9706_s22_qp_23 - revisedeck

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K Limited’s financial year ended on 31 December 2021. The company’s income statement for the year ended on that date has already been prepared. The following information was available at the year‑end. $ 8% Debentures (2022) 120 000 Bank overdraft 4 700 Dividends paid 96 000 Inventory 49 400 Non‑current assets at cost 960 000 Non‑current assets provision for depreciation 170 000 Ordinary share capital: shares of $0.25 each at 31 December 2021 480 000 Other payables 2 700 Other receivables 1 400 Profit for the year 99 400 Retained earnings at 1 January 2021 133 000 Share premium at 31 December 2021 90 000 Trade payables 25 900 Trade receivables 18 900 On 1 July 2021, the directors had made a rights issue of one ordinary share for every two ordinary shares in issue. The rights issue was made at $0.35 per share and was fully subscribed. REQUIRED Calculate the profit from operations for the year ended 31 December 2021. Calculate the amount raised by the rights issue on 1 July 2021. Prepare a statement of changes in equity for the year ended 31 December 2021. K Limited Statement of changes in equity for the year ended 31 December 2021 Share capital $ Share premium $ Retained earnings $ Total $ Balances at 1 January 2021 Prepare the statement of financial position at 31 December 2021. K Limited Statement of financial position at 31 December 2021 $ Explain the meaning of each of the following terms. Revenue reserve Capital reserve Additional information The directors of K Limited will require additional finance in 2022 to cover the cost of opening a new branch of the business. They are considering two options. Option 1: Make a further rights issue of shares. Option 2: Make an issue of 8% debentures. REQUIRED Advise the directors which option they should choose. Justify your answer by discussing both options.

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

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Rakesh prepared his business’s end of year financial statements on 30 September 2021. REQUIRED Define the following accounting concepts. Give one example of each. Matching Definition Example Going concern Definition Example Materiality Definition Example Additional information On 30 September 2021, Rakesh decided to write off an irrecoverable debt of $730 from the account of JD Supplies. REQUIRED Prepare the journal entry in Rakesh’s books of account to record the write off of the irrecoverable debt. A narrative is not required. Journal Dr $ Cr $ Additional information Rakesh receives rent from a tenant. The following details are available for the year ended 30 September 2021. At 1 October 2020, the tenant owed rent $1200. During the year ended 30 September 2021, the tenant paid rent of $9000 by bank transfer. At 30 September 2021, rent of $1125 had been received in advance. REQUIRED Prepare the rent receivable account in Rakesh’s books of account. Rent receivable account $ $ Additional information The business owns equipment which cost $24 000 when it was purchased on 1 October 2018. The policy is to provide depreciation at 20% per annum using the reducing balance method. REQUIRED Prepare the provision for depreciation of equipment account for the year ended 30 September 2021. Provision for depreciation of equipment account $ $

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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Nibras purchases and sells goods for cash and on credit. Control accounts are used to check the accuracy of the business’s purchases and sales ledgers. The following information is available for January 2022. Purchases ledger account balances at 1 January 2022 were: $ Amounts owed to suppliers 23 490 Amount overpaid to one supplier Totals from the books of prime entry were as follows: $ Cash book Cash purchases 18 540 Payments to trade payables 202 950 Discounts received 4 920 Purchases journal 212 480 Returns outwards journal 3 770 General journal Contras to sales ledger There were no overpaid accounts in the purchases ledger at the end of the month. REQUIRED Prepare the purchases ledger control account for January 2022. Purchases ledger control account $ $ Additional information On 31 January 2022 the following information was available concerning trade receivables. $ Balance of the sales ledger control account 25 310 Total of balances in the sales ledger 23 980 The following errors were discovered. When corrected, the total of balances in the sales ledger agreed with the balance of the sales ledger control account. An irrecoverable debt of $540 had been recorded as $450 in both the general ledger and the customer’s sales ledger account. The total of the returns inwards journal, $1390, had been omitted from the sales ledger control account. The balance of a customer’s account had been understated by $120. A credit note, $90, issued to a credit customer had been recorded correctly in the sales return journal but posted to the debit side of the customer’s account. REQUIRED Calculate the correct balance of the sales ledger control account. Calculate the correct total of balances in the sales ledger. Additional information Control accounts do not reveal every type of error. REQUIRED State three types of error which are not revealed by a control account.

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

1. Financial accounting (AS Level) → 1.2. The accounting system

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G Limited manufactures products at two factories. The company uses marginal costing. REQUIRED State four assumptions used in break‑even analysis. State the formula for calculating the margin of safety in units and sales value. Units Sales value Additional information At one factory a single product is made. The following budgeted details are available. Direct materials per unit 3 kg at $5 per kg Direct labour per unit 2 hours at $9.50 per hour Fixed costs per month $66 000 Selling price per unit $48 Sales 8 000 units per month REQUIRED Calculate the monthly margin of safety in units. Additional information The directors are concerned that there could be a fall in demand for this product. They plan to make some changes to reduce the product’s break‑even point and encourage sales. Use a different grade of material. The list price of this material is 10% less per kilogram than the existing material. Each unit will require 5% more kilograms of this material. The supplier of materials has agreed to give a 20% trade discount. Make alterations to machinery to improve efficiency at a cost of $24 000. Machinery is depreciated at 25% per annum. Introduce a sales commission of $0.50 per unit. Reduce the selling price by 1.5% per unit. REQUIRED Calculate the decrease in the monthly break‑even point in units if these changes are made. Additional information At the other factory monthly production and sales are normally 14 000 units of a different product. This product has a variable cost of $65 per unit and a contribution of $17 per unit. The budgeted factory fixed costs are $128 000 per month. A major customer normally purchases 5500 units per month. However, the company has been informed that no units will be required by this customer in August 2022. The directors are considering two options. Option A Reduce production in August 2022 by 4000 units. Run an advertising campaign at a cost of $2 200 to increase demand so that all production is sold. Option B Continue with normal production in August. Store 5500 units in a warehouse at a cost of $6000. At the end of August an overseas customer will purchase all the units in the warehouse at a special price of $70 per unit. Transport costs of $1.80 per unit will be incurred on these units. REQUIRED Calculate the profit for August 2022 for: Option A Option B Advise the directors which option they should choose. Justify your answer by discussing both financial and non‑financial factors.

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

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