9706_s24_qp_23 - revisedeck

1

K Limited provided the following extract from the company’s draft statement of profit or loss for the year ended 31 December 2023. $ Revenue 870 500 Cost of sales (493 000) Gross profit 377 500 It has now been discovered that adjustments are required for the following: Opening inventory at 1 January 2023 had been understated by $14 000. Sales returns, $8600, had been deducted from purchases. Closing inventory at 31 December 2023 included 40 damaged items costing $30 each. It is estimated that after repairs, costing a total of $420, the items could be sold for $38 each. Explain the accounting concept which is applied to the valuation of damaged inventory. Calculate the revised gross profit for the year ended 31 December 2023. Workings: Prepare the statement of profit or loss for the year ended 31 December 2023. Start the statement with the revised figure for gross profit from . Use the space provided on page 5 to show your workings. K Limited Statement of profit or loss for the year ended 31 December 2023 $ Gross profit , , Prepare an extract from the statement of financial position at 31 December 2023 to show the equity and liabilities section only. Statement of financial position at 31 December 2023 (Extract) $ Equity and liabilities Workings: , , Additional information The directors are planning to expand the business in 2024. The expansion will be financed by one of the following options: Option A: issuing 8% debentures (2030) Option B: making a general issue of ordinary shares. Advise the directors which option they should choose. Justify your choice by discussing both options. , ,

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

Open

2

Nadiya maintains control accounts as part of the double-entry system of her business. The purchases ledger and sales ledger contain memorandum accounts only. State three benefits of maintaining control accounts. Additional information On 31 March 2024 Nadiya found that the closing balance of the control accounts did not agree with the totals of the individual account balances in the purchases and sales ledgers. $ Purchases ledger control account balance 28 540 Total of trade payables in purchases ledger 31 790 Sales ledger control account balance 35 790 Total of trade receivables in sales ledger 36 410 Nadiya discovered the following errors which accounted for the differences. A credit note issued by Nadiya for $490 had been entirely overlooked. The total of the purchases journal had been understated by $3250. A cheque for $380 received from a credit customer had been dishonoured by the bank. This had been incorrectly recorded on the debit side of the cash book but had been posted correctly to the ledger account. An error of original entry had occurred when a purchases invoice for $4650 had been recorded as $5640. Interest of $70 charged on an overdue customer’s account had been credited to the customer’s account. Complete the following statements to correct the accounting records for trade payables. Correction of purchases ledger control account Correction of total of purchases ledger balances $ $ Incorrect balance 28 540 Incorrect total 31 790 Complete the following statements to correct the accounting records for trade receivables. Correction of sales ledger control account Correction of total of sales ledger balances $ $ Incorrect balance 35 790 Incorrect total 36 410 Additional information Control accounts sometimes contain contra entries. Explain why contra entries may be made in control accounts. , ,

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

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

Open

3

Usman began selling goods on credit on 1 January 2021. He maintains an allowance for irrecoverable debts at each financial year end. Explain two accounting concepts which are applied when making an allowance for irrecoverable debts. State two factors which should be considered when deciding the percentage that should be used for an allowance for irrecoverable debts. Additional information The following information is available about total trade receivables at the financial years ended 31 December: $ 18 200 17 300 19 600 The allowance for irrecoverable debts has been maintained at 4% each year. Prepare the allowance for irrecoverable debts account for the years 2022 and 2023. Allowance for irrecoverable debts account $ $ Additional information On 5 January 2024 it was decided to write off $3470 as irrecoverable, being the balance on the account of a credit customer, T Limited. However, on 29 March 2024 a cheque was received in full settlement of the amount owed by T Limited. State the double-entry necessary to record the following transactions: Writing off the account on 5 January 2024 The settlement of the amount due on 29 March 2024 , ,

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

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

Open

4

J Limited is a manufacturing company. Recently the directors decided to change the costing system from marginal costing to absorption costing. Explain each of the following terms used in absorption costing. Allocation Apportionment Additional information The factory has two production departments: preparation and finishing. There are two service departments: stores and canteen. Some overheads have already been allocated to departments. The following budgeted overheads for the year ended 31 March 2024 have yet to be apportioned. $ Electricity 63 000 Rent 44 000 The following information is available about the departments. Production departments Service departments Preparation Finishing Stores Canteen Floor area (square metres) Issues from stores – – Number of employees – Power (kilowatt hours) 32 000 Complete the table to show the apportionment of the budgeted overheads for the year ended 31 March 2024. Production departments Service departments Total Preparation Finishing Stores Canteen $ $ $ $ $ Overheads allocated 272 120 184 100 60 800 10 960 16 260 Electricity 63 000 Rent 44 000 Total overheads 379 120 Apportion canteen Subtotal Apportion stores Subtotal Additional information The following budgeted information is available for the two production departments for the year ended 31 March 2024. Preparation Finishing Machine hours 17 500 14 200 Labour hours 16 800 20 300 Calculate, to two decimal places, the overhead absorption rate for each production department for the year ended 31 March 2024. , , Additional information For the year ended 31 March 2024, actual hours for the preparation department were: Machine hours 16 920 Labour hours 16 350 Total actual overheads were the same as budgeted overheads. Calculate the over absorption or under absorption of overheads for the preparation department for the year ended 31 March 2024. Additional information An order has been received from a customer. The following information is available. Direct materials $800 Direct labour Preparation department 52 hours at $12.20 per hour Finishing department 90 hours at $14.50 per hour Machine hours Preparation department 140 hours Finishing department 48 hours Products are sold so as to achieve a gross margin of 50%. , , Calculate the selling price for the order. , , Additional information It has been suggested that the company would benefit if it switched to a just in time (JIT) method of inventory control. Advise the directors whether or not they should switch to a JIT method of inventory control. Justify your answer by considering both financial and non-financial factors. , ,

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

Open