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Advanced Financial Accounting
Sample Paper 3
2017 / 2018 Questions & Suggested Solutions
Page 2 of 28
NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
be asked and both students and teachers alike are reminded to consult our published syllabus (see
www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2017 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2017.
Page 3 of 28
INSTRUCTIONS TO CANDIDATES
PLEASE READ CAREFULLY
Candidates must indicate clearly whether they are answering the paper in accordance with the law
and practice of Northern Ireland or the Republic of Ireland.
In this examination paper the €/£ symbol may be understood and used by candidates in Northern
Ireland to indicate the UK pound sterling by candidates in the Republic of Ireland to indicate the
Euro.
Answer ALL THREE questions in Section A and TWO of the THREE questions in Section B. If
more than TWO questions is answered in Section B, then only the first TWO questions, in the
order filed, will be corrected.
Candidates should allocate their time carefully. All
workings should be shown.
All figures should be labelled, as appropriate, e.g. €’s, £’s, units etc.
Answers should be illustrated with examples, where appropriate.
Question 1 begins on Page 2 overleaf.
NOTE: This sample paper and solutions have been prepared to reflect the provisions of FRS
102
Page 4 of 28
SECTION A
Answer ALL THREE Questions in this Section
(The total marks for section A will be 60, made up of a theory question of 20 marks, a multiple choice
question of 15 marks and a further question of 25 marks)
QUESTION 1
(i) The Conceptual Framework for Financial Reporting provides a frame of reference that outlines
generally accepted theoretical principles for financial accounting.
(a) Explain briefly the purpose of the Framework. 6 marks
(b) A friend who has not studied accountancy has read the Conceptual Framework and
is confused by some of the terms and definitions discussed within. Prepare a note
setting out your understanding of three of the following four terms:
i. Going concern
ii. Accruals
iii. Asset
iv. Liability
6 marks
(ii) Define “Accounting Policies” and outline the circumstances under which an accounting
policy should be changed.
4 marks
Define “Accounting Estimates”and give examples of three items which are usually the subject
of accounting estimates.
4 marks
Total 20 marks
QUESTION 2
The following multiple choice question consists of TEN parts, each of which is followed by
FOUR possible answers. There is ONLY ONE right answer in each part.
Each part carries 1½ marks.
Requirement
Indicate the right answer to each of the following TEN parts. Total 15 Marks
N.B Candidates should answer this question by ticking the appropriate boxes on the special answer sheet
which is contained within the answer booklet.
Page 5 of 28
QUESTION 2 (cont’d)
BACKGROUND INFORMATION TO PARTS [1] – [5]
The following information relates to ROCK Ltd: £/€
Receivables at 1st
January 2016 ..................................... 60,000 Receivables at 31
st December 2016................................. 80,000
Payables at 1st
January 2016 ......................................... 75,000 Payables at 31
st December 2016..................................... 85,000
Inventory at 1st
January 2016 ........................................ 140,000 Inventory at 31
st December 2016 ................................... 170,000
Sales on credit for the year ended 31st
December 2016 ..... 1,800,000 Cash sales for the year ended 31
st December 2016........... 300,000
Purchases (all on credit) for the year ended 31st
December 2016 ................................................................................. 1,250,000 Bank overdraft at 31
st December 2016 ............................ 60,000
Taxation liability at 31st
December 2016 .......................... 70,000 Accrued expenses at 31
st December 2016........................ 25,000
Prepaid expenses at 31st
December 2016......................... 30,000
[1] The receivable days outstanding at 31st
December 2016 (to the nearest day) was: -
(a) 12 days
(b) 14 days
(c) 16 days
(d) 18 days
[2] The payables days outstanding at 31st
December 2016 (to the nearest day) was: -
(a) 23 days
(b) 24 days
(c) 25 days
(d) 26 days
[3] The current ratio at 31
st December 2016 (assuming no other current assets or liabilities), to two
decimal points, was: -
(a) 1.65 :1
(b) 1.17 :1
(c) 1.04 :1
(d) 0.16 :1
Page 6 of 28
Question 2 cont’d
[4] The inventory turnover (to two decimal places) for the year ended 31st
December 2016 was: -
(a) 8.06 times
(b) 7.87 times
(c) 7.35 times
(d) 1.18 times
[5] The gross profit margin for the year ended 31
st December 2016, to one decimal point was:
(a) 32.2 % (b) 38.6 % (c) 41.9 % (d) 44.3 %
[6] FRS 102 provides that a complete set of Financial Statements comprises the following:
(a) A Statement of Comprehensive Income and a Statement of Financial Position.
