Aslevel Mock 1

Name Date HIGHEST MARK IN CLASS TIME ALLOWED Percentage Grade Question number

3 hours

Full marks

Marks obtained

1. 2. 3. 4. 5. 6. Total marks

Grade

A

B

C

D

E

Lowest percentage for award of grade

8 7 65 55 5 0 5 0

Information for candidates: •

The total marks for this paper is 200.

•

The paper has six questions.

•

Answer all the questions in section A and any three in Section B.

•

Write your answers neatly and in good English.

•

Please do not talk with each other.

•

Understanding the questions is part of the exam.

Marks distribution between maths and theory Maths

142

Theory

90

61.2 % 38.7

Page 2 of 13

232

% 100%

TEACHERS COMMENTS:

Section A Answer all questions. 1. Speedy cycles sells and repairs motor cycles. The business has three departments: motor cycle sales, parts sales and motor cycle repairs. The following balances were extracted from the accounts on 30 April 2008. £ Sales: Motor cycle sales Part sales Motor cycle repairs Purchases: Motor cycles Parts Motor cycle repairs Stock 1 May 2007 Motor cycles Parts Wages and commission Motor cycle sales commission Parts wages Motor cycle repairs Management salaries Lease on premises (10 years) Heat and light Debtors: Motor cycle sales Motor cycle repairs Creditors Bank over draft Capital Drawings Fixtures and fittings at cost Fixtures and fittings provision for depreciation Repairs department: loose tools at cost Repair department: loose tools provision for depreciation Additional information:

311000 160000 68400 223500 170500 8900 64000 65200 32000 17050 21200 15400 30000 6700 50000 6000 58350 37100 125000 19500 40000 12000 5900 4000

Page 3 of 13 i.

The stock of parts on 1 May 2007 included obsolete parts which cost £9000. On 1 May 2007 these were revalued to a net realisable value of £800.

ii.

During the year parts costing £14500 were transferred from the parts sales department to the motor cycle repairs department for the repair of customer’s motor cycles.

iii.

Stock at 30 April 2008: motor cycles £61500, parts £63000.

iv.

Parts department’s wages owing on 30 April 2008 were £450.

v.

Depreciation is charged on fixtures and equipment at the rate of 15% on cost using the straight line method.

vi.

Repair department: loose tools were valued at £1500 on 30 April 2008.

vii.

A provision for doubtful debts is to be created at rate of 5% of debtors.

viii.

All costs which cannot be allocated to departments are to be apportioned on the most appropriate basis: Further information: Motor cycle sales Part sales

Staff (number) Area occupied (sq m) Fixtures & equipment ( £000)

3 300 10

2 300 12

Motor cycle repairs 2 400 18

Required: a. Departmental trading, profit and loss account of speedy cycles for the year ended 30 April 2008, showing clearly the net profit or net loss of each department. (You are advised to use columnar format. A total column format is not required.) (16) b. Balance sheet as at 30 April 2008. (16) c. The owners of speedy cycles have been considering closing the parts sales department of the business. You are advised that the averages for this type of business are: Mark up on cost

25%

Rate of stock turn over

8 times

Page 4 of 13 Evaluate whether the Part sales department should be closed. (6) d. Evaluate wether, by charging annual depreciation, Speedy cycles will have sufficient cash to replace their assets with a new one at the end of its economic life. (6) e. The management of speedy cycle depreciate their fixed assets on cost. Discuss with a brief an explanation the other methods available to them. (8)

Marks distribution between maths and theory Maths Theory

32 20 52

61.5% 38.5% 100%

2. Akij furnishings operate a number of manufacturing units throughout the country. One of those manufacturing units is in Jinjira, which produces tables, chairs, and benches from natural wood. After the products have been manufactured they are transferred to the Akij Furnishings central warehouse at an agreed factory transfer price.

Page 5 of 13 i.

In the current year, all items manufactured are transferred to the central warehouse at an agreed factory transfer price of £70/table and £40/chair and £20/bench.

ii.

During the period the following finished items were transferred to the central warehouse: 1000 tables, 4000 chairs, 2000 benches.

iii.

