Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

CL plc operates as a manufacturing business. Goods are moved out of the factory at a fixed percentage profit, and this rate has stayed unchanged for several years. The directors supplied the information below for the year ended 31 December 2017.
(a)[3]

Calculate the percentage of factory profit utilised by the company.

(b)[4]

Prepare the manufacturing account for the year ended 31 December 2017, showing as much detail as you can.

(c)[11]

Prepare the income statement for the year ended 31 December 2017, including all relevant figures.

(d)[4]

Advise the directors whether they ought to take this opportunity or not. Support your answer with justification.

(e(i))[1]

State what the term 'prime cost' means.

(e(ii))[1]

State one example of a cost that would be included in prime cost.

(e(iii))[1]

State one example of a cost that would be included in factory overheads.

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