Hi, I'm doing my level 3 manual course with Ideal Schools. I've generally found this course really difficult, after finding basic and level 2 relatively easy to do. I know I'm going to have to go through the whole course again before I can even think of taking the exam.
I'm having trouble with a question on one of my assignments. I've submitted it twice to Ideal Schools and got it back twice with the same comments and asking me to redo it. I just don't know where I'm going wrong, and wondered if I could ask for some help on here please. I'm sure it's something I should know, but I just can't see it.
The question is as follows:
The balance of Cool Iceboxes Ltd as at 31 March, Year 4, is as follows:
Fixed assets £13000 Current assets Stock £12000 Debtors £5000 £17000
Current liabilities Creditors £4200 Bank overdraft £6000 (£10200) £6800
£19800
Authorised share capital 20000 ordinary shares of £1 each £20000
Issued share capital 10000 ordinary shares of £1 each £10000 General reserves £4000 Profit and loss account £5800
£19800
During the year to 31 March, Year 5, a profit of £1200 is made. Closing stock is £11500, debtors are £4700 and creditors are £3700.
5000 ordinary shares are to be issued at a premium in order to eliminate the bank overdraft and produce a balance of £1500.
Calculate the price at which the new shares are to be issued.
I've got as far as this:
Fixed assets £13000 Current assets Stock £11500 Debtors £4700 Bank £1500 £17700
Current liabilities (£3700) Creditors £14000
£27000
Authorised share capital 25000 ordinary shares of £1 each £25000
Issued share capital 10000 ordinary shares of £1 each £10000 5000 ordinary shares of £ General reserves £4000 Profit and loss account
£27000
I know the first half is right. I'm struggling with knowing if my authorised share capital is now right, my profit and loss figure and my ordinary shares figure. I'm sure it's obvious to most of you, but it's not obvious to me. The tutor keeps telling me that there should be a balancing figure from which I can work out the share price, which is fine, but I'm obviously getting something else wrong along the way.
No, I know that. I know they will be issued at price that is higher than £1. I've put the authorised share capital in wrong. I can only think my profit and loss figures haven't been right. I had £1200 originally, then I had £2700 (£1200 plus the £1500 in the bank) but neither of those seem to be right.
hi, never did level 3 but what happens to last years profit (is it retained)? and is your authorised shares change from last year or just issued more from those? maybe I am totally wrong, as I said never did level 3 I had really good experience with ideal schools I think you should just phone them for advice. you are paying for tutor...
If you keep last years profit and this years (£7000 together - retained profit and p&l) you will only have to calculate the extra shares issued and the number you get seems to be reasonable. The authorised shares was just a question from me...I would have thought if they already authorised 20000 and only issued 10000 there is no need to increase the 20000 to 25000. I still would put the bank loan and the premium for the shares on the top section of the balance sheet (the extra on the top of the £1 ), oops maybe not if you have to eliminate the loan and have a balnce of £1500
Never dealt with these issues myself, hopefully someone will be able to tell you more, I am not even sure if I am right. Those are just ideas...
I think the p&l a/c should be £7k being £5,800 - 31.3. x4 + £1200 profit to 31.3x5
I agree with Attilla, I don't see why you need to increase the Authorised share capital. Looking at the balance sheet to 31.3.x4 it looks the of the 20k authorised shares only 10,000 had been issued.
Is the general reserves, the share premium account? I think it is so when you issue the new shares and assuming they're full paid then.
dr bank with face value + share premium cr ordinairy share capital with face value cr share premium / general reserve with the share premium
I dont think you've done this in the second B/sheet
Current liabilities Trade payables 3700 Total equity and liabilities30700
Bank overdraft is eliminated with the fully paid shares issued at premium. If everything is right what I assumed it is not difficult to work out the shares from here ;)
-- Edited by attilabenko on Sunday 5th of September 2010 05:23:42 PM
Thank you both so much for your help. I was beginning to wonder after Attila's first post if I should be adding the two lots of P&L together.
I've had it part-marked and so I know that the first half of the balance sheet comes to £27000 and therefore so must the second part. I think the share price for the new issue must be £1.20 each then.
I'll give that a try and hopefully I'll get it right this time. Thanks again - you are stars!
Had that thought... :) It did not work with the numbers given and no other info...but my personal opinion is that you never know with these assignments. you see if they say eliminate 6k overdraft and have a 1.5k balance with purely(!) issue shares at a premium did make me think. And I thought about dividends paid or not, the retained earnings (assignment does not say much about these so assumed profit is retained) so i just assumed the easiest scenario.
Let's hope Nicola passes the assignment with the answer above...
Nicola is not talking about an ICB question as far as I can see, but I can honestly say we very rarely receive complaints about ambiguity, which is not bad considering the volume of papers writen each year.
There is another thread on this forum talking about the Self Assessment paper claiming there is a little ambiguity. The examinations department have said they have received no valid complaint. I have said to email me the question and I will go to the examinations dept myself, but as of yet I have not received a single email.
If a question is ambiguous, just put a note as to how you took it, you wont be the first if it is actually a fault with the question and the examiner will take this into consideration.
