2013 Accounting Higher - Solutions Finalised Marking .

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2013 AccountingHigher – SolutionsQuestion 1Glencairn plcTrading and Profit and Loss and Appropriation Account for year ended 31 DecemberYear 4 000 000 000Sales430(1)Opening Stockplus Purchases302462762025616less Closing Stockplus Warehouse ExpensesCOST OF SALESGROSS PROFIT (1)(1)(1)(1)272158Plus RevenueDividends due from InvestmentsDiscountsLess ExpensesAdministration Expenses (36-2)Selling and Distribution ExpensesRent and Rates (5 1)WagesDebenture Interest (10% x 80)Provision for Bad Debts increase (6-5)Provision for DepreciationOffice Equipment (10% x 30)Motor Vehicles (20% x (50-10))NET PROFIT BEFORE TAX less Corporation TaxNET PROFIT AFTER TAX34(1)(1)343364081(2)(1)(2)(1)(2)(2)38(2)(2)ADD Unappropriated Profit c/f7165133328241034Less AppropriationsGoodwill w/dInterim Ordinary DividendFinal Proposed Dividend - Ordinary SharesUNAPPROPRIATED PROFIT C/F 12615(1)(1)(2)(1)(1)331 (27)Page 2

Balance Sheet as at 31 December Year 4 000Cost1003050FIXED ASSETSBuildingsOffice EquipmentMotor Vehicles 000Depn-101118InvestmentsGoodwill (20-12)CURRENT ASSETSVatStockDebtors (60-6)Dividends dueAdmin Expenses prepaidLESS CURRENT LIABILITIESProposed Final Ordinary DividendCreditorsBank Overdraft (6 1)Corporation Tax dueDebenture Interest owingWORKING CAPITALTOTAL NET (1)73 000NBV1101932161708239(1)(1)(1)(1)(1)22261FINANCED BY:150,000 1 Ordinary Shares150ADD RESERVESRevaluation ReserveUnappropriated ProfitShare Premium (30-10)10 (1)1 (1)20 (2)LONG TERM LIABILITIES10% Debentures(1)3118180261(1)(23)(50)Page 3

Question 2Part A(a)(i)Mark-up Ratio(1)Gross Profit 40% x 160,000 64,000(1)Cost of Sales 160,000 - 64,000 96,000(1)Mark-up Ratio (ii) 64,000/ 96,000 x 100 66.7%(3)Opening StockRate of Stock Turnover 10 times(1)Average Stock 96/10 9,600(1)Opening Stock (9,600 x 2 ) 19,200 - 10,000 9,200(iii)(2)Purchases(2) 96,000 - 9,200 10,000 96,800(2)(iv)Return on Capital EmployedCapital 120,000(1)Expenses 20% x 160,000 32,000Net Profit Gross Profit – Expenses(1)Net Profit 64,000 - 32,000 32,000Return on Capital Employed 32,000/120,000 x 100 26.7% (2)Page 4(4)

(v)Debtors Collection Period(1)Credit Sales 75% x 160,000 120,000(1)12,000/120,000 x 365 36.5 days(vi)(2)Fixed Asset TurnoverSales:Fixed Assets160,000:80,000 2:1(2)(2)(15)(b)(i)Cost of Goods SoldRate of Stock Turnover 12 times(1)Average Stock 9,600 x 75% 7,200(1)Cost of Sales 12 x 7,200 86,400(ii)(2)Gross ProfitSales – Cost of Sales Gross Profit(1)Sales 160,000 x 115% 184,000(1) 184,000 - 86,400 97,600(iii)(2)PurchasesPurchases Cost of Sales – Opening Stock Closing Stock(1)(2) 86,400 - 10,000 (2x 7,200 - 10,000) 80,800Page 5(3)

