9706_w16_qp_23 - revisedeck

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Maneesh has not maintained a full set of accounting records for the year ended 31 December 2015. The following information has been provided: Assets and liabilities at 1 January 2015 Assets Liabilities $ $ Non-current assets at net book value 83 400 Inventory 18 500 Trade receivables 22 460 Prepaid rent 1 900 Cash in hand Trade payables 12 770 Accrued general expenses 1 320 Bank overdraft 5 640 Balance at 1 January 2015 106 710 126 440 126 440 Summary bank account for the year ended 31 December 2015 $ $ Receipts from credit customers 176 750 Balance at 1 January 2015 5 640 Cash sales banked 7 450 Payments to credit suppliers 138 132 Balance at 31 December 2015 17 272 Non-current assets 5 200 Drawings 14 120 General expenses 11 280 Rent 27 100 201 472 201 472 Balance at 1 January 2016 17 272 Additional information Maneesh makes both cash and credit sales. All sales were made at 40% gross margin. Credit sales for the year totalled $184 190. Credit purchases for the year totalled $136 422. There were no cash purchases. The business maintains a cash float of $180. Maneesh withdrew $20 per week from cash sales for drawings, before banking the rest. Maneesh depreciates his non-current assets at 20% per annum using the reducing balance method. The rent charge for the year was $24 600. The general expenses charge for the year was $14 160. Irrecoverable debts of $900 should be written off at 31 December 2015. REQUIRED Prepare the income statement for the year ended 31 December 2015. Prepare the statement of financial position at 31 December 2015. Additional information Maneesh is concerned that the bank overdraft has increased substantially during the year ended 31 December 2015. REQUIRED Suggest to Maneesh four possible reasons for the increase in the bank overdraft. Additional information Maneesh has been advised by the bank manager that the bank overdraft must be repaid in full as soon as possible. Maneesh’s brother has offered the following possible solutions. Lend Maneesh $20 000 repayable in five equal annual instalments of $5000 each (including interest). Enter into a formal partnership with Maneesh in which his brother: immediately pays $20 000 into the business bank account; and receives 10% share of the future profits for the year. REQUIRED Advise Maneesh which option he should choose. Justify your answer. State two items which may be included in a partnership agreement (other than the share of profit) which will affect the appropriation account which will not affect the appropriation account.

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

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

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Alice, Eve and Jean are in partnership sharing profits and losses in the ratio 5 : 3 : 2 respectively. The partnership statement of financial position at 30 June 2016 was as follows: $ Non-current assets at net book value 162 000 Current assets Inventory 17 208 Trade receivables 11 376 28 584 Total assets 190 584 Capital accounts Alice 76 500 Eve 63 000 Jean 27 000 166 500 Current accounts Alice 14 112 Debit Eve 8 226 Credit Jean 18 982 Credit 13 096 Current liabilities Trade payables 8 532 Bank overdraft 2 456 10 988 Total capital and liabilities 190 584 Additional information On 1 July 2016 Alice retired from the partnership. Monies due to Alice on her retirement were paid to her from the partnership bank account. Non-current assets were revalued at 20% lower than the net book value. Inventory had a net realisable value of $12 908. An amount of $1990 was written off as an irrecoverable debt. Goodwill was valued at $20 250 and was not to remain in the books of account. Eve and Jean continued in partnership sharing profits and losses in the ratio 3 : 2 respectively. REQUIRED State what is meant by net realisable value. State two reasons why assets are revalued on the change of a partnership. Identify two situations where the capital accounts of partners may be adjusted for goodwill. Prepare the partners’ capital accounts at 1 July 2016. Assess the impact of Alice’s retirement on the partnership’s statement of financial position.

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

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

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

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Dolphin Limited is a bakery producing goods for wholesale. The issued share capital of the company is 300 000 ordinary shares of $2 each. The directors offered a further 125 000 ordinary shares to family and friends. The terms of issue were: 1 April 2016 – Payable on application $1.00 per share 30 June 2016 – Final payment $1.10 per share Applications were received for 150 000 shares. All monies received were entered into a holding account called ‘Application for Shares’. Transfers were made from this account to the relevant ledger accounts. The applicants were issued shares and all final payments were received on the due date. Excess application monies were returned to applicants. REQUIRED Prepare the relevant ledger accounts to record the issue of shares. Explain two differences between ordinary shares and preference shares. Name one capital reserve.

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

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Rajesh is a manufacturer with a trading year end of 31 December. He currently uses absorption costing. The business operates two production cost centres and two service cost centres. Details of these cost centres and the budgeted overhead costs for the whole business for the year ended 31 December 2015 are as follows: Overhead $ Basis of apportionment Depreciation 8 750 Non-current assets at cost Machinery maintenance 27 000 Machine hours Power 15 370 Kilowatt hours Rent of premises 63 510 Floor area The following information is also available: Production cost centres Service cost centres Machining Assembly Stores Canteen Floor area (square metres) Kilowatt hours 3 750 2 500 Non-current asset at cost ($) 90 000 30 000 12 000 8 000 Stores requisitions - - Staff - Direct labour hours 2 300 13 900 - - Machine hours 14 100 2 650 - - REQUIRED Apportion the overhead costs to the four cost centres and re-apportion the service cost centres costs to production cost centres using a suitable basis. Total Production cost centres Service cost centres Machining Assembly Stores Canteen $ $ $ $ $ Depreciation Machinery maintenance Power Rent of premises Re-apportionment of canteen Re-apportionment of stores Total overhead cost Calculate suitable overhead absorption rates for each production cost centre correct to two decimal places. Additional information The following budgeted information is also available: Product A Product B Number of units Direct costs per unit $5.75 $8.25 Machine hours per unit 1.5 0.3 Assembly hours per unit 0.5 2.0 REQUIRED Calculate the total cost per unit of Product A and Product B. Additional information The actual results for the year were as follows: Machining Assembly Factory overheads $76 750 $45 675 Direct labour hours 2 560 12 650 Machine hours 16 210 2 490 REQUIRED Calculate the over absorption or under absorption of overheads for each production cost centre. State what is meant by allocation. State what is meant by overhead costs. Explain why overhead costs are re-apportioned from service cost centres. Additional information Rajesh has been advised to change to a marginal costing system. REQUIRED Advise Rajesh whether or not he should change. 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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