FINANCIAL REPORTING AND COMPANY PERFORMANCE

SECTION A
Answer ALL questions from this section.
Each question is worth THREE marks.
(30 marks in total)
1. List three items that would be classified as a current asset in the Statement of Financial
Position.
2. List three items that would be classified as revenue expenditure in the Income Statement.
3. At the beginning of the year, the accounts receivable balances of KL plc were £1,750 and
at the end of the year they were £2,500. During the year payments by credit customers
totalled £3,000. What were credit sales during the year? Show your workings clearly.
No marks will be awarded if workings are not shown.
4. A non-current asset cost £385,000. It has an estimated useful life of 7 years and its
scrap (re-sale) value is estimated to be £35,000 at the end of year 7. What would be the
annual straight line depreciation charge? Show your workings clearly. No marks will
be awarded if workings are not shown.
5. If the asset described in Question 4 was depreciated on a reducing balance basis, using
a rate of 25%, what would be its net book value at the end of year 1? Show your
workings clearly. No marks will be awarded if workings are not shown.
The following information relates to questions 6 and 7:
At the start of May, JC Ltd. had 200 units of stock with an inventory valuation of $4,200. During
the month it recorded the following purchases:
Date Number of units Price per unit ($) Total ($)
2 May 50 22 1,100
10 May 100 23 2,300
16 May 150 24 3,600
23 May 75 25 1,875
Total 375 8,875
On 31 May, the company sold 325 units at a price of $40 per unit, giving a revenue of $13,000.
6. What is the inventory valuation at the end of May under first-in-first-out (FIFO)? Show
your workings clearly. No marks will be awarded if workings are not shown.
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7. What is the profit for May under average cost (AVCO)? Show your workings clearly.
No marks will be awarded if workings are not shown.
8. A production line has fixed costs of £1200 and normally produces 100 units each month.
In one given month the firm produces 120 units. What will be the result of the higherthan-normal production under absorption costing on the income statement? Show your
workings clearly. No marks will be awarded if workings are not shown.
9. What is the inventory valuation method which would give the highest profit when input
prices are rising?
10. With whom does the investment risk lie for a defined benefit pension plan?

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