9706_w11_qp_21 - revisedeck

1

Iqbal runs a small trading business which has been in operation for several years. Iqbal pays all sales receipts into the business bank account. The following is a summary of the bank account for the year ended 31 March 2011. Bank account summary for the year ended 31 March 2011 $ $ Balance b/d 4 650 Trade payables 37 000 Trade receivables 85 000 Motor expenses 4 100 Cash sales 24 000 Rent 6 000 Capital 36 000 Rates 2 200 Loan 14 000 Wages 43 000 Fixtures and fittings 40 000 Additional information Discounts received from suppliers during the year ended 31 March 2011 were $500. Iqbal allowed his customers discounts of $1400 during the year ended 31 March 2011. Iqbal had taken goods at a cost price of $2400 for his personal use. The loan was received on 1 October 2010 and interest is payable at 10% per annum. The loan is due to be repaid in five years’ time. Iqbal has decided to create a provision for doubtful debts of 3% of the trade receivables outstanding at 31 March 2011. Included in the wages figure in the bank account summary are Iqbal’s drawings of $25 000. The remaining assets and liabilities of Iqbal were: 1 April 2010 31 March 2011 $ $ Inventory at cost 8 000 9 200 Fixtures and fittings (Net Book Value) 36 000 68 000 Delivery van (Net Book Value) 10 000 7 500 Trade receivables 7 200 8 300 Trade payables 3 400 3 700 Motor expenses owing – Rent prepaid Rates owing – Rates prepaid – For Examiner’s Use REQUIRED Prepare the income statement (trading and profit and loss account) for Iqbal for the year ended 31 March 2011. For Examiner’s Use Prepare the statement of financial position (balance sheet) for Iqbal at 31 March 2011. [Total 30]

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

1. Financial accounting (AS Level) → 1.3. Accounting for non-current assets

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2

For Examiner’s Use Klix Limited’s book-keeper prepared the following details about the firm’s outstanding trade receivables at 31 December 2010. Age of debt Trade Receivables $ Up to 30 days 16 800 31 to 60 days 12 600 61 to 90 days 7 100 Over 90 days 1 300 The following rates are applied for the estimation of doubtful debts. Age of debt % Up to 30 days 31 to 60 days 61 to 90 days Over 90 days A provision for doubtful debts account is maintained. This had a balance of $800 on 1 January 2010. The bad debts written off for the year ended 31 December 2009 amounted to $1420. Debbie, a customer who owed the company $700, has recently been declared bankrupt. This amount had been included in the details above as ‘outstanding for 61 to 90 days’. It has been decided to write off the debt immediately. On 2 October 2010, Harvey, a credit customer, ceased trading and Klix Limited received payment of $0.25 in the dollar in final settlement of the debt of $600. The remainder had been written off as a bad debt. Other bad debts written off during the year ended 31 December 2010 totalled $350. These had been taken into account when drawing up the list of trade receivables above. REQUIRED Calculate the amount which should be provided as a provision for doubtful debts at 31 December 2010. Show your workings. For Examiner’s Use Prepare the following ledger accounts for the year ended 31 December 2010, showing the closing entry to the final accounts at the end of the year. Provision for doubtful debts account Bad debts account Harvey account For Examiner’s Use Prepare an extract from the statement of financial position (balance sheet) at 31 December 2010 showing the net amount of trade receivables. Klix Limited’s directors are reviewing the existing policy for calculating the provision for doubtful debts. They are considering applying a 4% rate to all debts as the basis for calculation. REQUIRED Calculate the effect of this change on the provision for doubtful debts. Explain how this change would affect the company’s income statement and statement of financial position. For Examiner’s Use Explain why this change might be necessary. State three factors that the directors should consider when creating a provision for doubtful debts. [Total 30]

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

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

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3

For Examiner’s Use Tattersall Ltd manufactures a single product. They have two production and two service departments. The following information relates to a four-week period. Production Departments Service Departments Machining Assembly Maintenance Canteen Overheads $143 500 $154 700 $165 800 $176 900 Direct machine hours 18 845 14 050 – – Direct labour hours 6 065 20 350 – – The service departments’ overheads are apportioned to the production departments on the following basis: Machining Assembly Canteen Maintenance 60% 30% 10% Canteen 40% 60% – REQUIRED Prepare an overhead absorption apportionment table clearly showing the reapportionment of the service departments’ overheads to the appropriate departments for one period. For Examiner’s Use Calculate the overhead absorption rate for each production department. State the bases used. Show your answer to two decimal places. The manager of Tattersall Ltd calculates selling price per unit based on full cost plus a 25% mark-up. The costs per unit are: Materials 3 metres at $4 per metre Labour 7 hours at $8 per hour Each unit takes 3 hours in the machining department and 4 hours in the assembly department. All overheads are fixed. REQUIRED Calculate the full cost per unit. For Examiner’s Use Calculate the selling price per unit. Calculate the number of units Tattersall Limited has to produce and sell in each period to break-even. State two limitations of break-even analysis. [Total 30]

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

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