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@katie8223 said:
Hmmm I’m not sure I saw an overdraft cost in mine? I probably wouldn’t have included it though because the annual order/holding amount was still the same 1.5m units, so the annual overdraft cost would have been the same. The only thing we were working out was how many units to order and hold each time, through the year and whether the bulk discount was cheaper. I may be completely wrong though 🙂 none of the past papers I did had any other costs in so it seemed like a pretty each question to me…but the examiners do always like to trick you so I could have missed it??Yea, you are right that none of the past papers had these other costs. But I came across a to a similar question in kaplan kit and also here below in ask the tutor forum.
https://opentuition.com/topic/eoq-31/
But yea, I might be wrong too. Let’s hope for the best.
@katie8223 said:
It was actually ok…Section C was about EOQ/Bulk discount which was easy enough and worth 10 marks, capital rationing explanation worth 10 marks, working capital funding policy explanation and a lease vs buy. I was a little confused on where to put the tax implications for lease vs buy but I got the same answer as the post above so hopefully correct. Section B was a lot of foreign currency and some WACC q’s. Section A was ok too. I hopefully did enough to get a pass although already second guessing things I wrote/calculated!!Good luck everyone!!!
How was the EOQ question? Because there was a trick included in the question I guess.. They had given overdraft percentage and i guess you need to include the cost of this overdraft into the holding cost of inventory..because of the reason of the lost interest on the capital(cash) tied up in inventory..
I am not sure anyways..
Its not a past exam question, however this question is in Kaplan Exam kit.
Loki plc is a growing company specialising in making accessories for mobile phones and
tablets. The company is currently all-equity financed with 2 million ordinary shares in issue.
The existing shareholders are mainly family members and friends. The directors of Loki
need to raise finance to fund a new factory and are considering a range of options including
flotation and venture capital. Future growth is anticipated to be the following:
Earnings next year = $0.25m, expected to grow at 7% pa
Dividend next year = $0.14m, expected to grow at 4% pa(c) Calculate the issue price of Loki shares to the nearest cent using the dividend
valuation model with a cost of equity of 14%.
A $0.60
B $0.70
C $1.19
D $1.24Answer – B
Thank you, Sir. Understood very well.
Phrase from the question Sleeptight
Sleeptight requires customers who place an order to pay a deposit of 40% of the total order value at the time the order is placed. The beds will take four to eight weeks to build, and the remaining 60% of the order value is due within a week of the final delivery. Risks and rewards of ownership of the beds do not pass to the customer until the beds are delivered and signed for. “Beds also come with a two year guarantee and the financial controller has made a provision in respect of the expected costs to be incurred in relation to beds still under guarantee.”
Answer on audit response in BPP kit –
Establish the basis of the amount provided for and assumptions made by the financial controller.
Re-perform any calculations and establish the level of warranty costs in the year, and compare with the previous provision.
“Review the level of repair costs incurred post year-end and use these to assess the reasonableness of the provision.”So suppose that the auditor is carrying out audit of FS for year end 30th june 2019, and today standing on 10th august 2019 it carries out review on repair costs. So does this mean that he will carry out review of repair costs between the dates 1st july to 10th august, and on this basis will assess the repair costs for the year end 30th june 2019??
So suppose that the auditor is carrying out audit of FS for year end 30th june 2019, and today standing on 10th august 2019 it carries out review on repair costs. So does this mean that he will carry out review of repair costs between the dates 1st july to 10th august, and on this basis will assess the repair costs for the year end 30th june 2019??
Thanks a lot, sir.
So that means the takeover of Alphabet Ltd by XYZ Ltd and Bon receiving XYZ Ltd shares against Alphabet Ltd shares are considered to be Disposal of shares?Sorry, Sir. I will post the whole question here
On 15 October 2017 Alphabet Ltd, an unquoted trading company, was taken over by XYZ plc. Prior to the takeover Alphabet Ltd’s share capital consisted of 100,000 £1 ordinary shares, and under the terms of the takeover, the shareholders received for each £1 ordinary share in Alphabet Ltd either cash of £6 per share or one £1 ordinary share in XYZ plc worth £6.50. The following information is available regarding three of the shareholders of Alphabet Ltd:
Aloi
Aloi has been the managing director of Alphabet Ltd since the company’s incorporation on 1 January 2011, and she accepted XYZ plc’s cash alternative of £6 per share in respect of her shareholding of 60,000 £1 ordinary shares in Alphabet Ltd. Aloi had originally subscribed for 50,000 shares in Alphabet Ltd on 1 January 2011 at their par value and purchased a further 10,000 shares on 20 May 2012 for £18,600.
On 6 February 2018 Aloi sold an investment property, and this disposal resulted in a chargeable gain against which her annual exempt amount will be set.
For the tax year, 2017/18 Aloi has taxable income of £60,000. All her income tax has previously been collected under PAYE so she has not received a notice to file a return for the tax year 2017/18 and so is required to give notice of her chargeability to capital gains tax to HMRC.Bon
Bon has been the sales director of Alphabet Ltd since 1 February 2017, having not previously been an employee of the company, although she had been a shareholder since 1 March 2016. She accepted XYZ plc’s share alternative of one £1 ordinary share for each of her 25,000 £1 ordinary shares in Alphabet Ltd. Bon had purchased her shareholding on 1 March 2016 for £92,200. On 4 March 2018 Bon made a gift of 10,000 of her £1 ordinary shares in XYZ plc to her brother. On that date, the shares were quoted on the stock exchange at £7.10 – £7.14. Holdover (gift) relief is not available in respect of this disposal.Dinah
Dinah has been an employee of Alphabet Ltd since 1 May 2016. She accepted XYZ plc’s share alternative of one £1 ordinary share for each of her 3,000 £1 ordinary shares in Alphabet Ltd. Dinah had purchased her shareholding on 20 June 2015 for £4,800. On 13 November 2017 Dinah sold 1,000 of her £1 ordinary shares in XYZ plc for £6,600. Dinah died on 5 April 2018, and her remaining 2,000 £1 ordinary shares in XYZ plc were inherited by her daughter. On that date, these shares were valued at £15,600. For the tax year, 2017/18 Dinah had taxable income of £12,000.(Q)Which TWO of the following statements are correct about Bon and Dinah’s entitlement to entrepreneurs’ relief on their disposals of shares in Alphabet Ltd?
(1) Alphabet Ltd was not Bon’s personal company for the requisite time before disposal.
(2) Bon was not an officer or employee of Alphabet Ltd for the requisite time before disposal.
(3) Dinah was not an officer or employee of Alphabet Ltd for the requisite time before disposal.
(4) Alphabet Ltd was not Dinah’s personal company for the requisite time before disposal.(a) 1 and 3
(b) 2 and 3
(c) 1 and 4
(d) 2 and 4ANSWER in BPP BOOK
(D)2 and 4
Bon only became a director on 1 February 2017, so this qualifying condition was not met for one year prior to the date of disposal. Her shareholding of 25% (25,000/100,000 ? 100) satisfies the minimum required holding of 5% for Alphabet Ltd to be her personal company and this qualifying condition was met for one year prior to the date of disposal.
Dinah was an employee for more than one year prior to the disposal but her shareholding of 3% (3,000/100,000 ? 100) is less than the minimum required holding of 5%.I didn’t understand that why BON did not qualify for Entrepreneurs relief cause he had met the condition of being the employee ie director for 12 months prior to disposal. (From 1/2/17 to 4/3/18 is 13 months)
