2011 Paper 2 Business Exam Answers JC-Learn. JC-Learn. Business Studies. Higher Level Exam + Answers - Paper 2. 1 P a g e

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1 JC-Learn Business Studies Higher Level 2011 Exam + Answers - 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: JONES Ltd, a car accessories business, had the following balances in its General Journal on 1 January 2011: GENERAL JOURNAL Date Details F Dr Cr 1/1/2011 Buildings GL1 300,000 Debtor: KIRBY Ltd DL1 40,000 Ordinary Share Capital GL2 340,000 Assets, Liabilities and Share Capital of JONES Ltd on this date 340, ,000 (A) (B) Post the balances in the above General Journal to the relevant ledger accounts. Record the following Credit Transactions in the Sales and Sales Returns Books of JONES Ltd for the month of January Post relevant figures from the books to the ledger accounts. 5/1/2011 Sold goods on credit to KIRBY Ltd Invoice No ,000 + VAT 21% 8/1/2011 KIRBY Ltd returned goods Credit Note No ,000 + VAT 21% (C) Record the following Bank Transactions for the month of January 2011 in the Analysed Cash book of JONES Ltd. Post relevant figures to the Ledger Accounts. Note: Analyse the Bank Transactions using the following money column headings: Debit (Receipts) Side: Bank Sales VAT Debtors Share Capital Credit (Payments) Side: Bank Purchases VAT Insurance 3/1/2011 Purchases for resale (Cheque No.1) 60,000 + VAT 21% 9/1/2011 Shareholder invested 30,000 and this was lodged. Receipt No. 1 11/1/2011 Paid Insurance (Cheque No. 2) 12,000 19/1/2011 Cash Sales lodged 96,800 ( 80,000 + VAT 16,800) 28/1/2011 KIRBY Ltd paid 50,000 and this was lodged. Receipt No. 2 (D) Balance the accounts on the 31 January 2011 and extract a Trial Balance as at that date. 2 P a g e

3 2. This is a Credit Sales, Business Documents and Bookkeeping Question Answer all parts of this question: (A) Effective purchasing is very necessary for businesses. Explain the term effective purchasing. (B) On 4 April 2011, MURPHY Ltd, Main Street, Castleblayney, Co. Monaghan sent an Order No. 4 to EIRN FURNITURE Ltd, Ballyshannon, Co. Donegal for the following goods: 6 Oak Kitchen 150 each excluding VAT 10 Pine 60 each excluding VAT EIRN FURNITURE Ltd issued Invoice No. 20 on 11April The invoice included the following terms: Trade Discount 20% and VAT 21%. On receiving the goods and Invoice No. 20 on 14 April 2011, MURPHY Ltd paid the amount due in full. EIRN FURNITURE Ltd issued Receipt No. 11 signed by Martin Kelly on 30 April (i) (ii) (iii) Outline how MURPHY Ltd should process invoices received. Complete the Invoice No. 20 and the Receipt No. 11 on the sheet supplied with this paper. Record the issue of the Invoice and Receipt in the Sales Book and Analysed Cash Book of EIRN FURNITURE Ltd on the sheet supplied with this paper. 3 P a g e