(b) A Statement of Comprehensive Income, a Statement of Financial Position and A
statement of Changes in Equity.
(c) A Statement of Comprehensive Income, a Statement of Financial Position, a statement of Changes in Equity and A Statement of Cash Flows. (d) A Statement of Comprehensive Income, A Statement of Financial Position, A
statement of Changes in Equity and A Statement of Cash Flows, and notes to the
Financial Statements.
[7] FRS 102 states that a business should prepare its financial statements on the basis that the business
is a going concern: -
(a) if it is being liquidated
(b) if it has ceased trading
(c) if the directors have no realistic alternative but to liquidate the entity or to cease trading
(d) only if none of the above situations exist
[8] Under the provisions of the Companies Acts there must be shown in a note to the accounts:
(a) the average number of people employed during the year
(b) the number of people employed on the first day of the year
(c) the number of people employed on the last day of the year
(d) the number of new employees employed during the year
Page 7 of 28
Question 2 cont’d
[9] Partners drawings are: -
(a) charged against the partners in their capital accounts
(b) charged against the partners in their current accounts
(c) credited to the partners in their capital accounts
(d) credited to the partners in their current accounts
[10] Payments by a lessee in an operating lease are:-
(a) charged in the lessee’s Statement of Comprehensive Income on the reducing balance
basis
(b) credited in the lessee’s Statement of Comprehensive Income on the reducing balance
basis
(c) charged in the lessee’s Statement of Comprehensive Income on the straight line basis
(d) credited in the lessee’s Statement of Comprehensive Income on the straight line basis
Page 8 of 28
QUESTION 3
CABLE Ltd., is a furniture company with an authorized share capital of
£/€3,000,000, comprised of 6,000,000 ordinary shares of 50 pence/cent each. The following trial:
balance was extracted as at 31st
December 2016
£/€’000 £/€’000
Ordinary share capital.................................................................... 2,200 Share premium account ................................................................. 180 General reserve .............................................................................. 260 Retained earnings balance at 1 January 2016 ................................ 74 8% debenture stock........................................................................ 250 Leasehold premises at cost ............................................................ 3,900 Leasehold premises – accumulated depreciation at 1 January 2016..... 500 Plant and machinery at cost ........................................................... 820 Plant and machinery – accumulated depreciation at 1 January 2016.... 320 Motor vehicles at cost.................................................................... 300 Motor vehicles – accumulated depreciation at 1 January 2016 ........... 80 Receivables.................................................................................... 169 Payables ........................................................................................... 95 Bank............................................................................................... 120 Sales............................................................................................... 4,500 Sales returns..................................................................................... 79 Opening inventory ......................................................................... 180 Purchases ........................................................................................ 2,400 Purchases returns ........................................................................... 160 Administration expenses................................................................ 450 Distribution expenses..................................................................... 340 Bankinterest .................................................................................. 60 Deposit interest received................................................................ 35 Debenture interest.......................................................................... 10 Interim ordinary dividend paid ...................................................... 66
.................................................................................................
8,774 8,774
ADDITIONAL INFORMATION
(1) Goods purchased on 28th
December 2016 for £/€70,000 had not been accounted for or
included in the physical stock count at 31st
December 2016.
