9706_w22_qp_22
A paper of Accounting, 9706
Questions:
4
Year:
2022
Paper:
2
Variant:
2
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1
The following balances have been extracted from the draft financial statements of H Limited at 30 September 2022. $ 8% bank loan (2028–2029) 28 000 Cash and cash equivalents 2 590 Inventory 48 900 Plant and machinery at net book value 52 000 Property at valuation 65 000 Retained earnings 27 350 Revaluation reserve 23 000 Share capital (ordinary shares of $1 each) 80 000 Share premium 19 400 Trade payables 17 140 Trade receivables 26 400 The directors discovered that the following had not been accounted for. Plant and machinery had been purchased for $16 500. This was settled by the part‑exchange of machinery with a net book value of $11 800 and a bank payment of $4700. No depreciation for the year had been charged. Plant and machinery is depreciated at 10% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase and none in the year of disposal. A bonus issue of one ordinary share for every four shares held had been made on 1 June 2022. The directors had decided to keep the reserves in the most flexible form. An interim dividend of $0.03 per share had been paid on 1 September 2022 on all shares in issue at that date. Property had been revalued downwards by $4000. One half of the 8% bank loan (2028–2029) had been repaid on 30 September 2022. A provision for doubtful debts of 5% was to be made. REQUIRED Prepare the journal entry to record the bonus issue of shares. Dates and narrative are not required. Calculate the net book value of plant and machinery at 30 September 2022. Calculate the adjusted balance of cash and cash equivalents at 30 September 2022. Calculate the adjusted balance of retained earnings at 30 September 2022. Prepare the statement of financial position at 30 September 2022. H Limited Statement of Financial Position at 30 September 2022 Explain two differences between capital reserves and revenue reserves. Explain one accounting concept applied when making a provision for doubtful debts.
1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements
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2
Usman has extracted the following information from his books of account in order to update the sales ledger control account for the month of August 2022. $ Balance brought down at 1 August 2022 34 210 Cheque receipts from credit customers 32 840 Customers’ dishonoured cheques 1 020 Sales journal totals 29 760 Sales returns journal totals Usman has produced a list of all customer account balances at 31 August 2022 totalling $30 477. He has discovered the following: The total of the sales journal had been overcast by $600. Discounts allowed of $218 had been entered in customers’ accounts but no entries had been made in the control account. A contra for $325 had been correctly entered in both the customer’s account and the supplier’s account. A customer’s overpayment of $65 had been repaid by cheque but no entries had been made in the books of account. A cheque received from Musa for $250 had been posted to the account of Hussein. An irrecoverable debt of $180 had been correctly written off in a customer’s account but had not been entered in the control account. A credit balance of $315 on a customer’s account had been incorrectly entered as a debit balance in the list of customer account balances at 31 August 2022. REQUIRED Prepare the updated sales ledger control account for the month of August 2022. Sales ledger control account $ $ Balance b/d 34 210 Prepare an amended total of customer account balances to agree with the sales ledger control account balance in . $ Original total of customer account balances 30 477 State one limitation of preparing a control account. Explain why a sales ledger control account would help in the prevention of fraud.
1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification
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3
N Limited provided the following information for the year ended 31 August 2022. $ 6% debentures (2022) 20 000 Bank overdraft 9 430 Cash in hand Closing inventory 64 800 Finance costs 1 400 Opening inventory 45 600 Operating expenses 96 000 Other payables 4 340 Other receivables 6 080 Purchases 172 000 Revenue 292 000 Trade payables 10 100 Trade receivables 19 800 Cash sales accounted for 20% of revenue. Cash purchases accounted for 25% of purchases. REQUIRED Calculate the following efficiency ratios, showing the formula used. Ratio Formula Workings Trade receivables turnover Answer: Trade payables turnover Answer: Calculate the following liquidity ratios to two decimal places, showing the formula used. Ratio Formula Workings Current ratio Answer: Liquid (acid test) ratio Answer: Additional information The directors have reported a 5% increase in profit for the year ended 31 August 2022 and are satisfied with the results. REQUIRED Advise the directors whether or not they are correct to be satisfied. Justify your answer and support it by considering the efficiency ratios and liquidity ratios in and . State two limitations of using accounting ratios to compare the results of two businesses.
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
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4
Brady manufactures one product which is sold through agents who receive a 10% commission based on the selling price. The following budgeted information is available for December 2022. $ Sales revenue (12 000 units) 78 000 Direct materials 21 600 Direct labour 14 400 Variable production overheads 4 800 Fixed production overheads 9 200 Fixed administrative overheads 6 100 Selling expenses including sales commission 13 200 All selling expenses with the exception of sales commission are fixed. REQUIRED Calculate for December 2022: budgeted total contribution budgeted total profit break‑even point in units. State the formula for calculating the margin of safety. Additional information Brady has a monthly target profit of $10 800. REQUIRED Calculate how many units Brady would have to sell in December 2022 in order to achieve the target profit. Additional information Brady is aware that he needs to make changes in order to achieve his monthly target profit and he is proposing the following: Improve the specification of the product and increase the selling price by $0.30 per unit. The new materials will increase the direct material price by $0.40 per unit. Reduce the direct labour rate by 5% per unit. Reduce the sales commission to 8%. Reduce the administrative overheads by $18 000 per annum by making one member of staff redundant. Increase the advertising budget by $2500 per month. Brady is confident that these measures will produce additional sales of 1000 units each month. REQUIRED Prepare a budgeted marginal cost statement for December 2022 if Brady makes the proposed changes. Brady Budgeted marginal cost statement for December 2022 Workings: Advise Brady whether or not he should make the proposed changes. Justify your advice by discussing the issues that he should consider. State two advantages of cost–volume–profit analysis. State two limitations of cost–volume–profit 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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