1
Suggest one non-financial reason why Ayanda might prefer to be an employee rather than a partner. [1]
Less risk/less responsibility/entitlement to holidays or sick pay.
State what is meant by the term ‘revaluation reserve’. [1]
A revaluation reserve arises when non-current assets are revalued at an amount greater than their current net book value.
State what is meant by ‘goodwill’. [1]
Goodwill is the amount paid for the acquisition of a business in excess of the acquired business’ separable net assets at fair value.
The average annual profit earned by Ephraim for the past three years was $60 000. The average annual profit earned by Fikriyah for the past three years was $40 000.
The budgeted profit for the partnership for its first year’s trading is expected to be $100 000. In each of the following three years it is expected to be 10% less than the previous year. This is as a result of the increasing competition.
Discuss the benefits and limitations of the merger to each partner. Justify your answer using both financial and non-financial factors. [12]
As profits are shared equally both Ephraim and Fikriyah would receive $50 000 in the first year. (1) Second year profits are $90 000 (1), third year $81 000 (1) and fourth year $72 900. (1) Ephraim is worse off (throughout the period). (1) Fikriyah is better off for years one, two and three (1) but is also worse off in year four. (1) Fikriyah is contributing significantly more capital but only receiving half the profit (1) OF The profits may not have been maintained by the sole traders for this four-year period (1) It would appear that the merger is beneficial for Fikriyah/not for Ephraim. (1) The partners should take action to reverse the trend in falling profit (1) The synergies from partnership will make it more efficient (1)
Paul's height is six feet, he's an assistant at a butcher's shop, and wears size 9 shoes. What does he weigh?
meat
Explain one benefit to partners of receiving ordinary shares. [2]
The dividend on ordinary shares is variable and dependent on the levels of profit (1) so has greater reward when the profits are high. (1) Possible involvement of Wembo and Bob in managing the company through voting rights (1)
State the meaning of the term ‘capital account’. [2]
The account which records the introduction (1) or withdrawal (1) of funds/assets of a person into the business.
State two advantages to a company of purchasing another business. [2]
Economies of scale (1) Synergy (1) Broader range of products / service (1) Increase the market share / eliminate competitor (1) Acquiring the knowhow / technology / expertise / good location etc., of the acquired company (1) If the acquired business is a new business to the acquiring company, there is no need to start from the scratch (1)
The financial statements of PL plc also contain a value for goodwill.
Explain the event which has taken place and caused the company to record the value for goodwill. [2]
The company has purchased another business as a going concern (1) and paid a purchase consideration higher than the value of the net assets taken over (1).
In what year did blue eyes the song release?
2013
State three reasons why goodwill might arise. [3]
Good reputation of business (1) Good location of premises (1) Profitability of business (1) Efficiency of employees (1) Good customer base (1) paid a purchase consideration higher than the value of the net assets taken over (1)
State three reasons why VC plc might want to buy the partnership. [3]
It is a profitable business. (1) The premises are in a good location. (1) There is a strong customer base. (1) The business has a good reputation. (1) The employees are well trained and efficient. (1)
State three ways in which the purchase consideration might be settled. [3]
cash (1) shares (1) debentures/loan stock (1)
Amir’s friend Lala has just left an international IT firm and wants to join the partnership.
Advise whether or not Amir, Ishan and Raj should admit Lala as a partner. Justify your answer. [3]
• same field and same knowledge/expertise (1) • international working experience (1) • bring additional capital (1) • may dilute the ownership (1) • may dilute the control (1) • already merge with Raj (1) • share the profit (1) • share the loss (1)
Complete the sentence..
And she said she said she said she's from hawaii..
Yaknow how to say cute in japanese? Kawaii!
After the first year’s successful trading as a partnership the partners were advised to consider incorporating their business. Both partners are close to retirement age and have family.
Discuss two advantages to the partners of incorporating their business. [4]
There would be limited liability / separate legal entity. (1) Possibility of raising more capital. (1) Ownership is transferable. (1) More legal formalities. (1) Greater expense to maintain. (1) Since the partners are close to retirement it is advisable to incorporate. (1)
Max 2 advantages x 2 marks each (1 mark for identifying, 1 mark for development.)
