9706_s13_qp_22 - revisedeck

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For Examiner's Use The following information relates to two businesses, one of which manufactures computers whilst the other is a food wholesaler. All sales and purchases are on credit. Business X Business Y Gross profit ratio 54% 30% Net profit ratio 18% 6% Current ratio 1.6:1 0.5:1 Trade receivables turnover 40 days 3 days Return on capital employed 5.4% 12% Cost of sales $248 400 $1 050 000 Closing inventory $38 000 $48 000 Cash and cash equivalents $30 000 $14 000 Long-term loan $1 000 000 $50 000 For calculations, assume a 360-day year. REQUIRED State and explain which business is the computer manufacturer and which is the food wholesaler. For Examiner's Use Prepare, as fully as the given information allows, income statements for both businesses. Income Statements Business X Business Y $ $ Revenue Less Cost of sales Gross profit Expenses Profit for the year Prepare, as fully as the given information allows, statements of financial position for both businesses. Statements of Financial Position Business X Business Y $ $ $ $ Non-current assets Current assets Inventory Trade receivables Cash and cash equivalents Total assets Current liabilities Trade payables Net assets Capital Non-current liabilities Loan Capital employed For Examiner's Use Define the term liquidity. State which business is more likely to have liquidity problems. State which ratio gives most concern and why it does so.

1. Financial accounting (AS Level) → 1.6. Analysis and communication of accounting information

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

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

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The following is the draft statement of financial position of George Grosz, a sole trader, at 30 June 2012. Statement of Financial Position at 30 June 2012 $ $ $ Non-current assets Buildings at valuation 108 000 Equipment at net book value 7 000 Motor vehicles at net book value 35 000 150 000 Current assets Inventory 21 000 Trade receivables 18 000 Cash and cash equivalents 8 000 Other receivables 13 000 60 000 Current liabilities Trade payables 42 000 18 000 168 000 Non-current liabilities Loan 50 000 118 000 Capital at 1 July 2011 90 000 Add Draft profit for the year 30 000 120 000 Less Drawings 2 000 118 000 Additional information: Provision for depreciation on motor vehicles for the year ended 30 June 2012 had not yet been charged. Depreciation is charged at 10% on the net book value at the year end. Items included in inventory and valued at their cost price of $9500 were damaged and had an estimated net realisable value of $2000. A purchase invoice for goods valued at $2000 had been omitted from the books. Sales invoices for goods valued at $4000 had been omitted from the books. The loan was received at 1 March 2012. Loan interest of 6% due at the year end had not yet been paid. For Examiner's Use REQUIRED Prepare a statement to show the corrected profit for the year ended 30 June 2012. Calculate Grosz’s capital at 30 June 2012. For Examiner's Use Grosz decided to form a partnership with Omar Kayal with effect from 1 July 2012, sharing the profits and losses in the ratio of 3:2 respectively. Goodwill was to be valued at double the amount of the corrected profit for the year. Kayal was to contribute cash of $30 000, inventory of $24 000 and equipment of $60 000. State two reasons why goodwill has arisen. Prepare the capital accounts of Grosz and Kayal immediately after the formation of the partnership. For Examiner's Use The following conditions were included in the partnership agreement: A partnership salary of $10 500 is payable to Kayal. Maximum drawings permitted each year – Grosz $20 000; Kayal $10 000. Interest is to be charged on drawings at 10% per annum. Interest on capital is payable at the rate of 5% per annum. The first 40% of any residual profits is to be shared equally and transferred to the partners’ capital accounts. In the first year of the partnership the profit for the year was $88 600. Grosz and Kayal both withdrew the maximum amount allowable during the year. REQUIRED Prepare the appropriation account for the year ended 30 June 2013.

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 Clarke Limited manufactures one product, the Apex. The following forecast information for the Apex is available for the year ending 31 December 2014: Per unit: Selling price $45.50 Direct material ($4 per metre) $14.00 Direct labour ($12 per hour) $18.00 Variable production overhead $ 3.00 Sales demand 4 000 units Fixed overheads are forecast to be $23 100 for the year. REQUIRED Calculate the breakeven point in units for the sales of the Apex. Calculate the margin of safety for the Apex in terms of revenue. For Examiner's Use Clarke Limited has decided to introduce two new products in addition to the Apex; the Bond and the Cord. Both products use the same direct material and the same grade of direct labour as the Apex. The following forecast information is available for the year ending 31 December 2014: Per unit: Bond Cord Selling price $52.00 $67.50 Direct material ($4 per metre) $16.00 $20.00 Direct labour ($12 per hour) $24.00 $30.00 Variable production overhead $ 4.00 $ 5.00 Sales demand 6 000 units 2 000 units Fixed overheads are expected to double as a result of producing all three products. REQUIRED Calculate the contribution per unit of the Bond and the Cord. Calculate the total quantity of direct material required by Clarke Limited for the year ending 31 December 2014. Clarke Limited has been told that due to a shortage of direct material, only 40 000 metres will be available for the year. Calculate the maximum forecast profit for Clarke Limited for the year ending 31 December 2014 using 40 000 metres of direct material. For Examiner's Use Explain why profit calculated using marginal costing would be different to that calculated using absorption costing.

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

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