-- Edited by ICBUK on Monday 6th of September 2010 04:21:43 PM
You are right, Nicola was talking about an assignment in study materials. I said this before I think lot of this assignments/exams have questions which are simple if you don't start to think about real life scenarios but it is something you do think about. Questions at this level can't be that complicated but normally we (students) complicate it :) But still we do need clarification sometimes what should be available in exams or if it is not possible the organisation has to make sure the questions are understandable. I don't know when ICB prepars the questions, test them before put them in exam (like give it to practising bookkeepers to see if it is viable question - do not check them only with your examiners/academic staff who will obviously know what they meant). Training providers are a different matter. You always should be able to ring them for clarification/help if you pay for tutor support. That's my opinion on that matter.
The rough process (off the top of my head) for writing papers is:
An individual (trained in writing papers) will write 2 or 3 papers for a particular subject
It is proof read and tested by quite a few people within the exams dept and various others
Tested on volunteer members
Released
Reviewed pretty much on going from our database statistics (% of people failing any particular question - does it need to be re-worded etc) also if we receive any feedback or complaints it is looked into straight away
Any results from part 5 are fed back to the author to take into consideration for the next batch of papers
Throughout 1-3 changes will be made and these points repeated
Hope that helps.
But yes if you have a phone tutor and something is not clear call them, otherwise you might as well study from a book.
If a question is ambiguous, just put a note as to how you took it, you wont be the first if it is actually a fault with the question and the examiner will take this into consideration.
-- Edited by ICBUK on Monday 6th of September 2010 04:21:43 PM
Hi James
How do you do that with an on-line assesment
Tony.
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Complete the paper and then call the ICB who can take notes. Your mark can then be amended accordingly.
Like I said, if it is a problem with the question, the chances are the exams dept already know about it (over 1000 people have done the on-line assessment already). We make changes to papers pretty quickly so hopefully you wont come across a problem question (touch wood there isn't one on the online assessment so far).
If a question is ambiguous, just put a note as to how you took it, you wont be the first if it is actually a fault with the question and the examiner will take this into consideration.
-- Edited by ICBUK on Monday 6th of September 2010 04:21:43 PM
Hi James
How do you do that with an on-line assesment
Tony.
The choice of answers would probably take away any ambiguity.
__________________
Never buy black socks from a normal shop. They shaft you every time.
The choice of answers would probably take away any ambiguity.
You'd hope so, there is a question in Level 1 I thought was ambiguous. I answered it, got it wrong, asked my tutor and he said he'd have aswered it the same as me.
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
overdraft is 6K they want a balance of 1.5K therefore they need 7.5K and issue 5000 shares...
I know its not right but you can see how people may think?
P
-- Edited by BackOfficeGroup on Monday 6th of September 2010 01:02:03 PM
That was my very first thought as to how to do it. I then had to ask for help and was told that if I worked out everything else then I would be left with a balancing figure for the shares.
I'll report back when I get my assignment back - hopefully third time lucky!
ADAS wrote: You'd hope so, there is a question in Level 1 I thought was ambiguous. I answered it, got it wrong, asked my tutor and he said he'd have aswered it the same as me.
Have you told the ICB this, as 1. the question could be wrong and you may gain some extra marks, and 2. your tutor might be wrong and therefore taught you wrong.
This is a bit like the thread for the SA exam. Once the exam is over you don't really bother with these things.
My own SA exam is rather like when I first sat my driving test. I had waited till I was over 40 before learning to drive. In my lessons I was told "make sure the driving test person sees you looking in your mirror - exaggerate it if need be". (I think my instructor may even have adjusted the mirror so I couldn't just glance up at it). Anyway, during the test the tester spent most of the time looking out the passenger window. A ridiculous amount of time in fact so I spent a ridiculous amount of time looking in my mirror to make sure he saw me. I started getting annoyed with him and my test suffered as a result and I failed. Driving home I was furious and saying I was going to write a letter to his superiors about his behaviour during my test. I wasn't going to do so until after I had passed the test though. I didn't want to rock the boat in case all the testers stuck together and failed me. After I passed the test I never got round to writing the letter.
That's what I'm like with this SA exam. If I pass I probably won't bother writing an email to say how ambiguous the task was. I'd imagine there are others that will be the same.
__________________
Never buy black socks from a normal shop. They shaft you every time.
When the ICB does its moderation it will say that 0 complaints have been received, when in reality it might be that people are unhappy but contact this forum instead.
Really it won't take any longer to fire a quick email to the ICB, than post on this forum, and feedback is what the ICB is all about.
Having said that, in almost 1000 people who have done the Self Assessment test I would have thought someone would have mentioned it?
It is new though and I have mentioned this forum to the exams dept for next time.
I do recall sending an email about a question previously and having no reply!
To me, once completed I forget all about the exam etc, so taking time out to say something is unusual as I've got nothing to gain from it. There are questions throughout the ICB exams which are ambiguous (well I found them to be!). If I had failed, I would probably be more interested in the questions but having passed (at such a high pass mark) I move on to the next exam.
I'm pleased to say that I have now passed this assignment. The correct share price was £1.20, and the bit I was doing wrong was not adding the previous year's P&L figure to the current year's figure.
