Introductory Financial © UNIVERSITY OF LEEDS Accounting

Module Title: Introductory Financial © UNIVERSITY OF LEEDS

Accounting

Leeds University Business School       Semester One 2020/2021

Exam information:

 

• There are 7 pages to this exam.
• There will be 48 hours to complete this exam. We anticipate that this exam should take students approximately 2-3 hours to complete.
• This exam paper contains three
• Answer all three
• If there is a word limit for the question, then it is noted at the end of the question.
• There are 100 marks available in total. The number of marks for each question is shown.
• It is recommended that you allow a minimum of 30 minutes to upload/submit your work.

The deadline date for this assessment is 14:00:00 on Saturday 16^th January 2021 (UK time).

An electronic copy of your completed answers must be submitted to the exam submission area within the module resource on the Blackboard MINERVA website no later than the date and time stated above.

Faxed, emailed or hard copies of your exam answers will not be accepted.

Late submissions will not be accepted.

Failure to meet this deadline will result in you being marked as absent from this assessment.

Questions during your exam

If you have a question about this examination paper during the exam, please direct all queries to the assessment team on LUBSassessment@leeds.ac.uk between the hours of 9am – 5pm (UK Time), Monday to Friday.  All questions should go through this route.  Do not contact your module leader directly.

 

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Submission

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Word limit

You are required to adhere to the word limit specified and state an accurate word count on the cover page of your assignment.  Your declared word count must be accurate, and should not mislead. Making a fraudulent statement concerning the work submitted for assessment could be considered academic malpractice and investigated as such.  If the amount of work submitted is higher than that specified by the word limit or that declared on your word count, this may be reflected in the mark awarded and noted through individual feedback given to you Question 1

You are helping Agned Ltd to prepare their accounts for the year ended 31 December 20X3. The following Trial Balance has been provided:

 

	Dr	Cr
	£000	£000
Inventories at 1 January 20X3	545
Trade receivables	730
Trade payables		600
Share capital: £1 shares		1,500
Share premium		750
8% debenture loans repayable 20X8		1,200
Retained profits at 1 January 20X3		190
Printing and stationery	750
Provision for doubtful debts		40
Wages and salaries	890
Delivery costs	95
Purchases	3,350
Sales revenue		7,900
Cash at bank	51
Rent and rates	320
Electricity	55
Loan interest paid	48
Property at cost	3,000
Property accumulated depreciation at 1 January 20X3		90
Fixtures and fittings at cost	1,500
Fixtures and fittings accumulated depreciation at 1 January 20X3		600
Plant and machinery at cost	2,800
Plant and machinery accumulated depreciation at 1 January 20X3		1,264
Total	14,134	14,134

 

The following additional information is now available:

1. Closing inventory at 31 December 20X3 was £910,000.
2. The rent and rates expense includes a rent payment of £144,000 for the period 1 April 20X3 to 31 March 20X4. iii. An electricity invoice for the 3 months ended 31 January 20X4 for £18,000 was received on 2^nd January 20X4.
3. Bad debts of £30,000 are to be written off.
4. The provision for doubtful debts is to be adjusted to be 5% of trade receivables, after writing off bad debts.

 

1. Depreciation is to be charged for the year as follows:
   • Property 2% per annum straight-line
   • Fixtures and fittings 20% per annum straight-line
   • Plant and machinery 25% per annum reducing balance vii. The second instalment of the loan interest on debentures is outstanding at the year end.

viii.     Corporation tax due to the tax authorities of £615,000 is to be accounted for.

 

Requirement:

1. Prepare an income statement for Agned Ltd for the year ended 31 December 20X3, and a statement of financial position (balance sheet) at that date, using all the information available. (The statements need not be in a form suitable for publication but should follow good presentation formats).

(33 marks)

1. Identify and explain two differences between the financial statements of a sole proprietor and the financial statements of a limited company. (Word count guidance:

300 – 400 words).

(8 marks)

(Total 41 marks)

Question 2

The financial statements of Mog plc for 20X4 and 20X3 are as follows:

 

Income Statements for Mog plc for the periods ended 31 December 20X4 and 20X3

		20X4		20X3
		£000		£000
Revenue		55,872		48,744

Cost of sales

Gross profit

Administrative expenses

Operating profit

Finance costs      (878)               (1,008)

Profit before tax	2,160		3,242
Taxation	(432)		(650)

Profit after tax

Dividends proposed and paid

                                               

Notes:      

1. Administrative expenses includes:              

£000               £000 Depreciation        2,670             4,495

Directors remuneration   450                 380

Auditors fees       150                 130

           

2. Interest paid is analysed as follows:              

£000               £000

Interest payable on bank loan   878                 1,008

 

Statements of Financial Position for Mog plc as at 31 December 20X4 and 20X3

        20X4               20X3

                                 

ASSETS     £000               £000

Non-current assets (net book value)                                

Land and buildings           11,600                        11,600

Plant and machinery         7,820             10,490

19,420                     22,090

           

Current assets                  

Inventory    4,320              7,800

Trade receivables 12,100                        7,100

Bank           5,480              4,402

        21,900                     19,302

           

TOTAL ASSETS   41,320                        41,392 

                       

EQUITY AND LIABILITIES                     

Equity                     

Equity share capital (£0.50 ordinary shares)     3,000              3,000

Share premium      900                 900

Retained earnings             15,720                        14,292

19,620                     18,192

           

Non-current liabilities                    

Bank loan

Current liabilities

Trade payables

TOTAL EQUITY AND LIABILITIES

Requirement:

4. Using ten key ratios of your choice, analyse and discuss the financial performance of Mog Plc as an investment prospect during the two years of 20X3 and 20X4. (Ratios should be rounded to one decimal place). (Word count guidance: 500 – 600 words).

(30 marks)

1. Identify two pieces of information, other than the information contained in the financial statements of Mog Plc, which would enable you to prepare a more thorough analysis of the company’s performance. For each additional piece of information, explain why it would be useful for your analysis. (Word count guidance: 200 – 250 words).

(6 marks)

(Total 36 marks)

           

Question 3

The Cash Flow Statement for Manadi Plc for the year ended 31 December 20X8 is as follows:

 

	£m
Cash flows from operating activities
Cash generated from operations (see note below)	1,036
Finance costs paid	(80)
Tax paid	(296)

Net cash from operating activities   

Cash flows from investing activities
Purchase of property, plant and equipment	(524)
Proceeds from sales of property, plant and equipment	80
Interest received	40

Net cash used in investing activities            (404) 

Cash flows from financing activities
Issue of long-term interest-bearing borrowings	400
Dividends paid	(280)

Net increase in cash and cash equivalents	376
Cash and cash equivalents at start of period	160

Net cash used in financing activities            120 

Cash and cash equivalents at end of period         

Note: Reconciliation of profit before tax to cash generated from operations
	£m
Profit before tax	640
Finance cost	80
Investment income	(40)
Depreciation charge	380
Loss on sale of property, plant and equipment	24
Decrease in inventories (£496m – £480m)	16
Increase in trade and other receivables (£584m – £320m)	(264)
Increase in payables (£824m – £624m)	200

Cash generated from operations            1,036  Required:

1. Analyse the statement of cash flows of Manadi plc for the year ended 31 December

20X8 and discuss the company’s cash management over the year. (Word count guidance: 400 – 500 words).

 

(13 marks)

1. Explain the purpose of a statement of cash flows and discuss why a statement of cash flows is useful for a business. (Word count guidance: 300 – 400 words).

(10 marks)

(Total 23 marks)

End