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Published Accounts Zodiac plc has an Authorised Capital of €950,000 divided into 650,000 Ordinary Shares at €1 each and 300,000 8% Preference shares at €1 each - Leaving Cert Accounting - Question 6 - 2009
Question 6
Published Accounts Zodiac plc has an Authorised Capital of €950,000 divided into 650,000 Ordinary Shares at €1 each and 300,000 8% Preference shares at €1 each. The... show full transcript
Worked Solution & Example Answer:Published Accounts Zodiac plc has an Authorised Capital of €950,000 divided into 650,000 Ordinary Shares at €1 each and 300,000 8% Preference shares at €1 each - Leaving Cert Accounting - Question 6 - 2009
Step 1
To prepare a balance sheet as at 31/12/2008
Answer
To draft the Balance Sheet:
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Fixed Assets:
- Vehicles: €280,000 - €112,000 (Accumulated Dep.) = €168,000
- Buildings: €860,000 - €52,800 (Accumulated Dep.) = €807,200
- Total Fixed Assets = €168,000 + €807,200 = €975,200
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Current Assets:
- Stock: €89,000
- Debtors: €243,000
- Bank: €62,900
- Total Current Assets = €89,000 + €243,000 + €62,900 = €394,900
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Total Assets:
- Total Assets = Fixed Assets + Current Assets = €975,200 + €394,900 = €1,370,100
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Creditors:
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Creditors Falling due within 1 year: Trade Creditors + Other Creditors = Trade creditors (€1,901,000) + Tax creditors (€128,000)
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Creditors Falling due after more than 1 year = €300,000
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Total Creditors = €1,901,000 + €128,000 + €300,000 = €2,329,000
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Net Assets:
- Net Assets = Total Assets - Total Creditors = €1,370,100 - €2,329,000 = -€958,900 (indicating possible insolvency)
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Capital and Reserves:
- Issued Share Capital = €750,000 + €160,000 + €213,800 = €1,123,800
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Final Placement:
- Total Liabilities and Capital Reserves = Creditors + Share Capital = -€958,900 + €1,123,800 = €164,900
This concludes a comprehensive balance sheet creation.
Step 2
Accounting policy note for tangible fixed assets and stock
Answer
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Policy Note on Tangible Fixed Assets: Fixed assets are initially recorded at cost, which includes costs directly attributable to bringing the asset to its intended use. Included in the cost of fixed assets are delivery costs, installation costs, and any other directly attributable costs to acquire the asset.
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Depreciation: Fixed assets are depreciated over their useful life using the straight-line method. For instance, vehicles may be depreciated at a rate of 20% annually while buildings might have a lower rate of 2% annually.
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Policy Note on Stock: Inventory is valued at the lower of cost or net realisable value, ensuring that stock is not permanently overvalued in the accounts during accounting periods. The method applied can vary such as FIFO or weighted average, and this should be stated in the notes.
Step 3
Explain the three items of information that must be included in a Director's Report
Answer
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Business Activities: A description of significant changes in the nature of the company’s business activities during the year to give the readers insight into operational adjustments.
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Financial Performance Overview: An overview of the company's performance, detailing results achieved, future prospects and any material developments affecting operations.
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Governance: Disclosure of the governance structure including board composition, any significant changes throughout the year, and evaluation of compliance with best practices in corporate governance.