2010 Paper 2 Business Exam Answers JC-Learn. JC-Learn. Business Studies. Higher Level Exam - Paper 2. 1 P a g e

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1 JC-Learn Business Studies Higher Level 2010 Exam - Paper 2 1 P a g e

2 1. This is a Book of First Entry, Ledger and Trial Balance Question. Answer all parts of this question: SMITH Ltd, a clothing company, had the following balances in its General Journal on 1 May GENERAL JOURNAL Date Details F Dr Cr 1/5/2010 Machinery GL 250,000 Debtor: KENNY Ltd DL 18,000 Bank ACB 20,000 Ordinary Share Capital GL 248,000 Assets, Liabilities and Share Capital of SMITH Ltd on this date 268, ,000 (A) (B) Post the balances in the above General Journal to the relevant ledger accounts and Analysed Cash Book. Post the relevant figures from the Sales and Purchases Books below to the Ledger Accounts. SALES BOOK Date Details Invoice No. F NET VAT TOTAL 12/5/2010 CLARKE Ltd 22 DL 20,000 4,200 24,200 23/5/2010 KENNY Ltd 23 DL 15,000 3,150 18,150 35,000 7,350 42,350 GL GL PURCHASES BOOK Date Details Invoice No. F NET VAT TOTAL 15/5/2010 LARKIN Ltd 32 CL 30,000 6,300 36,300 GL GL (C) Record the following Bank Transactions for the month of May in the Analysed Cash Book (ACB) of SMITH Ltd. Post relevant figures to the Ledger Accounts. Note: Analyse the Bank Transactions using the following money headings: Debit (Receipts) Side: Bank Sales VAT Debtors Credit (Payments) Side: Bank Purchases VAT Creditors Wages 5/5/2010 Cash Sales lodged 72,600 ( 60,000 + VAT 12,600) 8/5/2010 Purchases for resale Cheque No. 1 26,000 + VAT 21% 18/5/2010 Paid wages Cheque No. 2 5,000 20/5/2010 Paid LARKIN Ltd Cheque No. 3 25,000 28/5/2010 Received 20,000 from CLARKE Ltd and this was lodged. Receipt No. 45 (D) Balance the accounts on 31 May and extract a Trial Balance as at that date. 2 P a g e

3 2. This is a Credit Sales, Business Document and Bookkeeping Question. Answer all parts of this question: (A) When businesses sell goods on credit they need to be sure that they will get paid. (i) (ii) Explain two suitable methods a business could use to check the credit rating of new customers. How would the profit of the business be affected if there was no payment for sales? (B) The following details refer to the sale of goods on credit by KEOGH Ltd to HOGAN Ltd, 10 Bridge Street, Navan, Co. Meath for the month of May On 1 May 2010 HOGAN Ltd owes KEOGH Ltd 1,350. The following transactions took place during the month of May. 2/5/2010 KEOGH Ltd sent an invoice No. 4 to HOGAN Ltd 20,000 + VAT 21% 16/5/2010 KEOGH Ltd sent a Credit Note No. 56 to HOGAN Ltd 6,000 + VAT 21% 28/5/2010 KEOGH Ltd received a payment from HOGAN Ltd Receipt No. 17 for 15,000 On 31 May 2010 KEOGH Ltd sent a Statement of Account No. 33 to HOGAN Ltd. (i) (ii) (iii) (iv) Outline how KEOGH Ltd should process Statements issued. Complete the Statement of Account No. 33 on the blank document sheet supplied with this paper. Complete the Receipt No. 17, signed by Andy Keogh, given to HOGAN Ltd on the blank document sheet supplied with this paper. Record the payment received by KEOGH Ltd from HOGAN Ltd in the Analysed Cash Book of KEOGH Ltd on the blank document sheet supplied with this paper. 3 P a g e

