Reference no: EM132509076

Assignment - You are required to answer. One question in section A and Two questions from section B. Your answers need to be in the form of Word and/or Excel files.

Case Study - Background

Stockpile PLC is an independent UK cinema chain with 8 cinemas across the country, the majority of which are on the south coast of England. The market is fairly competitive with large national chains owning the majority of the UK market.

Three of the eight cinemas in the group (Isle of Wight, Bournemouth and Portsmouth) have a retail store within them in addition to the food and beverage offerings. These stores sell movie memorabilia and prices range from 99p to over £2,000.

You are employed as one of the Senior Finance Managers within Stockpile PLC's Head Office in Portsmouth and given the recent requirements in the UK to close cinemas temporarily, you have been asked to carry out a number of research tasks from home.

The Financial Controller would like you to respond to ONE question in section A and TWO questions in section B.

Section A can be submitted as an Excel spreadsheet, or equivalent. This section has no word count.

Section B needs to be presented in a report format limiting yourself to 1,500 words in total for this section. How you chose to allocate these words is up to you, however every question is of equal weighting. This report needs to be addressed to your line manager, Owen Klopp, the Financial Controller.

As a number of questions (3-6) require research, you are expected to cite your reference sources and provide a bibliography. This will not count towards the overall word count.

There is no need to introduce or conclude your work outside of the questions asked.

Section A - Answer ONE of the following TWO questions. Both questions are weighted equally. There is no word count limit for Section A.

Question 1 - Accounts preparation

The trial balance for the Southampton branch for the year ended 29th February 2020 is as follows:

Share capital: £1 Ordinary shares Share premium

General Reserve

Retained earnings as at 1/3/2019 Inventory as at 1/3/2019

Sales Revenue Purchases Administrative expenses Distribution expenses

Plant and machinery: cost

Plant and machinery: accumulated depreciation

Vehicles: cost

Vehicles: accumulated depreciation Returns outwards

8 % Debenture

Debenture Interest paid

Dividends paid

Returns inwards

Bad Debt expense

Salesmen's salaries Administrative wages and salaries Directors' remuneration

Trade receivables

Provision for doubtful debts (1/3/2019) Cash at bank

Trade payables

£000 £000

1,400 200 80 304

328

4,820

2,640 100 140 1,440

440 580

280 120 120

5 280 140 80 320 316 180 1,280

56 623

632 £8,452 £8,452

The following additional information is supplied:

(i) Depreciation of plant and machinery at 10% straight-line to be charged to cost of sales.

(ii) Depreciation of vehicles at 20% straight-line to be charged to distribution costs.

(iii) Provide for auditors remuneration.

(iv) Income tax expense

(v) Accrue for debenture interest unpaid

(vi) Closing inventory was valued at

£4,000 £106,000

£112,000

(vii) Based on past experience, the provision for doubtful debts is to be increased to 5% of trade receivables and allocated to administrative expenses.

(viii) Transfer to General Reserve £50,000.

(ix) On 1st September 2019 Stockpile plc had issued 400,000 Ordinary shares at full market price of £1.50 per share.

Required -

(a) Prepare an Income Statement, Statement of Financial Position and Statement of Changes in Equity as at 29th February 2020 for the Southampton branch, that comply with the Companies Act 2006 and IAS1.

(b) Calculate the basic earnings per share for the year ended 29th February 2020.

Question 2 - Consolidated group accounts

One of your junior staff is studying towards their ACCA exams and due to the recent provision to work from home they are now studying entirely online. Unfortunately, their education provider's website has crashed and they are unable to get the answer to the following revision question:

Requirement: Prepare the consolidated statement of financial position for the Zazu group as at 31st December 2019, so enabling your colleague to check their answer.

On 1st October 2012 Zazu PLC purchased 2,100,000 of the 3,000,000 £1 ordinary shares in Petersfield Ltd, paying £8,900,000 in cash; at the date of acquisition the Retained Earnings of Petersfield Ltd were £3,800,000 and there was no General Reserve.

The summarised Statement of Financial Position of the two companies for the year ended 31st December 2019 are as follows:

Non-current Assets

Property, plant and equipment

210,000 £1 shares in Petersfield Ltd at cost

Current Assets

Inventories

Trade Receivables Bank

Current Liabilities

Trade Payables

Net Current assets

Equity

Share Capital £1 ordinary Share Premium

Retained Earnings General Reserve

Zazu PLC £'000

21,000 8,900 29,900

10,000 3,000 2,000

15,000

8,000

7,000 36,900

10,000 1,000 25,900

36,900

Petersfield Ltd

£'000

8,500 8,500

6,000 1,500 500 8,000

3,500

4,500 13,000

3,000

8,000

2,000 13,000

The fair value of the land owned by Petersfield Ltd was £2,800,000 above book value. No adjustment has been made for this revaluation.

