1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
Klix Limited’s book-keeper prepared the following details about the firm’s outstanding trade receivables at 31 December 2010. Age of debt Trade Receivables $ Up to 30 days 16 800 31 to 60 days 12 600 61 to 90 days 7 100 Over 90 days 1 300 The following rates are applied for the estimation of doubtful debts. Age of debt % Up to 30 days 31 to 60 days 61 to 90 days Over 90 days A provision for doubtful debts account is maintained. This had a balance of $800 on 1 January 2010. The bad debts written off for the year ended 31 December 2009 amounted to $1420. Debbie, a customer who owed the company $700, has recently been declared bankrupt. This amount had been included in the details above as ‘outstanding for 61 to 90 days’. It has been decided to write off the debt immediately. On 2 October 2010, Harvey, a credit customer, ceased trading and Klix Limited received payment of $0.25 in the dollar in final settlement of the debt of $600. The remainder had been written off as a bad debt. Other bad debts written off during the year ended 31 December 2010 totalled $350. These had been taken into account when drawing up the list of trade receivables above. REQUIRED Calculate the amount which should be provided as a provision for doubtful debts at 31 December 2010. Show your workings. Prepare the following ledger accounts for the year ended 31 December 2010, showing the closing entry to the final accounts at the end of the year. Provision for doubtful debts account Bad debts account Harvey account Prepare an extract from the statement of financial position (balance sheet) at 31 December 2010 showing the net amount of trade receivables. Klix Limited’s directors are reviewing the existing policy for calculating the provision for doubtful debts. They are considering applying a 4% rate to all debts as the basis for calculation. REQUIRED Calculate the effect of this change on the provision for doubtful debts. Explain how this change would affect the company’s income statement and statement of financial position. Explain why this change might be necessary. State three factors that the directors should consider when creating a provision for doubtful debts. [Total 30]
9706_w11_qp_21
THEORY
2011
Paper 2, Variant 1
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X and Y are in partnership, sharing profits and losses in the ratio of 2:1. X had taken goods costing $1500 from the business for his own use. The goods had been treated as a sale and credited to the sales account at their normal selling price of $2400. It was agreed that the goods should have been credited to the purchases account and not to sales and the records were corrected accordingly. Which entries should be made in the partners’ current accounts to make the correction?
9706_w12_qp_13
MCQ
2012
Paper 1, Variant 3
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The following is the draft statement of financial position of Chan Ya Wen, a sole trader, at 31 May 2014. Statement of Financial Position at 31 May 2014 $000 Assets Non-current assets Buildings at valuation Equipment at net book value Motor vehicles at net book value Current assets Inventories Trade receivables Other receivables Cash and cash equivalents Total assets Capital and Liabilities Opening capital Add profit for the year Less drawing Closing capital Non-current liabilities Loan Current liabilities Trade payables Other payables Total capital and liabilities Additional information After preparation of the draft statement of financial position the following errors were discovered: A purchase credit note received for $12 000 had been completely omitted from the books. Inventory at 31 May 2014, cost $6000, was found to be damaged. A customer has agreed to buy the goods for $2500. Delivery costs will be $250. The loan was received on 1 December 2013. Loan interest of 4% per annum has not been paid. During the year vehicle repairs of $2000 had been incorrectly debited to the motor vehicles account. Motor vehicles have been depreciated by 25% per annum on the year end value. On 1 May 2014 a motor vehicle with a net book value of $16 000 had been badly damaged in a collision. No entry has yet been made in the accounts for this. The insurance company has agreed to pay $13 000 in compensation. The trader will receive a further $1200 for the scrap value. On 27 May 2014 a credit customer was declared bankrupt and it was decided to write off the $8000 owing. No record in the accounts has yet been made. REQUIRED Prepare a statement to show the corrected profit for the year ended 31 May 2014. Prepare a corrected statement of financial position at 31 May 2014. Additional information At 31 July 2014 Cha Ya Wen had a debit balance of $8000 in the bank column of his cash book. His bank statement showed a credit balance of $5600 at the same date. On comparing the cash book with the bank statement the following discrepancies were found: Bank charges of $150 appeared in the bank statement but had not been entered in the cash book. A credit of $450 for dividends received had not been entered in the cash book. Cheques received from customers amounting to $3500 had been entered in the cash book but had not yet been credited by the bank. A cheque for $1200 received from a debtor had been returned by the bank marked ‘insufficient funds for payment’. Cheques issued by the business amounting to $2000 were recorded in the cash book but did not appear in the bank statement. REQUIRED Update the bank columns of Cha Ya Wen’s cash book for the month of July 2014. Prepare a bank reconciliation statement as at 31 July 2014.
9706_w14_qp_21
THEORY
2014
Paper 2, Variant 1
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Questions Discovered
1775