9706_m18_qp_22 - revisedeck

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Delph started trading on 1 July 2016. For the year ended 30 June 2017 he provided the following information relating to his sales and purchases. $ Bank payments to credit suppliers 39 826 Cash purchases Credit purchases 74 779 Credit purchases returns 6 813 Discount received 1 764 At 30 June 2017 Sales ledger control account balance 21 555 Debit REQUIRED Explain two benefits of using control accounts. Additional information The following book-keeping errors have been discovered in the sales ledger: The sales journal total for June 2017 was understated by $1470. A customer’s invoice for $2910 was entered in the sales journal as $2190. Discounts allowed in June 2017 amounting to $435 were debited to the sales ledger control account. A sales invoice for $1520 dated 30 June 2017 was omitted from the sales journal. REQUIRED Prepare the amended sales ledger control account at 30 June 2017. Delph Amended sales ledger control account $ $ Balance b/d 21 555 Additional information At 30 June 2017 there was a debit balance on the purchases ledger account of $384. REQUIRED Prepare the purchases ledger control account for the year ended 30 June 2017. Delph Purchases ledger control account $ $ Additional information Delph has also provided the following information. At 1 July 2016 $ Capital introduced 10 500 Loan from the bank (repayable 2021) 3 000 During the year ended 30 June 2017 Bank payments Motor vehicle 13 560 Loan Drawings 12 625 At 30 June 2017 Inventory 3 700 Debit Cash in hand Debit Rent Debit Bank Credit Wages 1 890 Credit The motor vehicle is to be depreciated at 25% using the reducing balance method. REQUIRED Prepare the statement of financial position at 30 June 2017. Delph Statement of financial position at 30 June 2017 Additional information Delph has calculated the following ratios for the year ended 30 June 2017 for his own business and for his main competitor, Nadia. Delph Nadia Gross margin 26% 21% Profit margin 9% 12% REQUIRED Advise Delph whether or not his business is more profitable than Nadia’s business. Justify your answer.

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

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

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The following is an extract from the statement of financial position of X Limited at 31 December 2016. $ Equity Share capital ($1 ordinary shares) 400 000 Share premium 20 000 Retained earnings 190 000 Total equity 610 000 Non-current liabilities 8% debentures (201920) 80 000 Current liabilities Trade and other payables 20 000 Cash and cash equivalents 60 000 80 000 Total liabilities 160 000 Total equity and liabilities 770 000 During the year ended 31 December 2017 the following transactions took place. 1 January 2017 Issue of 80 000 ordinary shares at $1.25 each. 30 June 2017 Rights issue of 3 ordinary shares for every 8 shares held on this date at an issue price of $1.30. This was fully subscribed. 30 September 2017 Bonus issue of 1 ordinary share for every 6 shares held on this date. REQUIRED Prepare journal entries to record each of these transactions in the books of account. Dates and narratives are not required. Debit $ Credit $ Prepare a statement to show the effect that the transactions had on the total equity. State three uses of a share premium account. State three reasons why a company may make a bonus issue of shares.

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

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Paul and Angela are in partnership sharing profits and losses in the ratio of 3:2 respectively. No separate current accounts are maintained. On 1 May 2017, Rachael was admitted into the partnership. State two advantages to existing partners of introducing a new partner. State two disadvantages to existing partners of introducing a new partner. A summarised statement of financial position at 30 April 2017 before the admission of Rachael is as follows: $ Non-current assets 225 000 Cash and cash equivalents 7 450 Other current assets 61 500 293 950 Capital accounts: Paul 145 000 Angela 95 000 Current liabilities 53 950 293 950 The following information is available: Rachael paid $75 000 as capital into the partnership bank account. Goodwill was valued at $50 000. No goodwill account was to be maintained in the books of account. Non-current assets were revalued at $270 000. Current assets (excluding cash and cash equivalents) were revalued at $40 500. Current liabilities were revalued at $45 950. Paul, Angela and Rachael will share profits and losses in the ratio 5:3:2 respectively. REQUIRED Calculate the profit or loss from revaluation on 1 May 2017 when Rachael was admitted. Show how this is divided between the partners. Profit or loss from revaluation Division between partners Prepare, on the next page, the partners’ capital accounts on 1 May 2017 after the admission of Rachael. Explain why an adjustment for goodwill may be made when a new partner joins a business. State two factors that may result in the creation of goodwill for a business.

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

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

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K Limited has two production departments. Department A produces bicycles and Department B produces scooters. The company splits the costs of its maintenance department across the two production departments on the basis of stores requisitions. REQUIRED Name the accounting term which describes the splitting of a service department’s costs based on stores requisitions. Explain how the cost of direct materials is charged to each production department. Additional information K Limited provided the following budgeted information for January 2018. Department A Department B Production 1 000 1 200 Total production costs $ $ Direct materials 16 000 26 000 Direct labour 18 000 21 000 Indirect materials 4 000 3 000 Maintenance department costs 4 500 7 000 Factory rent 10 000 8 000 Depreciation of factory machinery 10 500 19 000 63 000 84 000 The selling and distribution costs for January were budgeted to be $33 000 and the administrative expenses for January were budgeted to be $66 000. These were to be split between the two departments on the basis of units produced. The budgeted selling prices were calculated using a mark-up of 25% on total cost. REQUIRED State the bases which the company may have used to split each of the following costs between the two departments. factory rent depreciation of factory machinery Calculate the inventory value of one bicycle produced by Department A using marginal costing using absorption costing. Calculate the budgeted profit for one bicycle. Calculate the budgeted profit for one scooter. Additional information The sales director has suggested that the company should reduce production of bicycles by 500 a month and increase production of scooters by 500 a month. REQUIRED Advise the directors whether or not they should proceed with this suggestion. Justify your answer using both financial and non-financial factors. Additional information K Limited pays its production workers $9 an hour. In January 2018 actual results for Department A showed the following. hours worked 2 100 total overheads $76 200 REQUIRED Calculate the overhead absorption rate per direct labour hour for Department A. Calculate the under-absorption or over-absorption of overheads for Department A in January 2018.

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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