7e0a9e8b079a56044d426c27a7ec87971. Statement of cash flows
Rolling Recordz Ltd. Statement of cash flows
£000
Cash flows generated from operating activities
Net cash from/used in operating activities
Cash flows generated from investing activities
Net cash from/used in investing activities
Cash flows generated from financing activities
Net cash from/used in financing activities
Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Reconciliation: Cash generated from operations
£000
Profit before Tax
£000
7e0a9e8b079a56044d426c27a7ec8797
Cash generated from operations
1. Statement of cash flows
7e0a9e8b079a56044d426c27a7ec8797
The adjustments should follow the format:
Adj 1:
DR
CR
Account name
Account name
An explanation as to what the adjustment is
Effect on overall profit
You should work in whole numbers for this requirement
2. a & b Accounting Adjustments
7e0a9e8b079a56044d426c27a7ec8797
2. c Adjusted FS
Statement of profit or loss
Draft figures
31/12/20X0
£000
1
£000
Revenue
7,958
Cost of sales
(5,612)
Gross profit
2,346
Profit on disposal of NCA
Operating expenses
319
(2,052)
Operating profit
613
Investment income
13
Finance cost
(33)
Profit before tax
593
Income tax
(95)
Profit in year
498
2
£000
3
£000
Adjustments
4
5
£000
£000
6
£000
7
£000
8
£000
Final Accounts
31/12/20X0
£000
7e0a9e8b079a56044d426c27a7ec8797
2. c Adjusted FS
Statement of financial position
Draft figures
31/12/20X0
£000
Non current assets
Cost
Accumulated depreciation
2
£000
3
£000
Adjustments
4
£000
537
(221)
316
Current assets
Inventories
Trade receivables
Prepayments
Cash
2,064
48
60
154
Total assets
2,642
Capital and reserves
Share capital (£1 shares)
Share premium
Retained earnings
1
£000
360
57
774
1,191
Non current liabilities
Loans
280
Current liabilities
Trade and other payables
Tax payable
Loan
Accruals
1,010
114
47
0
Total equity and liabilities
2,642
Statement of Changes in Equity
5
£000
6
£000
7
£000
8
£000
Final Accounts
31/12/20X0
£000
7e0a9e8b079a56044d426c27a7ec8797
Share Capital
£000
Balance at 1 January 20X0
Profit in year
Dividends
Bonus issue
Balance at 31 December 20X0
2. c Adjusted FS
Share Premium
Retained Earnings
Total
£000
£000
£000
Accounting
Interim Assessment:
Rolling Recordz Ltd
Ja
Accounting
Interim Assessment: Rolling Recordz Ltd
Contents
Introduction to the Interim Assessment
2
Rolling Recordz background information
3
Interim Assessment tasks
4
Appendix 1 – Draft financial statements and NCA note
5
Appendix 2 – Accounting adjustments
8
1
Accounting Interim Assessment: Rolling Recordz Ltd
Introduction to the Interim Assessment
The Interim Assessment is designed to test some of the core topics from the Accounting
syllabus and consolidate your knowledge, rather than replicate the format of the exam.
This interim assessment is based around a fictional company Rolling Recordz Ltd, who have
approached PwC as the company now requires an audit. You have been provided with some
background information on the client and also an extract from the draft set of financial
statements. The year end is 31 December 20X0.
You will need to address the tasks detailed on page 4. Please use the templates provided for
the tasks. You have been allocated half a day to complete the work, and this should be
sufficient time to complete all elements of the assignment and you should not spend
significantly more than this in doing so. The assignment deadline is detailed in the email you
received. Please ensure that you submit it by the given deadline and as a single PDF file.
During the project you can use any resources which you feel would be appropriate, including
your existing study resources.
The tasks, which you submit, should be your own work. Whilst you can discuss small
elements of the Interim Assessment with your colleagues, this assignment is an individual
piece of work. Plagiarism is a breach of ethical principles and any instances noted will be
taken seriously. Plagiarism will be reported to and investigated by PwC. DO NOT share these
questions/answers with any fellow students.
Your assignment will be marked by your PLA and returned to you on MyKaplan. Please take
the time to review your marked assignment and discuss anything you are unsure of with your
PLA.
2
Accounting Interim Assessment: Rolling Recordz Ltd
Background information: Rolling Recordz Limited
A new client, Peter O’Donnell, has approached the firm as his company, Rolling Recordz Ltd,
requires some assistance.
Rolling Recordz Ltd trades online and sells CDs, vinyl and cassettes to customers all over the
world. The company has been doing well in recent years, despite the demand for online music
growing, and expects revenues to continue to grow as vinyl records make a comeback and
cassettes are expected to re-gain popularity.
Up until recently, Peter’s friend was the Financial Director and looked after all of the
accounting issues. By his own admission Peter just checked that it was profitable and cash
positive.
Peter has recently taken a more professional attitude to the financial side of the business. On
1 April 20X0 he employed a new accountant, Jayne, to take over looking after the finances on
a part time basis. Jayne is settling in well but there are still some transactions and year-end
adjustments to be posted before the latest accounts are finalised.
Peter feels that now is the time to gain a better understanding of how the accounts work
while the new accountant is settling in. Therefore, he has requested some assistance in
advance of a meeting he has with the bank manager. At the meeting, Peter hopes to discuss
borrowing some more money as he wishes to explore the possibility of opening a retail outlet.
