7707_s24_qp_22
A paper of Accounting, 7707
Questions:
5
Year:
2024
Paper:
2
Variant:
2
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1
Lottie is a trader. Her financial year end is 30 April. She keeps her petty cash book using the imprest system. The imprest amount is $150. The totals of the payments analysis columns in her petty cash book for April 2024 are as follows. $ Cleaning Stationery Sundry expenses During April 2024, Lottie received a refund for damaged stationery, $15. This amount was received into petty cash. REQUIRED Calculate the amount required to restore the petty cash imprest on 1 May 2024. The petty cash book is one of the books of prime entry. REQUIRED State one other book of prime entry two advantages of using books of prime entry On 30 April 2024, Lottie sold a motor vehicle for $6000 on credit to Y Limited. She had purchased the vehicle on 1 May 2021 for $12 000. Lottie charges depreciation on vehicles at 25% using the reducing balance method. No depreciation is charged in the year of disposal. REQUIRED Calculate the accumulated depreciation on the vehicle at 30 April 2024. Prepare the disposal of motor vehicles account. Lottie Disposal of motor vehicles account Date Details $ Date Details $ Lottie sells 3 different types of goods. Her inventory at 30 April 2024 is as follows. Type Number of units Purchase price per unit $ Net realisable value per unit $ Carriage inwards per unit $ A B C REQUIRED Calculate the value of Lottie’s inventory at 30 April 2024. Lottie pays $360 per annum for insurance. On 1 May 2023, insurance of $60 was prepaid. On 1 August Lottie paid $360 by bank transfer for the year 1 July 2023 to 30 June 2024. REQUIRED Prepare the insurance account for the year ended 30 April 2024. Bring down the balance at 1 May 2024. Lottie Insurance account Date Details $ Date Details $
2. Sources and recording of data  →  2.3. Books of prime entry
4. Accounting procedures  →  4.5. Valuation of inventory
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2
Toyah owns a factory which makes dolls’ houses. Her financial year end is 31 January. At 31 January 2024, her ledger accounts included the following balances. $ Inventory at 1 February 2023 Raw materials 12 400 Work in progress 16 970 Finished goods 14 825 Revenue 390 100 Purchases of raw materials 143 000 Wages Factory operatives 51 000 Factory supervisor 19 000 Sales staff 30 000 Factory electricity 16 000 Rates and insurance 16 200 General factory expenses 6 155 Factory machinery – at cost 120 000 Factory machinery – provision for depreciation 52 500 Additional information 1. Inventory at 31 January 2024 Raw material 11 205 Work in progress 17 682 Finished goods 13 480 2. Rates and insurance are to be apportioned 2/3 to the factory and 1/3 to the office. 3. At 31 January 2024, general factory expenses of $235 were unpaid. 4. Factory machinery is depreciated at 25% per annum using the reducing balance method. REQUIRED Prepare Toyah’s manufacturing account for the year ended 31 January 2024. Toyah Manufacturing Account for the year ended 31 January 2024 $ $ …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. Prepare Toyah’s income statement (trading section) for the year ended 31 January 2024. Toyah Income statement (trading section) for the year ended 31 January 2024 $ $ …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. The factory produced 6936 dolls’ houses during the year ended 31 January 2024. REQUIRED Calculate the manufacturing cost of each dolls’ house. Round up your answer to the nearest dollar. Idir, a competitor of Toyah’s, has decided to cease trading. He has offered to sell his inventory of finished goods to Toyah at a discounted price in return for immediate payment in cash. The total price for these items is $9600. Toyah has $1415 cash at bank. REQUIRED Advise Toyah whether or not she should buy Idir’s inventory. Justify your answer by providing two points for and two points against buying this inventory. .
5. Preparation of financial statements  →  5.5. Manufacturing accounts
5. Preparation of financial statements  →  5.6. Incomplete records
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3
Akil prepared his trial balance at 29 February 2024. The total of the debit side was $83 640 and the total of the credit side was $84 025. Akil later discovered the following errors. The total of the sales journal for January 2024, $3416, had been credited to the sales returns account. A direct debit for insurance, $115, had been credited to both the bank account and the insurance account. Discount allowed, $47, had been credited to the account for discount received. A payment for office equipment, $52, had been debited to the stationery account. The purchases journal for February had been overcast by $90. REQUIRED State which business document shows when the direct debit for insurance was paid which of the errors listed in 1 to 5 above is an error of principle Prepare the journal entries to correct errors 1 to 3 only. Narratives are not required. Akil Journal Error number Details Debit $ Credit $ ……… ……… ……… ……… ……… ………… ………… ………… ………… ………… ………… ………… ………… ………… ………… ………… ………… ………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… …………………………………………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… State why a balance may remain on the suspense account after errors 1 to 5 have been corrected. Prepare the suspense account. Bring down any remaining balance at 1 March 2024. Akil Suspense account Date ……… ……… ……… ……… ……… ……… ……… Details ………………………… ………………………… ………………………… ………………………… ………………………… ………………………… ………………………… $ ……… ……… ……… ……… ……… ……… ……… Date ……… ……… ……… ……… ……… ……… Details ………………………… ………………………… ………………………… ………………………… ………………………… ………………………… ………………………. $ ……… ……… ……… ……… ……… ……… ……… Akil’s draft profit for the year, before correction of the errors, was $17 420. REQUIRED Calculate Akil’s profit after items 1 to 5 have been corrected.
