9706_m22_qp_22 - revisedeck

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Rafiq owns a retail business. When the business was opened a few years ago, Rafiq maintained only minimal accounting records. REQUIRED State two reasons why the owner of a business might maintain minimal accounting records. Identify four benefits of maintaining full accounting records. Additional information More recently Rafiq has been able to provide more detailed financial information. On 1 January 2021, the business’s assets and liabilities were as follows: $ Cash in hand Bank overdraft 1 390 Furniture and fittings at valuation 22 710 Trade payables 11 870 Inventory 14 430 Rent prepaid 1 250 The following summary of receipts and payments for the year ended 31 December 2021 has been prepared from the business’s bank statements. Receipts $ $ Cash sales banked 132 200 Disposal of furniture and fittings 3 480 Total receipts 135 680 Payments Drawings 18 390 Trade payables 93 100 Rent 14 750 Additional furniture and fittings 8 000 Installation costs for new fittings General expenses 5 940 Total payments 140 560 Rafiq purchases all goods for resale on a credit basis. All sales are on a cash basis. A cash discount of 5% was received when Rafiq settled debts with trade payables during the year ended 31 December 2021. At 31 December 2021 trade payables totalled $9230. REQUIRED Calculate the total purchases for the year ended 31 December 2021. Additional information During the year ended 31 December 2021: Some cash takings were not banked but were used to pay wages, $21 540, and drawings, $2580. Rafiq took goods costing $480 for private use. Furniture and fittings with a value of $2950 were sold. At 31 December 2021: Cash takings of $1200 had not yet been banked. The balance of cash in hand was $920. Inventory was valued at $11 920. Furniture and fittings were valued at $23 400. Rent of $1440 was prepaid. REQUIRED Prepare the income statement for the year ended 31 December 2021. Workings: Additional information Rafiq would like to expand his business but requires additional finance to carry out this plan. He is considering two options. Option 1: Invite a friend, Khaled, to become a partner in the business. Khaled would introduce capital of $10 000. Option 2: Apply for a bank loan of $10 000. REQUIRED Advise Rafiq which option he should choose. Justify your answer by discussing both financial and non-financial issues of each option.

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

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

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T Limited’s statement of financial position at 28 February 2021 included the following: $ Equity Issued capital: ordinary shares of $0.50 each 450 000 Share premium 122 000 Retained earnings 342 000 914 000 On 31 August 2021 the directors paid an interim dividend of $0.05 per share. REQUIRED Calculate the amount paid as an interim dividend. Identify two factors which directors should take into account when deciding the amount of a dividend payment to shareholders. Additional information On 1 December 2021, the directors made a bonus issue on the basis of two ordinary shares for every three ordinary shares currently held. The directors wished to leave the reserves in their most flexible form. REQUIRED Prepare the journal entry to record the bonus issue of shares. A narrative is not required. Journal Dr Cr $ $ Additional information On 28 February 2022, the directors paid a final dividend of $0.07 per share on all ordinary shares issued at this date. The company’s profit for the year ended 28 February 2022 was $114 000. REQUIRED Calculate the closing balance of the company’s retained earnings account at 28 February 2022. State three reasons why a company sometimes makes a rights issue of shares rather than a general issue of shares.

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

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Bipin, Feroz and Neeru have been in partnership for many years sharing profits and losses in the ratio 3 : 1 : 2 respectively. Feroz decided to retire from the partnership with effect from 1 January 2022. On this date the statement of financial position was available. Statement of financial position $ $ Assets Non-current assets at net book value 132 000 Current assets Inventory 17 560 Trade receivables 10 540 Cash at bank 18 490 46 590 Total assets 178 590 Capital and liabilities Capital accounts Bipin 72 000 Feroz 44 300 Neeru 57 000 173 300 Current accounts Bipin 4 240 Feroz (1 980) Neeru (2 750) (490) Total capital 172 810 Current liabilities Trade payables 5 780 Total capital and liabilities 178 590 The following information is also available. Non-current assets were revalued at $155 000 and inventory was revalued at $13 160. Goodwill was valued at $39 000. It was agreed that a goodwill account was not to be maintained in the books of the partnership. Bipin and Neeru agreed to remain in partnership sharing profits and losses equally. On his retirement, Feroz agreed to take a non-current asset at its valuation of $15 000. He agreed to leave the remaining amount due to him as a loan to the partnership. REQUIRED Prepare, on the next page, the partners’ capital accounts to record the retirement of Feroz. Additional information Bipin and Neeru have agreed the following for the new partnership. They will no longer use current accounts. Each partner’s current account balance is to be transferred to the partner’s capital account. The opening balances of their capital accounts are to reflect their new profit and loss sharing ratio. Neeru was to introduce or withdraw funds in order to achieve this. REQUIRED Calculate the amount Neeru should introduce or withdraw. Explain one reason for valuing goodwill when a partner retires. State two reasons why it is usual not to maintain a goodwill account in the books of a partnership.

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

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

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

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R Limited uses absorption costing at one of its factories. This factory has two production departments: Machining and Assembly, and two service departments: Support and Canteen. Some budgeted overheads have already been apportioned for April 2022. The remaining budgeted overheads for April 2022 are as follows: $ Depreciation of machinery 25 000 Production departments’ supervisor’s wages 19 800 The following additional information is available. Production departments Service departments Machining Assembly Support Canteen Floor area (m2) Power (Kwh) Machinery cost ($) 850 000 110 000 15 000 25 000 Number of employees The canteen provides meals for staff in the Machining, Assembly and Support departments. The Support department’s overheads should be reapportioned on the basis of production departments’ machinery cost. REQUIRED Complete the following table showing the apportionment of overheads and the reapportionment of service department overheads. Production departments Service departments Machining Assembly Support Canteen $ $ $ $ Overheads already apportioned 106 350 28 600 7 180 13 870 Depreciation of machinery Production departments’ supervisor’s wages Reapportioned Canteen Reapportioned Support Total Additional information Machining Assembly Direct labour hours per month Machine hours per month REQUIRED Calculate the overhead absorption rate for each production department to two decimal places. Machining Assembly State two reasons why overheads may be under-absorbed. REQUIRED Calculate the monthly profit to be made for each option. Option 1 Option 2 Additional information The cost of the additional machinery required in Option 2 would be financed by an issue of ordinary shares. REQUIRED Advise the directors which option they should choose. Justify your answer by considering both financial and non-financial factors. State two benefits of budgetary control. State two limitations of budgetary control.

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

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