Accounting 9706 · AS & A Level · Business acquisition and merger

Business acquisition and merger — practice question

Refer to Source A in the insert.
(a(i))[1]

State the way a business sets up a general reserve.

(a(ii))[2]

Explain why a business might establish a general reserve.

(b(i))[5]

Prepare a statement for the year ended 31 December 2024 to show the profit from operations.

(b(ii))[12]

Prepare the statement of cash flows in line with IAS7.

(c)[5]

Advise whether or not CF Limited has made a wise decision to take over the delivery services. Justify your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: A general reserve is formed by shifting profit from profit for the year / retained earnings.

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