In the exam you will be able to access relevant extracts from the AAT Code of Professional Ethics via a pop-up window. Statement True False

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1 BPP Practice Assessment 3 Task 2 (16 marks) This task is based on a workplace scenario separate to the rest of the assessment. You are Nikki, a part-qualified accounting technician employed by an accountancy firm. You are concerned that you may have been involved in a money laundering operation without your knowledge. You are worried that you may be incriminated if you report the issue and you are fearful of losing your job and damaging your reputation. The money laundering scheme was very small scale and you are considering not disclosing the matter. You do however confront the perpetrator and inform them that you will have no further dealings with them. In the exam you will be able to access relevant extracts from the AAT Code of Professional Ethics via a pop-up window. (a) Show whether the below statements are true or false? Statement True False Nikki has tipped off the client. If Nikki does fail to disclose her suspicions of money laundering she may face a maximum penalty of five years in prison or an unlimited fine. If Nikki was to make a protected disclosure she may have a If Nikki was to make an authorised disclosure she may have a You are now assisting one of your client s, Kipling, with some short term decision making. Kipling makes a single product, product K, and has asked for your help in establishing the company s breakeven point. The manager at Kipling will be paid a bonus if the company is able to generate a profit of 10,000. He has therefore approached you to help him calculate how many units of product K must be sold to generate a profit of 10,000. Information concerning product K is as follows: per unit Selling price 5.00 Variable production cost 1.10 Variable selling cost 0.50 Fixed production cost 3.00 Fixed selling cost 0.60 Budgeted production and sales for the year are 15,000 units. (b) The company's breakeven point, to the nearest whole unit is To achieve a profit of 10,000 for the year be sold. units of product K must

2 You are now working on the final accounts of another sole trader, Henderson Trading. You are to prepare the statement of financial position for Henderson Trading as at 31 December 20X1. The final trial balance is below. A profit for the year of 41,365 has been recorded. Henderson has a policy of showing trade receivables net of any allowance for doubtful debts. (c) Prepare the statement of financial position for Henderson Trading as at 31 December 20X1. Do NOT use brackets, minus signs or dashes. Henderson Trading Trial balance as at 31 December 20X1 Debit Credit Accruals 1,940 Administration expenses 33,193 Advertising expenses 2,000 Allowance for doubtful debts 1,200 Allowance for doubtful debts adjustment 435 Bank 1,645 Bank charges 300 Capital 20,000 Closing inventory 24,500 24,500 Depreciation charges 4,150 Disposal of non-current assets 400 Drawings 10,000 Equipment at cost 22,400 Equipment accumulated depreciation 12,300 Opening inventory 18,650 Payroll expenses 12,100 Payroll liabilities 450 Prepayments 750 Purchases 160,250 Purchases ledger control account 15,500 Rent 12,800 Sales 260,843 Sales ledger control account 33,460 Sales returns 500 Total 337, ,133

3 Henderson Trading Statement of financial position as at 31 December 20X1 Cost Accumulated depreciation Carrying amount Non-current assets Current assets 0 Current liabilities 0 Net current assets Net assets Financed by: Capital Opening capital Closing capital Drop-down list (1): Accruals Bank Bank charges Capital Disposals Drawings Equipment Expenses Inventory Payroll expenses Payroll liabilities Prepayments (2) (2)

4 Profit for the year Purchases Trade payables Trade receivables VAT Drop-down list (2): Add: Drawings Add: Profit for the year Less: Drawings Less: Profit for the year

5 Answers (a) Show whether the below statements are true or false? Statement True False Nikki has tipped off the client. If Nikki does fail to disclose her suspicions of money laundering she may face a maximum penalty of five years in prison or an unlimited fine. If Nikki was to make a protected disclosure she may have a If Nikki was to make an authorised disclosure she may have a Tipping off is where an accountant informs someone else that an authorised or protected disclosure has been made. Nikki has therefore not tipped off the client as she has merely informed them that she would have no further dealings with them. If she fails to disclose her suspicions of money laundering she may face a maximum penalty of five years in prison or an unlimited fine. A protected disclosure is made by someone who knows or suspects another person of money laundering and so would not be involved in money laundering herself. An authorised disclosure is made by any person who realises they may have engaged in or be about to engage in money laundering. Nikki would therefore make an authorised disclosure as she is concerned that she may have been involved in a money laundering operation without her knowledge. (b) Breakeven point = Fixed costs Contribution per unit Fixed costs = 15,000 x ( ) = 54,000 Contribution per unit = 5.00 ( ) = 3.40 Breakeven point = 54,000/3.40 = 15,882 units Contribution required for target profit = fixed costs + profit = 54, ,000 = 64,000 Contribution per unit = 3.40 Sales units required = 18,824 units

6 (c) Henderson Trading Statement of financial position as at 31 December 20X1 Cost Accumulated depreciation Carrying amount Non-current assets Equipment 22,400 12,300 10,100 Current assets Inventory 24,500 Trade receivables 32,260 Prepayments 750 Bank 1,645 59,155 Current liabilities Trade payables 15,500 Accruals 1,940 Payroll liabilities ,890 Net current assets 41,265 Net assets 51,365

7 Financed by: Accumulated Carrying Cost depreciation amount Capital Opening capital 20,000 Add: Profit for the year 41,365 Less: Drawings 10,000 Closing capital 51,365