4 3. This is a question on Report Writing and Business Insurance. Answer all parts of this question: (A) OPEN 247 Ltd, 13 Onion Road, Carlow, is a grocery business selling a wide range of goods and providing a delivery service for its customers. The Managing Director of OPEN 247 Ltd, Mary Greene, seeks your advice regarding its insurance needs. Mary Greene supplies the following information: Buildings 800,000, Equipment and Fittings 120,000, Delivery Vans 60,000 and Stock 65,000. She employs 25 workers. All takings are lodged, three times weekly in a bank which is 10 kilometres away. Assume you are Martin Kelly, Insurance Consultant, New Bridge Road, Waterford. In your answer book prepare a report, on 15 June 2010, setting out answers to the following questions asked by Mary Greene. Use the report template headings provided below: REPORT TEMPLATE HEADINGS FROM: TO: REPORT TITLE: DATE : INTRODUCTION ANSWERS TO QUESTIONS ASKED FOLLOW UP SIGNATURE POSITION/ TITLE OF REPORT WRITER (i) (ii) (iii) (iv) Why is it important for a business to have adequate insurance? Name one type of insurance that OPEN 247 Ltd is required to have by law. Name two types of insurance that you would advise OPEN 247 Ltd to purchase. State a reason for each type of insurance you selected. (You may not include the insurance mentioned in part (ii) or buildings insurance). State two non-insurable risks that OPEN 247 Ltd might have. (B) OPEN 247 Ltd insured its buildings for 600,000. Floods caused damage of 160,000. Calculate the amount of compensation it could expect to receive. Explain your answer. 4 P a g e

5 4. This is a Final Accounts and Balance Sheet Question. Answer all parts of this question The following Trial Balance was extracted from the books of REILLY Ltd, a furniture shop, on 31 December The Authorised Share Capital is 600,000 1 ordinary shares. TRIAL BALANCE OF REILLY Ltd Dr Cr as on 31 December 2009 Purchases and Sales 133, ,000 Carriage Inwards 5,000 Opening Stock 1/1/ ,000 Debtors and Creditors 31,000 24,300 Insurance 6,400 Rent Receivable 2,800 Advertising 54,000 Motor Vehicles 90,000 Buildings 400,000 Bank Overdraft 4, Year Loan 155,000 Cash 22,500 Land 140,000 Reserves ( Profit and Loss Balance) 98,000 Dividend Paid 14,000 Issued Share Capital : 360,000 1 Ordinary Shares 360, , ,100 (A) You are required to prepare the Trading, Profit and Loss Appropriation Account of REILLY Ltd for the year ending 31 December 2009 and a Balance Sheet as on that date. You are given the following information as on 31 May (i) Closing Stock 25,000 (ii) Carriage Inwards due 500 (iii) Rent Receivable due 1,000 (iv) Advertising due 300 (v) Insurance prepaid 400 (vi) Depreciation: Buildings 10% Motor Vehicles 8% (B) Name three suitable methods that REILLY Ltd could use to advertise its goods. 5 P a g e

6 5. This is a Delivery System and Wages Question. Answer all parts of this question (A) (i) State three factors that should be considered when deciding on a suitable form of transport for a business. (ii) Name two modern developments in delivery systems in Ireland. (B) FLOWFAST Ltd, a kitchen unit supplier, who operates 320 working days in the year, supplies the following details: Distance travelled each day is 700 kilometres The diesel van can do 35 kilometres to the litre The cost of diesel per litre is 1.10 Mary Harte, the driver, is paid 850 gross per five-day week Luke Kidney, the helper, is paid 400 gross per five-day week Annual Motor Insurance is 2,560 Annual Motor Tax is 1,600 Annual Motor Repairs are 1,280 Toll charges are 40 per day Calculate the following: (i) The Cost of Diesel for one day (ii) The Cost of Labour for one day (iii) The Total Cost of Motor Insurance, Motor Tax and Motor Repairs for one day (iv) The Total Cost of Transport for one day (C) The employees of FLOWFAST Ltd pay 6 % PRSI on Gross Pay and 4% Pension on Gross Pay. Complete the partially completed Wages Book for week No. 1 on the sheet supplied with this paper. 6 P a g e

7 6. This a Cash Flow Forecast Question Answer all parts of this question: (A) Outline two reasons why a business would prepare a Cash Flow Forecast on the separate sheet supplied with this paper. (B) On the separate sheet supplied with this paper, is a partially completed Cash Flow Forecast of MORGAN Ltd. You are required to complete this forecast for the months of May, June, July and August 2011 together with the total column. The following information should be taken into account: Monthly Cash Sales are expected to increase by 20% beginning in August Shareholders are expected to invest 210,000 in June Loan repayments are to cease after June An EU Grant of 40,000 is expected in two equal instalments in May and August Monthly Cash Purchases are expected to increase by 15% beginning in August Wages are expected to remain the same every month Shareholders will be paid a dividend of 18,000 in July MORGAN Ltd is expected to purchased new equipment in July for 35,000 Advertising is expected to decrease by 8% beginning in August (C) MORGAN Ltd forgot to allow for the purchase of new computers which will cost 18,000 during this period. Show the new Closing Cash figure for August, after allowing for this purchase, on the separate sheet supplied with this paper. 7 P a g e

