# AS 2 Accounting — Past Paper Q’s

January 2012

`1 (a) Define the term 'capital expenditure'. (2 marks)Expenditure on the purchase or improvement of a non-current asset. Expenditure that benefits the business for more than one year.`
`1 (b) Calculate the amount of revenue expenditure to be included in the income statement (trading and profit and loss account) for the year ended 31 December 2011. Ignore depreciation. Show your workings. (6 marks)Workings: £120,000 spent on computers for resale of that £120,000, £20,000 used for payroll and budgeting system. (£20,000 capital expenditure)`
`£84,860 spent on maintenance. Of that £8,400 spent on installing.Therefore £8,400 capital expenditure.`
`Training = £6,840 revenue expenditure.`
`Insurance = £2400 for year, only 2 months included in accounts so £400 for insurance.`
`Revenue expenditure`
`                                      £Computers for resale =             100,000Maintenance = (£84,860 - £8,400) = 76,460Training costs =                   6,840Insurance =                        400                                   --------                                   183,700`
`2 (a) Prepare a corrected income statement (trading and profit and loss account) for the year ended 30 September 2011. Take into account the additional information. (25 marks) (includes 2 marks for quality of presentation)Workings:(1) Purchases of fixtures costing £8500 had been included in the purchases figure.Purchases figure is £8,500 too highFixtures figure of £12,500 is £8,500 too lowNew Purchases figure = £72,468 - £8,500 = £63,968`
`(2) Goods to the value of £3,895 where taken for Harry Knight's own use.Purchases of £63,968 is £3895 too highDrawings of £22,560 are £3,895 too lowNew Purchases figure = £60,073`
`(3) Goods at a cost of £2,800 where damaged and can be sold for £3,200 after they have been repaired for £580.£3,200 - £580 = £2,620Reduce closing inventory by £2,800 - £2,620 = £180New Closing Inventory = £14,502`
`(4) Wages of £399 owing. Wages of £20,748 are too low by £399.`
`(5) Insurance of £489 prepaid. Insurance of £3,481 is £489 too high.`
`(6) Depreciation on fixtures using reducing balance at 33.33%Depreciate fixtures of (£12,500 + £8,500) at 33.33%Depreciation = £7,000`
`(7) Need a provision for doubtful debts of 5%Since no provision exists, essentially increasing provision of 0% by 5%.Trade Receivables are £18,760 x 5% = £938 provision for doubtful debtsIncrease in provision is an expense`
`Income Statement for Harry Knight for the year ended 30 September 2011`
`                                                £             £Revenue                                                    104 896`
`Purchases                                     60 073Closing Inventory                            (14 502)                                              ------                                                            45 571                                                            ------Gross Profit                                                59 325Less expensesWages                                         21 147Rent                                          5 200Insurance                                     2 992General Expenses                              2 786Depreciation of fixtures                      7 000Increase in provision for doubtful debts      938                                              ------                                                            40 063                                                           --------                                                            19 262                                                           --------`
`2 (b) Calculate the business’s capital at 30 September 2011. (4 marks)                                                £             £Opening Capital                                             21 000Add profit for the year                                     19 262                                                            ------                                                            40 262Less Drawings                                              (26 455)                                                            ------Capital at 30 September 2011                                13 807                                                            ------`
`3 (a) Calculate the interest to be paid each year if the debentures are issued. (2 marks)£20 000 000 x 7.5% = £1 500 000`
`3 (b) Calculate the gearing ratio if the debentures are issued. State the formula used. (4 marks)Non-current liabilities x 100-----------------------------Capital Employed`
`20 000 000 x 100---------------- = 57%35 087 595`

