9706_w14_qp_22 - revisedeck

1

The following information relates to the business of Nother Limited. Trial Balance at 31 March 2014 Dr Cr $000 $000 Share capital Factory premises at cost Factory machinery at cost Provisions for depreciation: Premises Machinery Inventories at 1 April 2013: Raw materials Work in progress Finished goods Revenue Purchases of raw materials Manufacturing wages Factory expenses Administrative expenses Sales expenses Retained earnings Trade receivables and payables Provision for doubtful debts Bank overdraft Bad debts written off Additional information Inventories at 31 March 2014 $ Raw materials 300 000 Work in progress 220 000 Finished goods 480 000 Other payables at 31 March 2014 $ Factory expenses 112 000 Sales expenses 56 000 Manufacturing wages 40 000 Prepayments at 31 March 2014 $ Administrative expenses 8 000 During the year ended 31 March 2014 a machine was sold for $14 000. This had been debited to the bank account and credited to the sales account. The machine had been purchased for $44 000 and depreciation of $24 000 had been written off up to 31 March 2013. A full year’s depreciation is provided in the year of purchase but none in the year of sale. Depreciation is to be provided as follows: Factory premises 1% straight line Factory machinery 15% reducing balance. The provision for doubtful debts is to be adjusted to 5% of trade receivables. REQUIRED Prepare Nother Limited’s manufacturing account for the year ended 31 March 2014. Prepare Nother Limited’s income statement for the year ended 31 March 2014. Explain the following terms. Direct costs Indirect costs Prime cost Production cost

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

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2

Bill and Charles are in partnership sharing profits and losses in the ratio of 2:1. Each partner draws $2000 cash from the business each month. On 1 October 2013 Bill paid $24 000 into the business bank account. They provided the following information. Capital accounts 1 January 2013 $ Bill 120 000 Charles 60 000 Current accounts 1 January 2013 31 December 2013 $ $ Bill 17 000 Cr 2 160 Cr Charles 18 000 Cr 2 800 Dr REQUIRED Calculate the partnership profit for the year ended 31 December 2013 before appropriation. Additional information On 1 January 2014 a new partnership agreement came into force which stated that Bill and Charles will share profits and losses in the ratio of 3:2. Bill will receive $6000 salary per annum, and Charles $5200 salary per annum. The rate of interest on capital is to be 8% per annum and interest on drawings is to be charged at 11% per annum. Bill and Charles will continue to withdraw $2000 each per month. Goodwill was valued at $48 000 but is not to be retained in the books of account. The net profit for the 6 months ended 30 June 2014 was $12 000. REQUIRED Prepare the capital accounts of Bill and Charles for the six months ended 30 June 2014. Prepare the partnership appropriation account for the six months ended 30 June 2014. Prepare the current account of Bill for the 6 months ended 30 June 2014. State two reasons why the partners are charged interest on drawings. State two reasons why the partners receive interest on capital.

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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Aluko Limited manufactures three products for the automobile industry, BS100, BS200 and BS300. The business is divided into four departments – machining, assembly, stores and canteen. The following information is available for one unit of the three products. BS100 BS200 BS300 Direct materials $12.60 $14.10 $18.80 Direct labour hours – machining ($7.80 per hour) 30 minutes 50 minutes 55 minutes Direct labour hours – assembly ($6.30 per hour) 10 minutes 12 minutes 15 minutes Machine hours – machining 20 minutes 30 minutes 30 minutes Machine hours – assembly 5 minutes 5 minutes 10 minutes The total estimated overhead costs for the year ended 30 June 2015 are as follows: $ Indirect wages 232 000 Machinery maintenance 94 000 Machinery insurance 9 020 Rent and rates 49 600 Buildings insurance 12 800 Machinery depreciation 26 600 The following information is also available. Machining Assembly Stores Canteen Number of indirect employees Floor area (sq metres) 8 000 9 000 2 000 1 000 Value of machinery ($000) Number of orders from stores 6 300 1 300 Budgeted labour hours 7 720 28 600 Budgeted machine hours 46 400 3 200 Use of canteen 30% 55% 15% REQUIRED Apportion the costs to the four departments and re-apportion the service departments’ costs to production departments using a suitable basis. Total $ Machining $ Assembly $ Stores $ Canteen $ Indirect wages Machinery maintenance Machinery insurance Rent and rates Buildings insurance Machinery depreciation Reapportionment of canteen Reapportionment of stores Calculate appropriate absorption rates for each production department correct to two decimal places. Additional information The actual results for the year were as follows: Machining Assembly Factory overheads $239 110 $192 860 Direct labour hours 8 420 28 150 Direct machine hours 49 120 3 050 REQUIRED Calculate the under or over absorption of overheads for each production department. Machining $ Assembly $ Explain the reason for the over or under absorption of overheads calculated for each production department in part . Additional information Aluko Limited has been asked to prepare a quotation for a customer requiring 250 units of BS200. The company requires a 35% gross profit on each order. REQUIRED Calculate the quoted selling price. $ Explain the following terms in relation to overheads. 1 Allocation 2 Apportionment 3 Absorption

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

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