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1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
The financial year end of T Limited was 30 June 2024. On that date the following balances were extracted from the books of account. Debit $ Credit $ 8% Bank loan (2024) 54 000 Administrative expenses 131 310 Bank overdraft 12 380 Cash Carriage inwards Distribution costs 114 870 Finance costs 5 180 Fixtures and fittings Cost Provision for depreciation at 1 July 2023 16 200 9 560 Inventory at 1 July 2023 93 400 Land and buildings Cost Provision for depreciation at 1 July 2023 165 000 6 300 Motor vehicles Cost Provision for depreciation at 1 July 2023 82 000 34 590 Purchases 293 780 Retained earnings 38 450 Revenue 705 100 Share capital 80 000 Trade payables 32 160 Trade receivables 69 740 The following information is also available. On 15 June 2024, goods were delivered and invoiced to a credit customer on a sale or return basis. The goods had a selling price of $12 000 including a mark-up of 25%. On 30 June 2024, inventory was counted and valued at cost, $86 400. On the same date, the customer informed T Limited that he had not yet decided whether to keep the goods. Distribution costs include a charge of $3120 for motor insurance for the year ending 30 November 2024. An irrecoverable debt of $540 is to be written off to administrative expenses. The directors have decided to create an allowance for irrecoverable debts of 5% of trade receivables to be charged to administrative expenses. Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space provided on page 5 to show your workings. T Limited Statement of profit or loss for the year ended 30 June 2024 $ Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Finance costs Profit before Taxation Taxation Profit for the year Workings: Cost of sales Allowance for irrecoverable debts Depreciation Distribution costs Administrative expenses Finance costs Calculate the balance of cash and cash equivalents at 30 June 2024. Prepare an extract from the statement of financial position at 30 June 2024 to show the equity and liabilities section only. T Limited Statement of financial position at 30 June 2024 $ Equity Total equity Liabilities Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Workings: Assess the directors’ decision on 30 June 2024 to take out the 5% debenture (2028–2029). Justify your assessment by considering both advantages and disadvantages of the decision to the company.
9706_w24_qp_21
THEORY
2024
Paper 2, Variant 1
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Ahmed is a sole trader. He does not maintain full accounting records. He provided the following information for the year ended 30 June 2024. Payments and receipts during the year included the following: $ Carriage outwards 1 040 Cash sales 5 200 Electricity charges paid 1 920 General expenses paid 3 600 Motor expenses paid 4 250 Payments to credit suppliers 61 240 Receipts from credit customers 102 600 Rent paid 16 800 All purchases are made on credit. Assets and liabilities included the following: At 30 June $ $ 8% bank loan – 3 000 Allowance for irrecoverable debts 1 055 ? Inventory 12 640 ? Other payables: Rent accrued Electricity – Other receivables: Rent prepaid – 1 800 Trade payables 8 800 6 300 Trade receivables 21 100 18 500 Inventory at 30 June 2024 was valued at $15 880. This included damaged items costing $960 that will be sold for $1100 after repairs costing $340. During the year Ahmed took goods costing $420 for his own use. An irrecoverable debt of $300 is to be written off. Ahmed wished to maintain the allowance for irrecoverable debts at the same rate as in the previous year. The 8% bank loan was taken out on 1 April 2024. No interest has yet been paid. Ahmed started the business on 1 July 2022. On that date he purchased a motor vehicle for $24 000 and fixtures and fittings for $3200. No other non-current assets have been purchased since that date. 10 Depreciation is to be provided as follows: Motor vehicle: 20% per annum reducing balance method Fixtures and fittings: 10% per annum straight-line method. 11 Motor expenses paid included $1140 for motor insurance for the twelve months to 31 August 2024. Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space provided on page 4 to show your workings. Ahmed Statement of profit or loss for the year ended 30 June 2024 Explain, with reference to an accounting concept, why adjustments 5, 6 and 11 on page 2 were to be made to the financial statements. Adjustment 5 Goods for own use Concept Explanation 6 Irrecoverable debt Concept Explanation 11 Motor insurance Concept Explanation Additional information Ahmed has been offered the opportunity to purchase larger premises for $85 000 which would allow him to increase the sales revenue of the business. As he does not have sufficient personal funds to make the purchase, he is considering two options. Option 1 Apply for a bank loan to cover the whole purchase price. The bank loan would be repayable over ten years and interest would be payable at 8% per annum. Option 2 Ahmed’s brother has offered to join the business as an equal sharing partner. He would introduce all of the cash required to complete the purchase in exchange for a 50% share of future profits. Advise Ahmed whether he should go ahead with either of these options. Justify your advice by discussing both financial and non-financial factors.