The major item of raw material is wood. On 1st July there were 60 cubic meters in stock which had cost £300/ cubic meter. During the six months to 31st December 1996 three separate purchases of wood were made. Purchase date 15th September 1996 3rd October 1996 10th December 1996

Cubic meters 80 100 40

Price £320 £340 £350

On 31st December 1996 the stock of wood amounted to 50 cubic meters. Stock is valued at FIRST IN FIRST OUT BASIS. iv.

Material records show that £29000 of material was used in the manufacture of tables, £8000 of material was used for benches and the balance was used for chairs.

v.

The company employs 15 production workers, 4 of whom work on the production of tables, 9 on chairs and 2 on benches. Workers are each paid £800 per month, plus a bonus of £2.50 per worker, for every unit of output over the production target of 160 tables, 600 chairs, or 400 benches per month.

vi.

A royalty of £0.50 per chair is paid to the designer.

vii.

Production overheads are categorised under three headings: Supervision and management £30000 Rent, rates and facilities £28000 Depreciation, and sundry overheads £18000 The floor area is occupied by the production of tables is 600 meters, chairs 1000 meters and benches 400 meters. The depreciation and sundry are allocated 40% to the production of tables, 50% chairs and 10% to benches.

viii.

Work in progress had been valued at: st

1 July 1996 31st December 1996

Tables £ 7500 7700

Chair £ 10900 11300

Benches £ 3000 2000

Page 6 of 13

Required: a. Prepare the manufacturing account of Akij Furnishing for six months ending 31st December 1996. (24) b. Calculate profit or loss on the manufacture of each product. (6)

c. The production director is concerned that the cost is very high and is affecting the firm’s “competitive edge” in the market. He believes the labour cost should be reduced. He proposes to scrap the bonus system and pay on piece rate basis. The payment would be £40, £30, and £35 for table, chair and bench respectively. i.

Calculate the annual cost savings. (4)

ii.

Evaluate the proposal. (6)

d. Another director advised the production director to improve the labour productivity of the workers. i.

Define productivity. (4)

ii.

Discuss some ways to improve labour productivity. (8)

Marks distribution between maths and theory Maths Theory

30 22 52

57.6% 42.4% 100%

Page 7 of 13

Section B Answer any three (3) questions. 3. The following trial balance, which failed to agree, was prepared by the business of Jerome on 30 November 2007. Debit £ Capital Debtors Creditors

Credit £ 5000

8640 6100

Page 8 of 13 Stock Bank Rent Fixtures and fittings Gross profit General expenses Wages Commission receivable Drawings

7900 850 1000 10000 9380 4410 10740 7400 50940

14960 ______ 35440

The following errors were found in the books: • Debtors included the account of J. Williams, whose debt of £450 became a bad debt on 1 August 2007. On 26 September 2007 a cheque was received in full settlement for £0.40 in the £. No entries had been in the account to record the bad debt or the cheque receipt. • Jerome paid rent of £500 per quarter year in advance, commencing on 1 January 2007. The third quarter rent had been credited to both the rent and the bank account. • Commission receivable is received twice yearly. On 30 March 2007, £16500 had been received and correctly entered in the bank account, but no entry had been made in the commission receivable account. On 30 September 2007, a cheque for commission receivable had been received which had been miscalculated in Jerome’s favour by £630. A cheque was drawn to refund the over payment. Required: a. Prepare for Jerome: i.

The journal entries to correct the errors. (Narrations not required.)(6)

ii.

Suspense account showing clearly the opening balance. (6)

b. Prepare the following ledgers i.

Rent account

ii.

Commission receivable account

(10)

c. Evaluate the contribution of trial balance in ensuring accuracy of ledger account. (4) d. List and explain in details four errors which are not detected by a trial balance. (6)

Page 9 of 13

Marks distribution between maths and theory Maths Theory

22 10 32

68.7% 31.3% 100%

4. Salman Khan, Katrina Kaif and Sohel Khan have been in business for several years sharing profits and losses in the ratio 3:2:1 respectively. The summarised balance sheet of the partnership as at 28th February 2004 was as follows: £

£

£

Fixed assets Premises

56000

Capital accounts Salman Khan

Machinery

18000

Katrina Kaif

Vehicles

27000

Sohel Khan

5000 0 3000 0 1800 0 9800 0

10100 0 Current assets Stock Debtors

11000 18500 29500

Current accounts Salman Khan Katrina Kaif Sohel Khan

3100 1900 (1000)

Loan from Kaif Current liabilities Creditors _____ 13050 0

£

Bank overdraft

4000 5000 1400 0 9500 1305 00

•

The partners have accepted an offer from a rival Shahrukh Khan of £105000 to buy all the assets of the business except the debtors and three of the vehicles which have been used by the partners over the last year.