(2) Closing inventory, as per the physical stock count at 31st
December 2016 was
£/€220,000.
(3) Training grants of £/€20,000 in respect of training sales staff were due to the company at 31st
December 2016.
Page 9 of 28
QUESTION 3(Cont’d.)
(4) Depreciation is to be charged as follows:
Leasehold premises ........... 2% on cost
Plant and machinery .......... 10% on cost
Motor vehicles................... 20% on cost
Depreciation on leasehold premises and plant and machinery should be included as part of
administration expenses and depreciation of motor vehicles should be included as part of
distribution expenses.
(5) The charge for corporation tax for the year ended 31st
December 2016 is estimated at 50% of
the profit before tax.
(6) A final dividend of 5 pence/cent per share was paid to the ordinary shareholders on 31
December 2016 however this payment has not yet been recorded in the accounts.
(7) Half year debenture interest to be provided for.
Requirement
(a) Prepare, in accordance with FRS 102, the Statement of Comprehensive Income of CABLE Ltd.,
for the year ended 31st
December 2016 in as far as the information provided permits.
N.B. You are NOT required to prepare a Statement of Financial Position or notes to the accounts. You are required to submit workings to show the make-up of the figures in the
Statement of Comprehensive Income.
20 Marks
(b) Prepare a Statement of Changes in Equity for the year ended 31 December 2016.
3 Marks
Presentation: 2 marks
Total: 25 Marks
Page 10 of 28
Premises..................................................... 250,000 50,000 200,000 Plant and machinery .................................. 130,000 65,000 65,000 Furniture and fittings ................................. 25,000 5,000 20,000
405,000 120,000 285,000
Geoff.........................................................
Henry ........................................................ 80,000
70,000
Ian.............................................................
Partners Current Accounts
70,000 220,000
Geoff......................................................... 16,000 Henry ........................................................ (20,000) Ian............................................................. 10,000
6,000 Profit for the year (not yet divided between the partners) 88,000
Current liabilities
Payables....................................................
26,000
Loan from Simon...................................... 13,000 39,000
Total capital and liabilities 353,000
SECTION B
Answer TWO of the THREE questions in this Section QUESTION 4
Geoff, Henry and Ian are in partnership sharing profits and losses in the ratio 4:2:2. The partners
receive a salary of £/€5,000, £/€6,000 and £/€7,000 each and are entitled to interest on the balance on
their capital accounts at 5% per annum. Ian is entitled to a guaranteed share of profits, in addition to his
salary and interest on capital, of £/€6,000 any deficiency to be borne by Geoff and Henry equally.
The following is the draft balance sheet of the partnership as at 31 December 2016 (before the profit for
the year has been divided between the partners).
DRAFT Statement of Financial Position as at 31st
DECEMBER 2016
Cost Accumulated Net Book
Depreciation Amount
£/€ £/€ £/€
Non-current Assets
Current Assets Inventory .................................................. 30,000 Trade receivables...................................... 26,000
Bank.......................................................... 12,000
68,000
................................................................... 353,000
Partners Capital Accounts
Page 11 of 28
QUESTION 4 (Cont’d.)
Adjustment is required in respect of the following items:
(1) Depreciation for the year has not been provided. It should be provided for as follows:
Premises ..................... £/€5,000 Plant and machinery ..... £/€26,000 Furniture and fittings..... £/€5,000
(2) Wages and salaries of £/€14,000 have not been provided for at the year end.
(3) Rent amounting to £/€7,000 has been prepaid at the year end.
Requirement
You are required to prepare:
(a) a statement setting out the adjustments required to the profit for the year arising out of items
(1) to (3) above;
3 Marks
(b) a statement setting out the appropriation of the adjusted profit between the partners;
3 Marks
(c) the current accounts of the partners;
4 Marks
(d) the revised balance sheet after dealing with parts (a) to (c) above.
