1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
The following balances were extracted from the books of K Limited at 30 September 2018. Debit Credit $000 $000 8% Debentures (2022-2024) Administrative expenses Cash and cash equivalents Cost of sales Debenture interest Distribution costs Dividends paid Equipment cost provision for depreciation at 1 October 2017 Land and buildings cost provision for depreciation at 1 October 2017 Inventory at 30 September 2018 Issued share capital: ordinary shares of $0.50 each Retained earnings at 1 October 2017 Revenue Share premium Trade payables Trade receivables The following information is also available. Administrative expenses includes a payment, $9000, for insurance for the three months ended 30 November 2018. Carriage inwards of $3000 had been included in distribution costs. Land and buildings includes land at a cost of $260 000. The company’s depreciation policy is as follows: Equipment 20% per annum using the reducing balance method Charged to distribution costs Buildings 2½% per annum using the straight-line method Charged to administrative expenses Land No depreciation REQUIRED Prepare the income statement for the year ended 30 September 2018. K Limited Income statement for the year ended 30 September 2018 $000 Workings: Additional information During the year ended 30 September 2018 the directors had made a rights issue of 1 ordinary share for every 2 shares held at a price of $0.70 per share. The issue was fully subscribed and had been recorded in the books of account. REQUIRED Prepare the statement of changes in equity for the year ended 30 September 2018. Share capital $000 Share premium $000 Retained earnings $000 Total $000 Workings: Additional information The directors wish to raise additional finance. They are considering making either a further rights issue of ordinary shares or issue another debenture. REQUIRED Advise the directors which option they should choose. Justify your answer. Additional information The directors have provided the following information: Year ended 30 September Year ended 30 September Industry average for both years Trade payables turnover 29 days 35 days 34 days Trade receivables turnover 39 days 31 days 32 days REQUIRED Analyse the effect that the changes in each of these ratios had on the company’s liquidity using all the available information. State three ways in which a business could reduce trade receivables turnover. State three drawbacks of increasing trade payables turnover.
9706_m19_qp_22
THEORY
2019
Paper 2, Variant 2
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The following information is available for S Limited for the year ended 31 December 2019. Balances at 1 January 2019 $ Inventory 122 000 Administrative expenses accrued 3 875 Amounts paid during the year ended 31 December 2019 Distribution costs 84 475 Administrative expenses 298 875 Purchases 435 000 Amounts received during the year ended 31 December 2019 Revenue 998 400 Balances at 31 December 2019 Inventory 134 200 Administrative expenses prepaid 7 500 6% debenture (2024) 100 000 The following information is also available. Inventory at 31 December 2019 included some damaged goods which had cost $5000. These goods can only be sold for $3000 after repairs costing $700 have been carried out. The 6% debenture (2024) was issued on 1 September 2019. REQUIRED Prepare the income statement for the year ended 31 December 2019. S Limited Income statement for the year ended 31 December 2019 Workings: Additional information The following additional balances were also available at 1 January 2019. $ Ordinary shares of $1 each 100 000 Share premium 20 000 Retained earnings 126 230 An interim dividend of $0.08 per share was paid on 30 June 2019. A bonus issue of one ordinary share for every four shares held was made on 31 October 2019. Reserves were maintained in their most flexible form. A final dividend of $0.09 per ordinary share was proposed on 31 December 2019. REQUIRED Explain what is meant by ‘Reserves were maintained in their most flexible form’. Prepare the ordinary share capital account for the year ended 31 December 2019. Ordinary share capital account $ $ Prepare the statement of changes in equity for the year ended 31 December 2019. S Limited Statement of changes in equity for the year ended 31 December 2019 Share capital $ Share premium $ Retained earnings $ Total $ Additional information The directors are planning to acquire more machinery in the following year and require a further investment of $50 000. They are considering two options: option 1: issue an additional 6% debenture for $50 000 option 2: make a rights issue of one ordinary share for every five shares held at a premium of $1 per share. REQUIRED Advise the directors on which option they should choose. Justify your answer.
