9706_s24_qp_22 - revisedeck

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Zahid owns a small retail business. He has not maintained a full set of accounting records. Zahid supplied the following information for the year ended 31 December 2023. All sales were made on a cash basis. Cash sales totalled $195 000. All goods were sold with a mark-up of 50%. Calculate the gross profit of the business for the year ended 31 December 2023. Additional information The following information is also available. Inventory and trade payables At 1 January 2023 $ At 31 December 2023 $ Inventory 16 400 22 460 Trade payables 13 500 15 600 All purchases were made on credit. Trade suppliers were paid $134 240 after deducting cash discounts totalling $560. Zahid took goods for his own use during the year. However, no record was made of the value of these goods. Calculate for the year ended 31 December 2023: purchases the value of goods taken for own use by Zahid. Additional information The following information is available for Zahid’s business. Non-current assets Non-current assets had the following values. $ 1 January 2023 194 000 31 December 2023 188 000 During the year ended 31 December 2023, a non-current asset was sold for $5600, resulting in a profit on disposal of $2400. Additional non-current assets were purchased for $9200. Income from rent receivable At 1 January 2023 Bank receipts during the year At 31 December 2023 owing to Zahid’s business $280 $5360 received in advance $600 Expenses At 1 January 2023 Bank payments during the year At 31 December 2023 Advertising prepaid $490 $5 960 accrued $610 General expenses accrued $570 $8 480 – Insurance prepaid $330 $4 510 prepaid $390 Wages – $12 400 accrued $470 Prepare an extract from the statement of profit or loss for the year ended 31 December 2023, starting with the gross profit calculated in . Workings: Zahid Statement of profit or loss for the year ended 31 December 2023 $ Gross profit Explain, with reference to an accounting concept, why Zahid made adjustments to his income and expenses when preparing the statement of profit or loss. Additional information Zahid plans to expand his business. This would mean he would no longer operate as a sole trader. He is considering the following options. Option A: form a partnership with Talha who currently owns a similar business. Option B: form a limited liability company with himself and Talha as shareholders and directors. Advise Zahid which option he should choose. Justify your answer by considering both the advantages and the disadvantages of each option.

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

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

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J Limited’s financial year ended on 31 December 2023. At this date the following balances remained in the books of account from which the statement of financial position is to be prepared. $ 8% Debentures (2024) 90 000 Cash and cash equivalents (debit balance) 28 900 Furniture and equipment at carrying value 180 000 Inventory 84 000 Issued share capital: shares of $0.50 each 750 000 Property at valuation 1 060 000 Retained earnings 242 400 Revaluation reserve 70 000 Share premium 220 000 Trade and other payables 19 700 Trade and other receivables 39 200 The following errors have been discovered in the information shown. Inventory at 31 December 2023 had been undervalued by $3600. Furniture and equipment had been depreciated by 25% instead of 20%, using the reducing balance method of depreciation. Sales returns of $1100 had been recorded in the books of prime entry as purchases returns. The error affected the general ledger and the personal accounts of credit customers and credit suppliers. Calculate the corrected balance of retained earnings at 31 December 2023. Prepare the statement of financial position at 31 December 2023. J Limited Statement of financial position at 31 December 2023

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

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

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

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Suki uses ratios to assess her business’s efficiency. The following information is available. 1 For the year ended 31 December 2023: $ Purchases 323 000 Revenue 482 500 2 At 31 December 2023: $ Trade payables 33 600 Trade receivables 34 100 All goods are purchased on credit. 80% of sales are on credit. Calculate the following ratios, stating the formula used. Trade payables turnover Formula Calculation Trade receivables turnover Formula Calculation Additional information At 31 December 2022 the following ratios were calculated. Trade payables turnover 32 days Trade receivables turnover 36 days Discuss the performance of Suki’s business, comparing the results for 2023 with those for 2022. Additional information Inventories were valued as follows: $ 1 January 2023 36 700 31 December 2023 42 100 Calculate, to two decimal places, the rate of inventory turnover, stating the formula used. Formula Calculation Explain the importance of the rate of inventory turnover to a business.

1. Financial accounting (AS Level) → 1.6. Analysis and communication of accounting information

3. Financial accounting (A Level) → 3.5. Analysis and communication of accounting information

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D Limited is a manufacturing company. Explain two uses of absorption costing. Additional information D Limited uses marginal costing. At one of its factories a single type of product is made. The following budgeted information is available. Per unit $ Selling price Direct materials Direct labour Fixed costs The factory has a budgeted capacity of 15 000 units per month. Calculate the monthly break-even point in units. Additional information It was forecast that only 4920 units would be sold in January 2024. Calculate the forecast profit or loss for January 2024. Additional information The directors have set a target profit of $150 000 per month. Calculate the number of units to be sold in order to achieve the target profit. Additional information At another factory of D Limited a single different type of product is made. The following budgeted details are available for one month’s production: Per unit $ Direct materials Direct labour Other variable costs Contribution Normal capacity at this factory is 18 000 units per month. Recently, the factory has been operating at 80% capacity and this has resulted in a monthly profit of $150 600. The directors have been informed that a major competitor manufacturing the same product plans to stop production. The directors plan to take advantage of the situation and are considering two options. Option A Increase monthly production by 6000 units on current output levels. Sell all production at a price per unit 2% above the current price. Any production above normal factory capacity will require direct labour to be paid an overtime premium of 50%. Option B Increase factory capacity to 22 000 units per month. Sell all production at a price per unit 3% above the current price. Suppliers of direct materials will be expected to offer a trade discount of 25% instead of the current trade discount of 20%. The direct labour rate per unit will be increased to $18.50. Some additional machinery will be purchased at a cost of $120 000. Machinery is depreciated by 20% per annum, using the straight-line method. An additional $20 000 per month will be spent on advertising. Calculate the monthly profit to be made from Option A. Prepare a monthly marginal costing statement for Option B. Advise the directors whether or not they should go ahead with either of these options. Justify your choice by discussing both financial and non-financial factors.

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

4. Cost and management accounting (A Level) → 4.3. Budgeting and budgetary control

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