9706_s21_qp_23
A paper of Accounting, 9706
Questions:
4
Year:
2021
Paper:
2
Variant:
3
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1
Adam owns a retail business. He is aware that he must follow certain accounting concepts when preparing his business’s financial statements. REQUIRED Explain how each of the following concepts is applied when preparing a business’s financial statements. Consistency Realisation Materiality REQUIRED Calculate a revised figure for gross profit for the year ended 31 December 2020. REQUIRED Prepare the income statement for the year ended 31 December 2020. Start the statement with your gross profit figure in part . Income statement for the year ended 31 December 2020 $ $ Additional information Adam would like to improve his business’s profitability. He has been considering the following proposals. Proposal 1: Reducing inventory levels Proposal 2: Increasing mark-up by 5% on the current level REQUIRED Advise Adam which proposal he should choose. Justify your answer by considering both proposals.
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
Hamid prepares control accounts to check the accuracy of his business’s purchases and sales ledgers. REQUIRED Explain two benefits to a business of using control accounts other than checking the arithmetical accuracy of ledger accounts. Additional information On 31 January 2021 Hamid provided the following information: The balance of the sales ledger control account on 1 January 2021 was $17 820. Totals for January 2021 from books of prime entry $ Cash book Discount allowed Receipts from trade receivables 16 230 General journal Contra entries with purchases ledger Sales journal 18 440 Sales returns journal On 31 January 2021 a credit customer had overpaid his account by $170. REQUIRED Prepare the sales ledger control account for January 2021. Sales ledger control account $ $ Additional information On 31 January 2021 the total of balances in the purchases ledger was $12 860, but the balance of the purchases ledger control account on this date was $12 980. The following errors were discovered. The total of the discounts received column of $110 had not been posted from the cash book. The total of the purchases returns journal had been overstated by $250. Interest of $130 charged by a supplier because of an overdue balance had been debited to the supplier’s account. REQUIRED Prepare statements to show corrected totals for: the purchases ledger balances Correction of purchases ledger balances Details $ Incorrect total 12 860 the purchases ledger control account balance Correction of purchases ledger control account balance Details $ Incorrect balance 12 980
1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification
1. Financial accounting (AS Level)  →  1.2. The accounting system
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3
Cherry, Winston and Yupar were in partnership sharing profits and losses in the ratio 3 : 5 : 2. The partners decided to dissolve their partnership on 1 December 2020. On this date the partnership’s statement of financial position was as follows. Assets $ $ Non-current assets at net book value Premises 97 000 Furniture and equipment 22 000 119 000 Current assets Inventory 17 400 Total assets 136 400 Capital and liabilities Capital accounts Cherry 18 300 Winston 54 900 Yupar 26 700 99 900 Current accounts Cherry (5 740) Winston 2 290 Yupar (2 630) Non-current liability Loan from Yupar 18 000 Current liabilities Trade payables 14 800 Bank overdraft 6 330 21 130 Total capital and liabilities 136 400 The following information is also available. Winston took over the equipment at a valuation of $7200. Premises and furniture were sold for $61 100 and a cheque for this amount was received. Inventory was sold at a loss of $5200. A cheque was received for the amount. Trade payables were settled in full by cheque after deducting a 5% cash discount. The expenses of dissolution were paid by cheque, $2140. The amounts owed by, or to, the partners were settled by cheque. REQUIRED Prepare the realisation account to show the profit or loss made on the dissolution of the partnership. Realisation account $ $ Prepare, on the next page, the capital accounts of the partners recording the dissolution and final settlement of the amounts owed to, or by, each partner. Additional information The partners had decided to dissolve their partnership because of disagreements on important decisions. REQUIRED State three other reasons why a partnership might be dissolved.
3. Financial accounting (A Level)  →  3.1. Preparation of financial statements
1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements
Open
4
T Limited manufactures a single product. The following budgeted information is available. Per unit $ Direct materials 8.40 Direct labour 14.50 Other variable costs 2.30 Fixed costs 8.00 Each unit is sold for $36. Budgeted monthly production and sales are 1200 units. REQUIRED Calculate the monthly break-even point in units. Calculate the margin of safety: in units in revenue Identify three assumptions made when using break-even analysis. Additional information In January 2021 the company made and sold 1120 units. REQUIRED Calculate the contribution to sales ratio. Calculate the profit made in January 2021. Additional information In March 2021 a machine fault meant that only 75% of budgeted output could be produced. The directors considered two options. Option A Reduce normal output by 25%; as a result, materials cost would be affected because trade discount of 20% on bulk orders would not be available. All other costs would remain the same. Buy in units from a competitor at $27.20 per unit. The competitor can supply a maximum of 250 units and will charge $125 for delivering this quantity. Option B Hire a replacement machine at a cost of $1600 for the month. The replacement machine could make an additional 200 units per month. All other costs would remain the same. REQUIRED Calculate the profit for March 2021 for: Option A Option B Advise the directors which option they should choose. Justify your advice by considering both options. Additional information Recently a system of budgetary control has been introduced by T Limited. However, there have been concerns that the system has not worked well. REQUIRED State three limitations of budgetary control.
4. Cost and management accounting (A Level)  →  4.3. Budgeting and budgetary control
2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods
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