8 Marks
Presentation: 2 marks
Total: 20 Marks
Page 12 of 28
QUESTION 5
JEWEL Limited, a car rental company, had revenue of £/€4,500,000 and made a net profit before
taxation of £/€350,000 for the year ended 31st
December 2016, as per the draft accounts.
During a review of the draft accounts you ascertain the following:
(1) A customer who owed the company £/€80,000 at 31
st December 2016 has gone into
receivership in January 2017 and is unlikely to be able to pay any part of the debt.
(2) A government grant of £/€50,000 to help meet the cost of wages and salaries to train staff was
treated as deferred income at 31st
December 2016.
(3) Inventory which cost £/€175,000 was found to be damaged and it is estimated that it has a net
realisable value of £/€125,000.
(4) On 6
th January 2017 goods costing £/€60,000 were received which had been ordered from a
supplier on 20th
December 2016.
(5) A customer of the company is suing the company for £/€600,000 damages on the basis that a car
which the customer rented from the company in December 2016 was mechanically deficient and
was the cause of the customer being involved in an accident which resulted in the customer
being badly injured. The company’s lawyers are unsure as to the company liability. The court case
will not take place until after the accounts are approved by the directors.
(6) Wages due to casual workers, who were recruited for the busy Christmas period, of
£/€17,000, were due at 31st
December 2016 and not yet accounted for.
Requirement
(a) Prepare the journal entries to show how each of the above items should be dealt with in the
final accounts for the year ended 31st
December 2016. You should use your understanding of FRS 102 in dealing with each item.
14 marks
(b) Compute the adjusted net profit before taxation for the year ended 31 December 2016
taking into account the adjustments made at [a] above.
4 marks
Presentation: 2 marks Total: 20 Marks
Page 13 of 28
QUESTION 6
The Statement of Comprehensive Income of OLIVE Ltd., for the year ended 31st
December 2016
and the Statement of Financial Position as at 31st
December 2016 (with comparative figures as at 31st
December 2015) are as follows:
Statement of Comprehensive Income for the year ended 31st December 2016
£/€’000 £/€’000
Revenue .................................................................................. 5,100
Less: Cost of goods sold................................................... 3,300
Gross Profit ........................................................................... 1,800
Government grant.............................................................. 10
Less: Expenses
Loss on disposal of Property
Plant and Equipment........................................... 10
Depreciation ................................................................ 120
Other administration expenses........................... 440
Distribution expenses.............................................. 390
(960)
Profit from Operations..................................................... 850
Debenture interest paid .................................................. (60)
Deposit interest received................................................ 20
(40)
Profit before tax .................................................................. 810
Taxation
On profits for the year ............................................. (320)
Underprovided in previous years ...................... (80)
(400)
Total comprehensive income for the year 410
Page 14 of 28
Question 6 cont’d
Statement of Financial Position as at 31ST DECEMBER
2016 2015
£/€’000 £/€’000 £/€’000 £/€’000
Assets
Non current assets
Property, plant and equipment .............. 1,880 1,480
Current assets
Inventories ...................................................... 160 304
Receivables...................................................... 692 520
Bank.................................................................... 596 480
1,448 1,304
Total assets 3,328 2,784
Equity and Liabilities Capital
and reserves
Ordinary share capital................................ 1,100 1,000
Share premium account 100 ‐ Retained profits 970 720
2,170 1,720
Non current liabilities
Debenture stock .............................................. 350 200
Current liabilities
Payables............................................................ 448 384
Taxation............................................................ 320 480
Deferred income (govt grant) ................. 40 ‐
808 864
Total equity and liabilities 3,328 2,784
NOTES to the accounts:
(1) The profit on ordinary activities before taxation has been arrived at after charging:
Auditors remuneration............. 24
Directors remuneration............ 80
Depreciation ................................................... 120
Page 15 of 28
(2) Property plant and equipment:
During the year ended 31st
December 2016, OLIVE Ltd., sold for £/€40,000 an asset which cost it
£/€120,000 in 2013 and which had been depreciated by £/€70,000 at the date of sale. There
were no other sales of property plant and equipment during the year.