9706_w24_qp_22
THEORY
2024
Paper 2, Variant 2
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The company accountant of J plc had prepared draft financial statements for the year ended 30 June 2024. The following balances remained in the books of account. $ 6% bank loan (2024) 11 000 Bank 1 980 Inventory 83 900 Other payables 3 150 Other receivables 5 320 Plant and equipment Cost Provision for depreciation 137 000 66 940 Property Cost Provision for depreciation 60 000 8 160 Retained earnings 122 300 Share capital (ordinary shares of $1 each) 70 000 Share premium 4 280 Taxation 13 600 Trade payables 21 450 Trade receivables 32 680 The draft statement of profit or loss showed a profit for the year of $83 250. It has since been discovered no account had been taken of the following errors and omissions. Closing inventory had been understated by $2 000. Administrative expenses included an interim dividend of 3% that had been paid on 1 April 2024. An amount of $1 250 prepaid on distribution costs had been treated as an accrual. The 6% bank loan (2024) had been repaid on 30 June 2024. The property was purchased on 1 July 2021 and had been correctly depreciated for each of the two years ended 30 June 2023 using the straight-line method at 2% per annum. However, the depreciation charge on the property for the year ended 30 June 2024 had been incorrectly calculated using the reducing balance method at 10% per annum. The taxation liability at 30 June 2024 had been over estimated by $3 000. Calculate the corrected carrying value of Property at 30 June 2024. Calculate the revised profit for the year ended 30 June 2024. Workings: Prepare the statement of financial position at 30 June 2024. Use the space provided on page 5 to show your workings. J plc Statement of financial position at 30 June 2024 Additional information The directors of J plc are aware that one factor causing the value of plant and equipment to depreciate is wear and tear. State two other factors that may cause the value of plant and equipment to depreciate. State the formula for each of the following ratios. Ratio Formula Profit margin Return on capital employed Additional information Having calculated both these ratios, the directors are pleased that both achieve the company’s targets. They are wishing to expand and are planning to acquire additional plant and equipment with an estimated cost of $80 000. They are considering two financing options but are also concerned as to the effect that these will have on the ratios. Option 1 Request a five-year bank loan to purchase the equipment outright. Option 2 Take out a three-year lease agreement for the equipment. Advise the directors which option they should choose. Justify your advice by considering both financial and non-financial factors.
9706_w24_qp_23
THEORY
2024
Paper 2, Variant 3
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King provided the following information for non-current assets at 1 April 2015. $ Property plant and machinery Land and buildings – cost 252 000 Plant and machinery – cost 123 000 Accumulated depreciation Buildings 21 000 Plant and machinery 49 000 During the year ended 31 March 2016, the following took place: Land was revalued to $202 500. It had originally cost $182 000. A machine was sold on 30 November 2015. It had a net book value on 1 April 2015 of $46 350 and an original cost of $76 200. A machine was purchased on 1 December 2015 at a cost of $62 850. The depreciation policy for non-current assets is as follows: Buildings 2% per annum using the straight-line method Plant and machinery 20% per annum using the reducing balance method Depreciation is charged on a month-by-month basis. REQUIRED Calculate the total depreciation charge for buildings for the year ended 31 March 2016. Calculate the total depreciation charge for plant and machinery for the year ended 31 March 2016. Prepare an extract from the statement of financial position at 31 March 2016 for non-current assets. King Extract from Statement of Financial Position at 31 March 2016 Accumulated Cost / Valuation Depreciation Net Book Value $ $ $ Workings: State three causes of depreciation.
9706_m17_qp_22
THEORY
2017
Paper 2, Variant 2
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Questions Discovered
1775