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程序代写案例-F 311
时间：2021-05-10
1
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2020 EXAMINATIONS
PART II (FINAL YEAR)
ACCOUNTING AND FINANCE
AcF 311 FINANCIAL ACCOUNTING II
(Duration: available for 24 hours)
It is recommended that you attempt to complete the exam within 3 hours
Answer any TWO questions. ALL QUESTIONS carry equal marks.
The examiner will mark the answers to the first two questions submitted. Do not submit
answers to more than two questions as it will not be marked.
This exam is open-book.
1. Your answers must be typed and saved with the file name AcF 311 Exam
2020 as either a word file or a pdf. Please include the number of the
questions you have attempted in the file name.
2. Include your student number at the top of your answers.
3. You must upload your answers to moodle by 9.30 am on Tuesday 19th May
2020 (UK time).
4. The examiner will take account of the way in which answers are presented.
5. Maximum word limits are given for relevant discursive sections.
6. Show all relevant workings.
1
Please turn over
QUESTION 1
Answer both Part A and Part B
Part A
An investor can choose between two actions ∈ ∀ ∈ {1, 2}. He faces three possi-
ble states ∈ ∀ ∈ {1, 2, 3} with probabilities ≥ 0 ∀ ∈ {1, 2, 3}:
states
1 2 3
probability 0.3 0.35 0.35
Outcomes conditional on states [ ∈ ∀ = (,) ] are the following:
states
1 2 3
actions 1 60 40 40
2 20 44 32
REQUIRED:
a) Assume that the investor has no additional information. Identify and explain the
action (1 or 2) the investor would choose.
(5 marks)
b) Now assume that the investor has access to an accounting system that partitions
the state space. Specifically, he has access to the information partition ∆1={1, 2} = {{1, 3}, {2}}. Explain whether access to this information partition would
change the investor’s action choice. To answer the question, first describe the
investor’s action choices separately for each information signal and then derive
his overall expected outcome.
(10 marks)
c) Now assume that the investor can choose between two accounting systems.
Specifically, he can either access the information partition ∆1= {1,2} ={{1, 3}, {2}} or the information partition ∆2= {1, 2} = �{1, 2}, {3}�. Identify the
information partition (∆1 or ∆2) the investor would choose. To do so, compare the
expected outcomes of both partitions and explain your rationale. You can refer to
your answers from a) and/or b) where appropriate.
(7 marks)
d) Think of the information partition ∆1 as an accounting system that prescribes fair
value measurement rules. Assume that, in the abstract model setting above, the
1
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investor would want to have access to the information partition ∆1. In a real-world
setting, explain why the investor might refrain from using ∆1. Provide at least
three reasons and explain each.
(8 marks)
Maximum word limit for Part A = 1,350 words
Part B
“[…] the valuation role of accounting will gradually decline from its now dominant role
and hence the relative importance of stewardship will increase. Both roles will remain
important; and their importance will vary across firms.”
[Zimmerman, J. L. (2015). The role of accounting in the twenty-first century firm, Ac-
counting and Business Research 45(4): p. 500]
REQUIRED:
a) Zimmerman (2015) discusses the objectives of financial accounting, i.e.,
valuation and contracting (or stewardship). He argues that the importance of
these objectives varies with the firm type. He describes two types of firms,
traditional firms and twenty-first century firms. Evaluate for which firm type the
valuation objective is more important and for which firm type the stewardship
objective is more important. Explain the underlying firm characteristics that drive
the differences in importance.
(8 marks)
b) Referring to the above quotation: Explain whether you agree with the author and
set out your rationale.
(12 marks)
Total for question 1: 50 marks
Maximum word limit for Part B = 900 words
1
Please turn over
QUESTION 2
a) Accounting and real earnings management are different types of earnings
management. Define and explain both types and provide an example for each.
(6 marks)
Maximum word limit for part a) = 270 words
b) Accounting researchers work, among other things, with accrual models to
measure earnings management empirically. A specific accrual model is the
Jones (1991) model:
= 0 + 1∆ + 2 +
where i stands for firm and t for year. is total accruals, ∆ is change in
revenue and is gross property, plant and equipment. All variables are
scaled by total assets.
REQUIRED
(i) Explain the purpose behind using accrual models for research on
earnings management.