(3) A government grant of £/€50,000 relating to plant and equipment purchased during the year was
received.
(4) Dividends paid during the year amounted to £/€160,000.
Requirement
Prepare a Statement of Cash Flow for OLIVE Ltd., for the year ended 31
st December 2016, in accordance
with FRS 102.
18 marks
Presentation: 2 marks
Total: 20 Marks
Page 16 of 28
Accounting Financial Accounting
Sample Paper 3 – Suggested Solutions
NOTE: This sample paper and solutions have been prepared to reflect the provisions of FRS
100 – FRS 102
Page 17 of 28
Solution to question 1
(i)
(a)
The FRC developed the Conceptual Framework to provide guidance for the application of
generally accepted accounting principles to financial transactions. The principles of the
framework form the basis for the development of new accounting standards and the
assessment and revision where necessary of existing ones. The Framework is not an
accounting standard however new standards issued following the publication of the
Framework must be in line with the principles of the Framework. Going forward the
incidents of conflict between the Framework and accounting standards will reduce thus
leading to increased harmonisation in financial accounting regulations. However as the
Framework is not an accounting standard it cannot override the principles of an existing
accounting standard, where a conflict exists the principles as laid out in the standard
must be complied with.
The framework also provides very important definitions which were not previously
defined, including the definitions of such frequently used terms such as asset and
liability. This eliminates the need to provide such definitions in each standard thereby
decreasing the time it takes to develop and publish new standards.
Overall, the Framework promotes a more consistent regulatory environment which
should help not only standard setting bodies but also preparers of financial statements and
users of such financial information.
(b) Definitions
Going concern
Financial statements are normally prepared on the assumption that an entity is a going concern and will continue in operation for the foreseeable future. Foreseeable future is
considered to be twelve months from the date the financial statements are signed. In the event that management decide that it is no longer appropriate to prepare the financial statements on a going concern basis this must be disclosed.
Accruals
Financial statements, with the exception of the cash flow statement, are prepared on the
accruals basis of accounting where transactions are recognised in the period in which they
occur (are earned or accrued) irrespective of when the cash flow arising from these
transactions occurs.
Asset
An asset is a resource controlled by an entity as a result of past events and from which
future economic benefits are expected to flow to the entity. Future economic benefits
represent the potential to contribute to the cash flow of the entity. Examples of assets
include premises, equipment, receivables.
Page 18 of 28
Liability
A liability is a present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow of resources from the entity. Examples of liabilities
include payables, finance lease obligations, accruals.
(ii)
Accounting Policies
FRS 102 defines Accounting Policies as “the specific principles, bases, conventions, rules and
practices applied by an entity in preparing financial statements.”
An entity should change an accounting policy only if the change:
is required by a Standard or an Interpretation, or
results in the financial statements providing reliable and more relevant
information about the effects of transactions, other events or conditions
on the entity’s financial position, financial performance or cash flows.
Accounting Estimates
Accounting estimates involve judgements on the uncertainties inherent in business
activities which cannot be measured with precision but only estimated.
Examples of items may which require accounting estimates are:
Provision for bad and doubtful debts
Inventory obsolescence
Useful life of depreciable assets
Page 19 of 28
Solution to question 2
(1) C (80,000 *365 / 1,800,0000)
(2)
C
(85,000 * 365 / 1,250,000)
(3)
B
(170,000 +80,000+30,000)/(85,000+60,000+70,000+25,000)
(4)
B
(140,000 + 1,250,000 – 170,000) / ((140,000 + 170,000) /2)
(5)
C
(2,100,000 – (140,000 + 1250,000 – 170,000) = 880,000 *100/210,000
(6)
D
(7)
D
(8)
A
(9)
B
(10)
C
Page 20 of 28
Solution to question 3
Cable Ltd.