3
Accounting Interim Assessment: Rolling Recordz Ltd
Interim Assessment tasks
1. Peter has requested that a statement of cash flow is produced based on the draft
accounts located in appendix 1. He needs this information in advance of the meeting
with his bank manager next week. Please use the template provided.
2. Jayne has identified some transactions that have yet to be recorded in the draft
accounts (see appendix 2).
a) Draft the journals required to process the transactions. For each adjustment,
please provide a simple rationale for Peter. Remember he is not an accounting
specialist soensure that you use appropriate language in the explanation. The
journals should be drafted to the nearest £1.
b) Make a note of the effect on the accounting profit of each journal.
c) Re-draft the statement of profit or loss and statement of financial position taking
the journals into account (work to the nearest £000). Also produce a statement of
changes in equity. Please use the template provided.
Notes:
1. Assume today’s date is 31 March 20X1.
2. All Rolling Recordz Ltd transactions are in pound sterling (£).
3. Ignore VAT.
4
Accounting Interim Assessment: Rolling Recordz Ltd
Appendix 1: Draft financial statements and NCA note
Rolling Recordz Limited
Statement of profit or loss for period ended 31 December 20X0
31/12/20X0
£000
31/12/20W9
£000
Revenue
7,958
6,777
Cost of sales
(5,612)
(4,740)
Gross profit
2,346
2,037
Profit on disposal of NCA
319
333
Operating expenses
(2,052)
(1,702)
Operating profit
613
668
Investment income
13
10
Finance cost
(33)
(58)
Profit before tax
593
620
Income tax
(95)
(90)
Profit in year
498
530
5
Accounting Interim Assessment: Rolling Recordz Ltd
Rolling Recordz Limited
Statement of financial position as at 31 December 20X0
31/12/20X0
£000
31/12/20W9
£000
537
(221)
316
695
(227)
468
Current assets
Inventories
Trade receivables
Prepayments
Cash
Total current assets
2,064
48
60
154
2,326
1,716
54
48
138
1,956
Total assets
2,642
2,424
360
57
774
1,191
360
57
463
880
Non-current liabilities
Loans
280
525
Current liabilities
Trade and other payables
Tax payable
Loan
Total current liabilities
1,010
114
47
1,171
883
89
47
1,019
Total equity and liabilities
2,642
2,424
Non-current assets
Cost
Accumulated depreciation
Capital and reserves
Share capital (£1 shares)
Share premium
Retained earnings
Notes
1.
2.
3.
4.
6
Total depreciation charge £60,000.
Trade and other payables do not include any interest payable.
A dividend was paid in the year.
In the year ended 20X0, two non-current assets were disposed of. A warehouse (original cost
£225,000 and accumulated depreciation of £56,000) was sold for £488,000. A delivery van
(cost £19,000 and accumulated depreciation of £10,000) was part exchanged for a new van
with a cost of £13,000. With the part exchange, only £4,000 cash was paid for the new van.
Accounting Interim Assessment: Rolling Recordz Ltd
Non-current asset note
Buildings
Plant &
machinery
£000
Cost
Brought forward
Additions
Disposals
Carried forward
Accumulated
depreciation
Brought forward
Charge for the year
Disposals
Carried forward
Carrying amount as at
31 Dec 20X0
Carrying amount as at
31 Dec 20W9
7
Motor
vehicles
Total
£000
Fixtures
&
fittings
£000
£000
£000
474
(225)
249
36
36
106
73
179
79
13
(19)
73
695
86
(244)
537
85
4
(56)
33
14
5
19
78
39
117
50
12
(10)
52
227
60
(66)
221
216
17
62
21
316
389
22
28
29
468
Accounting Interim Assessment: Rolling Recordz Ltd
Appendix 2: Accounting adjustments
Jayne’s notes
1.
Depreciation has been calculated on all motor vehicles except the van purchased on 1 July
(cost £13,000).
2.
Warehouse rent of £325,000 was paid in September, covering the year to 30 September
20X1.
3.
One customer has declared bankruptcy during the year. The outstanding balance of £25,000
needs to be written off.
4.
There was an allowance for doubtful debts of £8,000 in the prior year. At the current year
end, an allowance of £7,000 is believed necessary.
5.
Inventory is currently valued at cost but a recent review of high risk inventory has
highlighted that within this is a batch of 2000 CDs which were purchased at £5 each. It was
later discovered that the cases for these CDs are damaged, reducing their resale value to
£1.50 each.
6.
Rolling Recordz offer a 10% discount for payment within 14 days. A customer paid £9,000
having taken this discount. Rolling Recordz had not expected prompt payment from this
customer when they made the original sale. The only entry made on receipt was:
Dr Cash £9,000
Cr Receivables £9,000
7.
On 30 June 2020, Rolling Recordz made a 1 for 3 bonus share issue. This has not yet been
recognised in the financial statements. Rolling Recordz’ policy is to maximise retained
earnings where possible.
8.
There is an update on the corporation tax. It’s now expected that the company owes HMRC
£110,000 for the year ended 31 December 20X0.
Depreciation info
Buildings – 50 years straight line
Motor vehicles – 5 years straight line
Fixtures and fittings – 4 years straight line
Plant and machinery – 15% reducing balance
All depreciation is charged to operating expenses except plant and machinery which is charged to
cost of sales.
8
Accounting Interim Assessment: Rolling Recordz Ltd
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