(5 marks)
(ii) Explain the motivation for including the different variables in the Jones
(1991) model.
(6 marks)
(iii) Identify the component of the Jones (1991) model that serves as proxy
for earnings management. Explain your answer.
(3 marks)
Maximum word limit for part b) = 630 words
c) A rational expectations model for earnings management could be based on the
following assumptions:
• The value of the firm is and normally distributed with mean and
variance .
• The manager observes the signal = + , where is normally
distributed (0,2) and independent of .
• Market participants know that the manager observes .
• The manager reports = + with earnings management component
.
1
Please turn over
• The manager is risk-neutral with a utility function = − 2
2
, where is
the market price and 0 < < 1.
• Market participants know about the incentive structure and set the market
price based on all available information: = [|].
In equilibrium, action choices of both players, i.e., the manager and the market
participants, are mutual best responses. The manager manages earnings
according to the following linear function:
() = +
With the following coefficients in equilibrium:
= 0 and = 2
2+ 2
REQUIRED
(i) Explain the incentive structure of the manager. Identify and explain which
element of the manager’s utility function induces incentives to manage
earnings.
(4 marks)
(ii) Earnings management is costly for the manager. Explain the idea behind
the quadratic term in the utility function.
(5 marks)
(iii) Provide an interpretation of the equilibrium outcome and set out with
which factors earnings management varies.
(9 marks)
Maximum word limit for part c) = 810 words
d) Schipper (1989, p. 91) considers the following policy proposal: “should
accounting rules be promulgated in such a way that opportunities for earnings
management are eliminated?” Evaluate this policy proposal. You can, but do not
have to, refer to arguments made in Schipper (1989).
(12 marks)
Maximum word limit for part d) = 540 words
Total for question 2: 50 marks
1
Please turn over
QUESTION 3
All Metal plc manufactures metals and alloys. All Metal plc use the pound (£) as its
functional currency. It has the following draft financial statements:
Statement of comprehensive income for the year ended 31 March 2020
£m
Revenue 76
Cost of sales (30)
Gross profit 46
Administrative expenses (26)
Finance costs (2)
Profit before tax 18
Income tax (2)
Profit for the year 16
Other comprehensive income −
Total comprehensive income 16
Statement of financial position for the year ended 31 March 2020
£m
Property plant and equipment 56
Current assets 11
Cash and cash equivalents 13
Total assets 80
Equity
Share capital
10
Retained earnings 36
Non-current liabilities 7
5% debentures (Note 1) 10
Current liabilities 17
Total equity and liabilities 80
The following notes relate to unresolved financial reporting issues:
1
Please turn over
Note 1 Convertible debentures
On 1 April 2019 All Metal plc issued £10 million 5% convertible debentures at par. The
debentures can either be converted into 3 ordinary shares per £10 of debentures or
redeemed at par at any date from 1 April 2022. Interest is paid annually in arrears on
31 March. The interest rate on similar debentures without conversion option is 9%.
All Metal plc has recorded the debenture in the financial statements for the year ended
31 March 2020 as follows:
£m
Debit Cash 10
Credit Liability 10
Being the receipt of cash from debenture holders
Debit Finance cost 0.5
Credit Cash 0.5
Being the payment of interest to the debenture holders
(Ignore any transaction costs)
Note 2 Hedged transaction
On 1 November 2019 All Metal plc entered into a contract to sell a consignment of
Titanium on 30 April 2020 for $30,000,000.
In fixing this dollar ($) price it worked on the basis of the spot exchange rate of $1.50 =
£1, so that revenue would be £20,000,000.
On 1 November 2019, to ensure it received £20,000,000 on 30 April 2020, All Metal plc
took out a six-month future to sell $30,000,000 for £20,000,000.
On 31 March 2020, an equivalent futures contract traded at a value of £1,800,000.
This may be taken as an acceptable approximation to fair value at the year end 31
March 2020.
On 30 April 2020, the spot exchange rate was $1.75 = £1 and the future was worth
£2,857,143 (£20,000,000 – £($30,000,000/1.75 =) £17,142,857 = £2,857,143). The
entity closed out its future position at the then spot price and sold the Titanium.
