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9706_w20_qp_22
A paper of Accounting, 9706
Questions:
4
Year:
2020
Paper:
2
Variant:
2
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1
Anjali is a sole trader. She does not maintain a full set of accounting records. At 1 October 2019 the assets and liabilities of Anjali were as follows: Cash at bank 4 600 debit Inventory 14 500 Non-current assets (carrying value) 85 000 Trade payables 9 930 Trade receivables 12 850 During the year ended 30 September 2020 the following transactions were recorded. General expenses paid 11 480 Payments to trade payables 50 250 Receipts from trade receivables 73 850 Rental income received 9 000 Returns inwards 2 070 Returns outwards 1 290 Anjali made drawings of $600 per month throughout the year. All receipts and payments were processed through the bank account. Irrecoverable debts of $2300 were written off. At 30 September 2020 the assets and liabilities were as follows: Inventory 18 000 Non-current assets (carrying value) 72 250 Prepaid general expenses Trade payables 11 470 Trade receivables 14 980 REQUIRED Calculate the bank balance at 30 September 2020. Prepare the income statement for the year ended 30 September 2020. Use the space on the next page for your workings. Anjali Income statement for the year ended 30 September 2020 Workings: Calculate the following, to two decimal places, for the year ended 30 September 2020. Gross margin Mark-up Profit margin Explain how a business may increase its gross margin. Explain how a business may improve its profit margin. State one reason why each of the following may be interested in the financial statements of a business. 1 Employees 2 Suppliers 3 Government
1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements
3. Financial accounting (A Level)  →  3.1. Preparation of financial statements
1. Financial accounting (AS Level)  →  1.6. Analysis and communication of accounting information
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2
Khalid runs a business. His non-current assets with a total value of $200 000 consist of a motor vehicle and a machine with a life expectancy of 5 years. He anticipates that the machine will make products at a steady rate during that period. REQUIRED State three methods of depreciation which may be used by a business. Advise Khalid which method of depreciation he should use for each asset. Justify your advice. Motor vehicle Machine State which accounting concept Khalid did not apply in each of the following scenarios. Scenario Concept Khalid used the business bank account to pay for a deposit for a family holiday. This was treated as a business expense. A stapler for $10 paid by Khalid out of the business bank account was added to the business office equipment account balance. Khalid became aware that a customer owing $1500 was bankrupt. He took no action when preparing the financial statements. State the purpose of financial statements.
1. Financial accounting (AS Level)  →  1.3. Accounting for non-current assets
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3
Roberto and Sangeeta have been in partnership for many years sharing profits and losses in the ratio 3:2. They decided to dissolve the partnership on 31 August 2020. Their summarised statement of financial position at that date was as follows: $ Assets Non-current assets 160 000 Current assets Inventory 45 000 Trade receivables 15 000 60 000 Total assets 220 000 Capital and liabilities Capital accounts Roberto 110 000 Sangeeta 60 000 170 000 Current accounts Roberto 25 000 Sangeeta (10 000) 15 000 Total capital and current accounts 185 000 Current liabilities Trade payables 30 000 Bank overdraft 5 000 35 000 Total capital and liabilities 220 000 The following information is also available. Non-current assets were sold for $175 000. Inventory was sold for $42 000. Trade receivables were settled after allowing a 20% discount. Trade payables were settled after taking a 10% discount. Dissolution expenses of $4000 were paid by cheque. REQUIRED Prepare the partnership realisation account. Partnership realisation account $ $ Prepare the partners’ capital accounts on dissolution of the partnership. Partners’ capital accounts Roberto $ Sangeeta $ Roberto $ Sangeeta $ Prepare the bank account on dissolution of the partnership. Bank account $ $
1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements
3. Financial accounting (A Level)  →  3.1. Preparation of financial statements
Open
4
Kevin runs a small manufacturing business. He is considering which method of inventory valuation he should use. REQUIRED State two advantages to a business of using each of the following methods of inventory valuation. First in first out (FIFO) Last in first out (LIFO) Average cost (AVCO) Additional information Kevin manufactures a single product and he intends to value his closing inventory at selling price which includes a mark-up on cost. REQUIRED Explain why Kevin should not value his inventory at this price. Additional information Kevin currently uses marginal costing but is considering changing to absorption costing. The following budgeted information per unit is available. $ Selling price Direct material Direct labour Budgeted production 20 000 units per month Budgeted fixed overheads $100 000 per month. At 1 January there was no inventory held. The following actual results are available for January and February. January February Sales 15 000 21 000 Production 18 000 18 000 Fixed overheads $100 000 $100 000 REQUIRED Prepare the income statement for each of the months of January and February using marginal costing. Kevin Marginal cost income statement January February $ $ $ $ Prepare the income statement for each of the months of January and February using absorption costing. Kevin Absorption cost income statement January February $ $ $ $ Prepare a statement reconciling the marginal cost profit with the absorption cost profit for January. Advise Kevin whether or not he should change from marginal costing to absorption costing. Justify your answer.
2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods
2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour
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