9706_m19_qp_22 - revisedeck

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The following balances were extracted from the books of K Limited at 30 September 2018. Debit Credit $000 $000 8% Debentures (2022-2024) Administrative expenses Cash and cash equivalents Cost of sales Debenture interest Distribution costs Dividends paid Equipment cost provision for depreciation at 1 October 2017 Land and buildings cost provision for depreciation at 1 October 2017 Inventory at 30 September 2018 Issued share capital: ordinary shares of $0.50 each Retained earnings at 1 October 2017 Revenue Share premium Trade payables Trade receivables The following information is also available. Administrative expenses includes a payment, $9000, for insurance for the three months ended 30 November 2018. Carriage inwards of $3000 had been included in distribution costs. Land and buildings includes land at a cost of $260 000. The company’s depreciation policy is as follows: Equipment 20% per annum using the reducing balance method Charged to distribution costs Buildings 2½% per annum using the straight-line method Charged to administrative expenses Land No depreciation REQUIRED Prepare the income statement for the year ended 30 September 2018. K Limited Income statement for the year ended 30 September 2018 $000 Workings: Additional information During the year ended 30 September 2018 the directors had made a rights issue of 1 ordinary share for every 2 shares held at a price of $0.70 per share. The issue was fully subscribed and had been recorded in the books of account. REQUIRED Prepare the statement of changes in equity for the year ended 30 September 2018. Share capital $000 Share premium $000 Retained earnings $000 Total $000 Workings: Additional information The directors wish to raise additional finance. They are considering making either a further rights issue of ordinary shares or issue another debenture. REQUIRED Advise the directors which option they should choose. Justify your answer. Additional information The directors have provided the following information: Year ended 30 September Year ended 30 September Industry average for both years Trade payables turnover 29 days 35 days 34 days Trade receivables turnover 39 days 31 days 32 days REQUIRED Analyse the effect that the changes in each of these ratios had on the company’s liquidity using all the available information. State three ways in which a business could reduce trade receivables turnover. State three drawbacks of increasing trade payables turnover.

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

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Mira, Sasha and Peta have been trading as a partnership. They share profits and losses in the ratio of 2 : 2 : 1 respectively. The partnership ceased trading on 31 January 2019. REQUIRED State four reasons why a partnership may be dissolved. REQUIRED Prepare the partnership realisation account. Prepare, on the next page, the partners’ capital accounts on dissolution. Prepare the final bank account to show the closure of the partnership. Suggest two reasons why the trade receivables did not pay the full amount they owed.

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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Noor, a sole trader, was preparing her business’s financial statements for the year ended 31 December 2018. The following information is available. At 1 January 2018 $ General expenses prepaid During the year ended 31 December 2018 $ General expenses paid 12 400 Insurance premiums paid 6 480 Rent received 5 460 At 31 December 2018 General expenses, $1210, were due but unpaid. Insurance premiums paid included $630 covering the six months ended 31 January 2019. Rent receivable of $1200 for the three months ended 28 February 2019 had not yet been received. Inventory had been valued at a cost of $11 400. However, it included several damaged items which had a selling price of $840. All goods are sold with a mark-up of 50%. The damaged items could be sold but would require repairs costing $360. REQUIRED Calculate the amount to be recorded in the income statement for the year ended 31 December 2018 for each of the following items. General expenses Insurance Rent receivable Closing inventory Additional information Noor’s policy is to maintain a provision for doubtful debts at 5% of trade receivables at the end of the financial year. REQUIRED State two accounting concepts which are applied when recording a provision for doubtful debts. Additional information At 31 December 2017 Noor’s trade receivables were $34 200 after deducting the provision for doubtful debts. At 31 December 2018 total trade receivables were $37 200. This total included the accounts of the following two credit customers. $ MN Limited S Wells Noor decided to write off these two accounts. She will maintain her provision for doubtful debts at 5% of trade receivables. REQUIRED Calculate the increase or decrease in the provision for doubtful debts at 31 December 2018.

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) → 1.3. Accounting for non-current assets

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W Limited operates a system of marginal costing. The company makes two products, Product A and Product B. The directors provided the following budgeted information for a year. Product A Product B Production and sales 10 000 $ 6 000 $ Allocated fixed overheads 130 000 120 000 Per unit selling price direct material direct labour variable overheads REQUIRED Prepare a statement for the year to show: the budgeted total contribution for each product the budgeted total profit for each product the budgeted total profit. Product A $ Product B $ Total $ Additional information Included in the allocated fixed overheads is rental of machinery at a cost of $100 000 a year. This cost is allocated 75% to Product A and 25% to Product B. The directors are now considering two options. Option 1: Continue with the existing machinery rental on the same terms. Option 2: Taking out a new rental agreement for new machinery. The new rental agreement would consist of a fixed fee of $28 000 a year plus $4 for each unit produced. The fixed fee would be split across the products in the same proportions as under the current agreement. REQUIRED Complete the following table to show the effect of Option 2. Product A Product B Total Revised unit contribution Revised allocated total fixed overheads, total for the year Revised budgeted profit for the year Workings: Advise the directors which option they should choose. Justify your answer using both financial and non-financial factors. Explain how unit contribution can be used by a business manufacturing multiple products when there is a shortage of production materials. State two other uses of marginal costing to a business.

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

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