The All Metal plc has decided to use hedge accounting but is unsure about whether this
is a cashflow or fair value hedge.
1
Please turn over
REQUIRED:
a) By making reference to the relevant financial reporting standards,
(i) explain the difference between a fair value hedge and a cash flow hedge and
the implications of each type of hedge for the financial statements of an entity.
Include an explanation of any potential accounting policy choices.
(16 marks)
(ii) Set out and explain the correct financial reporting treatment in the All Metal plc
financial statements for the year ended 31 March 2020 and for the year ended
31 March 2021 for
• the issue of the 5% debentures (Note 1); and
• the hedged transaction (Note 2).
Show all journal entries required to correct the financial reporting.
(20 marks)
Maximum word limit for part a) = 1620 words
b) Prepare, including your adjustments above, a revised statement of
comprehensive income and a revised statement of financial position at 31
March 2020 for All Metal plc.
(14 marks)
Total for Question 3: 50 marks
Ignore any adjustments for current and deferred taxation
1
Please turn over
QUESTION 4 Answer both Part A and Part B
Part A Deferred taxation - Maximum word limit for A = 1350 words
The following transactions relate to the financial statements for HYH Ltd, a company
which manufactures domestic appliances, for the year ended 31 March 2020:
Note 1 Timing difference on plant and machinery
The carrying amount of HYH Ltd’s plant and machinery at 1 April 2019 was £2,000,000
and the tax written down value at the same date was £1,800,000. Depreciation charged
for the year ended 31 March 2020 was £500,000 and a claim for tax depreciation was
£640,000 for the year ended 31 March 2020. There have been no additions or disposals
of plant and machinery during the year. The tax rate is 20%.
Note 2 Other timing differences arising in the year ended 31 March 2020
• Inventory provision
During the year ended 31 March 2020 there was a large number of returns of a washing
machine product due to an electrical fault in a component part. Therefore, HYH Ltd made
a specific provision against inventory of £55,000. In addition, due to the uncertainty of the
impact of the fault on other washing machine models, a general inventory provision was
set up of £86,000. At 31 March 2020, the inventory provision is therefore £141,000.Tax
relief is available for specific provisions but not currently available for general provisions.
• Trading loss
HYH Ltd made a tax trading loss for the year ended 31 March 2020 of £600,000. The
trading loss can be carried forward against future trading profits. HYH Ltd expects to
make a taxable profit of £250,000 and £150,000 in the years ending 31 March 2021 and
2022.
REQUIRED:
a) Calculate and explain in respect of the timing difference on plant and machinery
(Note 1):
i. the opening deferred tax liability at 1 April 2019,
ii. the charge to the profit or loss in respect of deferred tax for the year ended
31 March 2020; and
iii. the closing deferred tax liability at 31 March 2020.
(15 marks)
b) Calculate and explain the deferred tax implications of the ‘other timing differences’
included in Note 2. You should include recommendations of appropriate financial
reporting treatment and journal entries.
(15 marks)
10
END OF PAPER
Part B Defined benefit pension scheme - Maximum word limit for B = 900 words
UB40 plc operates a defined benefit pension scheme for all staff. The financial
controller is unsure what entry to make in the financial statements in respect of the
scheme. The following information has been provided to you:
£000
Market value of the pension assets at 1 April 2019 32,000
Present value of the pension obligations at 1 April 2019 35,000
Current service cost 2,600
Benefits paid 3,400
Contributions paid 5,000
Market value of the pension assets at 31 March 2020 38,000
Present value of the pension obligations at 31 March 2020 41,000
The only accounting entry made in respect of the pension scheme was to credit cash
with the contribution paid to the scheme of £5,000,000 and debit the operating expenses.
The discount rate is 6% which represents the rate on high-quality corporate bonds.
REQUIRED:
a) Explain the meaning of the following in relation to accounting for defined benefit
schemes:
• Interest cost
• Current service cost
• Curtailment gain
• Contribution paid
• Actuarial gain or loss
(10 marks)
b) Set out and explain how UB40 plc should account for its pension obligations under
IAS 19 Employee Benefits. You should calculate and show extracts from UB40
plc’s statement of profit or loss, comprehensive income and the statement of
financial position.
