4. Accounting procedures
A section of Accounting, 7707
Listing 10 of 188 questions
Rani is a trader. Her financial year ends on 31 March. She provided the following information about her three types of inventory at 31 March 2020. Inventory Number Cost Selling price Selling expenses item of units per unit per unit per unit $ $ $ A B C REQUIRED Calculate the total value of Rani’s inventory at 31 March 2020. Rani later discovered that she had an amount of inventory of item D at 31 March 2020. This inventory originally cost $1660. She considered this inventory to be obsolete. REQUIRED Explain to Rani how the value of the inventory of item D affected the profit for the year ended 31 March 2020. Advise Rani whether or not she should stop purchasing item D to avoid having obsolete inventory in the future. Justify your answer by providing advantages and disadvantages. Rani earns advertising income by placing advertising boards in her shop window. The following details relate to her advertising income. On 1 April 2019 Rani had received $420 in advance, and $300 was owed to her. During the year ended 31 March 2020, Rani received cheque payments totalling $6000. She decided to write off the amount of $300 due to her. On 31 March 2020 Rani had received $500 in advance, and $400 was owed to her. REQUIRED Prepare the advertising income account in the ledger of Rani for the year ended 31 March 2020. Balance the account and bring down the balances on 1 April 2020. Rani Advertising income account Date ……… ……… ……… ……… ……… ……… ……… ……… ……… Details ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… $ ……… ……… ……… ……… ……… ……… ……… ……… ……… Date ……… ……… ……… ……… ……… ……… ……… ……… ……… Details …………………… …………………… …………………… …………………… …………………… …………………… …………………… …………………… …………………… $ ……… ……… ……… ……… ……… ……… …… ……… ……… Explain to Rani the effect on gross profit of recording sales of inventory as advertising income.
7707_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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MPT Limited prepares its financial statements to 30 April each year. The company’s retained earnings at 1 May 2019 were $14 000. The general reserve was $35 000. During the year ended 30 April 2020 the following took place. The company made a profit for the year of $28 000 after charging debenture interest. A transfer of $5000 was made to the general reserve. A dividend of $4500 was paid. No other dividends were payable for the year. MPT Limited provided the following balances at 30 April 2020. $ Fixtures and equipment at book value 152 000 Motor vehicles at book value 60 400 Inventory 30 330 Bank overdraft 6 200 Trade payables 24 900 Trade receivables 31 500 Provision for doubtful debts 5% Debentures (repayable 2025) 20 000 Ordinary share capital 150 000 REQUIRED Calculate the retained earnings of MPT Limited at 30 April 2020. Prepare the statement of financial position for MPT Limited at 30 April 2020. MPT Limited Statement of Financial Position at 30 April 2020 ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… The directors of MPT Limited are considering using the general reserve to repay the bank overdraft. REQUIRED State why it is not appropriate to use the general reserve to repay the bank overdraft. Calculate the return on capital employed (ROCE) for the year ended 30 April 2020. The calculation should be correct to two decimal places and should be based on closing capital employed. The directors are considering increasing dividend in 2021 as a way of increasing return on capital employed (ROCE). REQUIRED Advise the directors how the return on capital employed (ROCE) can be increased. Justify your answer by commenting on both profit and capital employed.
7707_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Questions Discovered
188