9706_w17_qp_23 - revisedeck

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F Limited is a large retail company. On 1 February 2016, the company invited applications for 50 000 ordinary shares of $1 each at an issue price of $1.20. The following terms applied: Payable on application $0.50 Payable on allotment $0.70 Applications were received for 65 000 shares. All monies received in respect of the share issue were posted to the bank account and a share issue holding account until the shares were allotted. At the time of allotment, transfers were made to the share capital account and the share premium account and monies were returned to the unsuccessful applicants. REQUIRED Prepare the following ledger accounts to show all transactions relating to the share issue. Dates are not required. Share issue holding account $ $ Bank account $ $ REQUIRED Prepare the statement of changes in equity for F Limited for the year ended 30 June 2016. F Limited Statement of Changes in Equity for the year ended 30 June 2016 Ordinary shares $000 Share premium $000 Revaluation reserve $000 Retained earnings $000 Total $000 Additional information The directors of F Limited wish to purchase a new retail store for $400 000. They are considering two different ways to raise the finance for this investment. Issue a further $400 000 8% debentures (2026–2028). Make a rights issue of 320 000 ordinary shares of $1 each at a price of $1.25. REQUIRED Explain one difference between debentures and ordinary shares. Advise the directors which method of raising the finance you would recommend. Give reasons for your answer. Additional information F Limited also operates a manufacturing business. In the last financial year they extended the factory premises. Expenditure included the following: $ Building contractor charges to construct extension 28 000 Structural repairs to existing roof 4 600 Wages to own employees to construct new loading bay 4 000 Materials for new loading bay 2 400 Legal fees for planning permission 2 200 REQUIRED Define the term ‘revenue expenditure’. Prepare a statement to show the total amount of capital expenditure to appear in the financial statements of the business in respect of the extension of the factory premises.

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

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Rowsell does not keep full accounting records. However, the following information is available for the year ended 31 May 2017: $ Inventory at cost 1 June 2016 19 600 31 May 2017 16 300 Trade payables 1 June 2016 14 350 31 May 2017 17 220 Rent paid 19 500 Telephone charges paid 2 750 Non-current assets net book value at 1 June 2016 24 600 Cheque payments to trade payables 144 715 Additional information All goods were sold with a 20% mark-up on cost. A non-current asset with a net book value of $9380 was sold during the year for $10 175. Non-current assets are depreciated using the reducing balance method at a rate of 25% per annum. It is the policy to provide depreciation for the full year in the year of addition and none in the year of disposal. The charge for rent is $1500 per month. Telephone charges paid cover the period up to 31 March 2017. An amount for the quarter to 30 June 2017 of $840 was paid in July 2017. All purchases were made on a credit basis. REQUIRED Prepare the income statement for the year ended 31 May 2017. Rowsell Income Statement for the year ended 31 May 2017 State three benefits of keeping full double entry accounting records for a business.

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

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Rahman, Silva and Thierry have been in partnership for a number of years sharing profits and losses in the ratio 3 : 2 : 1 respectively. The following draft statement of financial position was drawn up at 30 June 2017: $ $ Non-current assets at net book value Freehold property 120 000 Plant and machinery 56 000 Motor vehicles 38 000 214 000 Current assets Inventory 42 000 Trade receivables 19 400 Cash and cash equivalents 2 300 63 700 Total assets 277 700 Capital and liabilities Capital accounts Rahman 90 000 Silva 60 000 Thierry 30 000 180 000 Current accounts Rahman 42 300 Silva 18 600 Thierry (4 400) 56 500 Non-current liabilities Loan account - Thierry 30 000 Current liabilities Trade payables 11 200 Total capital and liabilities 277 700 Thierry decided to retire from the partnership on 30 June 2017 and the following information was available: Rahman and Silva were to continue in partnership sharing profits and losses in the ratio 3 : 2 respectively. Goodwill was to be valued at $48 000. No goodwill account was to be maintained in the books of account. Thierry was to take over one of the motor vehicles at an agreed value of $12 000. The remaining motor vehicles were to be valued at $22 000. The value of inventory was to be written down by $3000. An irrecoverable debt of $200 was to be written off. Thierry agreed not to ask for repayment of his loan to the partnership when he retired. REQUIRED Prepare the revaluation account at 30 June 2017. Prepare the journal entry to account for goodwill at 30 June 2017. A narrative is not required. Prepare a statement to show the total amount due to Thierry on his retirement from the partnership. State three items that may appear in a partnership agreement. Explain the difference between a realisation account and a revaluation 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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S Limited manufactures three different products. The following budgeted information is available: Products A B C $ $ $ Monthly sales revenue 72 000 27 000 165 000 Unit costs Direct materials ($1 per kilo) Direct labour Variable overheads Selling price per unit Total monthly fixed overheads are expected to be $138 000. The directors of S Limited have been informed that only $39 000 worth of direct materials would be available in December 2017. All products use the same type of direct material and no price increase would occur due to the shortage. No changes are anticipated in selling prices, fixed overheads or unit variable costs. Due to an increased demand, the directors do not want to discontinue any of the products and wish to produce a minimum of 1000 units of each. REQUIRED Prepare a statement to show the maximum budgeted profit the company will make in December 2017 taking into account the shortage in materials and minimum production requirement. Product A Product B Product C Contribution per unit ($) Contribution per limiting factor ($) Ranking Budgeted profit statement for December 2017 Production Contribution per unit $ Total $ Product A Product B Product C Total contribution Less: Fixed overheads Budgeted profit / loss Prepare a statement to show the maximum budgeted profit the company will make in December 2017 taking into account the shortage in materials but without the minimum production requirement. Budgeted profit statement for December 2017 Production Contribution per unit $ Total $ Product A Product B Product C Total contribution Less: Fixed overheads Budgeted profit / loss Advise the directors of S Limited whether or not they should produce a minimum of 1000 units of each product. Justify your answer. Define the term ‘margin of safety’. Explain the usefulness of margin of safety to a company.

4. Cost and management accounting (A Level) → 4.3. Budgeting and budgetary control

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

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