Arthur says that as there were only two partners, he is entitled to receive half of the purchase consideration.
Advise Belinda whether or not she should agree to Arthur receiving half of the purchase consideration. Justify your answer. [4]
The profit sharing ratio is 1:1 (1) and Arthur will have received 50% of the profit on realisation (1). The correct distribution of the purchase consideration depends on whether the partners contributed equally to the business (1) as shown by their capital accounts (1) and whether they withdrew resources equally from the business/taken equal amounts as drawings (1) as shown by their current accounts (1).
(1) for Decision plus max (3) for comments
After the first year’s successful trading as a partnership the partners were advised to consider incorporating their business. Both partners are close to retirement age and have family.
Discuss two advantages to the partners of incorporating their business. [4]
There would be limited liability / separate legal entity. (1) Possibility of raising more capital. (1) Ownership is transferable. (1) More legal formalities. (1) Greater expense to maintain. (1) Since the partners are close to retirement it is advisable to incorporate. (1)
Max 2 advantages x 2 marks each (1 mark for identifying, 1 mark for development.)
State one reason why the assets and liabilities may be revalued when a partnership is sold. [1]
To reflect the fair value (1) of assets and liabilities for the purpose of ascertaining the purchase consideration (1). To ensure partners are treated fairly for changes (1).
Which Pokémon evolves into two different forms based on friendship and the time of day?
Eevee (Espeon-day and Umbreon-night)
Profit for the year ended 31 December 2016 of Armfield was $80 000 and Bonetti was $120 000. The profit for the year of the partnership for the year ending 31 December 2017 is expected to be $200 000. The partners agreed to share the profits and losses equally.
Discuss whether or not the merger of the two businesses has been beneficial to each partner. [5]
Based purely on profitability, Armfield benefits by $20 000 (1) – Bonetti is worse off by $20 000. (1) Only one year’s results available, so difficult to form opinion. (1) Disadvantages include sharing of profits, possible disagreements and therefore delays to decision making process. (1) Advantages include more capital, more expertise. (1)
Discuss the advantages to C Limited, other than increase in the profit, of purchasing Alex and Brown’s business. [5]
• Shareholders may receive higher dividend • Improvement through the synergy effect, e.g. greater buying power, discounts from suppliers • Economy of scale • Alex and Brown’s skills, experience and methods may bring additional benefits • Goodwill of partnership brings additional revenue/customers • Efficiency in operation • Access to wider market
With the cash she has received, Alice is considering setting up a new business trading in wood on her own.
Advise Alice whether or not she should set up this new business. Justify your answer. [5]
Max 2 marks for ‘For’ comments
Max 2 marks for ‘Against’ comments
1 mark for decision supported with a comment
For (max 2): She has experience and knowledge in the trade. (1) She now has time to run her own business (1) She can supplement her income from X Limited. (1) She takes all the profit from her own business. (1)
Against (max 2): She will be in competition with X Limited. (1) She will have start up costs (1) She must consider whether the cash received is sufficient. (1) She has unlimited liability. (1)
The partnership business of Alan and Betty was the first business acquired as a part of the expansion strategy of J Limited. In a meeting to review the result of the acquisition after one year, the finance director reported that the acquisition of the partnership business did not bring the expected additional profit to J Limited.
Advise whether or not J Limited should continue the expansion strategy. Justify your answer. [5]
Max 2 marks for ‘should’ comments
Max 2 marks for ‘should not’ comments
1 mark for decision supported with a comment.
It is only one year’s time, J Limited should take the acquisition as a long-term strategy. (1) Acquiring businesses can bring synergy (1) and elimination of competitors. (1) J Limited pays for the goodwill in the expectation of additional future profit. (1) J Limited was too optimistic in its predictions. (1) Synergy may not succeed because there may be a culture clash between two businesses. (1
what did the contestants of lazawal ishq eat every night at the start of the show?
eggs