Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

Refer to Source A1 in the insert.
(a)[1]

State which bookkeeping entry lowered the company’s legal capacity to pay dividends in the future.

(b)[15]

Compile the statement of cash flows for the year ended 31 December 2020 under IAS 7.

(c)[4]

Advise the directors on whether the company’s performance is satisfactory. Justify your response.

(d)[5]

Discuss whether the debenture should be issued to finance the planned expansion.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Debiting the bonus issue against retained earnings instead of share premium

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