9706_w21_qp_22 - revisedeck

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The following balances have been extracted from the books of P Limited at 31 August 2021. $ 5% Debentures (2022–2023) 36 000 Administrative expenses 35 180 Bank 4 770 Credit Carriage inwards Delivery vehicles Cost Provision for depreciation at 1 September 2020 89 420 42 200 Distribution costs 44 320 Dividend paid 3 000 Freehold property at valuation at 31 August 2020 66 000 Interest paid 1 590 Inventory at 1 September 2020 22 880 Purchases 88 900 Revenue 216 600 Retained earnings 24 200 Returns outwards Revaluation reserve 6 000 Share capital (ordinary shares of $0.50 each) 60 000 Share premium 8 500 Trade payables 11 730 Trade receivables 32 480 Wages and salaries 26 100 The freehold property was revalued on 1 September 2020 at $58 000. The revaluation has not yet been recorded in the books of account. REQUIRED Prepare the journal entry to record the revaluation of the freehold property on 1 September 2020. A narrative is not required. REQUIRED Prepare the income statement for the year ended 31 August 2021. Use the space on the next page for your workings. P Limited Income statement for the year ended 31 August 2021 $ Revenue Cost of sales Gross profit Administrative expenses Distribution costs Profit from operations Finance costs Profit for the year Prepare a statement to show the balance of retained earnings at 31 August 2021 after the preparation of the income statement. Additional information The directors wish to reduce the level of trade receivables. REQUIRED State two ways in which the level of trade receivables of a business could be reduced. Additional information The directors have plans to expand the business and they are considering two options. Option 1: Make a rights issue of 80 000 ordinary shares of $0.50 each at a premium of 25%. Option 2: Issue 8% debentures (2027–2028) to raise $50 000. REQUIRED Advise the directors which option they should choose. Justify your decision.

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

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Shamal maintains a full set of accounting records. He has extracted a trial balance at 30 September 2021 that does not balance and he has opened a suspense account for the difference. Shamal has now identified the following six errors. There were no other errors. A payment of $169 for motor repairs had been correctly entered in the cash book but had been debited to the motor repairs account as $196. The purchase of new machinery, $670, had been debited to general expenses. Discount allowed of $175 had been entered correctly in the cash book but had not been posted to the discount allowed account. The sales journal was totalled at $86 961. The total should have been $86 741. A cheque for $425 received from McCann, a credit customer, had been correctly entered in the cash book but had been debited to the sales ledger control account. The total of the discount received column in the cash book, $490, had been entered twice on the correct side of the discount received account. REQUIRED Prepare the suspense account at 30 September 2021, clearly identifying the opening balance. Suspense Account Details $ Details $ Complete the table to name the type of error in each of the errors 1, 2 and 3 identified by Shamal. Error Type of error Explain two benefits to a business of preparing a purchases ledger control account. State two items that would appear on the credit side of a purchases ledger control account.

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

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The following information has been extracted from the financial statements of D Limited at 30 June 2020. $ Share capital (ordinary shares of $0.50 each) 150 000 Share premium 25 000 Retained earnings 28 700 Transactions during the year ended 30 June 2021. 1 August 2020 Made a rights issue of one ordinary share for every five shares held at $0.70 per share. The issue was fully subscribed. 1 December 2020 Paid a dividend of $0.02 per share on all shares in issue at that date. 1 March 2021 Made a bonus issue of two ordinary shares for every nine shares held. Reserves were left in the most flexible form. 30 June 2021 Proposed a final dividend of 2%. The profit for the year ended 30 June 2021 was $76 520. REQUIRED Prepare the following ledger accounts. Ordinary share capital Date Details $ Date Details $ Share premium Date Details $ Date Details $ Retained earnings Date Details $ Date Details $ State two differences between capital reserves and revenue reserves. Explain one reason why a company might make a bonus issue of shares.

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

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Hayden manufactures two products, Aye and Bee. The business operates two production departments, Machining and Finishing, and two service departments, Stores and Maintenance. REQUIRED Identify one possible basis of apportionment that a business could use in respect of: rent and rates machinery depreciation electricity for machinery. Additional information The following information is available. Machining Finishing Number of orders from Stores 3 200 1 800 Maintenance call-outs Budgeted direct labour hours 6 200 19 800 Budgeted machine hours 38 600 9 400 REQUIRED Complete the following table to show the apportionment of budgeted overhead costs for the year ended 30 September 2021. Production departments Service departments Total $ Machining $ Finishing $ Stores $ Maintenance $ Total apportioned overheads 449 800 188 850 172 850 53 325 34 775 Re-apportion Stores Subtotal Re-apportion Maintenance Total overheads cost Calculate, to two decimal places, an overhead absorption rate for each production department, using a suitable basis. Additional information The actual results for the year ended 30 September 2021 were as follows: Machining Finishing Factory overheads $265 800 $187 420 Direct labour hours 6 350 19 260 Machine hours 36 940 9 810 REQUIRED Calculate the over-absorption or under-absorption of overheads for each department for the year ended 30 September 2021. Additional information The following information is available for one unit of product Aye. Direct material $36.20 Direct labour hours Machining ($8 per hour) 45 minutes Finishing ($10 per hour) 60 minutes Machine hours Machining 20 minutes Finishing 30 minutes During September 2021, a customer requested a quotation for supplying 200 units of Aye. Hayden required a 30% gross profit margin on the order. REQUIRED Prepare a statement to show the total selling price that Hayden quoted to the customer. Additional information Hayden is considering using one factory-wide overhead absorption rate rather than separate departmental overhead absorption rates. REQUIRED Advise Hayden whether or not he should use one factory-wide absorption rate. Justify your answer. Explain two effects that the over-absorption of overheads may have on a business.

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

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