Fundamentals of Financial Reporting

Topics: Balance sheet, Debt, Depreciation Pages: 4 (996 words) Published: August 14, 2012

Two Hours Answer Sheet to be provided



25 January 2011 09:45 – 11:45

Attempt ALL questions in SECTION A (WITHHELD) (Enter your answers for this section on the multiple choice sheet provided) And attempt the COMPULSORY question in SECTION B And attempt the COMPULSORY question in SECTION C

Electronic calculators may be used, provided they cannot store text


Page 1 of 5


Section A (25 marks in total) Attempt ALL questions Questions 1 – 5 are worth 1 mark each Questions 6 – 15 are worth 2 marks each


PTO Page 2 of 5


Section B (50 marks) This question is COMPULSORY

16. Dreams Ltd Brian Lara owns a retail shop for sports equipments. The business is incorporated under the name of Dreams Ltd. As the business is small, a local accounting firm is employed to prepare its accounts after the end of the accounting period from information Brian supplies. You work for this firm as an intern and have been asked to prepare a first draft of the accounts for Dreams Ltd for the year ending 31st December 2010. A list of opening balances at 1st January 2010 is set out below: £ Premises at cost Shop premises: accumulated depreciation Fixtures and fittings: cost Fixtures and fittings: accumulated depreciation Inventories at cost Trade receivables Allowance against bad and doubtful debts Prepaid insurance Trade payables Accruals Bank Bank loan Share capital: £1 ordinary shares Retained profits Further information a. The shop premises were acquired under a 25 year lease on 1st January 2008 and are being depreciated to a zero residual value. b. Depreciation is provided on a straight line basis for the shop premises. Furniture and Fixtures are depreciated at a rate of 20% per annum using the reducing balance method. c. Brian pays insurance for the shop premises annually on October 1 to cover the twelve month period from that date. This is...
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