3. Verification of accounting records  →  3.2. Correction of errors
3. Verification of accounting records  →  3.1. The trial balance
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4
Tadeen and Yadid are lawyers who have been in partnership for many years. The partners provided the following trial balance at 30 April 2024. Tadeen and Yadid Trial balance at 30 April 2024 $ $ Revenue 236 350 Salaries 79 800 Rates and insurance 17 320 Advertising 16 730 Office expenses 6 150 Interest on loan from Tadeen 1 200 Premises at cost 180 000 Fittings and equipment at cost 70 000 Provision for depreciation of fittings and equipment 31 500 Receivables 24 200 Cash at bank 19 335 Cash in hand 1 375 Loan from Tadeen 20 000 Capital accounts Tadeen 125 000 Yadid 85 000 Current accounts Tadeen 3 300 Yadid 4 240 Drawings Tadeen 34 300 Yadid 46 500 501 150 501 150 Additional information Rates and insurance include an amount of $1920 for the year 1 March 2024 to 28 February 2025. At 30 April 2024, $1800 for salaries was due but unpaid. Irrecoverable receivables of $670 are to be written off. Depreciation on fittings and equipment is to be charged at 15% per annum using the straight‑line method. The partnership agreement provides for interest on partner’s loan of 6% per annum interest on drawings of 5% interest on capital of 3% per annum a salary to Yadid of $10 000 per annum residual profits and losses are to be shared 60% to Tadeen and 40% to Yadid. REQUIRED Prepare the income statement for Tadeen and Yadid for the year ended 30 April 2024. Tadeen and Yadid Income Statement for the year ended 30 April 2024 $ $ …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. Prepare the appropriation account for Tadeen and Yadid for the year ended 30 April 2024. Tadeen and Yadid Appropriation account for the year ended 30 April 2024 $ $ …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… …………………………………………………………… ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. ……………. State one reason why the partners might consider reducing their drawings which accounting principle reflects the partners’ intention to continue trading indefinitely. The partners employ one lawyer and office staff. The lawyer, Lakia is paid $25 000 but has decided to leave. Tadeen and Yadid have found a replacement lawyer, Raim. He has worked as a lawyer for 15 years and is well known in the local area. However, Raim wants to be a partner in the business rather than an employee and would expect 40% of the residual profit of the partnership each year. REQUIRED Advise Tadeen and Yadid whether or not they should offer Raim a partnership. Justify your answer by providing points for and against offering Raim a partnership. .
4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts
5. Preparation of financial statements  →  5.2. Partnerships
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5
Ajay is a retailer. He has provided the following information. $ At 1 April 2023 Inventory 5 200 Trade receivables 6 875 Cash at bank 1 946 Trade payables 5 115 For the year ended 31 March 2024 Revenue – credit sales 86 400 – cash sales 10 600 Purchases 51 300 Expenses 23 750 At 31 March 2024 Inventory 6 500 Trade receivables 9 550 Cash at bank 1 200 Trade payables 6 000 REQUIRED Complete the following table. ratio working answer Gross margin (to 2 decimal places) Profit margin (to 2 decimal places) Rate of inventory turnover (to 2 decimal places) Trade receivables turnover days (round up to next whole day) Liquid (acid test) ratio (to 2 decimal places) Ajay has been trading for 3 years and he has established a good reputation. He has never changed his selling price. His gross margin for the year ended 31 March 2024 is higher than for the previous years. REQUIRED Suggest one reason why Ajay’s gross margin has increased. State one reason why Ajay’s customers might be interested in his financial statements. Ajay is concerned about the levels of his inventory and trade receivables. He is considering reducing his selling price. REQUIRED Advise Ajay whether or not he should reduce his selling price. Justify your answer by providing advantages and disadvantages of reducing his selling price. Although Ajay’s gross margin has increased, his profit margin has fallen for each of the last two years. Sales revenue is Ajay’s only income. REQUIRED State two reasons why Ajay should be concerned about his falling profit margin.
6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios
6. Analysis and interpretation  →  6.1. Calculation and understanding of accounting ratios
4. Accounting procedures  →  4.5. Valuation of inventory
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