Club_Accounts

2004 6. Club Accounts Included among the assets and liabilities of the Green Glen Golf Club on 1/1/2003 were the following: Clubhouse & course €740,000, Bar stock €3,800, Equipment (at cost) €28,600, Life membership €36,000, Bar debtors €155, Bar creditors €2,450, Subscriptions received in advance €1,800, 6%Government investments €40,000, Investment income due €150, Levy reserve fund €60,000 and Wages due €2,400. The Club Treasurer has supplied the following account of the Club’s activities during the year ended 31/12/2003: Receipts € Payments € Bank Current Account 4,440 Bar purchases 80,500 Investment income 1,450 Sundry expenses 185,600 Entrance fees 17,000 Catering costs 4,460 Catering receipts 6,650 Equipment 44,500 Annual sponsorship 33,000 Coaching lessons 4,650 Subscriptions 254,200 Repayment of €30,000 loan on 31/12/2003 Bar receipts 112,660 together with 1¼ years’ interest 34,500 Transfer to Building Society 31/12/2003 70,000 _______ Balance 5,190 €429,400 €429,400 You are given the following additional information and instructions: 1. Bar stock on 31/12/2003 was €4,300. 2. Equipment owned on 31/12/2003 is to be depreciated at the rate of 20% of cost. 3. Clubhouse and course to be depreciated by 2% of cost. 4. Bar debtors and bar creditors on 31/12/2003 were €110 and €2,770 respectively. 5. Subscriptions include: 2 life memberships of €6,000 each. Subscriptions for 2004 amounting to €2,400. Levy for 2003 of €200 on 300 members. Levy of €200 on 8 members for 2002. 6. Life membership was to be written off over a 12 year period commencing in 2003. You are required to: (a) Show the Club’s accumulated fund (capital) on 1/1/2003. (30) (b) Show the Income and Expenditure Account for the year ended 31/12/2003. (35) (c) Show the Club’s Balance Sheet on 31/12/2003. (20) (d) Indicate the points you, as treasurer, might make if the members at the AGM of the club proposed to reduce the annual subscription by 20%. (15) (100 marks) 4. Cash Flow Statement The following are the balance sheets of Creation Plc as at 31/12/2002 and 31/12/2003, together with an abridged profit and loss account for the year ended 31/12/2003: Abridged Profit and Loss Account for the year ended 31/12/2003 € Operating profit 150,600 Interest for year (10,600) Profit before taxation 140,000 Taxation for year (47,000) Profit after taxation 93,000 Dividends - Interim 23,000 - Proposed 48,000 (71,000) Retained profits for the year 22,000 Retained profits on 1/1/2003 189,000 Retained profits on 31/12/2003 211,000 Balance Sheets as at 31/12/2003 31/12/2002 Fixed Assets € € € € Land and buildings at cost 800,000 725,000 Less accumulated depreciation (75,000) 725,000 (60,000) 665,000 Machinery at cost 380,000 450,000 Less accumulated depreciation (190,000) 190,000 (170,000) 280,000 915,000 945,000 Financial Assets Quoted investments 120,000 90,000 Current Assets Stock 225,000 208,000 Debtors 212,000 184,000 Bank − 12,000 Cash 3,000 1,000 440,000 405,000 Less Creditors: amounts falling due within 1 year Trade creditors 253,000 230,000 Interest due 1,400 − Taxation 51,000 44,000 Dividends 48,000 37,000 Bank 8,600 (362,000) (311,000) Net Current Assets 78,000 94,000 1,113,000 1,129,000 Financed by Creditors: amounts falling due after more than 1 year 8% Debentures 50,000 160,000 Capital and Reserves €1 Ordinary shares 840,000 780,000 Share premium 12,000 ─ Profit and loss account 211,000 1,063,000 189,000 969,000 1,113,000 1,129,000 The following information is also available: 1 There were no disposals of buildings during the year but new buildings were acquired. 2 There were no purchases of machinery during the year. Machinery was disposed of or €24,000. 3 Depreciation charged for the year on machinery in arriving at the operating profit was €55,000. You are required to: (a) Reconcile the operating profit to net cash inflow from operating activities (20) (b) Prepare the cash flow statement of Creation Plc for the year ended 31/12/2003. (30) (c) Explain why profit does not always mean a corresponding increase in cash and list two non cash items. (10) (60 marks) 2005 3. Depreciation of Fixed Assets Ace Haulage Ltd. prepares its final accounts to 31st December each year. The company’s policy is to depreciate its vehicles at the rate of 15% of cost per annum calculated from the date of purchase to the date of disposal and to accumulate this depreciation in a Provision for Depreciation Account. On 1/1/2003, Ace Haulage Ltd. owned the following vehicles: No. 1 purchased on 1/1/1999 for €70,000 No. 2 purchased on 1/8/2000 for €80,000 No. 3 purchased on 1/4/2001 for €88,000 On 1/5/2003, Vehicle