year end, at the following rates:

Administration office equipment -20% reducing balance;

Delivery trucks -10% straight line.

(vi)                During the year a refund of €600 was received from a trade payable. This was recorded by debiting trade payables and crediting bank.

(vii)             The allowance for receivables at the end of the year is to amount to €1 ,300.

Requirement

(a)  Prepare the Statement of Profit or Loss for the year ended 31 December 2018.

12 marks

(b) Prepare the Statement of Financial Position as at 31 December

2018.                                                                 8 marks

Total: 20 marks

Section B

Answer any FOUR questions from this section

2

(a) At the beginning of its financial year on 1 January 2018, Rotate Ltd had a balance on its fixtures & fittings account of €96,400 and a balance on its accumulated depreciation on fixtures & fittings account of €22,600. On 30 September 2018 the firm sold fixtures for €1 1 ,OOO. These fixtures had been purchased on 1 June 2015 at a cost of €16,000. On the date of purchase, Rotate Ltd spent €200 on transporting the fixtures from the supplier's premises to their own premises. They also spent a fuäher €800 on installing the fixtures.

On the 31 May 2016 repairs costing €400 were carried out on the fixtures.

On 1 July 2016 a new part costing €1 ,000 was added to the fixtures in order to enhance their usefulness.

The firm provides for depreciation on fixtures & fittings at 20% per annum, using the reducing balance method. A full year's depreciation is provided on all fixtures and fittings held at the end of the financial year.

Requirement

Prepare for the year ended 31 December 2018:

(i)              The fixtures and fittings account.

(ii)           The fixtures and fittings depreciation account,

(iii)        The accumulated depreciation — fixtures and fittings account.

(iv)         The fixtures and fittings disposal account.

(You may round your calculations to the nearest unit where appropriate.)

17 marks

(b) Explain why an organisation may choose to use the reducing balance approach rather than the straight line approach to calculate depreciation in respect of a particular asset 3 marks Total: 20 marks

3

(a)'n the context of preparing financial statements, explain what is meant by the accruals concept.     4 marks

(b) G O'Sullivan Ltd owns several rental properties. The company's financial year runs from 1 January to 31 December. The following information relating to rental income is available for the year ended 31 December 2018.

At 1 January 2018: Rental income of €34,600 had been received in advance and rental income of €1 ,600 was due but not yet received

On 30 March 2018: Received €38,200 in rental income

On 29 June 2018:    Received €32, 100 in rental income

On 30 September 2018: Received €30,700 in rental income

At 31 December 2018: Rental income of €2,000 had been received in advance and rental income of €1 1 , 200 was due but not yet received.

Requirement

Prepare the rental income account for the year ended 31 December

2018.                                                                            8 marks

3 continued

(c) G Lane has been trading for several years and prepares accounts each year to 31 December. The business maintains a combined account for motor insurance and servicing expenses. The following motor insurance and servicing cost data relates to the year ended 31

December 2018.

Servicing Costs

On 30 September 2018       Paid €510 in servicing costs

At 31 December 2018 Servicing costs of €410, incurred on 28 December 2018, were due but unpaid.

On 29 December 2018 €9,200 was paid for the half year ended 30 June 2019

Requirement

Prepare the combined motor insurance and servicing costs account for the year ended 31 December 2018. 8 marks

Total: 20 marks

4

The trial balance of Careless Ltd failed to agree on 31 December 2018. The difference was entered in a suspense account. The profit reported in the draft statement of profit or loss was €55,700. Prior to finalising the accounts, the following errors were discovered.

Credit purchases, amounting to €2,450, were completely omitted from the accounting records.

Carriage inwards of €260 was recorded by debiting carriage outwards and crediting bank.

(iii)             An amount of €1700 owed to Tully for goods supplied had been settled on contra against an amount of €2,950 owed by Tully. This had been reflected in the trade receivables ledger and the trade payables ledger, but no entry had been made in the nominal ledger.

(iv)             The total column in the sates day book was undercast by €2,000.

(v)                Discounts allowed of €480 were recorded by crediting discounts allowed and debiting trade payables.

(vi)             The discounts received column in the cash payments book was overcast by €700.

(vii)           A purchase on credit from a trade payable of €1 , 100 was incorrectly entered in the total column of the purchases day book as €1 ,700.

Requirement

(a)Prepare the journal entries for the corrections required to the nominal ledger. You should include a suitable narrative for each general journal entry jn your answer. 15 marks

(b)         Calculate the profit figure that would be reported for Careless Ltd after the appropriate corrections are made. 5 marks Total: 20 marks

5

The following information has been extracted from the records of S

Walsh.

Bank Account - A ril 2019

Bank Statement A ril 2019 Source : Bank

Requirement

(a)          Having confirmed with the bank that all entries in their statement are correct, you are required to:

(i) Calcutate the correct bank account balance.          8 marks (ii) Prepare a reconciliation of the closing balance per the bank statement to the correct bank account balance.     8 marks

(b)         Comment on whether management of an organisation should be concerned if the balance listed on a bank statement differs to the balance listed for the corresponding bank account in the organisation's own accounting records.     4 marks

Total: 20 marks

Question 6

(a)Briefly explain what is meant by each of the following enhancing qualitative characteristics:

(i)                Comparability;

(ii)              Verifiability;

(iii)           Timeliness;

(iv)           Understandability,

6 marks

(b)Discuss THREE arguments made in favour of accounting standards and THREE arguments made against accounting standards.

10 marks

(c) Provide two examples of information which users may require to make economic decisions but which cannot be provided by financial statements.      4 marks Total: 20 marks