Section C

Question 1

How to plan a performance analysis question?

Answer 1

1. Read the scenario and make notes of the ongoing relevant information. This will need to be included in your detailed response section.
2. Make notes of the potential new ratios and re-calculate the elements of those ratios.
3. Split out your answer into sections finishing with a conclusion.
4. Following on from point 1 a lot of your answer will be related to the relevant information and use this as evidence for your explanations.
5. Possible disposal of a company explain the potential advantages and disadvantages of the disposal.

Question 2

How to calculate a possible gain or loss on disposal?

Answer 2

1. Proceeds usually mentioned in question.
2. Minus net assets this is also usually mentioned in question. If not: share capital + PPE + retained earnings.
3. Minus goodwill this is calculated as so: cost of investment - net assets - any potential impairments.

Question 3

How should a statement of profit or loss and other comprehensive income look?

Answer 3

1. Revenue
2. Cost of sales
3. Gross profit
4. Operating expenses
5. Operating profit
6. Investment income and Finance costs
7. Profit before tax
8. Income tax
9. Profit for the year
10. Other comp income: investments and revaluation on land (Include DT in revaluation)
11. Subtotal of the above
12. Total comp income (Profit for the year + Comp income)

Question 4

How should a statement of changes in equity look?

Answer 4

1. B/f balances for : Share capital, Share premium, Revaluation (Investment), PPE (Revaluation) and Retained earnings.
2. Rights issue movement for Share capital and Share premium.
3. Loss or gain for revaluation investment.
4. Same for PPE.
5. Any dividends paid need to be deducted from retained earnings and any profits made need to be included in retained earnings.

Question 5

Working 1 of a Consolidated Statement of Financial Position?

Answer 5

Group structure:

Date subsidiary was acquired and at what percentage.

Question 6

Working 2 of a Consolidated Statement of Financial Position?

Answer 6

Net assets:

1. Share capital: at acquisition, minus at reporting and the difference is the movement at post.
2. Retained earnings: same as above
3. Revaluation: same as above
4. Fair value: same as above

Net assets at acquisition is included in your goodwill calculations

Question 7

Working 3 of a Consolidated Statement of Financial Position?

Answer 7

Goodwill:

1. Cost of investment (Cash or Share capital)
2. Deferred consideration (Cash x cost of capital)
3. NCI at acquisition
4. Subtotal

Minus
5. Net assets included in working 1.
6. Goodwill at acquisition within non current assets.

Question 8

Working 4 of a Consolidated Statement of Financial Position?

Answer 8

NCI

1. NCI that has been included in goodwill.
2. Post acq included in working 1 at NCI %.

Question 9

Working 5 of a Consolidated Statement of Financial Position?

Answer 9

Retained Earnings:

1. Retained earnings from question.
2. Minus Deferred consideration (Interest element)
3. Plus % of post acquisition adjustments relating to working 1.
4. Minus unrealized profit on inventory.

Question 10

How to plan a published accounts question?

Answer 10

1. Split workings for P&L and Balance Sheet into two sections.
2. Start with P&L adjustments: usually cost of sales have the most adjustments, CT or DT also and watch out for depreciation that will be included in one of the other elements.
3. Work your way through the notes by showing clear workings and relate back to the notes in question.
4. Once happy with your P&L work down to the balance sheet.
5. Things to look out for: revaluation gains will be included in equity net of any deferred tax.
6. Include any dividends paid and profit for the year in the working for retained earnings.
7. Once all adjustments have been completed please tally up your statements.

Question 11

How to plan Consolidated Statement of Profit or Loss?

Answer 11

1. Split your P&L into sections Parent, Sub and Adjustments.
2. Start your workings with group structure like and SOFP.
3. Now go onto your COS calculation this is usually the most marks so expect lots of adjustments.
4. Main this to look out for are depreciation, inter-co purchases and PUP.
5. You calculate PUP by multiply the margin or mark up of inventory remaining.
6. Final working would usually be NCI this is calculated as so: Apportioned profit of subsidiary, adny fair value adjustments and any impairment that has been mentioned.
7. Same as any other P&L other than you need to finish your P&L with attributable to: Parent and NCI. Your NCI figure will be carried over from your workings.