9706_w17_qp_21 - revisedeck

1

Huan owns a business selling electrical goods. He was unable to count his inventory at his year end of 31 March 2016. He counted his entire inventory on 6 April 2016, and valued it at cost, $57 760. The following information is available: Huan marks up the cost price of all goods by 25% to calculate the selling price. Purchases of inventory between 1 April 2016 and 6 April 2016 amounted to $6100. Sales between 1 April 2016 and 6 April 2016 amounted to $9600. Goods with a selling price of $2100 had been sent to a customer on a sale or return basis on 30 March 2016. The goods had not been sold at 31 March 2016 and had not been included when the inventory was counted. On 4 April 2016, a customer returned goods sold to him on 26 March 2016. The goods had a selling price of $650. REQUIRED Prepare a statement to show Huan the value of inventory to include in the financial statements at 31 March 2016. REQUIRED Prepare an income statement for Huan for the year ended 31 March 2016. Huan Income statement for the year ended 31 March 2016 Additional information All of Huan’s sales and purchases are made on a credit basis. He feels that his accounting records could be improved by preparation of control accounts. REQUIRED State three benefits and one limitation of preparing a sales ledger control account. Benefits Limitation Calculate the following ratios at 31 March 2016: operating expenses to revenue (to two decimal places) inventory turnover Additional information Huan’s sister Carla operates a bakery business. Both operating expenses to revenue ratio and inventory turnover ratio are lower for Carla’s business. REQUIRED Suggest one possible reason for the difference in each ratio: operating expenses to revenue inventory turnover

1. Financial accounting (AS Level) → 1.6. Analysis and communication of accounting information

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

3. Financial accounting (A Level) → 3.5. Analysis and communication of accounting information

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2

The directors of W Limited have provided the following balances at 1 August 2016: Cost Accumulated depreciation Net book value $ $ $ Motor vehicles 125 000 43 750 81 250 The company policy is to provide depreciation on motor vehicles at 20% per annum using the reducing balance method. Depreciation is charged on a month-by-month basis. During the year ended 31 July 2017, the following transactions took place: A motor vehicle was purchased on 31 January 2017 at a cost of $28 230. A motor vehicle was sold on 28 February 2017 for $14 600. It had originally been purchased on 30 April 2015 at a cost of $19 500. There were no other additions or disposals of motor vehicles during the year. REQUIRED State the double entry required to record the disposal of a non-current asset before the profit or loss on disposal is transferred to the income statement (amounts are not required). accounts to be debited accounts to be credited Prepare the provision for depreciation on motor vehicles account for W Limited for the year ended 31 July 2017 (dates are not required). Calculate the effect on profit for the year of each of transactions 1 and 2.

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

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

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3

P Limited was formed on 1 June 2015. The company’s share capital comprised of ordinary shares. Identify two differences between ordinary shares and cumulative preference shares. State three differences between a rights issue and a bonus issue. Additional information P Limited prepares financial statements to 31 May. The following transactions, all of which were entered in the appropriate accounts in the ledger, occurred in relation to the ordinary shares. 1 June 100 000 ordinary shares, with a nominal value of $1 each, were issued at a price of $1.45 each. Of this, $1.15 was received which included the full par value. 30 September The balance outstanding was received in full. 1 October P Limited made a 1 for 4 rights issue at a discount of 15% of the most recent share valuation of $1.40 per ordinary share. All shareholders took up their rights in full. REQUIRED Complete the following table for the two years ended 31 May 2017 to record these transactions. Date Name of account to be debited Amount $ Name of account to be credited Amount $ Additional information Shareholders have not received any dividend since the company was formed. However, the financial statements show the following: Profit for the years ended 31 May 2016 $15 000 31 May 2017 $30 000 Cash and cash equivalents at 31 May 2017 $90 000 On 1 June 2017 several major shareholders demanded that the directors pay a dividend of $0.48 per share. REQUIRED Advise the directors how they should respond to the shareholders’ demand. Support your answer with calculations.

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

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4

Anna has a manufacturing business with two production departments and two service departments. She makes circuit boards for electronic games using batch costing. REQUIRED Explain what is meant by ‘batch costing’. Additional information The following budgeted annual data for Anna is available: Production departments Service departments Assembly Machining Stores Canteen Overheads $36 000 $50 000 $6 250 $2 500 Direct labour hours 6 000 3 500 – – Machine hours 2 500 5 500 – – The following information is also available: Assembly Machining Stores Number of orders – Use of canteen 65% 25% 10% REQUIRED Re-apportion the service departments’ costs to the production departments using a suitable basis for each. Assembly $ Machining $ Stores $ Canteen $ Allocated overheads 36 000 50 000 Re-apportionment of canteen Subtotal Re-apportionment of stores Total Calculate a suitable overhead absorption rate for each production department to two decimal places. Additional information A typical order for a batch of 1000 circuit boards requires the following: Direct materials $48 000 Direct labour Assembly department 500 hours at $12 per hour Machining department 300 hours at $8 per hour Machine hours Assembly department 210 hours Machining department 500 hours Selling and administration costs $7000 REQUIRED Calculate, to two decimal places, the total cost per circuit board based on a batch of 1000 units. Additional information Sally, a customer, asked for a quote for an order for 75 circuit boards. Anna calculates the selling price to give a profit margin of 60%. REQUIRED Prepare a quote showing the total selling price. Additional information Sally considered the quoted price and has asked for a discount of 5%. REQUIRED Advise Anna whether or not she should allow Sally the discount. Justify your answer. Additional information Anna has recently opened another factory making cases for the electronic games. She is considering closing this factory as she believes it is unprofitable. The following estimated data is available based on orders for the next six months: Per unit $ Selling price Variable costs Total fixed costs 21 000 Estimated demand 2800 units REQUIRED Calculate the break-even point in units. Advise Anna whether or not she should close this factory giving both financial and non-financial reasons for your answer.

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

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