9706_w20_qp_23 - revisedeck

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The directors of G Limited have provided a trial balance at 30 September 2020. Debit Credit $ $ Administrative expenses 117 528 Bank 10 316 Distribution costs 60 263 Inventory at 1 October 2019 86 228 Ordinary share capital ($1 shares) 200 000 Property plant and equipment Cost 300 000 Provision for depreciation at 1 October 2019 82 500 Provision for doubtful debts at 1 October 2019 1 528 Purchases 237 851 Retained earnings 34 572 Revenue 498 430 Share premium 20 000 Trade payables 26 124 Trade receivables 71 600 873 470 873 470 The following information is also available. Property plant and equipment Cost $ Accumulated depreciation $ Depreciation method Allocation of depreciation Land 120 000 Nil – Nil Other than land 180 000 82 500 15% per annum straight-line 2/3 administrative expenses 1/3 distribution costs Total 300 000 82 500 There were no acquisitions or disposals during the year. Inventory at 30 September 2020 cost $91 368 and had a net realisable value of $126 435. The directors wish to maintain a provision for doubtful debts at 3% of trade receivables. All expenses relating to doubtful debts are charged to administrative expenses. At 30 September 2020 $ Administrative expenses accrued Bank interest accrued Distribution costs prepaid REQUIRED Prepare the income statement for the year ended 30 September 2020. G Limited Income statement for the year ended 30 September 2020 Workings: Prepare the statement of financial position at 30 September 2020. G Limited Statement of financial position at 30 September 2020 Workings: State two differences between ordinary shares and preference shares. Define a ‘capital reserve’. State one use of a capital reserve. Additional information The directors are planning a major expansion. They wish to raise $100 000. The directors are considering three options: Option 1: Issue 6% debentures (2029) of $100 000. Option 2: Make a rights issue of one ordinary share for every two ordinary shares held at $1 each. Option 3: Make a new issue of 100 000 ordinary shares at a premium of $0.10 per share. REQUIRED Advise the directors which option they should take. Justify your answer.

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

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Simone operates a double entry system of book-keeping. REQUIRED Explain why a trial balance may be arithmetically correct even though errors have been identified. Additional information Simone extracted a trial balance before preparing the financial statements for the year ended 30 June 2020. The totals of the trial balance did not agree. The following errors were discovered. A total of $5600 from the sales returns journal had been credited to the purchases returns account. A motor vehicle costing $15 000, acquired on 1 March 2020, had been posted to the motor expenses account. Simone does not own any other vehicles. Discount received of $750 had not been posted to the discount received account. A payment of $300 for insurance had been entered correctly in the cash book. No other entry had been made. REQUIRED Prepare the journal entries to correct the errors. Narratives are not required. Simone General journal Dr $ Cr $ Additional information Simone’s policy is to depreciate motor vehicles at 25% using the straight-line method on a monthly basis. She prepared a draft income statement that showed a profit for the year of $47 835 before the correction of errors. REQUIRED Calculate the revised profit for the year after the correction of errors. State three uses of the general journal other than the correction of errors.

1. Financial accounting (AS Level) → 1.4. Reconciliation and verification

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Giles, a sole trader, provided the following information for the year ended 31 March 2020. Closing inventory was valued at $40 250 which was 15% higher than the opening inventory. Rate of inventory turnover was 8 times. Gross margin was 30%. All sales and purchases were made on credit. Trade receivables at 31 March 2020 were $38 000 before accounting for an irrecoverable debt of $2000 and an allowance for doubtful debts which is maintained at 3.5% of trade receivables. Trade payables at 31 March 2020 were $22 000. REQUIRED Calculate the sales for the year ended 31 March 2020. Calculate the trade receivables turnover . Calculate the trade payables turnover . Explain the effect on the liquidity of Giles’s business of your answers to and .

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) → 1.6. Analysis and communication of accounting information

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Connie manufactures three products: A, B and C. She has provided the following budgeted information for one unit of each product for the year ending 31 December 2021. Product A Product B Product C $ $ $ Selling price 15.00 20.00 25.00 Direct Materials 5.00 5.50 6.00 Direct Labour 4.00 5.00 7.50 Variable Overheads 2.50 3.50 2.50 Total fixed costs for the year are expected to be $100 000. Forecast annual demand for each product is 12 000 units. REQUIRED Explain what is meant by contribution. Calculate the budgeted unit contribution for each product. Calculate the budgeted total profit for the year ending 31 December 2021 if the demand is fully met. Additional Information Connie has now discovered that her landlord may limit the use of the premises resulting in a total of only 78 000 machine hours being available. The number of machine hours to make each product are: Product A Product B Product C Fixed costs will remain unchanged. REQUIRED Prepare the optimum production plan for the year ending 31 December 2021 based on the available machine hours. Calculate the budgeted total profit for the year ending 31 December 2021 based on the optimum production plan. Additional information If Connie pays her landlord $65 000 she will be able to have unlimited machine hours. REQUIRED Advise Connie whether or not she should pay her landlord $65 000. Justify your advice. Define the following terms: Variable cost Semi-variable cost Fixed cost State three assumptions made when using marginal costing.

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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