3. Financial accounting (A Level)
A section of Accounting, 9706
Listing 10 of 734 questions
Tom and Jerry are in partnership. They do not have a formal partnership agreement. The following information is available for the partnership for the year ended 30 November 2015: $ Capital account balances at 30 November 2015 Tom 90 000 Jerry 54 000 Current account balances at 1 December 2014 Tom 18 000 Credit Jerry 10 800 Debit Drawings for the year Tom 8 000 Jerry 2 800 Profit from operations 12 600 Loan from partner account Tom 24 000 Tom made the loan to the partnership on 1 December 2014. Profits had accrued evenly and drawings had been taken evenly throughout the year. Additional information Tom and Jerry prepared a formal partnership agreement to take effect from 1 September 2015. The terms of the agreement were: Interest on capital was to be at a rate of 8% per annum. Interest on drawings was to be at a rate of 3% per annum based on the annual drawings. Tom was to be paid a salary of $16 216 per annum. Profits and losses were to be shared in the ratio 3 : 2 respectively. Loan interest was to be paid at a rate of 4% per annum. REQUIRED Calculate the profit before appropriation for the nine months ended 31 August 2015 and the three months ended 30 November 2015. Prepare the appropriation account for the nine months ended 31 August 2015 and the three months ended 30 November 2015. Appropriation Account 9 months 3 months $ $ Prepare the current accounts for Tom and Jerry for the year ended 30 November 2015. Additional information The partnership is considering expansion and will need to purchase additional non-current assets at a cost of $60 000. REQUIRED State the difference between capital and revenue expenditure. Identify and explain one accounting concept relating to depreciation. Discuss two possible sources of finance which could be used to fund the purchase of the additional non-current assets. Recommend the most appropriate source of finance for the partnership. Justify your answer.
9706_w16_qp_22
THEORY
2016
Paper 2, Variant 2
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Alice, Eve and Jean are in partnership sharing profits and losses in the ratio 5 : 3 : 2 respectively. The partnership statement of financial position at 30 June 2016 was as follows: $ Non-current assets at net book value 162 000 Current assets Inventory 17 208 Trade receivables 11 376 28 584 Total assets 190 584 Capital accounts Alice 76 500 Eve 63 000 Jean 27 000 166 500 Current accounts Alice 14 112 Debit Eve 8 226 Credit Jean 18 982 Credit 13 096 Current liabilities Trade payables 8 532 Bank overdraft 2 456 10 988 Total capital and liabilities 190 584 Additional information On 1 July 2016 Alice retired from the partnership. Monies due to Alice on her retirement were paid to her from the partnership bank account. Non-current assets were revalued at 20% lower than the net book value. Inventory had a net realisable value of $12 908. An amount of $1990 was written off as an irrecoverable debt. Goodwill was valued at $20 250 and was not to remain in the books of account. Eve and Jean continued in partnership sharing profits and losses in the ratio 3 : 2 respectively. REQUIRED State what is meant by net realisable value. State two reasons why assets are revalued on the change of a partnership. Identify two situations where the capital accounts of partners may be adjusted for goodwill. Prepare the partners’ capital accounts at 1 July 2016. Assess the impact of Alice’s retirement on the partnership’s statement of financial position.
9706_w16_qp_23
THEORY
2016
Paper 2, Variant 3
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Rahman, Silva and Thierry have been in partnership for a number of years sharing profits and losses in the ratio 3 : 2 : 1 respectively. The following draft statement of financial position was drawn up at 30 June 2017: $ $ Non-current assets at net book value Freehold property 120 000 Plant and machinery 56 000 Motor vehicles 38 000 214 000 Current assets Inventory 42 000 Trade receivables 19 400 Cash and cash equivalents 2 300 63 700 Total assets 277 700 Capital and liabilities Capital accounts Rahman 90 000 Silva 60 000 Thierry 30 000 180 000 Current accounts Rahman 42 300 Silva 18 600 Thierry (4 400) 56 500 Non-current liabilities Loan account - Thierry 30 000 Current liabilities Trade payables 11 200 Total capital and liabilities 277 700 Thierry decided to retire from the partnership on 30 June 2017 and the following information was available: Rahman and Silva were to continue in partnership sharing profits and losses in the ratio 3 : 2 respectively. Goodwill was to be valued at $48 000. No goodwill account was to be maintained in the books of account. Thierry was to take over one of the motor vehicles at an agreed value of $12 000. The remaining motor vehicles were to be valued at $22 000. The value of inventory was to be written down by $3000. An irrecoverable debt of $200 was to be written off. Thierry agreed not to ask for repayment of his loan to the partnership when he retired. REQUIRED Prepare the revaluation account at 30 June 2017. Prepare the journal entry to account for goodwill at 30 June 2017. A narrative is not required. Prepare a statement to show the total amount due to Thierry on his retirement from the partnership. State three items that may appear in a partnership agreement. Explain the difference between a realisation account and a revaluation account.
9706_w17_qp_23
THEORY
2017
Paper 2, Variant 3
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Aisha, Bilal and Cao have been in partnership for many years sharing profits and losses in the ratio 2 : 2 : 1. Bilal decided to retire from the partnership at 31 January 2018. Their statement of financial position at 31 January 2018 before any adjustments was as follows: Aisha, Bilal and Cao Statement of financial position at 31 January 2018 $ $ Assets Non-current assets Premises 85 000 Motor vehicles 32 000 Fixtures and fittings 7 500 124 500 Current assets Inventory 16 200 Trade and other receivables 4 800 21 000 Total assets 145 500 Capital and liabilities Capital accounts Aisha 48 000 Bilal 48 000 Cao 24 000 120 000 Current accounts Aisha 8 400 Bilal (1 200) Cao 6 400 13 600 Current liabilities Trade and other payables 5 600 Bank overdraft 6 300 11 900 Total capital and liabilities 145 500 The following information is available. The partners agreed that the value of goodwill at that date was $85 000. It was also agreed that certain assets should be revalued to the following amounts. $ Premises 114 000 Inventory 15 000 As part of the final settlement, Bilal was entitled to retain one of the motor vehicles at its net book value of $11 400. It was agreed that of the final settlement due to Bilal, $20 000 would be paid immediately by cheque and the balance would remain in the business as a loan. REQUIRED Prepare a statement to calculate the profit or loss on revaluation at 31 January 2018. Prepare Bilal’s capital account on his retirement from the partnership. Identify three ways, other than using bank finance, in which a partnership could raise funds to purchase a non-current asset. State three items that may be included in the appropriation account before the division of residual profit.
9706_w18_qp_21
THEORY
2018
Paper 2, Variant 1
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Questions Discovered
734