No. 2 was crashed and traded in against a new vehicle costing €90,000. The company received compensation to the value of €30,000 and the cheque paid for the new vehicle was €75,000. On 1/7/2004, Vehicle No. 1 was traded in for €24,000 against a new vehicle costing €95,000. Vehicle No. 1 had a refrigeration unit fitted on the 1/1/2001 costing €20,000. This refrigeration unit was depreciated at the rate of 30% of cost for the first two years and thereafter at the rate of 15% of cost per annum. You are required to show, with workings, for each of the two years 2003 and 2004: (a) The Vehicles Account. (6) (b) The Vehicle Disposal Account. (16) (c) The Provision for Depreciation Account. (32) (d) What factors are taken into account in arriving at the annual depreciation charge. (6) (60 marks) 4. Service Firm The following were included in the assets and liabilities of M. Casey, a dentist, on 1/1/2004:Surgery €120,000; Equipment €60,000; Motor Car €24,000; Stock of Dental Materials €5,400; Owed from Medical Insurance Scheme €5,700; Creditors for Dental Materials €3,200; 5% Investments €80,000; Fees due from Private Patients €2,100; Capital €219,160. The following is a Receipts and Payments Account for the year ended 31/12/2004: Jan. 1 Balance at Bank 6,760 Dental Materials 14,000 Receipts from Private Patients 96,000 Telephone and Postage 3,100 Investment Income 3,600 Wages of Receptionist 15,000 Medical Insurance Scheme 23,540 Repayment of €40,000 Sale of Equipment (cost €18,000) 9,000 loan on 1/5/2004 with 3 years interest 43,600 Equipment 22,000 Light and Heat 4,000 Insurance 2,360 Technician’s Fees 13,000 Drawings 18,500 Dec. 31 Balance at Bank 3,340 138,900 138,900 The following information and instructions are to be taken into account: (i) Stock of Dental Materials on 31/12/2004 was €4,900. (ii) 70% of the Light and Heat and the Telephone and Postage relate to the dental practice with the remainder for personal use. (iii) Depreciate fixed assets on 31/12/2004 as follows: Equipment 20% of cost. Surgery 2% of cost. Motor Car 20% of cost. Note: Fixed assets are given at cost and depreciation on them has been accumulated for 2 years to 31/12/2003. There is no depreciation on Equipment sold in the year of disposal. (iv) Amounts due from Medical Insurance Scheme and Private Patients are €4,800 and €1,400 respectively. (v) Creditors for Dental Materials on 31/12/2004 amounted to €3,500. You are required to prepare: (a) An Income and Expenditure Account for the year ended 31/12/2004. (35) (b) A Balance Sheet as at 31/12/2004. (25) Incomplete Records On 1/1/2004, J. Connolly purchased a business for €195,000 consisting of the following tangible assets and liabilities: Premises €162,000; Stock €15,200; Debtors €17,000; 3 months premises Insurance prepaid €860; Trade Creditors €18,700 and Wages due €1,700. During 2004 Connolly did not keep a full set of accounts but was able to supply the following information on 31/12/2004. Cash Payments: Lodgements €96,000, General Expenses €23,700, Purchases €53,000. Bank Payments: Equipment €22,000, Creditors €33,100, Light and Heat €5,800, Interest €2,325, annual Premises Insurance Premium €6,000, Standing Order for Charitable Organisation €3,200, Vehicle €26,000, Rent for one year €2,400. Bank Lodgements: Debtors €34,000, Cash €96,000, Dividends €3,800. Connolly took goods from stock to the value of €100 and cash €80 per week for household expenses during the year. Connolly borrowed €84,000 on 1/7/2004, part of which was used to purchase an adjoining warehouse costing €70,000. It was agreed that the sum borrowed would be repaid in 12 equal instalments on the 1st June each year. Interest was to be charged at the rate of 10% per annum on the initial sum to be paid monthly at the end of each month. The figure for Rent was in respect of an adjoining building rented by Connolly on 1/10/2004. It was payable in advance and Connolly estimated that ⅓ of the building was used as a private residence and that 20% of the Light and Heat used should also be attributed to the private section of the premises. Included in the assets and liabilities of the firm on 31/12/2004 were: Stock €17,300 (including stock of heating fuel €300), Debtors €18,100, Trade Creditors €15,500, Cash €650, Electricity due €720. You are required to show, with workings, the: (a) Trading and Profit and Loss Accounts for the year ended 31/12/2004. (52) (b) Balance Sheet as at 31/12/2004. (40) (c) What additional information would be available if Connolly’s accounts were prepared using the “double entry” system' (8) 2006 1. Sole Trader – Final Accounts The following