Feb/March 2017

Which accounting treatments show the application of the matching concept?

The accounting system

A business’s draft financial statements report a profit for the year of $64000 before allowing for the following:

Preparation of financial statements

The table summarizes transactions for a product in July. There was no inventory at the start. Purchased: 50 units at $4 per unit. Sold: 30 units at $10 per unit. Among the units left over, 8 are damaged and so have no value. Calculate the profit for July.

Preparation of financial statements

For the year ending 31 December, a trader gives the financial details below. Gross margin: $20\%$ Cost of goods sold: $220000$ Drawings: $7000$ Profit for the year: $28000$ Calculate the expenses.

Preparation of financial statements

Why does goodwill need to be adjusted in the books of account when a new partner joins the partnership?

Types of business entity

A partnership raises the valuation of its non-current assets. What ledger entries should be made to record this?

Accounting for non-current assets

X and Y are partners in a partnership. They bring in Z as a new partner. The profits will be shared in the ratio $2:1:1$ respectively. Goodwill is valued at $100000$. The goodwill is not to remain in the books of account. All other assets are reassessed at $40000$ above their net book value. Z contributes $250000$ in cash and office equipment worth $30000$. What is the balance on Z’s capital account after admission?

Types of business entity

Which statements concerning preference shares are correct?

Types of business entity

The table sets out year-end figures for a company. Income statement figures: Operating profit: $14000$ Finance costs incurred: $(1500)$ Loss arising on disposal of non-current asset: $(2500)$ Profit for the year: $10000$ Statement of financial position details: $5\%$ debenture 2020: $30000$ Ordinary share capital recorded at: $70000$ Share premium account: $15000$ Retained earnings: $35000$ Calculate the return on capital employed (ROCE).

Analysis and communication of accounting information

A business supplied this information. Revenue for the year: $390000$ Non-current assets at cost at the end of the year: $260000$ Accumulated depreciation at the end of the year: $65000$ Calculate the non-current asset turnover.

Analysis and communication of accounting information

The financial statements of a limited company provide the following details. Ordinary shares: $1200000$ General reserve: $120000$ Retained earnings: $710000$ $8\%$ debentures: $400000$ Calculate the value of total equity.

Preparation of financial statements

Which item ought to be classified as capital expenditure?

Accounting for non-current assets

Which item counts as a direct cost?

Costs and cost behaviour

Samuel produces one product. The total cost per unit is $70$ at a production level of $100$ units per week, and $62.50$ when output is $160$ units per week. Calculate the total fixed costs per week.

Costs and cost behaviour

When FIFO is used, how is the inventory held in stores valued?

Traditional costing methods

The business uses machine hours as the basis for absorbing overheads. For the most recent quarter, the budgeted and actual figures were as follows. Actual overheads: $118505$ Actual machine hours: $6230$ Budgeted overheads: $126725$ Budgeted machine hours: $6850$ Find the amount by which overheads were over-absorbed or under-absorbed.

Traditional costing methods

Actual output is greater than budgeted output. Which cost is above budgeted?

Costs and cost behaviour

A firm produces three products. The information below applies to next month’s budgeted output. Product X: contribution per unit $7$, contribution per kilo $3$, kilos of material needed $400$. Product Y: contribution per unit $6$, contribution per kilo $4$, kilos of material needed $600$. Product Z: contribution per unit $8$, contribution per kilo $6$, kilos of material needed $1000$. The firm has been told that only $1800$ kilos of material will be available for production next month. What is the greatest contribution the company can achieve?

Costs and cost behaviour

The information below is provided. Direct materials: $20000$ Direct labour: $45000$ Direct expenses: $6000$ Variable overheads: $11000$ Fixed overheads: $38000$ Sales: $240000$ Determine the contribution to sales ratio.

Costs and cost behaviour

The following information is given for a company. Budgeted overheads: $136000$ Budgeted labour hours: $10568$ Actual overheads: $146000$ Actual labour hours: $10110$ Calculate the overhead absorption rate per labour hour?

Traditional costing methods

The information below refers to a business. Planned fixed costs each month: $2000$ Desired profit each month: $3000$ Planned variable cost per unit: $15$ Selling price for each unit: $40$ Fixed costs are expected to rise by $500$ per month, while variable costs rise by $5$ per unit. What value of revenue will be needed to achieve the target profit?

Costs and cost behaviour

A company that sells $10000$ units each year has these costs: Direct material: $50000$ Assembly labour: $100000$ Factory overheads: $70000$ The usual selling price per unit is $50$. How many extra units must be sold to break even if the selling price is cut to $35$?

Costs and cost behaviour

A business acquired a vehicle for $23500 during the year ended 31 December 2012. It was then disposed of on 30 September 2015 for $3500. Depreciation was recorded at 20% per annum by the straight line method. In both the year of purchase and the year of disposal, depreciation for a complete year was charged. What was the profit or loss on disposal of the vehicle?

Accounting for non-current assets

Which statements identify a drawback of break-even analysis?

Costs and cost behaviour

For what reason is a sales ledger control account used?

The accounting system

A purchases ledger control account had been prepared, but it included several errors. What was the correct balance carried down?

Reconciliation and verification

A suspense account has a debit balance of $350. What might have led to this?

Reconciliation and verification

The balances below are related to Ladha’s business. What profit did Ladha make for the year ended 31 March 2016?

Preparation of financial statements

A trial balance reported a provision for doubtful debts of $1350. Trade receivables totalled $50320, including an irrecoverable debt of $500. Which entry was needed in the provision for doubtful debts account if the closing balance was to be 5% of trade receivables?

Preparation of financial statements

The following details are given for a business. Items are sold at cost plus 25%. The owner has taken some items for personal use, but these have not been entered as drawings. What is the value of the items taken for personal use?

The accounting system

Razia was a sole trader who launched her business on 1 July 2015, selling ladies’ clothing. She did not maintain proper books of account, but she could provide the information below.

Analysis and communication of accounting information

Sturgess has supplied details about provisions for doubtful debts and telephone expenses.

The accounting system

King supplied the details of non-current assets at 1 April 2015, along with the transaction information for the year.

Accounting for non-current assets

Miu runs a manufacturing business that produces one product only.

Traditional costing methods

XY Limited prepares annual financial statements in line with International Accounting Standards. Its non-current assets comprise both tangible assets and intangible assets.

Preparation of financial statements

Euan served as the external auditor for Z Limited.

Preparation of financial statements

The AB Cricket Club draws up its financial statements every year.

Preparation of financial statements

Sachin trades in electrical appliances costing $150 per unit. His brother, Tajid, lives overseas, and it had been arranged that Tajid would sell some of the appliances. In the year ended 31 December 2016, Sachin sent 1000 appliances to Tajid.

Preparation of financial statements

Joshua produces one product and applies standard costing.

Standard costing

LH Limited’s main cutting machine is due for replacement. Buying a new machine will cost $260 000. The case provides forecasts of output, costs, revenue and discount factors.

Investment appraisal