(10 marks)
Total for question 4: 50 marks
学霸联盟
Please turn over
2020 EXAMINATIONS
PART II (FINAL YEAR)
ACCOUNTING AND FINANCE
AcF 311 FINANCIAL ACCOUNTING II
(Duration: available for 24 hours)
It is recommended that you attempt to complete the exam within 3 hours
Answer any TWO questions. ALL QUESTIONS carry equal marks.
The examiner will mark the answers to the first two questions submitted. Do not submit
answers to more than two questions as it will not be marked.
This exam is open-book.
1. Your answers must be typed and saved with the file name AcF 311 Exam
2020 as either a word file or a pdf. Please include the number of the
questions you have attempted in the file name.
2. Include your student number at the top of your answers.
3. You must upload your answers to moodle by 9.30 am on Tuesday 19th May
2020 (UK time).
4. The examiner will take account of the way in which answers are presented.
5. Maximum word limits are given for relevant discursive sections.
6. Show all relevant workings.
1
Please turn over
QUESTION 1
Answer both Part A and Part B
Part A
An investor can choose between two actions ∈ ∀ ∈ {1, 2}. He faces three possi-
ble states ∈ ∀ ∈ {1, 2, 3} with probabilities ≥ 0 ∀ ∈ {1, 2, 3}:
states
1 2 3
probability 0.3 0.35 0.35
Outcomes conditional on states [ ∈ ∀ = (,) ] are the following:
states
1 2 3
actions 1 60 40 40
2 20 44 32
REQUIRED:
a) Assume that the investor has no additional information. Identify and explain the
action (1 or 2) the investor would choose.
(5 marks)
b) Now assume that the investor has access to an accounting system that partitions
the state space. Specifically, he has access to the information partition ∆1={1, 2} = {{1, 3}, {2}}. Explain whether access to this information partition would
change the investor’s action choice. To answer the question, first describe the
investor’s action choices separately for each information signal and then derive
his overall expected outcome.
(10 marks)
c) Now assume that the investor can choose between two accounting systems.
Specifically, he can either access the information partition ∆1= {1,2} ={{1, 3}, {2}} or the information partition ∆2= {1, 2} = �{1, 2}, {3}�. Identify the
information partition (∆1 or ∆2) the investor would choose. To do so, compare the
expected outcomes of both partitions and explain your rationale. You can refer to
your answers from a) and/or b) where appropriate.
(7 marks)
d) Think of the information partition ∆1 as an accounting system that prescribes fair
value measurement rules. Assume that, in the abstract model setting above, the
1
Please turn over
investor would want to have access to the information partition ∆1. In a real-world
setting, explain why the investor might refrain from using ∆1. Provide at least
three reasons and explain each.
(8 marks)
Maximum word limit for Part A = 1,350 words
Part B
“[…] the valuation role of accounting will gradually decline from its now dominant role
and hence the relative importance of stewardship will increase. Both roles will remain
important; and their importance will vary across firms.”
[Zimmerman, J. L. (2015). The role of accounting in the twenty-first century firm, Ac-
counting and Business Research 45(4): p. 500]
REQUIRED:
a) Zimmerman (2015) discusses the objectives of financial accounting, i.e.,
valuation and contracting (or stewardship). He argues that the importance of
these objectives varies with the firm type. He describes two types of firms,
traditional firms and twenty-first century firms. Evaluate for which firm type the
valuation objective is more important and for which firm type the stewardship
objective is more important. Explain the underlying firm characteristics that drive
the differences in importance.
(8 marks)
b) Referring to the above quotation: Explain whether you agree with the author and
set out your rationale.
(12 marks)
Total for question 1: 50 marks
Maximum word limit for Part B = 900 words
1
Please turn over
QUESTION 2
a) Accounting and real earnings management are different types of earnings
management. Define and explain both types and provide an example for each.
(6 marks)
Maximum word limit for part a) = 270 words
b) Accounting researchers work, among other things, with accrual models to
measure earnings management empirically. A specific accrual model is the
Jones (1991) model:
= 0 + 1∆ + 2 +
where i stands for firm and t for year. is total accruals, ∆ is change in
revenue and is gross property, plant and equipment. All variables are
scaled by total assets.
REQUIRED
(i) Explain the purpose behind using accrual models for research on
earnings management.