9706_m20_qp_22
THEORY
2020
Paper 2, Variant 2
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Nibras and Raif are in partnership. They own a car hire business. The following balances were available at 31 December 2022. Debit Credit $ $ Allowance for irrecoverable debts Cash at bank 7 370 Capital accounts Nibras 180 000 Raif 120 000 Current accounts Nibras 5 950 Raif 4 760 Drawings Nibras 19 200 Raif 12 140 Insurance 15 400 Interest on loan from Raif Loan from Raif 9 000 Motor vehicle expenses 12 420 Motor vehicles Cost 144 000 Provision for depreciation 1 January 2022 33 200 Premises Cost 220 000 Provision for depreciation 1 January 2022 44 000 Rent receivable 6 050 Repairs and maintenance 8 270 Revenue from car hire 88 300 Trade receivables 21 730 Wages and salaries 18 460 Totals 485 690 485 690 The following additional information is available. Interest at 10% per annum on the loan from Raif is accrued for the last two months of the year. Insurance payments covered the period 1 January 2022 to 28 February 2023. Monthly insurance costs have remained unchanged during this period. The partners have agreed that the allowance for irrecoverable debts is no longer required. Rent receivable by the partnership is $550 per month. Part of the premises have been rented for the full year. Motor vehicles are to be depreciated at 25% per annum using the reducing balance method. Premises are to be depreciated by 2% per annum using the straight-line method. REQUIRED Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space on page 4 to show your workings. Nibras and Raif Statement of profit or loss for the year ended 31 December 2022 $ $ Additional information Nibras and Raif agreed the following terms for the appropriation of profits and losses. Interest on capital to be 10% per annum. Nibras to receive a partnership salary of $6000 per annum. Remaining profits and losses to be shared in the ratio Nibras:Raif, 3:2. REQUIRED Prepare the appropriation account for the year ended 31 December 2022. Nibras and Raif Appropriation account for the year ended 31 December 2022 Additional information The partners would like to know what difference it would have made if they had operated without a partnership agreement during the year ended 31 December 2022. REQUIRED Calculate by how much Nibras’ current account balance at 31 December 2022 would have been different if there had been no partnership agreement during the year ended 31 December 2022. Additional information The partners had considered charging interest on drawings as part of their agreement. REQUIRED State one reason for including interest on drawings in a partnership agreement. State the double entry for recording interest on drawings. Debit Credit Additional information Nibras and Raif would like to expand their business but they require additional finance. They have considered two options: Option 1: Nibras to introduce additional capital by selling some personal investments Option 2: Arrange a bank loan REQUIRED Advise the partners which option they should choose. Justify your answer by discussing both options.
9706_m23_qp_22
THEORY
2023
Paper 2, Variant 2
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Haniya wished to compare some ratios for her business. The following information is available for the year ended 30 November 2021. Acid test ratio 0.8:1 Trade receivables turnover 34 days Trade payables turnover 36 days The following extract was taken from the statement of financial position at 30 November 2022. $ Current assets Inventory 11 500 Trade receivables 9 600 Cash at bank 6 250 27 350 Current liabilities Bank loan 10 000 Other payables 1 720 Trade payables 6 580 18 300 For the year ended 30 November 2022 credit sales totalled $94 800 and credit purchases totalled $88 300. REQUIRED Calculate each of the following ratios for the year ended 30 November 2022. Acid test ratio (to two decimal places) Trade receivables turnover Trade payables turnover Explain the importance of the acid test ratio to a business. Identify two ways in which the owner of a business could improve the acid test ratio. Discuss the changes that have occurred in the trade receivables turnover ratio and the trade payables turnover ratio for Haniya’s business during the year ended 30 November 2022.
9706_m23_qp_22
THEORY
2023
Paper 2, Variant 2
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Examiner's Use After completion of the Trading Account, the following balances were extracted from the books of Peter Jordan plc on 30 April 2006. $ Authorised and issued share capital Ordinary shares of $1 each fully paid 1 500 000 7 % Preference shares of $1 each fully paid 200 000 Premises 2 300 000 Motor vehicles 500 000 Fixtures and fittings 170 000 Provision for depreciation on motor vehicles 375 000 Provision for depreciation on fixtures and fittings 102 000 Gross profit 1 620 000 Stock 204 000 Office expenses 460 000 Selling and distribution expenses 486 000 6 % debentures – 2011 (issued in 2001) 100 000 Debenture interest paid 3 000 Profit on sale of motor vehicle 2 000 Profit and loss account balance – 1 May 2005 143 600 Cr Debtors 132 000 Creditors 116 000 Bank 26 800 Cr Cash Share premium 150 000 Interim dividend paid – ordinary shares 75 000 preference shares 8 000 Provision for doubtful debts 3 000 Additional information at 30 April 2006: Office expenses prepaid $8000 Selling and distribution expenses accrued $23 000 Provision for doubtful debts to be maintained at 2 % of debtors Depreciation to be provided as follows: Motor vehicles 50 % per annum reducing balance Fixtures and fittings 20 % per annum on cost The following are proposed: Final dividend of $0.10 per share to be paid to ordinary shareholders Remaining dividend due is to be paid to preference shareholders. For Examiner's Use REQUIRED Prepare Peter Jordan plc’s Profit and Loss and Appropriation Account for the year ended 30 April 2006. For Examiner's Use Prepare Peter Jordan plc’s Balance Sheet at 30 April 2006. For Examiner's Use Calculate the current ratio at 30 April 2006 to two decimal places. Calculate the acid test ratio at 30 April 2006 to two decimal places. Explain the uses of these two ratios, using Peter Jordan plc as an example.
9706_s06_qp_2
THEORY
2006
Paper 2, Variant 0
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Questions Discovered
1775