Accounting 0452/23 May/June 2022: question paper and mark scheme

Question

Peter is a trader. The following transactions took place in April 2022. April 2 Cash sales, $410, were paid directly into the bank account 3 Paid $798 to Rahat, by cheque, in full settlement of a debt of $840 8 Paid $42 cash for a motor vehicle repair 15 Purchased goods, list price $320, on credit subject to a trade discount of 10%, from Rahat 18 Cash sales, $460 20 Paid $392 to Samir by telephone transfer, having deducted 2% cash discount from the amount due 25 A cheque for commission receivable, $115, was paid into the bank account 29 Paid $285 to Rafael by cash, in full settlement of a debt of $300 REQUIRED (a) Prepare Peter’s cash book on the page opposite. Balance the cash book and bring down the balances on 1 May 2022. Peter Cash Book Date Details Discount Cash Bank Date Details Discount Cash Bank allowed received 2022 $ $ $ 2022 $ $ $ Apr 1 Balance b/d 135 920 …… …… …… …… …… 3 [11] Peter has received a bank statement for April. He is using it to prepare a bank reconciliation statement and to update his cash book. REQUIRED (b) Place a tick (✓) to show how each item in the table below would be used to prepare the bank reconciliation statement or to update the cash book. Prepare bank reconciliation Update cash book statement Added Deducted Items to be adjusted to bank from bank Debited to Credited to statement statement cash book cash book balance balance Bank charges Direct debit for rent Cheque paid to a supplier but not yet cashed Cheque for commission received dishonoured Dividend received [5] REQUIRED (c) Prepare the account for Rahat as it would appear in the ledger of Peter. Balance the account and bring down the balance on 1 May 2022. Peter Rahat account Date Details $ Date Details $ 2022 2022 …… …… …… Apr 1 Balance b/d 840 [4] [Total: 20]

Question

Stalla started trading on 1 April 2021. All receipts are paid into the bank and all payments are made from the bank. She has not kept a full set of books but has provided the following information. Summary of receipts and payments for the year ended 31 March 2022 $ Receipts Capital introduced 8 000 Loan received (repayable 2027) 5 000 Sales (all cash) 36 000 Payments Trade payables 17 850 Fixtures and fittings 12 000 General expenses 1 920 Rent and insurance 7 100 Drawings ? Bank balance at 31 March 2022 2 330 REQUIRED (a) Record the total receipts and total payments to Stalla’s bank account showing the cash drawings for the year ended 31 March 2022. Balance the bank account and bring the balance down on 1 April 2022. Stalla Bank account Date Details $ Date Details $ [4] During the year ended 31 March 2022, Stalla took goods from the business for her own personal use. The selling price of these goods is $3375. Her mark‑up is 25%. REQUIRED (b) Calculate Stalla’s total drawings for the year ended 31 March 2022. …… [2] Stalla has provided a list of balances at 31 March 2022. $ Fixtures and fittings (net book value) 10 800 Inventory 2 150 Prepaid rent 500 Balance at bank 2 330 Trade payables 1 875 Loan (repayable 2027) 5 000 Capital ? REQUIRED (c) Prepare a statement of affairs to calculate Stalla’s capital at 31 March 2022. Stalla Statement of Affairs at 31 March 2022 $ $ [5] (d) Calculate Stalla’s profit for the year ended 31 March 2022. …… [4] Stalla is now considering whether she should start to sell at least some of her goods on credit. REQUIRED (e) Advise Stalla whether or not she should start selling on credit terms. Justify your answer. …… [5] [Total: 20]

Question

Mosi is a trader. The totals of his trial balance at 30 April 2022 did not agree and the difference was placed in a suspense account. Mosi later discovered the following errors. 1 Commission received, $96, had been debited to the discount received account. The entry to the bank account was correctly made. 2 The total of the sales journal for April 2022, $1258, was transferred to the sales account as $2185. 3 A cheque payment for motor expenses, $77, had been omitted from the book‑keeping records. 4 A payment by electronic transfer, $135, was recorded as a payment in the petty cash book. 5 An invoice received from Tracey, $160, was credited to the account for Stacey. REQUIRED (a) Prepare the journal entries to correct errors 1–5. Narratives are not required. Mosi Journal Error Details Debit Credit number $ $ [11] (b) Prepare the suspense account. Include the original difference on the trial balance as a balancing figure. Mosi Suspense account Date Details $ Date Details $ [4] Mosi’s original draft profit, before correcting the errors, was $39 970. REQUIRED (c) Calculate Mosi’s corrected profit for the year ended 30 April 2022. …… [5] [Total: 20]