(5 marks)
(ii) Explain the motivation for including the different variables in the Jones
(1991) model.
(6 marks)
(iii) Identify the component of the Jones (1991) model that serves as proxy
for earnings management. Explain your answer.
(3 marks)
Maximum word limit for part b) = 630 words
c) A rational expectations model for earnings management could be based on the
following assumptions:
• The value of the firm is and normally distributed with mean and
variance .
• The manager observes the signal = + , where is normally
distributed (0,2) and independent of .
• Market participants know that the manager observes .
• The manager reports = + with earnings management component
.
1
Please turn over
• The manager is risk-neutral with a utility function = − 2
2
, where is
the market price and 0 < < 1.
• Market participants know about the incentive structure and set the market
price based on all available information: = [|].
In equilibrium, action choices of both players, i.e., the manager and the market
participants, are mutual best responses. The manager manages earnings
according to the following linear function:
() = +
With the following coefficients in equilibrium:
= 0 and = 2
2+ 2
REQUIRED
(i) Explain the incentive structure of the manager. Identify and explain which
element of the manager’s utility function induces incentives to manage
earnings.
(4 marks)
(ii) Earnings management is costly for the manager. Explain the idea behind
the quadratic term in the utility function.
(5 marks)
(iii) Provide an interpretation of the equilibrium outcome and set out with
which factors earnings management varies.
(9 marks)
Maximum word limit for part c) = 810 words
d) Schipper (1989, p. 91) considers the following policy proposal: “should
accounting rules be promulgated in such a way that opportunities for earnings
management are eliminated?” Evaluate this policy proposal. You can, but do not
have to, refer to arguments made in Schipper (1989).
(12 marks)
Maximum word limit for part d) = 540 words
Total for question 2: 50 marks
1
Please turn over
QUESTION 3
All Metal plc manufactures metals and alloys. All Metal plc use the pound (£) as its
functional currency. It has the following draft financial statements:
Statement of comprehensive income for the year ended 31 March 2020
£m
Revenue 76
Cost of sales (30)
Gross profit 46
Administrative expenses (26)
Finance costs (2)
Profit before tax 18
Income tax (2)
Profit for the year 16
Other comprehensive income −
Total comprehensive income 16
Statement of financial position for the year ended 31 March 2020
£m
Property plant and equipment 56
Current assets 11
Cash and cash equivalents 13
Total assets 80
Equity
Share capital
10
Retained earnings 36
Non-current liabilities 7
5% debentures (Note 1) 10
Current liabilities 17
Total equity and liabilities 80
The following notes relate to unresolved financial reporting issues:
1
Please turn over
Note 1 Convertible debentures
On 1 April 2019 All Metal plc issued £10 million 5% convertible debentures at par. The
debentures can either be converted into 3 ordinary shares per £10 of debentures or
redeemed at par at any date from 1 April 2022. Interest is paid annually in arrears on
31 March. The interest rate on similar debentures without conversion option is 9%.
All Metal plc has recorded the debenture in the financial statements for the year ended
31 March 2020 as follows:
£m
Debit Cash 10
Credit Liability 10
Being the receipt of cash from debenture holders
Debit Finance cost 0.5
Credit Cash 0.5
Being the payment of interest to the debenture holders
(Ignore any transaction costs)
Note 2 Hedged transaction
On 1 November 2019 All Metal plc entered into a contract to sell a consignment of
Titanium on 30 April 2020 for $30,000,000.
In fixing this dollar ($) price it worked on the basis of the spot exchange rate of $1.50 =
£1, so that revenue would be £20,000,000.
On 1 November 2019, to ensure it received £20,000,000 on 30 April 2020, All Metal plc
took out a six-month future to sell $30,000,000 for £20,000,000.
On 31 March 2020, an equivalent futures contract traded at a value of £1,800,000.
This may be taken as an acceptable approximation to fair value at the year end 31
March 2020.
On 30 April 2020, the spot exchange rate was $1.75 = £1 and the future was worth
£2,857,143 (£20,000,000 – £($30,000,000/1.75 =) £17,142,857 = £2,857,143). The
entity closed out its future position at the then spot price and sold the Titanium.
