Accounting 9706 · AS & A Level · Investment appraisal

Investment appraisal — practice question

International Dancing is a dance club that requires each member to pay an annual subscription of $500.
(a)[9]

Prepare the club’s income and expenditure account for the year ending 31 December 2015.

(b(i))[2]

Calculate the balance at the bank on 31 December 2015.

(b(ii))[3]

Calculate the amount of loan required.

(c)[4]

Assess the likely effect that buying the premises would have on the club’s annual cash flows in future years.

(d)[7]

Recommend to the management committee of the club whether they ought to go ahead with the purchase of the premises or not. Support your answer by discussing both the advantages and the disadvantages of the purchase.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Annual subscriptions total $106 500

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