9706_s16_qp_21 - revisedeck

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Bayliss Limited is a retailer of ladies’ fashion material. The following trial balance has been extracted from the books of account at 31 December 2015: Dr $ Cr $ 5% debentures (2017) 80 000 Administrative expenses 205 000 Cash and cash equivalents 32 000 Distribution costs 197 000 Dividends paid 10 000 General reserve 21 000 Interest paid 13 000 Inventory at 1 January 2015 98 000 Non-current assets at cost / valuation Land and buildings 185 000 Plant and machinery 204 000 Provision for depreciation Buildings 23 000 Plant and machinery 94 000 Ordinary shares of $0.50 each fully paid 140 000 Other payables 7 000 Other receivables 3 000 Purchases 480 000 Retained earnings 61 000 Revenue 984 000 Share premium 3 000 Trade payables 59 000 Trade receivables 109 000 1 504 000 1 504 000 Additional information Inventory at 31 December 2015 is valued at a cost of $105 000. Land is included in the trial balance at a value of $135 000. It is to be revalued to $150 000 at 31 December 2015. Depreciation for the year ended 31 December 2015 is to be provided as follows: Buildings – 2% per annum using the straight-line method Plant and machinery – 10% per annum using the reducing balance method. All annual depreciation is to be charged to administrative expenses. Trade receivables includes a debt of $9000 which is to be written off to administrative expenses at 31 December 2015. The directors wish to make provision for doubtful debts of 3% of trade receivables. The adjustment should be charged to administrative expenses. On 31 December 2015, Bayliss Limited made a bonus issue of shares on the basis of one ordinary share for every twenty ordinary shares held. The company policy is to leave reserves in their most flexible form. No entries have been made in the books of account in respect of the bonus issue. Debenture interest has been paid to 30 September 2015. REQUIRED Prepare the income statement for Bayliss Limited for the year ended 31 December 2015.

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

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9706/21/M/ Prepare the statement of changes in equity for Bayliss Limited for t Bayliss L Statement of changes in equity for th Share capital $000 Share premium $000 Rev re $ Balance at 1 January 2015 Prepare the statement of financial position for Bayliss Limited at 31 December 2015. Additional information The 5% debentures are due for repayment in the next two years. The directors of Bayliss Limited are considering the following two options to raise the necessary finance to repay the $80 000. Issue 160 000 ordinary shares of $0.50 each. Issue a further debenture of $80 000. REQUIRED Discuss the impact of each option on the future profits of Bayliss Limited. Advise the directors which option they should choose. Give reasons for your decision. Additional information The statement of financial position of a limited company may include capital reserves and also revenue reserves. REQUIRED Explain the difference between a capital reserve and a revenue reserve. State one example of a capital reserve.

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

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The following information has been extracted from the financial statements of Thaw Limited at 31 December 2015. $ Revenue 156 000 Purchases 88 000 Inventory at 31 December 2015 42 000 Operating expenses 48 000 Trade receivables 39 000 Other receivables 2 000 Cash in hand 1 000 Trade payables 29 000 Other payables 8 000 Bank overdraft 10 000 8% debenture (2019 – 2021) 6 000 Additional information Inventory at 1 January 2015 was valued at $34 000. All sales and purchases were on credit. REQUIRED Calculate the following ratios for Thaw Limited. Current ratio to two decimal places. Liquid (acid test) ratio to two decimal places. Trade receivables turnover Trade payables turnover Inventory turnover Discuss the ratios calculated in part in respect of Thaw Limited’s liquidity and comment on the overall position. Explain three limitations of ratio analysis.

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

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Wang and Yuan, who share profits and losses in the ratio 2 : 1, decided to dissolve their partnership. Their summarised statement of financial position at 30 September 2015 was as follows: $ Non-current assets Land and buildings 60 000 Motor vehicles 10 000 70 000 Current assets Inventory 14 000 Trade receivables 16 000 30 000 Total assets 100 000 Capital and liabilities Capital accounts Wang 40 000 Yuan 25 000 65 000 Current accounts Wang (10 000) Yuan 13 000 3 000 Current liabilities Trade payables 26 000 Bank 6 000 32 000 Total capital and liabilities 100 000 Additional information Land and buildings were sold for $70 000. Yuan took one vehicle at an agreed value of $3000 and the remaining vehicle was sold for $3500. Trade receivables realised $15 000. Trade payables were paid after taking a discount of $1500. The inventory was sold for $12 000. The expenses of dissolution were $1700. REQUIRED Prepare the partnership realisation account. Calculate the amount due to each partner when the bank account is closed on dissolution. State two reasons why a partner may have an overdrawn current account. State why partnerships maintain separate capital accounts for each partner. Rahel manufactures a single product X and wishes to know the break-even point. REQUIRED State what is meant by break-even point. Additional information The following budgeted information is available for product X. Selling price per unit $2.00 Contribution to sales ratio 62.5% Fixed costs $50 000 Production and sales 100 000 units REQUIRED Calculate the break-even point in units and $ revenue. in units in revenue Prepare a break-even chart for product X. Calculate the margin of safety. in units as a percentage Additional information Rahel is considering opening another factory to produce two new products: Y and Z. The following information is available. Y Z $ per unit $ per unit Direct material Direct labour ($5 per hour) Variable overhead 1.5 1.5 Selling price Forecast demand for April is 4000 units of Y and 6000 units of Z. REQUIRED Calculate the contribution per unit of each product Y and Z. Additional information During April, fixed costs are forecast to be $60 000. REQUIRED Calculate the forecast profit for the new factory for the month of April. Additional information During April, direct labour hours are expected to be limited to 10 000 hours. REQUIRED Calculate the revised profit taking into account the limited direct labour hours. Additional information Rahel has to meet the forecast demand in April as she has contracts with her customers. In order to achieve this she has two alternatives. Ask the workers to work overtime. Buy in the products from another supplier. REQUIRED Advise Rahel which option she should choose. Justify your answer. State one advantage and one disadvantage of marginal costing. Advantage Disadvantage

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

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

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