8 JC-Learn Business Studies Higher Level 2010 Exam Answers - Paper 2 8 P a g e

9 Q 1 Book of First Entry, Ledger and Trial Balance of SMITH Ltd (A~C) Date Details F Total Date Details F Total GENERAL LEDGER of SMITH Ltd Machinery 1/6 Balance B/D GJ 250,000 A/C Wages A/C 18/6 Bank ACB 5,000 Ordinary Share Capital A/C 1/6 Balance B/D GJ 248,000 Purchases 30/6 Total Net PB 30,000 Creditors 30/6 Bank ACB 26,000 56,000 Sales A/C A/C 30/6 Total Net Debtors SB 35,000 30/6 Bank ACB 60,000 95,000 VAT A/C 30/6 Credit Purchases PB 6,300 30/6 Credit Sales SB 7,350 30/6 Cash Purchases ACB 5,460 30/6 Cash Sales ACB 12,600 30/6 Balance C/D 8,190 19,950 19,950 1/7 Balance B/D 8,190 CREDITORS LEDGER of SMITH Ltd LARKIN Ltd A/C 20/6 Bank ACB 25,000 15/6 Purchases PB 36,300 30/6 Balance C/D 11,300 36,300 36,300 KENNY Ltd A/C 1/6 Balance B/D GJ 18,000 23/6 Sales SB 18,150 36,150 1/7 Balance B/D 11,300 DEBTORS LEDGER of SMITH Ltd 9 P a g e

10 Q 1 continued DEBTORS LEDGER of SMITH Ltd Date Details F Total Date Details F Total CLARKE Ltd A/C 12/6 Sales SB 24,200 28/6 Bank ACB 20,000 30/6 Balance C/D 4,200 24,200 24,200 1/7 Balance B/D 4,200 ANALYSED CASH BOOK (DEBIT SIDE) of SMITH Ltd Date Details Receipt F Bank Sales VAT Debtors 2010 No. 5/6 Sales GL 72,600 60,000 12,600 28/6 CLARKE Ltd 22 DL 20,000 20,000 (1) 92,600 60,000 12,600 20,000 1/7 Balance B/D 11,140 ANALYSED CASH BOOK (CREDIT SIDE) of SMITH Ltd Date Details CH. F Bank Purchases VAT Creditors Wages 2010 No. 1/6 Balance B/D GJ 20,000 8/6 Purchases 1 GL 31,460 26,000 5,460 18/6 Wages 2 GL 5,000 5,000 20/6 LARKIN 3 CL 25,000 25,000 81,460 26,000 5,460 25,000 5,000 30/6 Balance C/D 11,140 (1) 92,600 Trial Balance of SMITH Ltd as on 30/6/2010 DR CR Machinery 250,000 Wages 5,000 Purchases 56,000 Bank 11,140 KENNY Ltd 36,150 CLARKE Ltd 4,200 Ordinary Share Capital 248,000 Sales 95,000 VAT 8,190 LARKIN Ltd 11, , , P a g e

11 Q 2. (Ai) This is a Credit Sales, Business Document and Bookkeeping Question. Suitable Method of Checking Credit Rating Any two methods 3 marks each 1 Ask for a Trade Reference, from some other business who sold this new customer goods on credit, which will state that payment was made in full. 2 Ask for a Bank Reference, from the new customer s bank manager, which will state that this customer has always being in good standing with the bank Other Method Use a Status Enquiry Service who could carry out checks on this customer (Aii) Impact on Net Profit of the Non Payment for Sales One 3 marks There will be a reduction in the Net Profit of the business because the non payment will be treated as a bad debt i.e. an expensive mistake giving credit to an unsuitable customer. (Bi) Process for Statements Issued Any three of the 2 marks each 1 Check that the name and address of the debtor/ customer is correct 2 Check that the details are the same as in the Debtors Ledger 3 Check that all the calculations are correct 4 File a copy of the Statement Issued (Bii) See over (Biii) See over (Biv) see over 11 P a g e