Question

Nala is a trader who buys and sells stationery. She provided the following information about her inventory at 28 February 2022. Item Number of Cost per unit Carriage Selling Selling units inwards per expenses price per unit per unit unit $ $ $ $ Packs of paper 240 4.50 – – 8.00 Packs of envelopes 225 5.50 1.00 1.50 10.00 Notepads 150 4.00 2.00 – 5.00 Boxes of pencils 96 3.50 – – 6.00 REQUIRED (a) (i) Calculate the value of Nala’s inventory at 28 February 2022. …… [6] (ii) State the accounting principle used to value inventory. …… [1] (b) (i) Complete the table by placing a tick (✓) to show how Nala should treat each item of her expenditure. Capital Revenue expenditure expenditure Computer printer paper Computer equipment Installation of computer equipment Motor vehicle Insurance of motor vehicle Delivery of motor vehicle [4] (b) (ii) Explain how the materiality principle is applied to the treatment of non‑current assets. …… [2] Nala has treated the receipt of a bank loan as a revenue receipt. REQUIRED (c) Complete the table by placing a tick (✓) to show the effect of the error on capital and on liabilities. overstated understated Effect on capital Effect on liabilities [2] Nala has charged depreciation on her shop fittings at 25% per annum using the reducing balance method. This year she is considering changing this to 10% per annum using the straight‑line method, as this would improve her profit for the year. REQUIRED (d) Advise Nala whether or not she should change her depreciation method. Justify your answer. …… [5] [Total: 20]

Question

The trial balance of M Limited at 30 November 2021 was as follows. M Limited Trial Balance at 30 November 2021 Debit Credit $ $ Revenue 203 600 Inventory at 1 December 2020 12 945 Purchases 143 750 Rent and rates 12 460 Operating expenses 12 920 Wages 24 380 Equipment at cost 40 000 Provision for depreciation of equipment 17 500 Trade receivables 9 800 Provision for irrecoverable debts 295 Bank 162 Trade payables 11 585 Ordinary share capital 20 000 General reserve 3 000 Retained earnings 2 037 Dividend paid on ordinary shares 1 600 258 017 258 017 Additional information 1 Inventory at 30 November 2021 was valued at $12 830. 2 Depreciation on equipment is to be charged at 25% per annum using the reducing balance method. 3 Accrued operating expenses at 30 November 2021 were $415. 4 Rent includes a payment of $2250 for the 3 months from 1 October 2021 to 31 December 2021. 5 The provision for doubtful debts is to be set at 4% of trade receivables. 6 No dividends were outstanding at 30 November 2021. 7 $1000 is to be transferred to the general reserve at 30 November 2021. REQUIRED (a) Prepare the income statement for M Limited for the year ended 30 November 2021. M Limited Income Statement for the year ended 30 November 2021 $ $ [7] (b) Prepare the statement of changes in equity for M Limited for the year ended 30 November 2021. M Limited Statement of Changes in Equity for the year ended 30 November 2021 Details Ordinary General Retained Total Share capital reserve earnings $ $ $ $ On 1 December 2020 …… …… …… …… On 30 November 2021 …… …… …… …… [5] (c) Calculate the liquid ratio for M Limited at 30 November 2021. The answer should be correct to two decimal places. Liquid (acid test) ratio workings answer [3] The managing director, Emily, plans to buy new equipment to be used to improve the profitability of the company. She is considering whether to fund the equipment by issuing further ordinary shares or requesting a bank overdraft. REQUIRED (d) Advise Emily whether to fund the purchase of the equipment by issuing further ordinary shares or by requesting a bank overdraft. Justify your answer. …… [5] [Total: 20]