PAPER2A Accounting Module

General Principles of Marking

1. The answers given in this marking scheme and those brought up in light of live scripts and discussions at theMarkers'Meeting are'suggestions'only. There are answers that are not mentioned but nevertheless areequally valid.

2. Where the number of points required is specified in a question, the fast listed points will be marked up to thenumber required, and other points crossed out as'excess'.

...............................................................................

SECTION A

QUESTION 1

(a)

Marks

2014 Cash at bank $ 12014 ＄

½ Dec 31 Balance b/d 58 930 Dec 3 I Water: direct debit 3 JOO Sunny Ltd: credit transfer 12 300 Man Ltd: dishonoured cheque 19 300 I Yip's Ltd 8 000 Bank charges 30 ½

Balance c/d 56 800 79 230 79 230

(5)

(b) Bank reconciliation statement as at 31 December 2014

Updated balance as per cash at bank Add: Unpresented cheque: 707893

Less: Uncredited deposit - Nam Ltd Balance as per bank statement

＄

56 800 ½ 12 200 69 000 8 620 1

½ (3)

8 marks

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「＇

QUESTION7 Marks

(aXi) Fixed production overheads = $286 000 + $80 000 + $144 000 =$510 000

Direct labour hours = (2400 x½) + (1800 x½) = 1700 direct labour hours Predetermined fIXed production overhead absorption rate = $510 000 / 1700 direct labour hours

= $300 per direct labour hour (2)

{ii) Cupcakes Direct material Direct labour Variable production overheads Fixed production overheads Total production cost per box of cupcakes

$1204515

150一

纈

($90 X汾

($300 X汾(2)

(b) Total manufacturing cost Direct material Direct labour Variable production overheads Fixed production overheads (exclude depreciation)

＄ 264 000 ($20 X 2400 + $120 X 1800) 153 000 ($90x½x2400+ $90x½xl800) 63 000 [$15 X (2400 + 1800)]

430 000 ($286 000 + $144 000) 910 000

, ,

Total purchase cost = ($170 x 2400) + ($270 x 1800) = $894 000 Net savings by purchasing: $16 000

Susan CaftS should buy cookies and cupcakes from the local supplier.

½

½

½

l /

½

%-

½ ( 4)

(c) (i)

Selling price per box Direct material cost per box Direct labour cost per box Variable production overheads per box C'ontril 、111 ion per box

I >irt'rt l11ho11r required per box ('ontribution per direct labour hour

Production Priority

(ii )

· · · ·· - .. ·· ·· · · · ·· ·---…................................ 曰................

片hour 訌our ¼hour$675 $420 $960

賈 買 懌

···

123

Shortbread Cookies Cupcakes

Cookies

＄ 290 (20 ) (30) (15) �:\'i

Direct labour hours required

650 800 纈

2000

s e

­

k

-

』$

390

回圄

向210

adre

了370

需四160

崮

s

2

Annual production quantity

3 900 2400 1100

I

I

I

11 111nrl\N � －

丶

，

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QUESTION 8 (Cont'd) Marks

Nancy Company Limited Statement of financial position as at 31 December 2014

ASSETS $ Non-current assets Office equipment ($1 570 000 -$100 000 + $168 000) Less: Accumulated depreciation ($340 000-$52 500 + $1 47 000 + $4200)

Current assets Inventory Trade receivables ($321 900 -$7500) TOTAL ASSETS

EQUITY AND LIABILITIES Equity Ordinary shares of $5 each, fully paid General reserve Retained profits ($210 000 -$60 620 -$100 000)

Non-current liabilities 6% Debentures

Current liabilities Trade payables Accrued finance cost Accrued selling expenses Bank overdraft TOTAL EQUITY AND LIABILITIES

281 980 314 400

247 800 4 500 2 000

42 000

＄

1638 000 1 438 700 1½

1 199 300

596 380 1795680

1200 000 ½ 100 000 ½ 49 380 1

1349380

150 000 ½

296 300 1 795 680

½

½

½ ½ ½ ½

(8)

(c) - Prudence concept should be applied.

- It means that when choosing among accounting alternatives, the best choice is one that is Max. 2least likely to overstate assets and profits.

- The company should adopt the lower of cost or net realisable value in the valuation ofinventory.

- The loss of the damaged inventory $8020 ($58 000 - $49 980) should he recognised in theincome statement for the ycur ended 11 Doccmbcr 20 I·I.

(I 11111rk for each rclt1v1111t poi11t, llltlK. } 11111rlrn) (3)

20 marks '"'

:w

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QUESTION9 Marks

(a) - Accrual concept is violated.- Revenues and expenses are recognised and included in the financial statements when they are 1

earned or incurred, not when they are received or paid.- Therefore, the electricity expenses should be recorded in the financial statements of 2014, 1

though it was still unpaid at the year end.(3)

(b) (i) Inventory= $31 700-($3000 X 0.9) + $5000 = $34 000

(ii) Current assets= ($343 000 - $101 000) + $27 000 - ($65 000 - $34 000)= $238 000

(c) (i) Net profit ratio:= [($128 000 - $40 000) + ($34 000 -·$31 700) - $2500] x I 00%

390 000 + 60 000 $87 800 X } 00%

$450 000 = 19.51%

(ii) Quick ratio:$238 000-$34 000

$43 000 + $3000 + $2500 $204 000 $48 500

=4.21:1

(iii) Trade payables turnover (times)$132 000

($43 000 + $46 000) /2 $132 000 $44 500

= 2.97 times

(iv) Inventory turnover (times)$65 000 + ($110 000 + $132 000)- $34 000

($65 000 + $34 000) /2 $273 000 $49 500

= 5.52 times

(d) - Pearl Ltd should invest in Lily Ltd.

2

3

2

2

2

） 1

3

2

1 （

Lily Ltd is a better investment because it has- higher return on capital employed: it has higher profitability with more efficient use of its

capital to generate profits.- lower gearing ratio: it has lower degree ofleverage and hence lower risk and financial burden. 1 - higher earnings per share: it has higher profitability and the amount of profits earned for each 1

outstanding share is higher.(4)

20 marks ENDOFPAPER2A

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