trial balance was extracted from the books of K. Kelly on 31/12/2005. € € Buildings (cost €900,000) 855,000 Delivery Vans (cost €130,000) 60,500 6% Investments 1/6/2005 160,000 Patents (incorporating 3 months investment income) 60,600 5% Fixed Mortgage (including increase of €100,000 received on 1/4/2005) 300,000 Debtors and Creditors 76,500 85,500 Purchases and Sales 650,000 980,000 Stock 1/1/2005 65,700 Commission 20,000 Salaries and general expenses (incorporating suspense) 192,500 Provision for Bad Debts 3,900 Discount (net) 3,600 Rent 12,000 Mortgage interest paid for the first 3 months 3,000 Insurance 7,800 V.A.T. 4,300 P.R.S.I. 2,500 Bank 60,800 Drawings 36,000 Capital 735,000 2,187,600 2,187,600 The following information and instructions are to be taken into account: (i) Stock at 31/12/2005 at cost was €72,500. No record had been made in the books for ‘goods in transit’ on 31/12/2005. The invoice for these goods had been received showing the recommended retail selling price of €7,000 which is cost plus 25%. (ii) Provide for depreciation on vans at the annual rate of 15% of cost from the date of purchase to the date of sale. NOTE: On 30/4/2005 a delivery van which cost €35,000 on 31/10/2002 was traded against a new van which cost €41,000. An allowance of €15,000 was made on the old van. The cheque for the net amount of this transaction was entered in the bank account but was incorrectly treated as a purchase of trading stock. These were the only entries made in the books in respect of this transaction. (iii) The suspense figure arises as a result of the posting of an incorrect figure for mortgage interest to the mortgage interest account and discount received €700 entered only in the creditors account. The correct interest was entered in the bank account. (iv) Patents, which incorporate 3 months investment income, are to be written off over a 5 year period, commencing in 2005. (v) Provision to be made for mortgage interest due. (vi) A new warehouse was purchased during the year for €200,000 plus VAT 12.5%. The amount paid to the vendor was entered in the buildings account. No entry was made in the VAT account. (vii) Provide for depreciation on buildings at the rate of 2% of cost per annum. It was decided to revalue the buildings at €1,200,000 on 31/12/2005. (viii) Provision for bad debts to be adjusted to 3% of debtors. You are required to prepare a: (a) Trading and Profit and Loss account, for the year ended 31/12/2005. (75) (b) Balance sheet as at 31/12/2005. (45) Casf flow statement 3. Cash Flow Statement The following are the Balance Sheets of Butler Plc as at 31/12/2004 and 31/12/2005, together with an abridged Profit and Loss account for the year ended 31/12/2005: Abridged Profit and Loss Account for the year ended 31/12/2005 € Operating profit 140,000 Interest for year (8,000) Profit before taxation 132,000 Taxation for year (45,000) Profit after taxation 87,000 Dividends - Interim 21,000 - Proposed 45,000 (66,000) Retained profits for the year 21,000 Retained profits on 1/12/2005 191,000 Retained profits on 31/12/2005 212,000 Balance Sheets as at 31/12/2005 31/12/2004 Fixed Assets € € € € Land and buildings at cost 825,000 750,000 Less accumulated depreciation (95,000) 730,000 (80,000) 670,000 Machinery at cost 400,000 470,000 Less accumulated depreciation (202,000) 198,000 (180,000) 290,000 928,000 960,000 Financial Assets Quoted investments 130,000 100,000 Current Assets Stock 220,000 205,000 Debtors 200,000 190,000 Government securities 12,000 - Bank - 10,000 Cash 2,000 1,000 434,000 406,000 Less Creditors: amounts falling due within 1 year Trade creditors 250,000 228,000 Interest due 1,200 - Taxation 50,000 43,000 Dividends 45,000 34,000 Bank 6,800 - (353,000) (305,000) Net Current Assets 81,000 101,000 1,139,000 1,161,000 Financed by Creditors: amounts falling due after more than 1 year 9% Debentures 75,000 180,000 Capital and Reserves €1 Ordinary shares 830,000 790,000 Share premium 22,000 - Profit and loss account 212,000 1,064,000 191,000 981,000 1,139,000 1,161,000 The following information is also available: 1 There were no disposals of Buildings during the year but new Buildings were acquired. 2 There were no purchases of Machinery during the year. Machinery was disposed of for €35,000. 3 Depreciation charged for the year on Machinery in arriving at the Operating profit was €60,000. You are required to: (a) Prepare the Cash Flow Statement of Butler Plc for the year ended 31/12/2005 including Reconciliation Statement(s). (48) (b) Explain why Cash Flow Statements are prepared. (8) (c) Identify a Non Cash expense and a Non Cash gain. (4)