1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
The following information relates to the business of Nother Limited. Trial Balance at 31 March 2014 Dr Cr $000 $000 Share capital Factory premises at cost Factory machinery at cost Provisions for depreciation: Premises Machinery Inventories at 1 April 2013: Raw materials Work in progress Finished goods Revenue Purchases of raw materials Manufacturing wages Factory expenses Administrative expenses Sales expenses Retained earnings Trade receivables and payables Provision for doubtful debts Bank overdraft Bad debts written off Additional information Inventories at 31 March 2014 $ Raw materials 300 000 Work in progress 220 000 Finished goods 480 000 Other payables at 31 March 2014 $ Factory expenses 112 000 Sales expenses 56 000 Manufacturing wages 40 000 Prepayments at 31 March 2014 $ Administrative expenses 8 000 During the year ended 31 March 2014 a machine was sold for $14 000. This had been debited to the bank account and credited to the sales account. The machine had been purchased for $44 000 and depreciation of $24 000 had been written off up to 31 March 2013. A full year’s depreciation is provided in the year of purchase but none in the year of sale. Depreciation is to be provided as follows: Factory premises 1% straight line Factory machinery 15% reducing balance. The provision for doubtful debts is to be adjusted to 5% of trade receivables. REQUIRED Prepare Nother Limited’s manufacturing account for the year ended 31 March 2014. Prepare Nother Limited’s income statement for the year ended 31 March 2014. Explain the following terms. Direct costs Indirect costs Prime cost Production cost
9706_w14_qp_22
THEORY
2014
Paper 2, Variant 2
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Lance, a trader, has provided the following balances at 30 November 2014 after the preparation of the income statement for the year. $000 Profit for the year Non-current assets – at cost –accumulated depreciation Accrued expenses Cash in hand Bank overdraft Inventory Trade payables Trade receivables Bank loan (2020) Opening capital Drawings REQUIRED Prepare the statement of financial position at 30 November 2014. Lance Statement of Financial Position at 30 November 2014 Calculate, stating the formula used, the following ratios correct to two decimal places. Ratio Formula Calculation Current Liquid (acid test) Additional information Ratio Current 2.0:1 2.30:1 Liquid (acid test) 1.40:1 1.0:1 REQUIRED Evaluate the change in Lance’s liquidity position over the three years. Additional information Lance has provided the following forecast for December 2014: Sales are expected to be $75 000 of which 30% will be on a cash basis and the remainder payable the month after sale. All trade receivables outstanding at 30 November 2014 were expected to pay in full during December 2014. Purchases are expected to be $45 000 of which 40% will be cash and the remainder payable the month after purchase. All trade payables at 30 November 2014 were expected to be paid in full during December 2014. Business expenses of $12 500 will be paid in the month incurred. Depreciation on non-current assets will be $9500 per month. A loan of $25 000 will be negotiated with the bank and interest at 6% per annum will be paid on a monthly basis from December 2014 onwards. REQUIRED Complete the following cash budget for December 2014. Lance Cash budget for December 2014 $ Receipts Payments Net cash flow Opening balance Closing balance
9706_w14_qp_23
THEORY
2014
Paper 2, Variant 3
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Questions Discovered
637