June 2015

`1 (a) Calculate the effect that the purchase of the premises would have on Dipak’s: [8 marks]profit for the year ended 31 December 2015Reduce profit by 3 months of repayments loan interest (£1 333 x 3) + Reduce profit for depreciation 4% reducing balance. Reduce profit by £16 000 for depreciationReduce profit by £3 999                 ------Total reduction  £19 999`
`bank balance during the period 30 September to 31 December 2015Bank balance will reduce by £80 000 for the 20% of the loan + (£2 400 x 3 = £7 200)Bank balance will be reduced by £87 200`
`2 Use items (1) to (8), shown on the opposite page, to complete the following table. You should show the correct accounting treatment for each of the items to calculate: `
`● a revised profit for the year ● a revised figure for net current assets. `
`The first item has already been completed.Item          Profit for the year £           Net current assets £ Draft         78 567                          18 762 1             (450)                           (450)2             (8 000)                         (8 000)3             600                             6004             678                             6785             2 000                           06             1 800                           1 8007             (3 720)                         (3 720)8             0                               10 000Revised       71 475                          19 670`
`3 (a) Calculate the value of the bonus issue made on 30 September 2014. [2 marks]7 new shares for every 2 heldPremises NBV = £450 000Revalued to £800 000 -> Increase by £350 000Increase Equity using Revaluation Reserve -> £350 000`
`New Equity                                   £Ordinary shares of 20p each     80 000Retained earnings               35 640Revaluation reserve             350 000                                -------                                465 640`
`Bonus Issue is 7 for every 2£80 000 x 3.5 = £280 000`
`3 (b) Calculate the dividend paid on 31 March 2015. [5 marks]                                     £Ordinary shares of 20p each       80 000Bonus Issue                       280 000                                  -------                                  360 000£360 000 x 5 = 1 800 000 shares`
`1 800 000 shares x 6p = £108 000`
`3 (c) Calculate the retained earnings at 31 March 2015. [6 marks]Retained earnings at start £35 640Operating profit = £128 650Less Tax           (£25 730)                   ---------Profit after tax    £102 920Add to RERetained Earnings         = £138 560Less £108 000 Bonus Issue = £30 560 Less debenture interest of 5% of 200K for 6 months = £5 000Retained Earnings at 31 March 2015 = £25 560`
`3 (d) Prepare the following extracts from the balance sheet at 31 March 2015: (i) Non-current assets (ii) Equity. [10 marks]`
`Ashes LtdStatement of Financial Position (Extract)Non-Current Assets         £             £             £Premises                 800 000       16 000       784 000Plant and equipment      85 000        55 000       30 000                                                    -------                                                    814 000                                                    -------`
`Equity                     £             £             £Ordinary shares @ 20p                               360 000Retained Earnings                                   25 560Revaluation Reserve                                 70 000                                                    -------                                                    455 560                                                    -------`
`4 (a) Tick one box below to show the correct gross profit mark-up. [1 mark]50%`
`4 (b) Tick one box below to show the correct gross profit margin. [1 mark]33 1/3rd %`
`4 (c) Tick one box below to show the correct profit in relation to revenue ratio. [1 mark]5%`

June 2014

`Cash Budget for MoFor each of the 3 months ending 30 September 2014                        July        August        September                          £            £              £ReceiptsSales                   15 120       15 750         14 580`
`Total Receipts for mnth 15 120       15 750         14 580`
`PaymentsPayments                 7 100       8 050          8 550Overheads                7 100       7 500          8 240Non-Current Assets                                  10 800Drawings                 1 512       1 575          1 500`
`Total Payments for mnth  15 712      17 125         29 090`
`Summary of bank accountNet cash flow            (592)       (1 375)        (14 510)Bank at beginning        6 860        6 268          4 893Bank at end              6 268        4 893          (9 617)`
`WorkingsSales40% in month of sale, 30% 1 month late, 30% 2 months lateJuly-> ((18 000 x 0.4) - 2.5%) + (15 000 x 0.3) + (12 000 x 0.3)August-> ((15 000 x 0.4) - 2.5%) + (18 000 x 0.3) + (15 000 x 0.3)September-> ((12 000 x 0.4) - 2.5%) + (15 000 x 0.3) + (18 000 x 0.3)`
`July = (7 200 - 180(7 200 x 0.025)) + 4 500 + 3 600 = £15 120August = (6 000 - 150(6 000 x 0.025)) + 5 400 + 4 500 = £15 750September = (4 800 - 120(4 800 x 0.025)) + 4 500 + 5 400 = £14 580`
`Purchases10% in cash, 90% 1 month lateJuly-> 800 + 6 300 = 7 100August-> 850 + 7 200 = 8 050September-> 900 + 7 650 = 8 550`
`2 (a) Complete the income statement, showing clearly the profit for the year after tax. (A space for workings is provided on page 8.) [7 marks]Workings`
`Rights Issue of Ordinary Shares                           £Ordinary shares @ 20p   1 200 000 (6 million shares)1 new for every 3Capital will increase by 1/3`
`After rights issueOrdinary shares @ 20p   1 600 000 (8 million shares)Share premium @ 15p     300 000`
`Dividend of 2p per share8 000 000 shares x 0.02 = £160 000`
`W1) Debenture Interest£600 000 x 0.06 = £36 000`
`Income Statement for Weirwolf plc year ended 30 April 2014                                                 £                 £ Revenue                                                        2 856 000 Cost of sales                                                  1 142 400                                                               ---------Gross profit                                                   1 713 600 Less expenses Marketing                                     335 600 Administration                                236 780 Distribution                                  68 500Directors Remuneration                        240 000Depreciation charge for the year              257 780                                              -------                                                                 1 138 660                                                                 ---------Operating Profit                                                  574 940Debenture Interest                                                36 000                                                                 ---------Profit for the year before tax                                    538 940Less Tax                                                          107 788                                                                 ---------Profit for the year after tax                                     431 152                                                                 ---------`
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