Exam focus point. This question provides excellent practise of the knowledge and skills required to tackle long questions that may appear in Section B of the paper-based exam. However, the question is slightly longer, and the mark allocations lower,
than a typical 15 mark exam question. Use this question to practise the techniques required to score well in longer Section B
financial statement questions.
You have also been provided with the following information:
(a)?Inventory at 31 October 20X6 was valued at $275,000 based on its original cost. However, $45,000 of this inventory has been in the warehouse for over two years and the directors have agreed to sell it in November 20X6 for a cash price of $20,000.
(b)?The marketing expenses include $5,000 which relates to November 20X6.
(c)?The allowance for receivables is to be increased to the equivalent of 5% of trade receivables.
(d)?There are wages and salaries outstanding of $40,000 for the year ended 31 October 20X6.
(e)?Buildings are depreciated at 5% of cost. At 31 October 20X6 the buildings were professionally valued at $1,800,000 and
the directors wish this valuation to be incorporated into the financial statements.
(f)?Depreciation is to be charged as follows:
(i)?Motor vehicles at 20% of carrying amount
(ii)?Furniture and equipment at 20% of cost
(g)?No dividends have been paid or declared.
(h)?Tax of $150,000 is to be provided for the year.
(i)?During October 20X6 a bonus issue of one for ten shares was made to ordinary shareholders. This has not been entered
into the books. The share premium account was used for this purpose.