(iv) Expenses 15% of Sales15% x 184,000 27,600(2)(v) Net ProfitGross Profit less Expenses 97,600 - 27,600 70,000(1)(10)(c)Gross Profit Ratio 97,600/ 184,000 x 100 53.04%(2)3 reasons for change in Gross Profit Ratio:Cheaper SupplierBulk buyingLess wastageBetter stock control/more security/supervisionIncrease in selling prices etcAny 3 x 1(3)(5)Part BStatement of Amended Net Profit at 31 December Year 2 Original Net ProfitAddError 1 – SalesError 4 – Rent ReceivedError 6 – LaptopError 7 – StockLessError 2 – WagesError 5 – Loss on SaleAmended Net Profit3,6001,000520300 54,000 (1)(1)(2)(1)(1)3,200 (1)700 (2)5,42059,4203,90055,520 (1)(10)(40)Page 6

Question 3(a)Accumulated Fund at 1 January Year 2AssetsSubs in ArrearsEquipmentBar StockBankLiabilitiesSubs in advanceCreditors for Bar PurchasesLoanRent due on clubhouse 00032104 0002631223(1)(1)(1)(1)194(4)(b)(i) Bar Trading Account for the year ended 31 December Year 2 000 000Bar Sales21 (1)Less: Cost of salesOpening Stock3 (1)Add Carriage on bar purchases1 (1)Purchases for Bar (9 - 2 1)8 (3)12(1) (1) (1)Less: Closing Stock2 (1)10Gross Profit11Less: ExpensesBar Wages (21/3)7 (2)Electricity (10 * 3/5)6 (2)13Loss on Bar -2(11)Page 7

(ii)Income and Expenditure Account the year ended 31 December Year 2 000 000IncomeProfit on Dance (4 - 2)Profit on Raffle (3 - 1 - 1)Profit on Vending Machines (4 - 2)Subscriptions (60 (1) 3 (1) 4 (1))Life Membership Fees (20% * 20)21267476ExpenditureLoss on BarWagesCoaches HonorariumElectricity (10 * 2/5)Stationery (2 (1) -1 (1))214241Rent of Clubhouse (24 – 4 (1) 3 (1))Depreciation: Equipment (6 (8 x 1/2) *10%Surplus (c)Bank Balance at 31 December Year 2Opening BalanceAdd ReceiptsLess Payments(2)(2)(2)(3)(2)(1)(1)(1)(1)(2)23 (2)1 (3)121151278740 (3)4729(22)(3)(40)Page 8

Question 4(a) StakeholdersAny Government body (once only), Partners/Owners/Investors,Suppliers/Creditor, Banks, Customers, Local Community, Employees,Managers, Lenders etcAny 4 x 1 (4 marks max)(4)(b) Procedure for admission of new partner Revaluation of Assets (1)Sharing of any profit or loss on revaluation among existing partners (1)Valuation of goodwill (1)Sharing of goodwill among existing partners (1)Goodwill can be written off between the new partners (1)Update capital accounts (1)Revision of the partnership agreement to include the financial (1) details ofthe new partner – capital, drawings, interest on each, salary, premium forgoodwill, and the new profit sharing ratio (1 max)(4)(c) Limited PartnerA Limited Partner is one who contributes capital to the partnership but haslimited liability. (1) Limited partners may not take part in the management ofthe partnership (1) or make contracts on behalf of the partnership (1) orwithdraw or receive back any part of the capital they have invested during thelifetime of the partnership. (1) One limited partner per partnership or if a LLPall partners were limited. (1 only) Max 2(2)(10)Page 9

Question 5(a) Duties of a financial accountant Reports to the owners of the firm the effect of managerial decisions on theperformance of the firm (1)Keeps accurate records of the daily financial transactions of the firm (1)Checks the financial records to maintain accuracy and reduce fraud (1)Prepares periodic financial statements to show profit/loss, balance sheet etc (1)Prepares accounts for auditing and publication as and if required (1)Ensures that the firm is operating within the rules laid down by legislation fromgovernment or professional bodies (1)Taxation calculations (1)Ratio analysis (1)(6)Max 6(b) Difference between Preference Shares and Ordinary SharesPreference SharesOrdinary Shares First to receive any dividend/return Dividends are a fixed rate First to be repaid capital No voting rights at AGM Dividends can be cumulative Shares can be redeemable Less risky investment Last to receive any dividend/return Dividends are at a variable rate Last to be repaid capital Voting rights at AGM Dividends not cumulative Shares are non-redeemable More risky investment1 mark per line to a maximum of 4 (must be comparison)(4)(10)Page 10

