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Workshop Qustion Lecture 3

The regulatory framework establishes accounting standards and financial reporting requirements to ensure accurate and consistent financial reporting. It aims to protect investors and other stakeholders by mandating disclosure of key financial information. The trial balance and additional information provided are used to prepare Rainbow plc's statement of comprehensive income and statement of financial position for the year ended December 31, 2011. Key figures include revenues of £1,200m, expenses of £720m, and net income of £60m. Assets include freehold land of £1,050m, plant and machinery of £210m, and cash of £150m. Liabilities include trade payables of £50m, debentures of £500m, and estimated

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163 views2 pages

Workshop Qustion Lecture 3

The regulatory framework establishes accounting standards and financial reporting requirements to ensure accurate and consistent financial reporting. It aims to protect investors and other stakeholders by mandating disclosure of key financial information. The trial balance and additional information provided are used to prepare Rainbow plc's statement of comprehensive income and statement of financial position for the year ended December 31, 2011. Key figures include revenues of £1,200m, expenses of £720m, and net income of £60m. Assets include freehold land of £1,050m, plant and machinery of £210m, and cash of £150m. Liabilities include trade payables of £50m, debentures of £500m, and estimated

Uploaded by

Ayesha Nadeem
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Reporting and Analysis

Week 4 Class/Seminar Questions

Question 1

Explain the term regulatory framework and why this framework is needed.

Question 2

The following trial balance was taken from the books of Rainbow plc as at 31 December
2011:

m m
Retained profit at 1 January 2011 30
Sales 1,200
Purchases 500
Inventories at 1 January 2011 400
Rent and rates 90
Salaries and wages 80
Other expenses 50
Freehold land at cost 900
Plant and machinery at cost 350
Motor vehicles at cost 90
Accumulated depreciation:
Plant and machinery 140
Motor vehicles 50
Trade receivables 120
Other receivables 80
Cash 150
Trade payables 50
Other payables 30
10% Debentures 500
Debenture interest paid 25
Ordinary share capital of 1 each 700
Share premium 140
Interim dividends paid 5
------- -------
2,840 2,840
------- -------

The following additional information became available to you:

1. Inventories as at 31 December 2011 are valued at 300m.


2. Annual rent and rates is 120m.

3. Salaries and wages include 15m advance payments.

4. The annual depreciation on plant and machinery, and motor vehicles has not been
charged. The company depreciates plant and machinery at 20% using the straight-line
method and motor vehicles at 25% using the reducing-balance method.

5. A trade debtor owing 20m to the company has been declared bankrupt.

6. A provision of doubtful debts has to be made at 15% of the remaining trade receivables.

7. The remaining debenture interest has not been paid yet.

8. The freehold land was re-valued at 1,050m. The directors decided to reflect this in the
accounts.

9. Taxation for the year is estimated to be 60m and has not been paid yet.

10. No final dividends have been declared.

Required:

Prepare a Statement of Comprehensive Income for the year ended 31 December 2011 and a
Statement of Financial Position as at that date in a form suitable for publication, so far as the
information given allows.

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