6. Analysis and interpretation
A section of Accounting, 7707
Listing 10 of 43 questions
The directors of JKY Limited provided the following information. For the year to 30 April 2020: $ Revenue 209 510 Purchases 121 618 At 30 April 2020: Inventory 11 050 Trade receivables 28 700 Bank overdraft 6 280 All sales and purchases were made on credit terms. Inventory at 1 May 2019 was valued at $8000 REQUIRED Calculate the following ratios. Show your workings. Rate of inventory turnover workings answer (to two decimal places) Trade receivables turnover workings answer (round up to nearest whole day) The rate of inventory turnover for the year ended 30 April 2020 was lower than that of the previous year. The trade receivables turnover for the year ended 30 April 2020 was higher than that of the previous year. REQUIRED Explain the effects of the change in: inventory turnover trade receivables turnover The directors are concerned about the level of trade receivables. They are considering introducing cash discount of 1% for payment within 21 days or charging interest on amounts outstanding after 30 days. REQUIRED Advise the directors whether they should introduce the cash discount policy or the interest charge policy. Justify your answer by providing one advantage and one disadvantage of each policy. The information in the accounting statements is affected by the company’s accounting policies. REQUIRED Explain to the directors of JKY Limited the importance of the following objectives in selecting the company’s accounting policies. comparability relevance
7707_s20_qp_22
THEORY
2020
Paper 2, Variant 2
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Questions Discovered
43