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Published Accounts Marx plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 3 - 2011
Question 3
Published Accounts Marx plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 5% preference shares at €1 each.... show full transcript
Worked Solution & Example Answer:Published Accounts Marx plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 3 - 2011
Step 1
Prepare the Published Profit and Loss account for the year 31/12/2010
Answer
Profit and Loss Account of Marx plc for the year ended 31/12/2010
| Description | Amount (€) |
|---|---|
| Turnover | 1,880,000 |
| Cost of Sales | (1,152,000) |
| Gross Profit | 728,000 |
| Distribution Costs | (250,000) |
| Administrative Expenses | (240,000) |
| Operating Profit | 238,000 |
| Other Operating Income | 80,000 |
| Profit Before Tax | 318,000 |
| Taxation (Estimated) | (60,000) |
| Profit After Tax | 258,000 |
| Dividends Paid | (60,000) |
| Profit Retained | 198,000 |
Notes:
- Turnover includes all revenue generated during the financial year.
- Cost of Sales accounts include costs directly attributable to sales.
- Administrative Expenses consist of general administrative overheads, amounting to €240,000.
- Operating Profit is calculated as Gross Profit minus Distribution Costs and Administrative Expenses.
Step 2
State how a company should deal with a Contingent Liability which is probable.
Answer
A contingent liability that is probable should be recognized in the financial statements. The company should disclose the nature of the contingent liability and an estimate of its financial effect. Additionally, a provision may be established for the liability in accordance with applicable accounting standards.
Step 3
Explain the difference between an auditor’s qualified and unqualified report.
Answer
An unqualified auditor's report indicates that the financial statements give a true and fair view of the company's financial position, and they comply with applicable laws. In contrast, a qualified auditor's report suggests that there are certain exceptions or issues that the auditor encountered, and therefore, the financial statements may not fully comply with the relevant accounting standards or regulations. This highlights potential uncertainties and risks regarding the financial information presented.