exam Hi! Mine was alright. I got my balance sheet to balance but got very confused with the wacc questions where they asked us to "estimate" ungeared and geared beta. I did some sort of average. Other than that, multiple choice seemed pretty straightforward and I missed left points on the short questions.
Balance Sheet Question I was quite confused with the Valuation. It said that the factory was revalued, but was not recorded in the books. Does that mean we don't use the re-valued figure for calculation of Dep and Asset Value?
Yeah, that confused me as well. I thought it meant use it to calculate depreciation but don't record it as the new cost on the balance sheet. That's what I did but I might be wrong.
I didn't use that figure for both (depreciation and asset value). And it balanced. lol.. If I can correctly remember I think the balancing I got was 1,222. But I am sure we were supposed to use that re-valuation somewhere. Other than that the beta calculations was a mess for me, but looks like quite a few people didnt get that as well. Anyway its all over now. Let's forget about these exams for a while.
Hi, Here's what I did, though it may not be correct: The asset had been revalued at 1st April 2008, while the date we had to draw accounts up for was 31st March 2009, i.e. one year on. Where it says "has not yet been recorded in the accounts yet" I took that to mean it was referring to the trial balance. I used the revaluation when calculating both the depreciation for the income statement and the value of assets in the balance sheet. My balance sheet balanced for once! I think the value I got was 1384. Aside from that question, I thought the multiple choice seemed a bit trickier than in past papers. There seemed to be a lot less straightforward answers. Also the calculation of the beta I seemed to get into a bit of confusion!
My balance sheet balanced with the firgure 1380 which is wrong because i messed up on using the reval reserve!!but i am surprised it balanced. The whole paper was alot better than i imagined it to be but (like others ) i got confused on estimating the ungeared beta, so i worked an average beta using the 20 million assuming it were raised as equity and not debt, any ideas anyone if thats wot it was asking? Most of the MCQ's were pretty staright forward but some required some thinking (which is something I cannot do in an exam). Good luck with results and anymore exams you may have.
Exam I got it balanced as well... the valuation figure said in the question is 700000 ( i think)..but i don't think we need to use that until in the latter part of the question where it asks about the good or bad about the revaluation of the asset. Since the question states that we produce the income statement as of 31 March 2009 instead of 1 April 09 (which is when the revaluation starts) i think we can ignore that in producing the income statement?? ( I hope....)
CT2 paper Hi I also appeared at CT2 on April 23. I feel as below: Re: WACC problem – It was surprising to see “estimate ungeared beta” I think, it was already given as 1.6 in the question, when d=0, e=60 million. By definition, this was ungeared beta only, it can not change by changing gearing levels, it is like a constant, so will not change subsequently. In the material also, there are examples to calculate geared beta at g2, given the geared beta at g1. Procedure is to get ungeared beta first and then get geared at g2. So, clearly, ungeared beta is only the one, and not something for g1 and something else for g2 level of gearing. Re: Income Stat/Balance sheet – Tax was not given, so it should be 0. Many have worked out by taken tax as 28% as given in WACC problem. We can not borrow this from other questions. I feel Revaluation of Factory was decided on April 01, 2008 and so far it was not incorporated. Accordingly, it had to be incorporated in the statements as on March 31, 2009. I could match my balance with this at Assets = 1349. I don’t know how much it is correct. Re: MCQ – Yes, this time, objective questions were a bit tricky. I could really not found any choice in Q10 of quick ratio. I think many could solve with choice (b), which was 0.90:1. In fact, I also ticked with this. What was the correct answer? I am trying to memorize some of my answers to MCQs, as below: • Margin will increase • Put option • QR = 0.90:1 • When quick ratio decreases • Because info of liquidity ratio will be out dated when published. • Overdraft permitted by bank to withdraw immediately. • I can not remember other 4 questions All the best for results, Sinha
Tax rate I am not from UK, but I think there are two slabs of corporation tax rates, 21% for small and 28% for large companies in UK. There was no clue whether it was a small or big company. Further, I was wondering if a tax (say, GBP X) is deducted from profit before tax in Income Statement, then the same amount (GBP X), should be mentioned in the current liabilities in the balance sheet. Question should have been clear-cut on tax issue. Examiners should give now appropriate credit for different approaches. Further, as the question was confusing, it took much time to apply a suitable approach, so 12 marks alloted to the question appeared to be a costly affair, impacting time management badly. How examiners would compensate this and for one wrong MCQ question. For "estimate ungeared beta", I fear that if there is some different solution, there would be huge loss of marks, as subsequent parts of the question (WACC calculation etc.), were fully based on this value of this ungeared beta.
