9706_w18_qp_23 - revisedeck

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From time to time M Limited issues shares. REQUIRED State the double entry required to record a rights issue of shares at a premium. Additional information The directors of M Limited have a policy of not paying interim dividends. The statement of changes in equity of the company for the year ended 31 December 2016 was as follows. M Limited Statement of changes in equity for the year ended 31 December 2016 Ordinary share capital Share premium General reserve Retained earnings Total $ $ $ $ $ Jan 1 Balance 400 000 150 000 – 120 000 670 000 Feb 10 ? 100 000 (100 000) – Jun 25 Dividend (60 000) (60 000) Dec 31 Transfer 50 000 (50 000) – Dec 31 Profit for the year 90 000 90 000 Dec 31 Balance 500 000 50 000 50 000 100 000 700 000 REQUIRED State which event was recorded by the entry on 10 February 2016. Explain why the entry made on 10 February 2016 was made to the share premium account rather than the retained earnings account. State which dividend was recorded by the entry on 25 June 2016. State why the directors decided to create a general reserve. Explain why a long-term bank loan received by the company on 1 July 2016 was not recorded in the statement of changes in equity. Additional information Balances at 1 January 2017 included the following. $ Buildings cost 400 000 provision for depreciation 38 000 Equipment cost 256 000 provision for depreciation 61 000 Motor vehicles cost 188 000 provision for depreciation 81 000 During the year ended 31 December 2017 the following took place: new equipment costing $37 000 was bought a motor vehicle with an original cost of $10 000, bought during 2016, was sold. The company’s depreciation policy is as follows: buildings at a rate of 2% per annum using the straight-line method equipment at a rate of 10% per annum using the straight-line method motor vehicles at a rate of 20% per annum using the reducing balance method. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. On 31 December 2017 the buildings were revalued at $650 000. REQUIRED Calculate the net book value of non-current assets which will appear in the statement of financial position at 31 December 2017. Additional information The following information is also available. $ At 1 January 2017 10% Bank loan (2025) 100 000 During the year ended 31 December 2017 Dividend paid 66 000 Profit for the year before charging depreciation and loan interest 163 000 There was no change to issued share capital At 31 December 2017 Current assets 290 300 Current liabilities (including accrued loan interest) 96 300 REQUIRED Prepare the statement of financial position at 31 December 2017. Use the space on the next page for your workings. Use this space for your workings. Additional information The directors are considering the rates of depreciation applied to the company’s non-current assets. REQUIRED Advise the directors whether or not they should decrease the depreciation rates. Justify your answer.

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

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Angela, Beena and Cai were in partnership sharing profits and losses in the ratio of 4 : 3 : 1. They dissolved their partnership on 30 September 2017. The following information is available. At that date their statement of financial position was as follows: Assets $ $ $ $ Non-current assets Land and buildings 150 000 Motor vehicles 40 000 Machinery 60 000 250 000 Current assets Inventory 35 000 Trade receivables 45 000 Bank 4 500 84 500 Total assets 334 500 Capital and liabilities Angela Beena Cai Capital account 100 000 75 000 25 000 200 000 Current account 5 000 4 000 (1 000) 8 000 Total 105 000 79 000 24 000 208 000 Non-current liabilities 10% loan from Beena 100 000 Current liabilities Trade payables 26 500 Total liabilities 126 500 Total capital and liabilities 334 500 The following assets were sold for cash. $ Land and buildings 200 000 Machinery 55 150 Inventory 33 750 Angela took a motor vehicle at an agreed valuation of $20 000. Beena took the remaining motor vehicle at an agreed valuation of $13 000. An amount of $40 500 was received from trade receivables in full settlement of their accounts. An amount of $25 000 was paid to trade payables in full settlement of their accounts. Dissolution costs of $2300 were paid from the bank. REQUIRED Prepare the realisation account on dissolution of the partnership. Realisation account $ $ Calculate the amount to be paid to Beena on dissolution of the partnership. State two items which may be included in a partnership agreement. Explain why partners may each have a separate capital account and current 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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H Limited provided the following information for its most recent year of trading. $ Cash sales 10 600 Credit sales 81 900 Purchases (all credit) 77 800 Purchases returns 1 600 Administrative and distribution expenses 14 800 Opening inventory 4 300 Closing inventory 6 500 H Limited calculates a number of different ratios to analyse its results each year. REQUIRED Explain the difference between gross margin and mark-up. Name one cost recorded in an income statement which would not be included in the calculation of the expenses to revenue ratio. Name two costs which might be included in the administrative expenses of a limited company. Calculate the following ratios for the year. gross margin expenses to revenue profit margin State how the three ratios calculated in are related. Suggest two reasons why H Limited’s gross margin may have been higher than the previous year.

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

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

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

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J Limited produces and sells a single product. The budgeted operating statement of the company for the year ending 31 March 2019 is as follows: $000 $000 Sales income (20 000 units) 2 900 Direct materials Direct labour Production overheads (1 480) Gross profit 1 420 Selling overheads (898) Profit for the year The variable production overheads will be $5 per unit. The variable selling overheads will be $10 per unit. REQUIRED Calculate the budgeted contribution per unit. Calculate the budgeted margin of safety in units. Calculate the budgeted margin of safety as a percentage. Additional information The sales manager believes that production and sales can be increased to 25 000 units per year based on the following plan. The company spends $250 000 on an advertising campaign which will last for one year only. The unit selling price is reduced by 15%. The direct material unit cost is reduced by 5%. REQUIRED Prepare statements to calculate the following in the first year if the directors decide to proceed with this plan. the revised budgeted contribution the revised budgeted total profit Additional information If the directors decide to proceed with the sales manager’s plan they would do so for a period of 3 years. If the directors decide not to proceed with the sales manager’s plan they estimate that profit for the years ending 31 March 2019, 31 March 2020 and 31 March 2021 will be $522 000, $322 000 and $220 000 respectively. REQUIRED Advise the directors whether or not they should accept the sales manager’s plan. Justify your answer using both financial and non-financial factors and any relevant calculations. State three assumptions made when using costvolumeprofit (CVP) analysis. State two advantages of using CVP analysis.

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

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

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