9706_s23_qp_21 - revisedeck

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Mima is the owner of a wholesale business, Mima Supplies. During the year ended 31 December 2022 the business owned the following delivery vehicles. Date of purchase Cost $ Vehicle A 1 January 2019 28 000 Vehicle B 1 January 2020 30 000 Vehicle C 1 July 2022 32 000 Delivery vehicles are depreciated at 25% per annum using the straight‑line method on a month‑by‑month basis. No depreciation is provided in the year of sale. Vehicle A was sold for $5200 on 30 June 2022. REQUIRED Calculate the profit or loss on the disposal of Vehicle A. Calculate the total depreciation charge on delivery vehicles for the year ended 31 December 2022. REQUIRED Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space provided on the next page to show your workings. Mima Supplies Statement of profit or loss for the year ended 31 December 2022 Workings: Explain the importance of making an allowance for irrecoverable debts in a business’s financial statements. Additional information Mima would like to assess her business’s liquidity position at 31 December 2022. REQUIRED Identify two ratios which could be used to assess a business’s liquidity position. Additional information Mima has noticed that her business’s rate of inventory turnover has decreased since last year. She is considering two options to increase the rate of inventory turnover. Option A: reduce inventory levels. Option B: reduce selling prices by 2% and increase the annual advertising budget by 5%. REQUIRED Advise Mima which option she should choose. Justify your choice by considering both options.

3. Financial accounting (A Level) → 3.1. Preparation of financial statements

1. Financial accounting (AS Level) → 1.3. Accounting for non-current assets

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Param uses control accounts to verify the accuracy of his business’s sales and purchases ledgers. He provided the following information for the month ended 30 April 2023 relating to trade receivables. $ Sales ledger balances, 1 April 2023 Debit 14 890 Credit Contra entries with the purchases ledger 1 850 Credit sales 153 480 Credit customers’ cheques returned Discounts allowed 4 830 Interest charged on overdue accounts Irrecoverable debts written off 1 830 Receipts from credit customers 148 200 Returns inwards 2 790 There were no credit balances in the sales ledger on 30 April 2023. REQUIRED Prepare the sales ledger control account for April 2023. Dates are not required. Sales ledger control account $ $ Identify the books of prime entry for each of the following: discounts allowed irrecoverable debts written off. State three benefits of maintaining control accounts. Additional information The balance of the sales ledger control account at 30 April 2023 did not agree with the total of the individual customer account balances at this date. The following errors were discovered, some of which affected the sales ledger control account and some of which affected the customer account balances. Returns inwards of $720 had been credited to the account of Rafiq Stores instead of Raif Stores. A sales invoice for $820 had been omitted from the books of account. The balance of a credit customer’s account, $430, had been brought down as $340. The total of the returns inwards journal had been understated by $470. Interest of $40 charged on an overdue account had been correctly entered in the journal but had been credited to the customer’s account. REQUIRED Calculate the revised sales ledger control account balance at 30 April 2023.

1. Financial accounting (AS Level) → 1.4. Reconciliation and verification

1. Financial accounting (AS Level) → 1.2. The accounting system

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The following extract from J Limited’s statement of financial position at 1 January 2022 is available. $ Equity Issued capital: ordinary shares of $0.25 each 600 000 Share premium 175 000 Retained earnings 54 000 Total equity 829 000 Non‑current liabilities 7% Debentures (2028) 200 000 REQUIRED State two features of revenue reserves which do not apply to capital reserves. Additional information The directors wished to raise additional finance. On 1 April 2022 the company made a rights issue of 2 ordinary shares for every 3 shares held at a price of $0.35 per share. The issue was fully subscribed. REQUIRED Calculate the amount raised by the rights issue of shares. Additional information The directors had considered making an issue of debentures rather than a rights issue. Identify two reasons why the directors of J Limited might prefer to raise additional finance through a rights issue rather than by issuing debentures. Additional information The directors paid an interim dividend of $0.12 per share on 1 July 2022. REQUIRED Calculate the total amount of the interim dividend. Additional information The company made a profit of $535 000 for the year ended 31 December 2022. REQUIRED Prepare the statement of changes in equity for the year ended 31 December 2022. J Limited Statement of changes in equity at 31 December 2022 Share capital $ Share premium $ Retained earnings $ Total $

1. Financial accounting (AS Level) → 1.5. Preparation of financial statements

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D Limited has two production departments and two service departments at one of its factories where absorption costing is used. Some forecast factory overheads have already been allocated and apportioned as follows: Production departments Service departments Cutting $ Assembly $ Maintenance $ Canteen $ Factory overheads 223 480 217 980 45 270 36 260 The following forecast factory overheads are still to be apportioned. $ Depreciation of machinery 48 000 Power 40 200 Canteen department overheads should be reapportioned on the basis of the number of employees. Maintenance department overheads should be reapportioned on the basis of the number of machines in production departments. The following data is available. Production departments Service departments Cutting Assembly Maintenance Canteen Machinery at carrying value $90 000 $66 000 $18 000 $6 000 Number of machines Kilowatt hours 1 800 1 500 Number of employees Budgeted machine hours 40 000 33 500 Budgeted direct labour hours 23 000 62 500 REQUIRED Complete the following table to show the apportionment of factory overheads and the reapportionment of service department overheads. Production departments Service departments Cutting Assembly Maintenance Canteen $ $ $ $ Factory overheads 223 480 217 980 45 270 36 260 Depreciation of machinery Power Total overheads Reapportionment Subtotal Reapportionment Total overheads Calculate, to two decimal places, an overhead absorption rate for each production department, using a suitable basis. Additional information The following information is available. Cutting department Assembly department Direct labour rate per hour $10.90 $8.20 Machine hours per unit Labour hours per unit Direct materials cost $6.95 per unit. Selling prices are set to achieve a profit margin of 25%. A customer has placed an order for 40 units. REQUIRED Calculate the selling price to be quoted for this order of 40 units. State two causes of under absorption of overheads. Additional information At the other factory a single product, Product Exe, is currently being made. Marginal costing is used at this factory. The following information is available. Selling price per unit $48 Contribution per unit $13 Direct labour 2.5 hours per unit at $10 per hour Fixed costs $96 000 per annum Factory capacity 28 000 labour hours per year Current production level 80% of factory capacity All units produced are sold. REQUIRED Calculate the profit made each year from Product Exe. REQUIRED Calculate the total profit from both products which will be made in the first year if this plan is put into operation. Advise the directors whether this plan should be put into operation. Justify your answer by considering both financial and non‑financial factors.

2. Cost and management accounting (AS Level) → 2.2. Traditional costing methods

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