General Comments lX 4
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The following three questions have been taken from the Internationalvariant of the paper and were the three questions with the lowest pass rates onthe paper.The aim of reviewing these questions is to give future candidates anindication of the types of questions asked and guidance on dealing with examquestions. S_UIO.K
Sample Questions for Discussion yN( %-u"
Example 1 A$ 0fKko
1.The following extract is from the financial statements of Pompeii,alimited liability company at 31 October
What is the cash flow from financing activities to be disclosed inthe statement of cash flows for the year ended 31 October 2010?(2marks) X \qNG]
A $60,000 inflow K1yzD6[eW
B $10,000 inflow +V OK%8,p
C $110,000 inflow @`- 4G2IU}
D $27,000 inflow >_ T-u<E
The correct answer is B.Only 32% of candidates answered thiscorrectly.In terms of difficulty this question was not particularlycomplicated,but statements of cash flows have been consistently answered badlyin each sitting of the paper.In this question,the answer can be derived as follows: )1`0PJoHE
Cash flows from financing:$000 j' "J%e]
Issue of share capital:(120+60)-(80+40)=60 f uf"A e
Repayment of bank loan:(100-150)=-50 vV-`jsq20H
Net cash inflow from financing:10 w+u3*/Zf
The most common answer selected was D which included retainedearnings in the calculation which is incorrect.Candidates need to spend moretime learning the format and technique for answering questions on thistopic.
Example 2 ; )@~
Smith and Jones commenced in partnership on 1 December 2009 sharingprofits equally.Smith paid cash of $40,000 into the partnership.Jones paid incash of $25,000 and brought in a motor vehicle,computer and furniture worth$15,000.The partners maintain both capital and current accounts.The partnershippays interest on capital at 4% per annum. M!D3 }JRm
What should the balance be on thecapital accounts of Smith and Jones at 30 November 2010?(2marks) Y&Z.2 >b
Smith Jones 56 kI
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A $41,600 $41,600 [ 5Mr@f4
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B $40,000 $40,000 'e'cb>GnA
C $40,000 $25,000 5K8^WK
D $41,600 $26,000 ~dTrf>R8M
The correct answer is B.Only 33% of candidates selected B,with themajority selecting option A.Partnership accounts is another area that seems toconsistently show poor performance.It is a large part of the F3 syllabus so itis surprising that candidates perform so badly.This question required knowledgeof what should be included in the capital accounts of a partnership.There wereno complicated calculations to perform,so this shouldn’t have caused anyproblems.The correct answer of B shows both partners contributing an equalamount of capital – the only difference being that Jones has paid cash and otherassets into the partnership.Most candidates selected A which meant that theycorrectly identified the capital balance,but then added on the interest oncapital,which should be included in the current accountbalance.
Example 3
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The statement of financial position of Cartwright,a limited liabilitycompany,shows closing retained earnings of $320,568.The income statement showedprofit of $79,285.Cartwright paid last year’s final dividend of $12,200 duringthe current year and proposed a dividend of $13,500 at the year end.This had notbeen approved by the shareholders at the end of the year. u <v7;dF|s
What is the openingretained earnings balance?(2 marks) =$JE
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A $241,283 60?%<oJ oH
B $387,653 N2<
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C $254,783 MeZf*'
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D $253,483
The correct answer is D and almost 36% of candidates selected thisoption.This question required knowledge of how dividends are treated in thefinancial statements and then working backwards to obtain the opening retainedearnings balance.The solution is calculated as follows: V QOezQs\
Opening retained earnings+profit–prior year final dividend=closingretained earnings 5D// *}b,
Opening retained earnings=$79,285–$12,200–$320,568 `1IgzKL9
Opening retained earnings=$253,483
The most frequently selected incorrect answer was B.This distractertook closing retained earnings as the opening balance and then added profit lessthe final dividend($320,568+$79,285 -$12,200).This is a careless error from notreading the question carefully enough. ^9:Z7 >Z
Conclusion a~y'RyA
It has been surprising that these questions were the worst answeredon the paper at this sitting.They cover key exam topics and all are relativelystraightforward.Partnerships and statements of cash flows are consistentlyamongst the worst answered questions in the paper,which seems to highlight thatcandidates are not preparing sufficiently in these areas.At the risk ofrepeating the conclusion of previous reports,candidates must focus on thebreadth of the syllabus as this exam will examine the whole range of the studyguide and candidates need to be prepared for this.
