business-reporting-july-2010-exam-paper

Dippers accounting policy in relation to pensions is

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Dipper’s accounting policy in relation to pensions is to recognise immediately actuarial gains and losses. I intend to maintain this policy in the group financial statements but I do not know how to calculate the actuarial gain or loss. I have been advised by the scheme actuary that at 31 May 2010 the fair value of the pension assets was £2.08 million and the present value of pension obligations was £2.75 million at that date. We conducted an impairment review of goodwill at the end of our accounting period and estimated that goodwill arising on the acquisition of Dipper was worth £1.1 million. I have therefore debited £400,000 to other comprehensive income. No other adjustments were required to goodwill.
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© The Institute of Chartered Accountants in England and Wales 2010 4 of 16 Exhibit 2: Draft consolidated statement of comprehensive income for year ended 31 May 2010 Income statement 2010 2009 £'000 £'000 Revenue 14,725 13,330 Cost of sales (7,450) (7,560) Gross profit 7,275 5,770 Operating costs (3,296) (3,007) Other operating income 150 - Operating profit 4,129 2,763 Investment income 39 32 Finance costs (452) (468) Profit before tax 3,716 2,327 Income tax expense (1,003) (628) Profit after tax 2,713 1,699 Other comprehensive income Goodwill impairment (400) - Total comprehensive income for the year 2,313 1,699 NOTE: All calculations should be to the nearest £’000
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© The Institute of Chartered Accountants in England and Wales 2010 5 of 16 2. You are Laura Craft and you work in the tax department of TTR chartered accountants. TTR provides tax advisory services to Pepper Art plc. Pepper Art is a company based in Manchester which designs and builds computer games. Pepper Art bought 75% of the ordinary shares in Spaceway Ltd on 1 August 2009. Prior to this date, Pepper Art did not have any subsidiaries. Pepper Art has a 30 June year end. Spaceway is a non-trading company which owns and manages a number of commercial properties. Spaceway’s corporation tax return has been submitted by its previous tax adviser. It shows a tax loss (ie surplus management expenses) of £240,000 for the year to 31 May 2010. Spaceway owns 100% of the shares in DeliverUK Ltd, a trading company which operates as a delivery company. In January 2010, DeliverUK invested £900,000 in new fixed plant and machinery to be used in the warehouse and has achieved a break-even position for tax purposes for the year ended 31 May 2010. TTR dealt with the direct tax compliance work for Pepper Art up to and including the year ended 30 June 2009. However, for later periods the compliance work for all group companies will be handled by Pepper Art’s internal tax department. Jim Jones, the financial controller, is also the acting head of the internal tax department of Pepper Art. TTR’s engagement letter with PepperArt was revised to reflect the client’s responsibilities to file all
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Dippers accounting policy in relation to pensions is to...

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