Faculty of Business and Law
Department of Accounting and Finance
BABSc Honours Degree
Academic Year 201920
Assignment Brief
Financial Reporting ACFI 2307
Accounting Standards and Theory ACFI 2421
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 analyse and interpret typical financial statements in accordance with all relevant regulations and standards.
To analyse and draw appropriate conclusions from both given and prepared data.
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:
The following trial balance relates to Alpaca plc at 30 September 2019:
000
000
Land and Buildings at valuation 110 2018
130,000
Plant at cost
128,000
Accumulated depreciation of plant at 110 2018
32,000
Investment property at valuation 1102018
26,500
Investment income
2,200
Cost of sales
89,200
Distribution costs
11,000
Administrative expenses
12,500
Loan interest paid
6,400
Inventory at 30 September 2019
39,900
Corporation tax overprovided for 2018
400
Trade receivables trade payables
33,100
34,700
Revenue
180,400
Equity shares of 50p each fully paid
60,000
Retained earnings
55,700
8 loan note redeemable 2025
80,000
Revaluation reserve arising from land and buildings
14,000
Deferred tax
11,200
Bank
6,000
476,600
476,600
The following notes are relevant:
Alpaca plc has a policy of revaluing its land and buildings at each year end. The valuation in the trial balance includes a land element of 30 million. The estimated remaining life of the building at that date 1 October 2018 was 20 years. On 30 September 2019, a professional valuer valued the buildings at 92 million, with no change in the value of the land. Depreciation of buildings is charged on a straightline basis and is allocated 60 to cost of sales and 20 each to distribution costs and administrative expenses.
During the year, Alpaca plc manufactured an item of plant that it is using as part of its own operating capacity. The details of its cost, which is included in cost of sales in the trial balance, are:
000
Direct materials cost
6,000
Direct labour cost
4,000
Installation and testing costs
8,000
Directly attributable overheads
6,000
General and administrative overheads
4,500
The manufacture of the plant was completed on 31 March 2019 and the plant was brought into immediate use, but its cost has not yet been capitalised.
All plant is depreciated at 20 per annum time apportioned where relevant using the reducing balance method and charged to cost of sales.
On 1 October 2018, Alpaca plc acquired plant and machinery which had a cost of 50 million. The company traded in partexchanged an old item of plant for a value of 15 million and paid cash of 35 million. The cash transaction has been accounted for in the trial balance above, but the tradein has not yet been recorded. The plant traded in had been bought on 1 April 2016 at a cost of 31,250,000.
The investment property is let at commercial rates to tenants who are not connected to the company in any way. Alpaca plc adopts the fair value model in its accounting treatment of the asset. At 30 September 2019, the property had a value of 28 million.
The Corporation tax account in the trial balance represents the overprovision of the previous years estimate. The estimated Corporation tax liability for the year ended 30 September 2019 is 8.7 million. At 30 September 2019 there were 40 million of taxable temporary differences. The Corporation tax rate is 25.
Required:
PART A TO BE SUBMITTED AS THE ASSIGNMENT FOR ACFI2307 FINANCIAL REPORTING
Prepare for Alpaca plc, a Statement of Profit or Loss for the year ended 30 September 2019 and
A Statement of Financial Position as at 30 September
Note: A Statement of Changes in Equity is NOT required
A schedule of movements in property, plant and equipment for the year ended 30 September 2019
The following ratios have been extracted from industry averages:
Current ratio
1.55
Quick ratio
0.90
Inventory days
85 days
Receivable days
40 days
Payable days
45 days
Calculate the relevant ratios for Alpaca plc and comment on the liquidity position of the company and its management of working capital.
250 words
PART B TO BE SUBMITTED AS THE ASSIGNMENT FOR ACFI2421 ACCOUNTING STANDARDS AND THEORY
Prepare a report for the CEO of Alpaca plc that explains, with reference to appropriate accounting standards, your treatment of the changes in property, plant and equipment for the year ended 30 September 2019.
1,250 words
Submission date
Thursday 30th January 2020.
Assessment Criteria
Part A
Statement of Profit or Loss Financial Position
25
Schedule of Property, Plant and Equipment
10
Ratio calculation and analysis
15
Part B
Format of report
5
Technical knowledge and understanding
40
BibliographyCitationsHarvard referencing
5
100