Statement of Comprehensive Income for the year ended 31 December 2016
£/€’000
Sales Revenue (W.1)
4,421
Cost of sales (W.2)
2,200
Gross profit
2,221
Other Income
20
Distribution costs (W.3)
(400) Administrative expenses (W.4) (610)
1,231
Interest received
35 Interest paid (W.5) (80)
Profit before tax 1,186
Tax expense
(593)
Profit on ordinary activities after tax
593
CABLE Limited
Statement of Changes in Equity for the year ended 31 December 2016
Share
Capita Share
Premiu Retained
earnings Genera
l
Total
£/€'000 £/€'000 £/€'000 £/€'000 £/€'000
As at 1 January 2016
2,200
180
74
260
2,714
Profit for the year 593 593
Ordinary dividends (w.6) (286) (286)
2,200 180 381 260 3,021
Page 21 of 28 AFA Sample Paper 3
Solution to question 3(cont ’ d)
Workings
(1) Sales revenue
£/€’000 £/€’000
Sales per T/B 4,500
Less: sales returns 79
4,421
(2) Cost of sales
Opening inventory 180
Purchases 2,400
Less : purchases returns (160)
2,240
Add : goods purchased on 28/12 70 2,310
2,490
Less : Closing Inventory
Per physical count (220)
Add : not accounted for (70)
(290)
2,200
(3) Distribution expenses
Per T/B
Depreciation : Motor Veh. 60
400
(4) Administrative expenses
Per T/B 450
Add : Depreciation : Premises 78
Plant and Mach. 82
(5) Interest paid
610
Bank overdraft interest 60
Debenture interest Paid 10
Due 10
20
80
Solution to question 3(cont ’ d)
Page 22 of 28 AFA Sample Paper 3
(6) Dividend
£/€’000
Interim dividend per trial balance 66
Final dividend paid 220
Total dividend 286
(7) Other Income
Training Grant receivable 20
Page 23 of 28 AFA Sample Paper 3
Solution to question 4
(a) Statement of adjusted profit for the year ended 31 December 2016
€/£ €/£
Net profit as per draft accounts 88,000
(1) Depreciation:
Leasehold Premises 5,000
Plant and Machinery 26,000
Furniture & Fittings 5,000
(36,000)
(2) Wages owing (14,000)
(3) Rent prepaid 7,000
Adjusted net profit 45,000
(b) Appropriation account for the year ended 31 December 2016
Net profit 45,000
Less:
Partner’s salaries
Geoff 5,000
Henry 6,000
Ian 7,000 (18,000)
Interest on capital Geoff 4,000 Henry 3,500 Ian 3,500 (11,000)
Appropriated as follows:
Geoff 8,000
Less: to meet guarantee (1,000)
Henry 4,000
Less: to meet guarantee (1,000)
Ian 4,000
Add: to meet guarantee 2,000
16,000
7,000
3,000
6,000
16,000
Page 24 of 28 AFA Sample Paper 3
Partners Current Accounts
Geoff Henry Ian Geoff Henry Ian
Balance b/d 20,000 Bal b/d 16,000 10,000
Salaries 5,000 6,000 7,000
Interest on capital 4,000 3,500 3,500
Share of profits 7,000 3,000 6,000 Balance c/d 32,000 26,500 Balance c/d 7,500
32,000 20,000 26,500 32,000 20,000 26,500 Balance b/d 7,500 Balance b/d 32,000 26,500
Solution to Q4 continued overleaf
Page 25 of 28 AFA Sample Paper 3
Non-current assets
€/£ €/£ €/£
Leasehold Premises 250,000 55,000 195,000 Plant and machinery 130,000 91,000 39,000 Furniture & Fittings 25,000 10,000 15,000
405,000 156,000 249,000
Current Assets
Inventory 30,000 Receivables 26,000 Prepaid rent 7,000 Bank 12,000
75,000 324,000
Partners capital accounts Geoff
80,000
Henry 70,000 Ian 70,000
220,000
Partners current accounts
Geoff 32,000 Henry (7,500) Ian 26,500 51,000
Current liabilities Payables
26,000
Loan from Simon 13,000 Accrued wages and salaries 14,000
53,000 324,000
(d)
Statement of Financial Position as at 31 December 2016
Cost Accumulated
NBV Depreciation
Page 26 of 28 AFA Sample Paper 3
(3) Inventory (SOCI) 50,000
Inventory ( SOFP ) 50,000
(4)
Being reduction of inventory from cost to NRV
No adjustment ; a non adjusting event as per FRS 102
Solution to question 5
(a) Journal
Dr. Cr.
