9706_s13_qp_23
A paper of Accounting, 9706
Questions:
3
Year:
2013
Paper:
2
Variant:
3
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1
Eagle Manufacturing Limited produces components for cars and lorries. The following figures have been taken from their books of account. $000 Revenue Inventories at 1 April 2012 Raw materials Work in progress Finished goods Factory machinery – cost – accumulated depreciation Office equipment – cost – accumulated depreciation Motor vehicles – cost – accumulated depreciation Purchases of raw materials Labour Electricity Carriage inwards Carriage outwards Rent Salaries Sundry expenses Insurances Additional information: Inventories at 31 March 2013 were: Raw materials $18 000 Work in progress $15 000 Finished goods $41 000 Factory machinery and motor vehicles are to be depreciated at 25% using the reducing balance method. Office equipment is to be depreciated at 10% on cost. During the year a motor vehicle was sold for $4 000. The profit on disposal was $1 000. A new motor vehicle was purchased for $9 000. All motor vehicles are used by the sales staff. A full year’s depreciation is charged in the year of purchase, no depreciation is charged in the year of sale. At 31 March 2013 electricity of $5 000 was accrued and rent of $10 000 was prepaid. Labour costs include $16 000 for indirect labour. The balance is direct labour. Electricity is apportioned between the factory and office in the ratio 4:1. Rent is apportioned between factory and offices in the ratio 3:2. Sundry expenses are apportioned between factory and offices in the ratio 1:2. Insurances are apportioned between factory and offices in the ratio 5:1. For Examiner's Use REQUIRED Prepare the manufacturing account for the year ended 31 March 2013. For Examiner's Use Prepare the income statement for the year ended 31 March 2013. For Examiner's Use Explain how the following will be affected if the company makes a loss in the year: Dividend payable for cumulative preference shares Dividend payable for ordinary shares Dividend payable on non-cumulative preference shares Interest payable on debentures.
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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2
For Examiner's Use B M Reid’s books of account showed the following figures for the year ended 31 December 2012: $ Revenue 200 000 Ordinary goods purchased 145 000 Profit from operations 22 500 Reid’s balances at 31 December 2012 were: Inventory 12 500 Trade receivables 40 000 Cash and cash equivalents 10 000 Trade payables 25 000 Finance costs (interest owing) 12 500 Non-current assets at net book value 60 000 Additional information: 80% of revenue was on credit Inventory at 1 January 2012 was $17 500 Trade payables and trade receivables balances were unchanged since 1 January 2012. REQUIRED Calculate the following ratios, correct to two decimal places, in each case stating the formula used. Mark-up Inventory turnover Trade receivables turnover For Examiner's Use Operating expenses to revenue ratio Current ratio Acid test/liquid ratio Non-current asset turnover. For Examiner's Use For the year ended 31 December 2011 the following ratios were: Inventory turnover 13 times Trade receivables turnover 70 days REQUIRED Use the above ratios to compare B M Reid’s performance with the year ended 31 December 2012. State possible reasons for the changes. State two limitations of the uses of ratios.
1. Financial accounting (AS Level)  →  1.6. Analysis and communication of accounting information
3. Financial accounting (A Level)  →  3.5. Analysis and communication of accounting information
3. Financial accounting (A Level)  →  3.1. Preparation of financial statements
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3
For Examiner's Use At 1 January 2013, Brahms had opening inventory of 50 teddy bears at a purchase price of $30 each. His transactions for the first three months of 2013 were: Date Purchases Purchase price (per unit) Sales Jan $30.00 $30.50 Feb $31.00 March $31.50 $32.00 No other transactions took place during these months. Each teddy bear was sold for $50. REQUIRED Calculate the value of the inventory at 31 March 2013 using the following methods of valuation. FIFO For Examiner's Use AVCO. Using each method of valuation, calculate the gross profit for the three months ending 31 March 2013. FIFO AVCO. For Examiner's Use State one advantage and one disadvantage of using the following methods of inventory valuation: FIFO AVCO. Brahms currently uses FIFO to value his inventory. He is considering changing the method to show a lower profit each year. State two reasons why he should not do this. Make reference to any relevant accounting principles, concepts and conventions. For Examiner's Use Charlie runs a similar business and also completes his financial year on 31 March 2013. He is unable to value his inventory at that date. The stock count takes place on 7 April 2013. The value at that date is $1000. Between the two dates the following transactions had occurred. Sold goods at a selling price of $120. (Charlie normally marks up his goods for sale at 25%. These goods were in stock on 31 March 2013.) Purchased goods at an invoice price of $70. Goods sold to a customer for $80 had been returned by them. (The sale took place on 28 March 2013.) Damaged goods were discovered which had been included at a cost of $30. Charlie could only sell them for $20. REQUIRED Calculate the value of Charlie’s closing inventory at 31 March 2013.
2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour
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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