1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
Bayliss Limited is a retailer of ladies’ fashion material. The following trial balance has been extracted from the books of account at 31 December 2015: Dr $ Cr $ 5% debentures (2017) 80 000 Administrative expenses 205 000 Cash and cash equivalents 32 000 Distribution costs 197 000 Dividends paid 10 000 General reserve 21 000 Interest paid 13 000 Inventory at 1 January 2015 98 000 Non-current assets at cost / valuation Land and buildings 185 000 Plant and machinery 204 000 Provision for depreciation Buildings 23 000 Plant and machinery 94 000 Ordinary shares of $0.50 each fully paid 140 000 Other payables 7 000 Other receivables 3 000 Purchases 480 000 Retained earnings 61 000 Revenue 984 000 Share premium 3 000 Trade payables 59 000 Trade receivables 109 000 1 504 000 1 504 000 Additional information Inventory at 31 December 2015 is valued at a cost of $105 000. Land is included in the trial balance at a value of $135 000. It is to be revalued to $150 000 at 31 December 2015. Depreciation for the year ended 31 December 2015 is to be provided as follows: Buildings – 2% per annum using the straight-line method Plant and machinery – 10% per annum using the reducing balance method. All annual depreciation is to be charged to administrative expenses. Trade receivables includes a debt of $9000 which is to be written off to administrative expenses at 31 December 2015. The directors wish to make provision for doubtful debts of 3% of trade receivables. The adjustment should be charged to administrative expenses. On 31 December 2015, Bayliss Limited made a bonus issue of shares on the basis of one ordinary share for every twenty ordinary shares held. The company policy is to leave reserves in their most flexible form. No entries have been made in the books of account in respect of the bonus issue. Debenture interest has been paid to 30 September 2015. REQUIRED Prepare the income statement for Bayliss Limited for the year ended 31 December 2015.
9706_s16_qp_21
THEORY
2016
Paper 2, Variant 1
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Jing is a sole trader. He does not maintain full accounting records. All sales and purchases are on credit. He provided the following information for the year ended 30 April 2015. $ Cheques received from credit customers 96 300 Cheques paid to credit suppliers 73 540 Rent paid 5 500 Electricity paid Carriage inwards Carriage outwards Other operating expenses Irrecoverable debts written off Purchases returns 2 480 Jing had the following assets and liabilities. At 30 April 2014 At 30 April 2015 $ $ Equipment ? ? Inventory 15 000 11 500 Trade receivables 3 750 2 250 Rent prepaid Electricity owing Trade payables 3 460 1 790 All equipment was originally purchased for $2700 on 1 May 2013. Jing depreciates his equipment using the reducing balance method at a rate of 10% per annum. REQUIRED Calculate the sales for the year ended 30 April 2015. Calculate the purchases for the year ended 30 April 2015. Prepare Jing’s income statement for the year ended 30 April 2015. Jing Income Statement for the year ended 30 April 2015 Additional information After preparing the financial statements, Jing remembered the following: He had paid his cleaner $60 cash, out of his own money, to clean the offices and his house. He agreed that this should be split in the ratio 3 : 2 respectively. REQUIRED Prepare the journal entry to record this transaction. A narrative is not required. State two types of entries, other than the correction of errors, which would usually be recorded in the general journal. Additional information Jing calculated the gross margin and the profit margin for his business. He discovered that the gross margin had decreased for the year ended 30 April 2015. For the same period the profit margin had increased. REQUIRED Assess the performance of the business for the year ended 30 April 2015. Suggest possible reasons for the changes. State three benefits to a business of using ratios.
9706_s16_qp_22
THEORY
2016
Paper 2, Variant 2
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Questions Discovered
637