DFS June 2008 Suggested Answers

visha

Check this out

Attachment not found.

I look forward to agreements, disagreements and discussion

Visha

peugeot

Hi Visha,

Saves me a job doing those suggested answers (bonus) :thumbup:

Can I just raise a query re your answers. Please bear in mind I have not yet seen the DFS paper.

The elements of financial statements in section B - should these not be:

Assets;
Liabilities;
Equity;
Income; and
Expenses.

The income statement, balance sheet, statement of cash flows and notes are 'components' rather than 'elements'.

Please accept my apologies if I am barking up the wrong tree as I haven't yet seen the DFS paper but the word "element" in your answer triggered the query.

And did IAS 38 get tested as there is no reference to Intangible Assets in the answers??

Kind regards
Steve

karenv

I agree with Peugeot.
These are what I listed in my answers.
I dont recall being questioned on IAS 38. The only place intangibles came into the paper was in the consolidated balance sheet.

mehmet

Cheers for taking the time to do these.

To reiterate Steve, you appear to have omitted task 1.5, which asked about intangible assets and development costs. Also, I agree with the points he makes about the elements of Financial Statements question.

Also, I'm not sure which profit figure you are referring to when you say NP in the Interest Cover and ROE formula, but shouldn't Interest Cover use Profit Before Interest and Tax(the profit made before finance costs are serviced) and ROE use Profit for the year(after Interest and Tax, as this is the profit attributable to equity holders).

Also, in terms of discussion, in reference to your report, which does contain well a drawn out argument, I disagree with your conclusion.
Although risk is increasing and return is decreasing, further examination of the financial statements shows that the ROE and Interest Cover were heavily affected by the extra finance costs that arose due to the Company taking out a loan in the period. The amount of the loan taken out (£20,400, I think), is reflected by an increase in PPE of the same amount, which would appear to suggest investment in Non-current assets, which, if properly employed, will lead to increased profitability in the future. Therefore, providing she was prepared to take on the risk, an investment would have potential for good returns in the future.
I think either conclusion (to invest or not to invest), as long as it's supported by a well thought out argument, would gain credit for this section. My main reason for stating the above is just to show that there are two angles to this argument.

karenv

karenv wrote: »

I agree with Peugeot.
These are what I listed in my answers.
I dont recall being questioned on IAS 38. The only place intangibles came into the paper was in the consolidated balance sheet.

Oops! forgot about that question on developement costs!

visha

Peugeot

Thank for your comment and valuable contribution.

I stand corrected by your coments.

The following web page may be a help interested students

http://www.flashcardexchange.com/flashcards/list/376091

confused!!

I also said that the elements were Assets, Liabilities, Income, expenditure and equity

visha

Mehmet

I agree that the interest cover should be profits before interest.

However, for the AAT exam purposes it will not make that difference which profit figure you take provided you show your understanding of the concept and how will it affect the investment/funding decisions.

With reference to disagreeing with my conclusion is absolutely fine.

Everybody is different and everybody has a diverse appetite for risk. I may be more cautious then you. But the Examiner will be looking at your supporting arguments to establish your understanding of the ratios.

This what makes accounting exciting for me when two people can come to different conclusion from the same information? – Hence the market – You need a buyer who thinks the price will go up and a seller who thinks that the price will go down.

Only in retrospect can we say what we should have done!

I agree with your last paragraph

richards0l0

In the journals you have 38000 as the prepayment is it not 19000 as it has only prepaid the 1 month of April?

confused!!

Yes thought I put 19000 as well?

LouLou143

confused!! wrote: »

Yes thought I put 19000 as well?

Just looked at the question........yup agree 100% it should be 19000 as its a prepayment!

richards0l0

This means you are taking 38000 out of admin expenses, this is wrong as you only need to take 1 months worth of expenses out which is 19000.

>Michaela<

I agree on the prepayment aswell.

NBB

>Michaela< wrote: »

I agree on the prepayment aswell.

Yep, me too!!!!

karenv

I got 19000 as well!

TRO44ER1

Hi,
I was wondering if you would help me with an easier way to do Accruals and Prepayments?

Cheers Richard TRO44ER1.

amanda lewis

hi i agree with you i put Assets etc for my answers also there was a question on IAS 38 cos that was the only one I could remenber!!!!

sebastianforbes

hey there,

i put the tax liability in 1.6, not 1.7 ?!!

didn't the section 2 ratios specifically ask for 2 decimal places ?!!

CJPJ

When trying to open the answers it says "the file cannot be found"

Please help?!

visha

CJPJ

post your e-mail address or PM it to me and I will e-mail it to you.

Visha

CJPJ

Thanks!!

My email address is cheryl.janney@crayvalley.com

:001_smile:

kel524uk

visha wrote: »

CJPJ

post your e-mail address or PM it to me and I will e-mail it to you.

Visha

Hi

Is it ok you can email me the DFS suggested answers to please, i think i mjorly messed up section 2

kellymartinson@hotmail.com