4 3. This is a question on Letter Writing, Job Loss and Company Formation Answer all parts of this question: Mary and Bernard Burke, 10 Happy Valley View, Carlow, were employed in Wonder Kitchens Ltd up until May 2011 when they both lost their jobs due to the fall in the sale of houses. Mary had worked in the business for 15 years as an Accounts Manager earning 850 per week. Bernard had worked for 11 years as a Kitchen Designer earning 910 per week. They were told that they would receive redundancy money of two weeks wages for each year they worked. Because of their vast experience they are considering starting their own company, MBB Ltd, but are unsure about being self-employed and forming a private limited company. They were advised to contact Molly Maloney, a business consultant, for assistance. (A) Assume you are Molly Maloney, 16 Congress Avenue, Portlaoise, Co. Laois. Write a letter to Mary and Bernard, dated 1 June 2011, answering the following questions asked by Mary and Bernard. (i) (ii) How much redundancy money can Mary and Bernard expect to receive in total from Wonder Kitchens Ltd? Explain one advantage and one disadvantage of being self-employed. (iii) Explain how a private limited company is formed. (B) Mary and Bernard set up MBB Ltd and lodged 40,000 from their redundancy money to the company bank account on 14 June Show how this transaction would be recorded in the Bank Account and Share Capital Account of MBB Ltd on the sheet supplied with this paper. 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 BRADY Ltd, a hardware business, on 31 December The Authorised Share Capital is 500,000 1 ordinary shares. TRIAL BALANCE OF BRADY Ltd Dr Cr as on 31 December 2010 Purchases and Sales 270, ,000 Opening Stock 1/1/ ,000 Import Duty 3,800 Interest Receivable 22,400 Debtors and Creditors 31,000 18,000 Insurance 23,000 Wages 83,500 Motor Vehicles 50,000 Buildings 285,000 Bank 19, Year Loan 20,000 Cash 12,000 Machinery 150,000 Dividends paid 14,000 Reserves (Profit and Loss Balance) 52,900 Issued Share Capital: 350,000 1 Ordinary Shares 350, , ,300 (A) You are required to prepare a Trading, Profit and Loss Appropriation Account of BRADY Ltd for the year ending 31 December 2010 and a Balance Sheet as on that date. You are given the following information as on 31 December (i) Closing Stock 25,400 (ii) Import Duty due 1,500 (iii) Insurance prepaid 3,200 (iv) Interest Receivable due 1,200 (v) Depreciation: Motor Vehicles 12% Machinery 10% (B) Calculate the rate of dividend using the following formula: Dividend Paid 100 Issued Share Capital 1 5 P a g e

6 5. This is an Analysed Cash Book and Monitoring of Overheads Question Answer all parts of this question: (A) (B) State three reasons why it is important for a business to monitor its overheads. Prepare the Analysed Cash Book of BURKES BAKERY Ltd from the data supplied below. Use the following money column headings: Debit (Receipts) Side: Bank Credit (Payments) Side: Bank; Van; Wages; Interest; Waste Collection. Receipt Cheque Amount Date Transaction No No. 1/5/2011 Owed to bank 1,700 2/5/2011 Paid wages 1 1,100 3/5/2011 Paid for van repairs /5/2011 Paid for waste collection /5/2011 Paid interest on loan 4 1,400 10/5/2011 Received from MURPHY Ltd 35 2,600 12/5/2011 Paid for diesel /5/2011 Paid wages /5/2011 Paid for waste collection /5/2011 Received from SMYTH Ltd 36 4,000 23/5/2011 Paid wages /5/2011 Paid for van insurance /5/2011 Paid for diesel (C) On the sheet supplied with this paper you will find a partially completed table showing Business Overheads for May (i) (ii) Complete the Actual Column using the totals from the Payments side of the Analysed Cash Book in part (B). Show the difference between the Actual and Budgeted figures by completing the column marked Difference. List the overheads whose actual figures are greater than the budgeted figures and give one possible reason for the difference in each case on the sheet supplied with this paper. (iii) List the overheads whose actual figures are less than the budgeted figures and give one possible reason for the difference in each case on the sheet supplied with this paper. 6 P a g e

7 6. This is a Channels of Distribution and Marketing Question Answer all parts of this question: (A) The channels of distribution are the different ways by which a manufacturer can get its products to the consumers. (i) (ii) Illustrate, with suitable diagrams, three of these channels. Give one type of product distributed by each of these channels. (B) Explain, with examples, two methods of carrying out market research. (C) On 1 August 2011, SEE EASY Ltd, a spectacles (glasses) manufacturer, is launching a new type of spectacles CN3D for watching 3D TV programmes. They will be available online at The spectacles will sell at 95 each but there will be a discount of 20% for the first 500 customers. (i) (ii) Calculate the cost of purchasing these spectacles if you are customer number 350. Draft a suitable advertisement to promote the new spectacles. (The advertisement should contain five pieces of information). (iii) Other than advertisements, explain two methods that SEE EASY Ltd could use to promote the CN3D spectacles. 7 P a g e

