Examination Period 3: 2016/17 Module title Level Time Allowed Financial Accounting Four Three hours, plus reading time of 15 minutes. Students should not begin answering the questions until the reading time has ended. Instructions to candidates: Enter your student number not your name on all answer books. Answer two questions from Section A and all questions from Section B. Answer the questions in answer book provided. The use of a silent non-programmable calculator is permitted. During the 15 minutes reading time, students are permitted to make notes on the examination paper but not on the answer book. Students should begin answering the questions after the reading time has ended. No. of Pages 8 No. of Questions 6 Page 1 of 8
Section A Answer two questions. Question 1 Below is the trial balance of Vinod Shah, who runs a manufacturing business in Thrapston, called Rapido : Trial Balance as at 30 June 2016 Purchases/Sales 135,780 345,000 Carriage inwards 4,200 Drawings 35,000 Rent 12,400 Business rates 3,600 Electricity 4,800 Postage 420 Stationery 1,285 Advertising 850 Wages 17,600 Bad debts 890 Allowance for doubtful debts - 1,200 Accounts receivable/payable 12,400 16,995 Cash in hand 1,240 Bank loan - 13,500 Inventory 21,200 Machinery at cost 390,000 Accumulated depreciation - 40,000 Capital - _224,970 641,665 641,665 Additional notes: 1. Accrued at the year end: rent 680, business rates 420. 2. Prepaid at the year-end: electricity 160, advertising 240. 3. Inventory at the year-end: 19,600. 4. Depreciation is to be charged on the equipment, using the reducing balance method at a rate of 20%. 5. The allowance for doubtful debts is to be increased to 12% of the trade receivables at the year end. Page 2 of 8
Required: a. An income statement for the year to 30 June 2016. (13 marks) b. A Statement of Financial Position (balance sheet) at the year-end 30 June 2016. (12 marks) (Total: 25 marks) Question 2 Enter the following transactions in the ledger accounts of Elmsett Logistics, balance the accounts and produce a trial balance: 2016 July 1 July 6 July 7 July 8 July 11 Started business with 110,000 cash and a motor vehicle, previously the personal property of the business owner, valued at 4,600 Transferred 85,000 cash into the business bank account Purchased goods on credit for 8,625 from Urban Supplies Ltd. Purchased goods on credit for 6,500 from Orthodox Productions Ltd. Purchased a hydraulic lift for 4,800 from Robertson Elevations on 30 days credit Returned goods worth 525 to Urban Supplies Ltd. July 15 July 19 Sold goods for cash 3,195 July 22 Sold goods on credit to C Gateway for 960 July 25 Paid staff salaries 11,250 by cheque July 29 C Gateway returned goods to us 95 July 30 The owner took 925 inventory for her personal use July 31 The owner transferred a previously privately owned personal computer to the business valued at 1,500 (25 marks) Page 3 of 8
Question 3 Income Statement of J. Wright for the year ending 31 October, 2016 Sales Revenue 260,000 Less cost of sales Opening inventory 108,200 Add purchases 88,400 196,600 Less closing inventory 69,400 127,200 127,200 Gross profit 132,800 Less expenses Depreciation 4,800 Bank interest 750 Salaries 46,200 Marketing costs 8,600 Electricity 16,800 77,150 Net profit 55,650 Statement of Financial Position of J Wright as at 31 October, 2016 Non-current assets Equipment at cost 99,600 Less depreciation to date 24,800 74,800 Current assets Inventory 69,400 Trade receivables 9,750 Bank 8,800 87,950 Less current liabilities Trade payables 13,200 Net current assets 74,750 Total net assets 149,550 Financed by Capital 126,200 Add net profit 55,650 181,850 Less drawings 32,300 149,550 Page 4 of 8
You are required to calculate the following ratios, clearly showing the formula used: a. Net profit margin b. Quick ratio c. Current ratio d. Payable days e. Receivable days f. ROCE g. Gross profit margin h. Inventory turnover days (4 marks) (Total: 25 marks) Page 5 of 8
Question 4 Pearl and Dean were in partnership with the following partnership agreement: 1. Pearl would receive a salary of 18,000 per year and Dean would receive a salary of 21,500 per year. 2. Interest on capital was allowed at 5% per annum. 3. Profits and losses were to be shared on the basis of 3:2 An extract from the trial balance at 30 June 2016 shows the following: Capital Accounts Pearl 180,000 Dean 90,000 Current Accounts Pearl 12,000 Dean 8,000 Drawings Pearl 28,000 Dean 24,000 The partnership made a net profit of 132,500 for the year ending 30 June 2016. Prepare the appropriation account and the partners current accounts and show the figures that would appear in the statement of financial position for the partners capital and current accounts. (25 marks) End of Section A Section B Overleaf Page 6 of 8
Section B Answer all questions. Question 5 You are asked to provide explanation of the following accounting concepts. Use relevant examples where appropriate to illustrate the key points. a. Materiality b. Prudence c. Accruals d. Consistency e. Going Concern (Total: 25 marks) Question 6 Francis Beart runs a motor factors business called Bits and Pieces. He has been trading for one year but has unfortunately failed to maintain appropriate accounting records. The following information is available in relation to his first year of trading which ended on 30 November, 2016: Summary of the business bank account for the year ending 30 November, 2016: Capital introduced by the owner 80,000 Payments to suppliers 68,000 Receipts from sales 163,850 Marketing 11,650 Salaries 31,650 Business rates 16,150 Insurances 1,860 Shop fittings 72,000 Drawings 18,500 Page 7 of 8
Summary of assets and liabilities of the business as at 30 November, 2016 Shop fittings at cost 72,000 Inventory 69,950 Trade receivables 5,800 Trade payables 26,000 Additional information Francis intends to depreciate the fixtures at 15% per year using the straight line method At 30 November 2016 marketing costs of 865 are owing and insurances of 320 are prepaid You are to: a. Prepare Francis Beart s income statement for the year ending 30 November 2016 (13 marks) b. Prepare Francis Beart s s Statement of Financial Position as at 30 November 2016 (12 marks) (Total: 25 marks) End of Section B End of Paper Page 8 of 8