9706_s20_qp_21 - revisedeck

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Hamza and Noor are in partnership. They own a service business. The following information has been extracted from the partnership’s books of account for the year ended 31 December 2019. $ Administrative expenses 18 270 Equipment at 1 January 2019 Cost 11 000 Provision for depreciation 3 300 Loan account (Hamza) 10 000 Motor vehicle at 1 January 2019 Cost 20 000 Provision for depreciation 7 200 Revenue 45 400 Wages of assistant 15 540 The following information is also available. Administrative expenses include $1800 insurance for the three months ended 29 February 2020. The assistant works a 5-day week and is paid a weekly wage of $350. At 31 December 2019 three days’ wages were due but unpaid. Hamza’s loan was provided on 1 April 2019. He is entitled to interest of 8% per annum. Loan interest has not yet been paid to Hamza. The depreciation policy is: Equipment 15% per annum straight-line method Motor vehicle 20% per annum reducing balance method A full year’s depreciation is charged in the year of purchase but none in the year of disposal. An item of equipment was sold for $480 on 3 August 2019. This equipment had been purchased on 1 January 2017 for $2000. REQUIRED State how profits and losses are shared in a partnership where there is no agreement. Explain two reasons why you would recommend partners to have a written agreement, other than stating a ratio for sharing profits and losses. Prepare the income statement for the year ended 31 December 2019. Hamza and Noor Income Statement for the year ended 31 December 2019 Additional information Hamza and Noor have an agreement about sharing profits and losses. Their agreement is as follows. Noor is to be given a salary of $11 000. Partners are allowed to have drawings of $14 000 per annum. Interest of 10% is charged on any drawings in excess of this amount. Remaining profits and losses are to be shared in the ratio Hamza : Noor, 3 : 2. The following balances were available. $ Current account balances at 1 January 2019 Hamza 1 290 Debit Noor 4 350 Credit Drawings for the year ended 31 December 2019 Hamza 16 900 Noor 13 200 REQUIRED Prepare the appropriation account for the year ended 31 December 2019. Hamza and Noor Appropriation account for the year ended 31 December 2019 Calculate the balance of Hamza’s current account at 31 December 2019. Additional information Hamza and Noor have been considering expanding their business which will require additional finance of $90 000. In order to finance the expansion they are considering two options. Option 1: admit a new partner Option 2: apply for a bank loan REQUIRED Advise which option the partners should choose. Justify your advice.

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

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Ayesha has provided the following extracts from her business’s financial statements. Extract from the Income Statement for the year ended 31 December 2019 $ $ Revenue 145 500 Opening inventory 11 440 Purchases 120 120 131 560 Closing inventory 14 560 Cost of sales 117 000 Gross profit 28 500 Extract from the Statement of Financial Position at 31 December 2019 $ Current assets Inventory 14 560 Trade receivables 9 300 Cash and cash equivalents 4 240 28 100 Current liabilities Bank overdraft 8 000 Trade payables 10 400 18 400 All purchases are on credit. Two-thirds of all sales are on a credit basis. REQUIRED Calculate the following ratios. State the formula used. Trade payables turnover (in days) Formula Calculation Trade receivables turnover (in days) Formula Calculation Current ratio (to two decimal places) Formula Calculation Additional information Ayesha is concerned about her business’s liquidity. She has provided the following ratios based on the year ended 31 December 2018. Trade payables turnover 34 days Trade receivables turnover 32 days Current ratio 1.90 : 1 Analyse the trend in Ayesha’s business’s liquidity. State two factors that should be considered when choosing businesses with which to compare a business.

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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Jason is responsible for preparing his business’s accounting records. He has discovered some errors in this year’s accounts. REQUIRED State two types of error which do not affect the agreement of the totals of a trial balance. Additional information When Jason prepared a trial balance on 30 September 2019 the totals did not agree. The total of debit entries was greater than the total of credit entries by $1140. A suspense account was opened for the difference. Subsequently the following errors were found. The total of the sales returns journal was undercast by $90. The owner had withdrawn inventory valued at cost, $870. The only entry made was to debit the drawings account. The total of the discount received column in the cash book, $180, had been debited to the discounts allowed account. There were no other errors. REQUIRED Prepare entries in the general journal to correct these errors. Narratives are not required. General Journal Dr Cr $ $ Prepare the suspense account. Suspense Account $ $ Additional information The business’s draft profit for the year ended 30 September 2019 was $68 440 before taking account of the errors. REQUIRED Calculate the corrected profit for the year ended 30 September 2019.

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

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G Limited manufactures cakes for celebrations. The company uses absorption costing. REQUIRED Explain three benefits to a business of using absorption costing. REQUIRED Complete the table to show the apportionment of overheads and the reapportionment of the service department overheads using suitable bases. Total Baking department Decoration department Stores department Maintenance department $ $ $ $ $ Budgeted overheads already allocated 57 620 38 530 14 150 2 800 2 140 Machinery depreciation 33 600 Power 45 500 Lighting and heating 18 000 Total overheads 154 720 Reapportionment of first service department overheads Subtotal Reapportionment of second service department overheads Total overheads Calculate the overhead absorption rate, to two decimal places, for each production department using an appropriate basis. Baking department Decoration department State two possible reasons why overheads may be under absorbed. Additional information D Limited, a competitor of G Limited, makes a single product. The factory has the capacity to make 850 units per month. Overtime working is not available at this factory. The following information is available for each unit of production and is based on operating at full capacity. $ Selling price Direct labour Direct materials Fixed costs In April 2020 the factory was planned to operate at 80% capacity. The directors of D Limited have received an offer from Wendy to supply 280 units at $45 per unit. Wendy stated that the offer would depend on the entire order of 280 units being supplied. REQUIRED Calculate the profit for the month of April if the offer from Wendy is accepted. Advise the directors whether or not they should accept the offer from Wendy. Justify your answer.

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

4. Cost and management accounting (A Level) → 4.1. Activity based costing (ABC)

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