Question 6PART A(a)(i)(ii)(iii)Unit Selling PriceVariable CostContributionProductR 0001056045(b)Total Machine Hours(c)Year 3 hours 16,000Increase capacity – 25% 4,000New machine hours 20,000Contribution permachine hourOrder of PriorityHours allottedUnitsTotal Contributionless Fixed CostsProfit (d)8000 x 2ProductR 45/2 22.5036,0003,000 135,000(1)(1)(1)ProductT 000350250100(1)(1)(1) (9)16,000(2)(2)ProductS 95/2 47.5028,0004,000(1) 380,000(2)ProductT 100/2 5016,0003,000(1)(2)(2)(1) 300,000(1)(2)(2) 815,000430,000 (1) 385,000(17)New contribution per unit for R 45 3 48 (1)New contribution per machine hour 48/1 48Order of Priority now T, R, SHours allottedContribution permachine hourTotal contributionless Fixed CostsMaximum Profit(e)(1)(1)(1)ProductS 00030020595ProductR8000 48 384,000(1)(2)ProductS6000 47.50 285,000(1)(2)ProductT6000 50.00 300,000Yes Profit has increased (2) (by (539,000 – 385,000) 154,000)(2) 969,000 (1)430,000 539,000(10)(2)(40)Page 11

PART B(a)(i)Total losses 500 – 450 50 kg (1)Normal loss 4% x 500 20 kg (1)(ii)(b)Abnormal loss 50 – 20 30 kg (1)(3)Cost per kg 8160/480 17 (3)(3)(2)(1)Cost per kg ( 8160 - 96)/480 16.80Reduction 20p per kg (1)(4)(10)Page 12

Question 7PART AProduction Budget - July - October - Year 4Salesplus Closing StockJuly August September 1406,6006,920less Opening 01 line1 line(1 each)(6)Cash Budget for 2 months/August-September (Year 4) Opening BalanceRECEIPTSCash SalesCredit SalesLoanOrdinary SharesShare PremiumProceeds of Sale - VanTOTAL RECEIPTSPAYMENTSMaterialsLabourVariable Overheads (1)Variable Overheads (2)Fixed OverheadsLoan RepaymentLoan InterestTOTAL PAYMENTSClosing 006,800 ,000(1)(1)(1)(1)September50,460110,40055,728(1)(2) 166,128 165,380 50,46068,88057,12023,80022,1003,0002,500125 177,525 39,063(1)(1)(1)(1)(1)(1)(2)(24)(30)TOTAL SALES155,040166,128Page 13

PART B(a)Stock at startPurchases1501,2001,3501,160190 (3)Less: issuesStock at end(b) 2.25(3)(1)(1)(c) Stock Record Card of Par72 for ssueReceiptsQPV400 840400400 2.10 2.20 2.25IssuesQPV300 2.10 630(1)20400 2.10 2.20 42 880(1)(1)40400 2.10 2.25 84 900(1)(1) 880 900BalanceQP150 2.00150 2.00400 2.10150 2.00100 2.10150 2.00100 2.10400 2.20150 2.0080 2.10150 2.0080 2.10400 2.25150 2.0040 2.10V 300 300 840 300 210 300 210 880 300 168 300 168 900 300 84 384(1)(6)(10)(40)Page 14

Question 8(a)(i) & (ii)RentCanteen CostsPowerHeat and LightMachineInsuranceIndirectMaterialsXYA 36,00036,00040,0009,000B 54,00022,50096,00013,500C 27,00018,00024,0006,750X 18,0009,0004,500Y (21,140)(1)(2)(2)(15)(b)Absorption rate (A)Absorption rate (B)Absorption rate (C)(c) 153,200/38,300 4 (per labour hour)(2) 222,432/26,480 8.40 (per machine hour)(2) 104,400/10,440 10 (per labour hour)(2)(6)Quotation Direct materialDirect labourOverheadsTotal CostProfitSelling PriceA 30 x 8B 15 x 10C 6 x 9A30 x 4B10 x 8.40C6 x 10240 (3)150 (3)54 (3)120 (2)84 (2)60 (2) 192 (1)444264900600 (3)1,500(19)(40)Page 15