9706_s11_qp_23 - revisedeck

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For Examiner’s Use The following is the draft balance sheet of Marshall Klingsman, a sole trader, at 30 April 2011. Balance Sheet at 30 April 2011 $ $ $ Non-current assets Buildings at valuation 300 000 Equipment at book value 540 000 Motor vehicles at book value 330 000 1 170 000 Current assets Inventories 70 000 Trade receivables 19 000 Other receivables 2 000 Cash and cash equivalents 4 000 95 000 Current liabilities Trade payables 57 000 Other payables 3 000 60 000 Net current assets 35 000 1 205 000 Non-current liabilities Loan 200 000 Net assets 1 005 000 Financed by: Capital at start 1 000 000 Add Profit for the year (net profit) 80 000 1 080 000 Less Drawings 75 000 Capital at end 1 005 000 Additional information: After preparation of the draft balance sheet the following errors were found. Goods in inventory at 30 April 2011, valued at cost $15 000, were found to be damaged. The estimated net realisable value is $8 000. Loan interest of 4% per annum had been omitted from the accounts. No provision for depreciation on equipment had been made for the year. Depreciation should have been provided at 5% per annum using the reducing balance method. Motor vehicles are depreciated by 10% per annum. During the year vehicle repairs of $10 000 had been incorrectly debited to the motor vehicles account. On 28 April 2011 a credit customer, who owed $3600, was declared bankrupt. It was decided to write off this amount in full. No record of this has been made in the accounts. For Examiner’s Use REQUIRED Prepare a statement to show the corrected profit for the year (net profit) ended 30 April 2011. For Examiner’s Use Prepare the corrected balance sheet at 30 April 2011. For Examiner’s Use Explain two differences between cost and net realisable value. Discuss the accounting treatment of the damaged inventory in item 1. Using your answers to and calculate the following ratios to two decimal places: current ratio liquid ratio (acid test). For Examiner’s Use State four ways in which Klingsman could improve his working capital. Explain why the liquid ratio (acid test) is a more reliable indicator of liquidity than the current ratio.

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

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For Examiner’s Use Robbie and Liza are in partnership with capitals of $90 000 and $60 000 respectively. The following information is available for the year ended 30 April 2011. Revenue $240 000 Inventory (30 April 2011) $9 000 Gross profit as a percentage of turnover 35% Inventory turnover 12 times Expenses ratio 15% All purchases and sales of inventory are on credit. REQUIRED Prepare a detailed income statement (profit and loss account) showing gross profit and profit for the year (net profit) for the year ended 30 April 2011. For Examiner’s Use On 1 May 2010 the current account balances were Robbie $5000 and Liza $2000 . The partnership agreement provides for the following: Partners are permitted to withdraw up to a maximum of 20% of capital invested. Interest is charged on drawings at 8% per year. Interest on capital is payable at 5% per year. Liza is to receive a salary of $1250 per month. Profits and losses are shared in the ratio of capital invested. Both partners withdrew the maximum amount of drawings permitted during the year. REQUIRED Prepare the appropriation account of the partnership for the year ended 30 April 2011. For Examiner’s Use At 30 April 2011 Robbie and Liza had a debit balance in the bank column of their cash book of $12 000. Their bank statement, however, showed that the partnership had $9000 in the bank at that date. On comparing the cash book with the bank statement the following differences were found: Bank charges of $250 appeared in the bank statement but had not been entered in the cash book. Cheques received from customers amounting to $3750 had been entered in the cash book but had not been credited by the bank. A cheque for $600 received from a debtor had been entered in the cash book but had been returned by the bank marked ‘insufficient funds for payment’. Cheques issued by the business amounting to $1600, recorded in the cash book, did not appear in April’s bank statement. REQUIRED Update Robbie and Liza’s cash book for the month of April 2011. Prepare a bank reconciliation statement at 30 April 2011 to reconcile the bank statement balance with the updated cash book balance. For Examiner’s Use Give three reasons why the bank column balance in the cash book does not always agree with the balance shown in the bank statement at the same date.

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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For Examiner’s Use Paul owns two car wash businesses, called City Centre Car Wash and Suburban Car Wash. City Centre Car Wash has the following monthly costs: Per car $ Detergent 1.00 Electricity 0.50 Water costs 0.05 Wage costs 1.25 Per month $ Insurance of site Lease of equipment Manager’s salary Additional information: Both car wash businesses are open for 400 hours every month. The cars are washed one at a time. The average time taken to wash each car is 10 minutes. City Centre Car Wash is currently operating at 80% capacity and Suburban Car Wash at 70% capacity. REQUIRED For City Centre Car Wash, calculate the following correct to two decimal places: the total number of cars washed per month the total variable operating cost per month For Examiner’s Use the total operating cost per month the average cost per car wash the price to be charged per car to give a profit margin of 20% the total profit per month. For Examiner’s Use Using the price calculated in –above, calculate the following for City Centre Car Wash, correct to two decimal places: the contribution per car (per unit) the break-even point in units the margin of safety, in dollars, when operating at 80% capacity the margin of safety, in dollars, if operating efficiency falls to 60% capacity the contribution/sales (C/S) ratio when operating at 80% capacity. For Examiner’s Use Suburban Car Wash charges the same price as City Centre Car Wash. At that price Suburban Car Wash shows a contribution to sales (C/S) ratio of 40%. Fixed costs are $3240. REQUIRED Calculate, for Suburban Car Wash the break-even point in units and in dollars the total monthly profit when operating at 70% capacity.

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

2. Cost and management accounting (AS Level) → 2.1. Costs and cost behaviour

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