12 Q 2 contd QUESTION 2 (B ii) STATEMENT No. 33 KEOGH LTD, 10 Bridge Street, Navan To : HOGAN Ltd* Tel Bridge Street VAT Reg. No. 1E Navan Account No Date: 31/5/2010 DATE DETAILS DEBIT CREDIT BALANCE 1/5/2010 Balance 1,350 2/5/2010 Invoice No. 4 24,200 25,550 16/5/2010 Credit Note No. 56 7,260 18,290 28/5/2010 Payment Receipt No ,000 3,290 Amount Due QUESTION (Biii) KEOGH Ltd, 10 Bridge Street, Navan RECEIPT No. 17 Date: 28/5/2010 Received from: HOGAN Ltd, 10 Bridge Street, Navan, Co. Meath The Sum of: Fifteen thousand euro 15,000 With Thanks Signed: Andy Keogh (Accounts Department) QUESTION 2(Biv) Analysed Cash Book of KEOGH Ltd Date Details Receipt No. F Bank Debtor 28/5/2010 HOGAN Ltd 17 DL 15,000 15, P a g e

13 Q 3. This is a Business Insurance and Report Question (Ai,ii,iii) REPORT FORMAT FROM : Martin Kelly, New bridge Road, Waterford TO : Mary Greene, 13 Onion Road, Carlow REPORT TITLE Answers to Insurance Questions DATE : 15 June 2010 INTRODUCTION Further to your enquiry re insurance for your business please find my answers set out below MAIN BODY- (i) Adequate insurance is important so that all possible ANSWERS risks are insured for the correct amounts. TO QUESTIONS (ii) Motor insurance is required by law* (iii) Public Liability in case a customer might make a claim against the business. Theft insurance in case goods are stolen.** FOLLOW UP SIGNED BY POSITION/ TITLE OF REPORT WRITER (D) (iv) Two non insurable risks include: Deliberate Damage by the owners of the business Loss due to bad management and mistakes I am available to discuss any questions that you may have re the above Martin Kelly Insurance Consultant Q 3 (B) Answer 120,000 If the answer is incorrect then award marks for Workings as follows Formula Workings Sum Buildings Insured For X Damage 600,000 x 160,000 Value of Buildings 800,000 Explanation of answer The buildings were only insured for 75% of their value so they were underinsured. The insurance company would only pay compensation for 75% of the damage i.e. 120, P a g e

14 Q 4. (A) This is a Final Accounts and Balance Sheet Question Trading, Profit and Loss Appropriation Account of REILLY Ltd for the year ended 31/12/ 2009 Sales 270,000 Less Cost of Actual Sales 1/1/2009 Opening Stock 18,000 Purchases 133,200 Carriage Inwards 5,000 Add Carriage Inwards due 500 5,500 Cost of Sales Available for Sale 156,700 31/12/2009 Less Closing Stock 25, ,700 Gross Profit 138,300 Add Gains Rent Receivable 2,800 Add Rent Receivable due 1,000 3, ,100 Less Expenses Insurance 6,400 Less Insurance Prepaid 400 6,000 Advertising 54,000 Add Advertising Due ,300 Depreciation : Buildings 40,000 Motor Vehicles 7,200 47, ,500 Net Profit 34,600 Less Dividends Declared 14,000 20,600 Add Opening Reserves 98,000 Reserves 118,600 Alternative Presentation of figures where Expenses are Deducted before Adding Gains Gross Profit 138,300 Less Expenses 107,500 30,800 Add Gains 2,800 plus 1,000 3,800 Net Profit 34, P a g e

15 Q 4 (A) contd. Balance Sheet of REILLY Ltd as on 31 /12/ 2009 Fixed Assets Cost Depreciation NBV Land 140, ,000 Buildings 400,000 40, ,000 Motor Vehicles 90,000 7,200 82,800 Total Fixed Assets 630,000 47, ,800 Current Assets Closing Stock 25,000 Debtors 31,000 Cash 22,500 Insurance prepaid 400 Rent Receivable due 1,000 79,900 Less Current Liabilities Creditors 24,300 Advertising due 300 Bank Overdraft 4,000 Carriage Inwards due ,100 Working Capital 50,800 Total Net Assets 633,600 Financed By Authorised Issued 600,000 1 ordinary shares 600, ,000 Add Reserves 118,600 Add Long Term Liabilities 30 Year Loan 155,000 Capital Employed 633,600 (B) Three suitable types of advertising furniture Suitable types of advertising furniture 1 Television; 2 Cinema; 3 Colour Magazines Other Billboards 15 P a g e

