1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
Booksellers Limited prepared the following trial balance for the year ended 31 December 2012: $000 $000 Gross profit for the year Wages and salaries Rent Heating and lighting Motor expenses Office expenses Insurance Discount allowed Other expenses Inventory at 31 December 2012 Trade receivables Provision for doubtful receivables Bank Trade payables Goodwill Motor vehicles at cost Shop fittings at cost Office fittings at cost Provision for depreciation on motor vehicles Provision for depreciation on shop fittings Provision for depreciation on office fittings 5% Debentures Ordinary share capital Retained earnings ___ Additional information: Wages owing amounted to $23 000 at 31 December 2012. Debenture interest for the year had not been paid. Bad debts of $5000 were to be written off. The provision for doubtful receivables was to be 5% of trade receivables. Depreciation was provided on motor vehicles at 12½% on cost and on shop fittings at 10% on net book value. Office fittings had been revalued at $19 000. Rent paid in advance was $8000. For Examiner's Use REQUIRED Prepare an income statement for the year ended 31 December 2012. For Examiner's Use Calculate the retained earnings of Booksellers Limited at 31 December 2012. Prepare, in as much detail as possible, a statement of financial position at 31 December 2012. For Examiner's Use The directors wish to raise funds to expand the business. State two sources of finance they could use. State the advantages and disadvantages to the company of the two sources of finance you have chosen.
9706_w13_qp_21
THEORY
2013
Paper 2, Variant 1
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Lance, a trader, has provided the following balances at 30 November 2014 after the preparation of the income statement for the year. $000 Profit for the year Non-current assets – at cost –accumulated depreciation Accrued expenses Cash in hand Bank overdraft Inventory Trade payables Trade receivables Bank loan (2020) Opening capital Drawings REQUIRED Prepare the statement of financial position at 30 November 2014. Lance Statement of Financial Position at 30 November 2014 Calculate, stating the formula used, the following ratios correct to two decimal places. Ratio Formula Calculation Current Liquid (acid test) Additional information Ratio Current 2.0:1 2.30:1 Liquid (acid test) 1.40:1 1.0:1 REQUIRED Evaluate the change in Lance’s liquidity position over the three years. Additional information Lance has provided the following forecast for December 2014: Sales are expected to be $75 000 of which 30% will be on a cash basis and the remainder payable the month after sale. All trade receivables outstanding at 30 November 2014 were expected to pay in full during December 2014. Purchases are expected to be $45 000 of which 40% will be cash and the remainder payable the month after purchase. All trade payables at 30 November 2014 were expected to be paid in full during December 2014. Business expenses of $12 500 will be paid in the month incurred. Depreciation on non-current assets will be $9500 per month. A loan of $25 000 will be negotiated with the bank and interest at 6% per annum will be paid on a monthly basis from December 2014 onwards. REQUIRED Complete the following cash budget for December 2014. Lance Cash budget for December 2014 $ Receipts Payments Net cash flow Opening balance Closing balance
9706_w14_qp_23
THEORY
2014
Paper 2, Variant 3
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Tania and Sue are in partnership. The following balances have been taken from their books of account at 31 January 2015. $ Revenue 163 400 Insurance 13 260 Wages 6 500 Rent received 10 400 Rates paid 9 500 Provision for doubtful debts Office expenses 28 200 Capital Tania 120 000 Sue 80 000 Additional information On 31 January 2015, insurance prepaid amounted to $6400 and wages accrued amounted to $8500. Rent received is for the period 1 February 2014 to 28 February 2015. Office expenses include $470 for use of Tania’s home telephone. The provision for doubtful debts is to be maintained at 3% of trade receivables. On 31 January 2015 the trade receivables totalled $7800. Fixtures and fittings are depreciated at 10% per annum using the straight-line method. Fixtures and fittings cost $7500. Motor vehicles cost $60 000. Accumulated depreciation at 31 January 2014 was $35 000. No vehicles were bought or sold during the year. Vehicles are depreciated at 20% using the reducing balance method. Computer equipment was valued at $5700 on 1 February 2014. A new computer costing $1800 was purchased during the year. There were no sales of computer equipment during the year. On 31 January 2015 the computer equipment was valued at $6200. REQUIRED Prepare the partnership’s income statement for the year ended 31 January 2015. Additional information On 1 February 2014 the balance on Tania’s current account was $5000 . On 31 January 2015, the balance on her current account was $71 068 . She withdrew $5000 during the year. The partnership agreement provides for the following: Partners are permitted to withdraw up to a maximum of 5% of capital invested. Interest on drawings is charged at a rate of 7% on the annual drawings. Interest on capital is payable at 4% per year. Tania receives a salary of $1450 per month. Profits and losses are shared in the ratio of capital invested. REQUIRED Prepare Tania’s current account for the year ended 31 January 2015 to identify her share of profit for the year. State four possible causes of depreciation of non-current assets. State and explain two accounting concepts that apply to depreciation. State why the reducing balance method of depreciation is more appropriate for non-current assets like motor vehicles.
9706_w15_qp_23
THEORY
2015
Paper 2, Variant 3
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Huan owns a business selling electrical goods. He was unable to count his inventory at his year end of 31 March 2016. He counted his entire inventory on 6 April 2016, and valued it at cost, $57 760. The following information is available: Huan marks up the cost price of all goods by 25% to calculate the selling price. Purchases of inventory between 1 April 2016 and 6 April 2016 amounted to $6100. Sales between 1 April 2016 and 6 April 2016 amounted to $9600. Goods with a selling price of $2100 had been sent to a customer on a sale or return basis on 30 March 2016. The goods had not been sold at 31 March 2016 and had not been included when the inventory was counted. On 4 April 2016, a customer returned goods sold to him on 26 March 2016. The goods had a selling price of $650. REQUIRED Prepare a statement to show Huan the value of inventory to include in the financial statements at 31 March 2016. REQUIRED Prepare an income statement for Huan for the year ended 31 March 2016. Huan Income statement for the year ended 31 March 2016 Additional information All of Huan’s sales and purchases are made on a credit basis. He feels that his accounting records could be improved by preparation of control accounts. REQUIRED State three benefits and one limitation of preparing a sales ledger control account. Benefits Limitation Calculate the following ratios at 31 March 2016: operating expenses to revenue (to two decimal places) inventory turnover Additional information Huan’s sister Carla operates a bakery business. Both operating expenses to revenue ratio and inventory turnover ratio are lower for Carla’s business. REQUIRED Suggest one possible reason for the difference in each ratio: operating expenses to revenue inventory turnover
9706_w17_qp_21
THEORY
2017
Paper 2, Variant 1
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Questions Discovered
1775