£/€ £/€
(1) Irrecoverable Receivable a/c (SOCI) 80,000
Receivable(SOFP) 80,000
Being write off of an irrecoverable receivable
(2) Deferred Income (SOFP) 50,000
Other Income (SOCI) 50,000
Being correction of mis‐posting;‐ Revenue grant posted in error to Deferred Grants
(5) Contingent liability, a possible but uncertain obligation, no provision required as per
FRS102. Show as a note to the accounts.
(6) Wages expense (SOCI) 17,000
Accrued expense (SOFP) 17,000
(Accounting for wages accrued due at year end not provided for)
(b) Adjusted net profit before tax
£/€ £/€
Profit before taxation per draft accounts 350,000
Adjustments :
(1) Irrecoverable Receivable (80,000)
(2) Training grant 50,000
(3) Inventory write off (50,000)
(6) Wages expense (17,000)
(97,000)
Adjusted net profit 253,000
Page 27 of 28 AFA Sample Paper 3
Cash generated from operations .......................................................... 1,006 Interest paid................................................................................................... (60) Income tax paid (w.1)................................................................................ (560)
Net cash flow from operating activities.............................................
386
Cash flow from investing activities:
Solution to question 6
OLIVE Ltd., Statement of Cash Flow for the year ended 31st December 2016
Cash flow from operating activities:
£/€’000 £/€’000
Profit on ordinary activities before interest 850
Adjustment for:
Government grant..........................................................................
(10)
Depreciation ............................................................................ 120
Loss on disposal of property plant and equipment ....... 10
Operating profit from working capital changes:
Decrease in inventories ........................................................... 144
Increase in receivables ................................................................
(172)
Increase in payables......................................................................
64
120
970
36
Purchases of property plant and equipment (w.2) ....... (570)
Proceeds of sale of property, plant and equipment....... 40
Interest received ......................................................................... 20
Net cash used in investing activities ................................................... (510) Cash flow from financing activities:
(124)
Proceeds from issue of shares (100+100) ................................ 200 Government grant received ....................................................... 50
Proceeds from long term borrowing ........................................ 150
Dividends paid ................................................................................
(160)
240
Net increase in cash and cash equivalents ....................................... 116 Cash and cash equivalents at beginning of year ............................ 480
Cash and cash equivalents at end of year ......................................... 596
Page 28 of 28 AFA Sample Paper 3
Solution to question 6 (Cont’d.)
WORKINGS
(1) Income tax paid
£/€’000
Due at 1st January 2016 .............................................. 480
Charge for year ........................................................... 400
880
Due at 31st December 2016 ........................................ 320
Income tax paid .......................................................... 560
(2) Purchase of property plant and equipment
£/€’000
Net book amount at 1st January 2016 ................ 1,480
Less: net book amount of sale
During year (£/€120,000 ‐ £/€70,000) ........... (50)
1430
Depreciation charge for year ................................. (120)
1310
Net book amount at 31st December 2016 ........ 1880
Purchases during year…………………… 570