16 Q 5 This a Delivery System and Wages Question A (i) Three factors Three Factors that should be considered when deciding on a suitable delivery system 1 Type of goods being transported 2 Value of goods being transported 3 Cost of delivery system Other Location of customer/ Destination, Safety/Security; Speed / Urgency A (ii) Two developments named Modern Developments in Delivery Systems in Ireland 1 Tool Roads/ Bridges/ Bypasses 2 Port Tunnel Other Barrier Free Toll Roads ; Luas / Extension to Luas lines; Bicycle Lanes; New Trains e.g. Train to Donboyne; Quality Bus Corridors; New Gas Pipe line; New newer alcohol limits for drivers (B) Cost of Transport for one day Section Answer Workings B(i) klms = 20 litres; 35 litres 20 litres X 1.10 = 22 B(ii) 250 Driver Wages 850 = days Helpers Wages 400 = 80 5 days Total Cost of Labour 250 B(iii) 17 Insurance 2,560 = days Motor Tax 1,600 = days Motor Repairs 1,280 = days Total Cost = 17 B (iv) 329 Total Cost of Transport for One Day Diesel 22 Labour 250 Daily Annual Costs 17 Toll 40 Total Cost 329 Q 5 (C) contd. Wages Book of FASTFLOW Ltd Deductions Week Employee s Gross PAYE PRSI Pension Total Net No. Name Wage Wage 1 Mary Harte Luke Kidney P a g e

17 Q. 6 This is a Cash Flow Forecast Question (A) Reasons 1 To find out if a business can live within its means 2 To find out if there will be any liquidity problems in the future Other To find out the timing and or amounts of any future shortfalls; Necessary for obtaining Investment; Necessary for obtaining Loans / Overdrafts Needed as part of Business Plan (B) Cash Flow Forecast of MORGAN Ltd for the Period March to August 2011 March April May June July August Total Mar. to RECEIPTS Sales 40,000 40,000 40,000 40,000 40,000 48, ,000 Share Capital 210, ,000 EU Grant 20,000 20,000 40,000 A. Total Receipts 40,000 40,000 60, ,000 40,000 68, ,000 PAYMENTS Wages 10,500 10,500 10,500 10,500 10,500 10,500 63,000 Purchases 24,000 24,000 24,000 24,000 24,000 27, ,600 Loan Repayments 3,000 3,000 3,000 3,000 12,000 Equipment 30,000 35,000 65,000 Dividend 18,000 18,000 Advertising 2,000 2,000 2,000 2,000 2,000 1,840 11,840 B. Total Payments 39,500 69,500 39,500 39,500 89,500 39, ,440 C. Net Cash (A-B) 500 (29,500) 20, ,500 (49,500) 28, ,560 D. Opening Cash 4,200 4,700 (24,800) (4,300) 206, ,700 4,200 E. Closing Cash (C+D) 4,700 (24,800) (4,300) 206, , , ,760 Aug. (C) New Closing Cash Figure for August = Own figure for Closing Cash less 18,000 Answer Workings 166, ,760-18, P a g e

JUNIOR CERTIFICATE 2010 BUSINESS STUDIES PAPER 11 SUPPORT NOTES. GENERAL LEDGER of SMITH Ltd. Machinery A/C 1/6 Balance B/D GJ 250,000 1

JUNIOR CERTIFICATE 2010 BUSINESS STUDIES PAPER 11 SUPPORT NOTES. GENERAL LEDGER of SMITH Ltd. Machinery A/C 1/6 Balance B/D GJ 250,000 1 Q (A~C) Date 00 JUNIOR CERTIFICATE 00 BUSINESS STUDIES PAPER SUPPORT NOTES Book of First Entry, Ledger and Trial Balance of SMITH Ltd Details F Total Date Details F Total 00 GENERAL LEDGER of SMITH Ltd