Financial Reporting (FR) September/December 2021 Sample Answers Section C Mims Co & Pinardi Co

Jul 17, 2026

Uploaded by Levi

Sample answers for Financial Reporting (FR) September/December 2021, Section C, covering Mims Co and Pinardi Co. The document provides a statement of profit or loss, a statement of changes in equity, and cash flow extracts for Mims Co, including impacts of inventory adjustments, provisions, dividend and investment property items. For Pinardi Co it includes disposal gain computation with goodwill impairment, explanation of a discontinued operation (Silva Co), key ratio calculations across two years, and an analytical discussion of performance, margin movements, financing, and statement of position effects.

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Answers Applied Skills (FR) Financial Reporting (FR) September/December 2021 Sample Answers Section C Mims Co (a) Statement of profit or loss for the year ended 31 December 20X5 $’000 Revenue 24,300 Cost of sales (11,600 – 700 inventory) ( 10 ,900) Gross profit 13,400 Administrative expenses (10,900 + 1,400 provision + 1,300 promoting brand + 100 amortisation – 1,000 investment property depreciation – 3,000 dividend) (9,700) Distribution costs (7 ,300) Loss from operations (3,600) Finance costs (1,400) Investment income (500 + 2,000 investment property gain) 2 ,500 Loss before taxation (2,500) Taxation (140 – 1,200 current + 500 movement in deferred tax) 560 Loss for the year ( 1 ,940) (b) Statement of changes in equity for the year ended 31 December 20X5 Share capital Share premium Retained earnings $’000 $’000 $’000 Balance at 1 January 20X5 60,000 – 43,200 Prior period error – – (700) Restated balance 1 January 20X5 60,000 – 42,500 Share issue 15,000 37,500 – Profit for the year – – (1,940) Dividends paid (75,000 x $0·04) – – (3 ,000) Balance 31 December 20X5 75 ,000 37 ,500 37 ,560 (c) Extracts from statement of cash flows for the year ended 31 December 20X5 $’000 Cash flows from investing activities Purchase of brand (2,000) Purchase of investment property (20 ,000) Net cash used in investing activities (22 ,000) Cash flows from financing activities Proceeds from issue of share capital 52,500 Dividends paid (3 ,000) Net cash from financing activities 49 ,500 Pinardi Co (a) Gain on disposal: $’000 Proceeds 42,000 Less: Net assets at disposal (35,000) Less: Goodwill at disposal (W1) (4 , 200) Gain on disposal 2 ,800 (W1) Goodwill at disposal $’000 Goodwill at acquisition 6,000 Less: Impairment (6,000 x 30%) ( 1 ,800) Unimpaired goodwill at disposal 4 ,200 (b) Explanation of Silva Co disposal Silva Co is likely to meet the criteria as it is a separate major line of operations which has been disposed of during the year. As a discontinued operation, the results would be removed and presented separately on the face of the statement of profit or loss together with the gain (post-tax) on disposal of $2·8m. As Silva Co was sold on 1 January 20X7, there are no results to incorporate for the current year. However, the results of 20X6 should be shown as a discontinued operation for comparative purposes. (c) Ratio calculations: Ratio Working 20X7 Working 20X6 Gross profit margin (50,700/98,300) x 100 51·6% (50,600/122,400) x 100 41·3% Operating profit margin (17,000/98,300) x 100 17·3% (13,200/122,400) x 100 10·8% Interest cover (17,000/3,200) 5·3 times (13,200/5,500) 2·4 times Inventory turnover days (13,300/47,600) x 365 102 days (22,400/71,800) x 365 114 days (d) Analysis Performance The overall revenue is down by $24m, which may be largely due to the disposal of Silva Co which is in the 20X6 results but contributed no rev

Jul 17, 2026

Uploaded by Levi