8 JC-Learn Business Studies Higher Level 2011 Exam Answers - Paper 2 8 P a g e

9 Q 1 Books of First Entry, Ledger and Trial Balance of JONES Ltd (A ~C) Date Details F Total Date Details F Total GENERAL LEDGER OF JONES Ltd Buildings 1/1 Balance GJ 300,000 Ordinary Insurance 11/1 Bank ACB 12,000 A/C Share Capital A/C 1/1 Balance B/D GJ 340,000 9/1 Bank ACB 30, ,000 A/C Sales Returns A/C 31/1 Total Net Debtors SRB 12,000 Purchases A/C 31/1 Bank ACB 60,000 Sales A/C 31/1 Total Net Debtors SB 24,000 31/1 Bank ACB 80, ,000 VAT A/C 31/1 Sales Returns SRB 2,520 31/1 Credit Sales SB 5,040 31/1 Cash Purchases ACB 12,600 31/1 Cash Sales ACB 16,800 31/1 Balance C/D 6,720 21,840 21,840 1/2 Balance B/D 6,720 DEBTORS LEDGER OF JONES Ltd KIRBY Ltd A/C 1/1 Balance B/D GJ 40,000 8/1 Sales Returns SRB 14,520 5/1 Sales SB 29,040 28/1 Bank ACB 50,000 31/1 Balance C/D 4,520 69,040 69,040 1/2 Balance B/D 4,520 9 P a g e

10 Sales Book of JONES Ltd Date Details Invoice No. F NET VAT Total 5/1/ 2011 KIRBY Ltd 50 DL 24,000 5,040 29,040 GL GL DL Sales Returns Book of JONES Ltd Date Details Credit Note F NET VAT Total No. 8/1/2011 KIRBY Ltd 12 DL 12,000 2,520 GL GL DL ANALYSED CASH BOOK (Debit Side) of JONES Ltd Date 2011 Details Receipt No. F Bank Sales VAT Debtors Share Capital 9/1 Shareholder 1 GL 30,000 30,000 19/1 Sales GL 96,800 80,000 16,800 28/1 KIRBY Ltd 2 DL 50,000 50, ,800 80,000 16,800 50,000 30,000 1/1 Balance B/D (1) 92,200 ANALYSED CASH BOOK (Credit Side) of JONES Ltd Date 2011 Details Cheque No. F Bank Purchases VAT Insurance 3/1 Purchases 1 GL 72,600 60,000 12,600 11/1 Insurance 2 GL 12,000 12,000 84,600 60,000 12,600 12,000 31/1 Balance C/D 92,200 (1) 176, P a g e

11 Trial Balance of JONES Ltd as on 31 1/2011 Dr Cr Buildings 300,000 Insurance 12,000 Sales Returns 12,000 Purchases 60,000 Bank 92,200 KIRBY Ltd 4,520 Share Capital 370,000 Sales 104,000 VAT 6, , P a g e

12 Q 2 (A) This is a Sales, Business Document and Bookkeeping Question Explanation Effective purchasing involves obtaining quotations from a number of suppliers to ensure the business obtains: the best quality of goods and services, at the correct price, when they are needed. (Bi) Process for Invoices received 1 Check that the name and address of the creditor (seller) is correct 2 Record the invoice received in the Purchases Book 3 File the invoice Other (B ii) Invoice see over page 5 (B ii) Receipt see over page 5 Check that all the calculations are correct Check that the goods are as per order (B iii) Sales Book and Analysed Cash Book see over page 6 12 P a g e