The All Metal plc has decided to use hedge accounting but is unsure about whether this
is a cashflow or fair value hedge.
1
Please turn over
REQUIRED:
a) By making reference to the relevant financial reporting standards,
(i) explain the difference between a fair value hedge and a cash flow hedge and
the implications of each type of hedge for the financial statements of an entity.
Include an explanation of any potential accounting policy choices.
(16 marks)
(ii) Set out and explain the correct financial reporting treatment in the All Metal plc
financial statements for the year ended 31 March 2020 and for the year ended
31 March 2021 for
• the issue of the 5% debentures (Note 1); and
• the hedged transaction (Note 2).
Show all journal entries required to correct the financial reporting.
(20 marks)
Maximum word limit for part a) = 1620 words
b) Prepare, including your adjustments above, a revised statement of
comprehensive income and a revised statement of financial position at 31
March 2020 for All Metal plc.
(14 marks)
Total for Question 3: 50 marks
Ignore any adjustments for current and deferred taxation
1
Please turn over
QUESTION 4 Answer both Part A and Part B
Part A Deferred taxation - Maximum word limit for A = 1350 words
The following transactions relate to the financial statements for HYH Ltd, a company
which manufactures domestic appliances, for the year ended 31 March 2020:
Note 1 Timing difference on plant and machinery
The carrying amount of HYH Ltd’s plant and machinery at 1 April 2019 was £2,000,000
and the tax written down value at the same date was £1,800,000. Depreciation charged
for the year ended 31 March 2020 was £500,000 and a claim for tax depreciation was
£640,000 for the year ended 31 March 2020. There have been no additions or disposals
of plant and machinery during the year. The tax rate is 20%.
Note 2 Other timing differences arising in the year ended 31 March 2020
• Inventory provision
During the year ended 31 March 2020 there was a large number of returns of a washing
machine product due to an electrical fault in a component part. Therefore, HYH Ltd made
a specific provision against inventory of £55,000. In addition, due to the uncertainty of the
impact of the fault on other washing machine models, a general inventory provision was
set up of £86,000. At 31 March 2020, the inventory provision is therefore £141,000.Tax
relief is available for specific provisions but not currently available for general provisions.
• Trading loss
HYH Ltd made a tax trading loss for the year ended 31 March 2020 of £600,000. The
trading loss can be carried forward against future trading profits. HYH Ltd expects to
make a taxable profit of £250,000 and £150,000 in the years ending 31 March 2021 and
2022.
REQUIRED:
a) Calculate and explain in respect of the timing difference on plant and machinery
(Note 1):
i. the opening deferred tax liability at 1 April 2019,
ii. the charge to the profit or loss in respect of deferred tax for the year ended
31 March 2020; and
iii. the closing deferred tax liability at 31 March 2020.
(15 marks)
b) Calculate and explain the deferred tax implications of the ‘other timing differences’
included in Note 2. You should include recommendations of appropriate financial
reporting treatment and journal entries.
(15 marks)
10
END OF PAPER
Part B Defined benefit pension scheme - Maximum word limit for B = 900 words
UB40 plc operates a defined benefit pension scheme for all staff. The financial
controller is unsure what entry to make in the financial statements in respect of the
scheme. The following information has been provided to you:
£000
Market value of the pension assets at 1 April 2019 32,000
Present value of the pension obligations at 1 April 2019 35,000
Current service cost 2,600
Benefits paid 3,400
Contributions paid 5,000
Market value of the pension assets at 31 March 2020 38,000
Present value of the pension obligations at 31 March 2020 41,000
The only accounting entry made in respect of the pension scheme was to credit cash
with the contribution paid to the scheme of £5,000,000 and debit the operating expenses.
The discount rate is 6% which represents the rate on high-quality corporate bonds.
REQUIRED:
a) Explain the meaning of the following in relation to accounting for defined benefit
schemes:
• Interest cost
• Current service cost
• Curtailment gain
• Contribution paid
• Actuarial gain or loss
(10 marks)
b) Set out and explain how UB40 plc should account for its pension obligations under
IAS 19 Employee Benefits. You should calculate and show extracts from UB40
plc’s statement of profit or loss, comprehensive income and the statement of
financial position.
(10 marks)
Total for question 4: 50 marks
学霸联盟