Petersfield Ltd sold goods to Zazu PLC during the year at an invoice price of £5,000,000. The goods had originally cost Petersfield Ltd £3,800,000. A quarter of these goods remained in stock at the year-end.

At 31st December 2019 Zazu PLC owed £900,000 to Petersfield Ltd for goods purchased for resale. This amount is shown as a trade payable in the Statement of Financial Position of Zazu PLC and as a trade receivable in the accounts of Petersfield Ltd.

An impairment test at 31st December 2019 on the consolidated goodwill indicated that it should be written down to £2,000,000. No other assets were impaired.

No dividends were paid by either of the companies in the relevant years, nor were there any changes in share capital.

Required: Prepare the consolidated statement of financial position for the Zazu group as at 31st December 2019.

Section B - Answer TWO of the following FOUR questions. All questions are weighted equally in section B and the word count for section B is 1,500 words. The following scenario relates to ALL section B questions:

Question 3 - Taxation

One of Stockpile PLC's rivals have been in the press recently in relation to a tax avoidance scheme.

Requirement: As a result of your competitor's actions, Owen would like you to investigate and report back on the impact that the adoption of a tax avoidance scheme will have on a company. Owen specifically wants to know:

a) What is their motivation for adopting a tax avoidance scheme?

b) What happens to a company once they are found guilty of tax avoidance?

Your work should discuss both positive and negative effects on a business and you can bring in real life examples to substantiate your points.

Question 4 - Statement of Cash Flows

Your team has just received the draft Statement of Cash Flows for each cinema in the group up to the end of February 2020. You have been allocated the Isle of Wight cinema to review and their statement is over the page.

Requirement: Within your report to Owen Klopp, please discuss your thoughts on the Statement of Cash Flow below, highlighting any key entries you notice, both positive and negative, for the company.

You will need to expand your answers to highlight the implications of these entries and what further information you would need to develop your understanding.

Statement of Cash Flows Year ended 29th February 2020

Isle of Wight branch

Cash flows from operating activities

Profit before tax

Adjustments for:

Depreciation

Interest expense

Operating profit before working capital changes (Increase) / decrease in trade and other receivables (Increase) / decrease in inventory

Increase / (decrease) in trade and other payables Cash generated from operations

Interest paid

Interest received

Income taxes paid

Net cash from operating activities

Cash flows from investing activities

Purchase of plant and machinery Purchase of a leasehold property Sale of plant and machinery

Net cash from investing activities

Cash flows from financing activities

Proceeds from the sale of ordinary share capital Bank loan repaid

Dividends paid

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

£'000

1,023

232 60 1,315 187 (420) 260 1,342 (10) 135 (280)

1,187

(301) (800) 201

(900)

456 (120) (750)

(414)

(127) 92

(35)

£'000

Question 5 - Internal Controls

One of your team needs to review the internal controls of the Brighton cinema as this branch only joined the group in January 2020. The Brighton cinema is the third largest branch in the group with a £2million annual turnover. It employs 60 staff, both full and part-time, including 1 Manager (Ben Skrtel) and 1 Deputy Manager (Trent Oxlade).

The Brighton cinema is in the process of setting up a memorabilia store onsite which is due to open later this year. The current offering includes popcorn, ice cream and both alcoholic and soft beverages. Everything is scanned through a till system other than the ice cream sales, as there have been issues since 2018 with the till terminals at this stand. The sales are 95% on card payments.

Cinema ticket sales are taken both online via the company website and in person using the terminals in the lobby. Between Friday night and Sunday evening the entrance is manned by a member of staff who checks the tickets of those entering the cinema.

The payroll and accounting records are completed by Ben on a weekly basis. Staff are registered onto the payroll system after working for the company for 3 months. Ben finds the whole payroll system particularly laborious, and knows at certain points of the year he needs extra staff for a few weeks.

Once registered, staff get a name badge, uniform and their own user name for the till. Until this point, uniform is borrowed, random name badges are supplied and a temporary log on is issued for the till system.

Requirement - As you cannot visit the cinema at the present time and observe how it operates, Owen has asked that you outline how the following areas could be at risk if they are not protected and suggest, with examples, what control activities could be put in place to help with any of the above?

Question 6 - Accounting regulations

Part of your role is to mentor junior staff. A number of them have asked for some guidance on the advantages and disadvantages of using accounting standards in financial reporting.

Research and present your thoughts on this, offering examples wherever possible. Your work should be presented in clear, and fully explained manner as this will ultimately be sent out to junior staff with very little knowledge in this area.

Attachment:- Financial Reporting Assignment File.rar