13 For use with 2 (B) (i) EIRN FURNITURE Ltd INVOICE No. 20 Ballyshannon, Co. Donegal Telephone: VAT Reg. No. IE To: MURPHY Ltd, Date: 11/4/2011 Main Street, Your Order No.: 4 Castleblaney Co. Monaghan PRICE TOTAL QUANTITY DESCRIPTION EACH 6 Oak Kitchen Tables Pine Wardrobes Total (Excluding VAT) 1,500 Trade Discount 300 Subtotal 1,200 E & O E VAT 252 Total (Including VAT) 1,452 For Use with 2 (B) (ii) EIRN FURNITURE Ltd Ballyshannon, Co. Donegal RECEIPT Telephone: No. 11 Date: 30/4/2011 Received From: MURPHY Ltd, Main Street, Castleblaney, Co. Monaghan The Sum of: One thousand, four hundred and fifty two euro 1,452 With Thanks Signed: Martin Kelly Accounts Dept 13 P a g e

14 For Use with Question 2 (B) (iv) Sales Book of EIRN FURNITURE Ltd Date Details Invoice F Net VAT Total No. 11/4/2011 MURPHY Ltd 20 DL 1, ,452 Analysed Cash Book of EIRN FUURNITURE Ltd Date Details Receipt No. F Bank Debtor 30/4/2011 MURPHY Ltd 11 DL 1,452 1, P a g e

15 Q 3 (A) This is a question on Letter Writing, Losing Employment and Company Formation 16 Congress Avenue Portlaoise, Co. Laois Mary and Bernard Burk, 10 Happy Valley View, Carlow Ref: Query on redundancy money and company formation 1/6/2011 Dear Mary and Bernard, Thanks for getting in touch with me. I hope my advice will be of some help. My answers to your questions are set out below. (i) You will be entitled a total of 45,520 in redundancy from Wonder Kitchens (ii) The main advantage of being self employed is you can keep all the profits you make.* The main disadvantage of being self employed is that you will receive no money if the business fails to be a success. ** (iii) A private limited company is formed by between 1 and 99 shareholders. Certain documents e.g. memorandum of association must be completed and forwarded to the Companies Registration Office. If all documentation is in order, a Certificate of Incorporation is issued. If you require any further assistance please feel free to contact me Yours sincerely Molly Maloney Business Consultant Workings Workings Amount Mary weeks 15 years 25,500 Bernard weeks 11 years 20,020 Total 45,520 * Advantages: Make all the decisions **Disadvantages: If the business fails they will lose what they invested in the business and possibly more. 15 P a g e

16 (B) Ledger MBB Ltd Date Total Date Total 2011 Details F 2011 Details F Bank A/C 14/6/ Share Capital GL 40,000 Share Capital A/C 14/6/2011 Bank ACB 40, P a g e

17 Q 4 Final Accounts and Balance Sheet Question (A) Trading, Profit and Loss Appropriation Account of BRADY Ltd for the year ended 31/12/2010 Sales 510,000 Less Cost of sales 01/01/2010 Opening Stock 32,000 Purchases 270,000 Import Duty 3,800 add Import Duty due 1,500 5,300 Cost of Goods Available for Sale 307,300 31/12/2010 Less Closing Stock 25, ,900 Gross Profit 228,100 Add Gains Interest Receivable 22,400 add Interest Receivable due 1,200 23, ,700 Less Expenses Insurance 23,000 less Insurance prepaid 3,200 19,800 Wages 83,500 Depreciation: Motor Vehicles 6,000 Machinery 15,000 21,000 Net Profit 127,400 Less Dividends paid 14, ,400 Add Opening Reserves 52,900 Reserves 166, P a g e

18 Q 4 (A) contd. ½ 1 ½ Balance Sheet of BRADY Ltd as on 31 /12/2010 Fixed Assets Cost Depreciation NBV Buildings 285, ,000 Motor Vehicles 50,000 6,000 44,000 Machinery 150,000 15,00 135,000 Total Fixed Assets 485,000 21, ,000 Current Assets Closing Stock 25,400 Debtors 31,000 Cash 12,000 Bank 19,000 Interest Receivable due 1,200 Insurance prepaid 3,200 91,800 Less Current Liabilities Creditors 18,000 Import duty due 1,500 19,500 Working Capital 72,300 Total Net Assets 536,300 Financed By Authorised Issued 500,000 1 ordinary shares 500, ,000 Add reserves 166,300 Add Long term Liabilities 25 Year Loan 20,000 Capital Employed 536,300 (B) Formula Workings Answer Dividend Paid x 100% 14,000 x 100% 4% Issued Share Capital 350, P a g e

