Faculty of Business and Law Department of Accounting and Finance



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BA/BSc Honours Degree

Academic Year 2020/2021


Assignment Brief


Financial Reporting (ACFI 2307)




Assessment Learning Outcomes

Following completion of this assignment, students should be able to demonstrate the following:

  • The ability to apply numeracy skills, including the ability to manipulate financial and other numerical data.
  • To appraise the impact of the regulatory framework on single entity companies.
  • To apply selected accounting standards and discuss their impact upon modern business practice.
  • To discuss the regulatory framework within which accounting operates.
  • To demonstrate the ability to communicate, including the ability to present quantitative and qualitative information together with analysis, argument and commentary in a form appropriate to the intended audience.



Assignment Question:

Mickledore plc was established in 2005 and manufactures windows and doors.

The following draft trial balance has been produced for the year ended 31 March 2021.


  £000 £000
Revenue   25,920
Dividends received from non-current asset investments   52
Cost of sales 12,510  
Distribution costs 3,290  
Administrative expenses 2,500  
Finance Costs 277  
Interim dividend paid 80  
Freehold land 2,790  
Freehold buildings 6,200  
Leasehold building 1,200  
Plant and machinery 5,429  
Furniture and fittings 3,840  
Provisions for depreciation:    
   Freehold buildings   1,240
   Plant and machinery   1,220
Furniture and fittings   1,080
Non-current asset investments (at cost) 940  
Closing inventory 2,016  
Trade receivables/payables 1,338 834
Bank account   240
Underprovision for corporation tax in previous year 6  
Share capital (50p ordinary shares)   4,000
Share premium account   320
Loan stock (redeemable 2030)   2,750
Deferred tax account   650
Retained earnings           – 4,110
  42,416 42,416


The following notes are relevant:

  • Depreciation for the year has not been provided. The depreciation policy is as follows:


Leasehold buildings Straight line over the period of the lease, charged to cost of sales
Plant and machinery 20% reducing balance, charged to cost of sales
Furniture and fittings 25% reducing balance, charged to administrative expenses


The company’s depreciation policy is to charge a full year in the     accounting year of acquisition of the asset, but none in the year of        disposal.

  • On 1 April 2020 the freehold buildings were valued at a figure of £6,800,000. The directors wish to incorporate this figure into the accounts. The buildings have an estimated remaining life of 40 years. Depreciation of buildings is charged to cost of sales.


  • Plant and machinery bought on 30 September 2018 and costing £100,000 was sold on 31 August 2020 for £48,000. No adjustment for this sale has been made and the sale proceeds have been included in revenue in the trial balance.



  • The leasehold building was acquired on 6 July 2020. The lease is for a period of 30 years.


  • During the year, a research and development department was established, incurring costs to the year-end of £770,000, including £180,000 for specialised machinery (bought on 11 January 2021) . The whole of this expenditure is included in cost of sales.  The directors of the company estimate that £450,000 of the expenditure relates to the development of a new window frame that will be launched later in 2021 and the remaining expense relates to pure research.  It is confidently expected that the new product will earn substantial profits.


  • On 1 September 2020, Mickledore plc closed a division of the company. The division’s results from 1 April 2020 to the date of closure, which are included in the figures in the trial balance were:


Revenue 1,985
Cost of sales 2,380


The directors of the company decided at a board meeting to dispose of the plant and machinery used by the discontinued division and started actions to locate a buyer.  The plant had a carrying value at 1 April 2020 of £420,000, made up of a cost of £820,000 and accumulated depreciation of £400,000.  The plant is in short supply, so the company is confident that the asset will be sold quickly.  The current market value of the plant is £350,000 and it will cost £8,000 to dismantle the machinery to make it available to the purchaser.






  • The inventory of Mickledore plc was not counted until 6 April 2021 due to operational reasons. At this date its value was £2,016,000 which is included in the trial balance.  Between 31 March 2021 and 6 April 2021 the company received a delivery of goods at a cost of £150,000 and made sales of £400,000 at a mark-up on cost of 25%.  Neither the goods delivered nor the sales made in this period were included in Mickledore plc’s cost of sales or revenue in the trial balance.


  • The inventory at 31 March 2021 includes £200,000 of slow-moving goods. Mickledore plc is trying to sell these to another company, but has not been successful in obtaining a reasonable offer. The best price it has been offered is £160,000.


  • Corporation tax is to be provided at a rate of 20% of the net profit on continuing activities as shown in the statement of profit or loss. The company also accounts for deferred taxation in accordance with IAS12.  At 31 March 2021 the difference between the carrying amounts of the net assets of Mickledore plc and their (lower) tax base was £3,175,000.







  1. Prepare for Mickledore plc, a Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 March 2021
  2. A Statement of Financial Position as at 31March 2021 and

(Note: A Statement of Changes in Equity is NOT required)










Prepare a report for the CEO of Mickledore plc that explains, with reference to appropriate accounting standards, your treatment of the accounting adjustments for the year ended 31 March 2021.


(1,250 words)


Submission date

Thursday 28th January 2021.



Assessment Criteria %
Part A  
Statement of Profit or Loss/ Financial Position 50
Part B  
Format of report 5
Technical knowledge and understanding 40
Bibliography/Citations/Harvard referencing 5


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