•

Each partner agreed to take over the personally used vehicle which he had been using during the year. Details of these vehicles were:

Salman Khan Katrina Kaif Sohel Khan

Book value of vehicle £5000

Agreed take over price £6000

£5000 £7000

£5000 £8000

Page 10 of 13 •

Cash collected from the debtors amounted to £17900 and the partners paid £12500 to creditors in full settlements of the amounts due to them.

•

The cost of dissolution of the partnership amounted to £4500 and was paid by the partnership.

Required: a. Realisation account to calculate the profit/loss in dissolution of the partnership. (8) b. Prepare the capital accounts.(8) c. Prepare the bank account.(8) d. What are the constituents of Partnership Act 1890?

(8)

Marks distribution between maths and theory Maths Theory

24 8 32

75% 25% 100%

5. The following information relates to Akij holdings fixed assets of computer equipment.

i.

ii.

iii.

Account balances at 1 January 2005: •

Computer equipment account £120000

•

Computer equipment provision for depreciation account £40000

Purchases and sales of equipment in 2005: •

On 31 March 2005 computer equipment purchased on 1 January 2004 for £16000 was sold on credit £11500.

•

On 1 July 2005 new computer equipment was purchased on credit at a cost of £10000.

The policy of Akij holdings is to charge depreciation at the rate of 25% on cost using the straight line method. In the year of purchase full year’s depreciation will be charged. In

Page 11 of 13 the year of sale, depreciation will be charged on the proportion of the year for which the asset had been owned. Required: a. Prepare for the year ended 31 December 2005, the: i.

Computer equipment account

ii.

Computer equipment provision for depreciation account;

iii.

Disposal account

iv.

Profit and loss account (extract) (14)

b. Distinguish between capital expenditure and revenue expenditure. (6) c. Explain how the accounting concept of materiality assists in determining whether expenditure is classified as capital expenditure or revenue expenditure. (6) d. Evaluate whether it would be prudent to consider training costs for staff to use new equipment as capital expenditure or revenue expenditure. (6)

Marks distribution between maths and theory Maths Theory

14 18 32

43.75% 56.25% 100%

6. Saima has operated a shop selling mountaineering equipment for several years but has never maintained full book keeping records.

Page 12 of 13 An analysis of her bank records for the year ended 31 December 1996 is as follows: £ Purchase of goods 66200 New shop fittings 3000 Rent and rates 4000 Light and heat 3900 New Van 4000 Van running expenses 1400 Wages to shop 9070 assistants Advertising 840 Insurance 560 Sundry expenses 2800 Details of Saima’s assets and liabilities at the start and end of the year are:

Opening balance Cash banked Closing balance

£ 2800 86900 6670

1 January 1996 £ Debtors creditors Insurance prepaid Advertising accrued Stock at cost Van (net book value) Shop fittings at cost Depreciation on shop fittings

600 2400 80 140 16800 2400 1500 450

31 December 1996 £ 850 3300 120 120 23700 ? ?

Additional information: i.

Saima had banked all the takings, with the exception of personal drawings of £200 per week for 50 weeks and £500 which she used to pay for a holiday.

ii.

Closing debtors included an amount of £100 which had been outstanding for over six months. It has now been decided to write it off as bad debt.

iii.

The van owned on 1 January 1996 was traded in for £2000 on a part exchange deal to purchase a new one.

iv.

Depreciation policy is to provide a full year’s depreciation in the year of purchase but none in the year of sale. Depreciation rates are 25% straight line method on vans and 30% reducing balance method on shop fittings. No shop fittings had been sold during the year.

Prepare for Saima:

Page 13 of 13 a. Trading profit and loss account for the year ended 31 December 1996. b. A balance sheet as at 31 December 1996.

(20)

c. Evaluate the decision by Saima of not maintaining full set of accounts. (6) d. Evaluate the role of control accounts in detecting fraud & theft in a business (6)

Marks distribution between maths and theory Maths Theory

20 12 32

62.5% 37.5% 100%