19 Q 5 This is an Analysed Cash Book and Monitoring of Overheads Question (A) Reason why it is important to monitor overheads 1 To allow comparison between budgeted and actual overheads. 2 To ensure that a business lives within its means 3 To identify the main overheads and make changes where necessary (B) Analysed Cash Book (Debit Side) of BURKES BAKERY Ltd Date Details Receipt F Bank 2011 No 10/5 Murphy Ltd 35 DL 2,600 20/5 Smyth Ltd 36 DL 4,000 31/5 Balance C/D 2,040 6,600 8,640 Analysed Cash Book (Credit Side) of BURKES BAKERY Ltd Date Details Cheque F Bank Van Wages Interest Waste 2011 No. Collection 01/05 Balance B/D 1,700 02/05 Wages 1 GL 1,100 1,100 03/05 Van Repairs 2 GL /05 Waste Collection 3 GL /05 Interest on Loan 4 GL 1,400 1,400 12/05 Diesel 5 GL /05 Wages 6 GL /05 Waste Collection 7 GL /05 Wages 8 GL /05 Van Insurance 9 GL /05 Diesel 10 GL /06 Balance B/D 2,040 8,640 2,320 2,580 1, P a g e

20 5 (C) (i) continued Business Overheads for May 2011 Overheads Budgeted Actual Difference Van 1,800 2, Wages 3,500 2, Interest 1,100 1, Waste Collection 1, For Use with Question 5 (C) (ii) Actual overheads Possible Reasons Greater than Budgeted Van Diesel and insurance went up in price Interest Interest rate increased For Use with Question 5 (C) (iii) Actual overheads Possible Reasons Less than Budgeted Wages Workers had to take a cut in pay Waste Collection Cut back on wastage and did more recycling 20 P a g e

21 Q6 This is a Channels of Distribution and Marketing Question (A) The following diagrams illustrate the three channels: Channel 1 Channel 2 Channel 3 Is used for specialised Is used for less Is used for less goods. specialised goods such as specialised goods such as grocery items where the grocery items where the retailers are big enough retailers are very small to deal directly with the manufacture. and could not deal directly with the manufacturer Manufacturer Manufacturer Manufacturer Wholesaler Retailer Retailer Consumer Consumer Consumer Examples Dress Making Bread Beans (B) Two methods of carrying out market research. Method Explanation Example Desk Use Existing Reports, Internet, Own Files, CSO / Government Research * Information Publications, Magazines/ Newspapers. Field Obtain New Questionnaires, Surveys, Interviews- Face to face Research** Information or Telephone, Observation. * Secondary Research, ** Primary Research (C) (i) Answer Workings less 19 (20% of 95) 21 P a g e

22 (C) (ii) There are five points of information (at 2 marks each) required from the following : Piece of Information Name of Company Example See Easy Ltd Name of Product CN3D Selling Price 95 Special Promotion Discount of 20% for first five hundred customers who produce copy of the advertisement Where to purchase Online at Date of launch 1 August 2011 Availability Presentation Point e.g. Total Marks Available from 1 August 2011 onwards Don t Just Watch TV Programmes CN3D Them (C) (iii) Apart from Advertising The following two methods might be used to promote the CN3D spectacles. Types of people Use of personalities such as Actors / Musicians/ Sportspersons and Techno people Sponsorship Competitions Press Releases Open days in TV and Opticians Shops Special Offers Explanation Actors /musicians / sportspersons have big following and are treated as icons. People are influenced by what they do and say. People would have confidence in what they say. Supporting teams and events Holding quizzes etc Using the media to promote the spectacles Invite customers to try them out Reductions given such as 20% off for first 500 customers 22 P a g e

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