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 = 100,000
Maintenance = (£84,860 - £8,400) = 76,460
Training costs = 6,840
Insurance = 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 high
Fixtures figure of £12,500 is £8,500 too low
New 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 high
Drawings of £22,560 are £3,895 too low
New 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 = £2,620
Reduce closing inventory by £2,800 - £2,620 = £180
New 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 debts
Increase in provision is an expense
Income Statement for Harry Knight for the year ended 30 September 2011
                                                £             £
Revenue 104 896
Purchases                                     60 073
Closing Inventory (14 502)
------
45 571
------
Gross Profit 59 325
Less expenses
Wages 21 147
Rent 5 200
Insurance 2 992
General Expenses 2 786
Depreciation of fixtures 7 000
Increase 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 21 000
Add profit for the year 19 262
------
40 262
Less 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 2015
Reduce 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 depreciation
Reduce profit by £3 999
------
Total reduction £19 999
bank balance during the period 30 September to 31 December 2015
Bank 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)
3 600 600
4 678 678
5 2 000 0
6 1 800 1 800
7 (3 720) (3 720)
8 0 10 000
Revised 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 held
Premises NBV = £450 000
Revalued to £800 000 -> Increase by £350 000
Increase Equity using Revaluation Reserve -> £350 000
New Equity 
£
Ordinary shares of 20p each 80 000
Retained earnings 35 640
Revaluation 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 80 000
Bonus 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 £35 640
Operating profit = £128 650
Less Tax (£25 730)
---------
Profit after tax £102 920
Add to RE
Retained Earnings = £138 560
Less £108 000 Bonus Issue = £30 560
Less debenture interest of 5% of 200K for 6 months = £5 000
Retained 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 Ltd
Statement of Financial Position (Extract)
Non-Current Assets £ £ £
Premises 800 000 16 000 784 000
Plant and equipment 85 000 55 000 30 000
-------
814 000
-------
Equity                     £             £             £
Ordinary shares @ 20p 360 000
Retained Earnings 25 560
Revaluation 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 Mo
For each of the 3 months ending 30 September 2014
July August September
£ £ £
Receipts
Sales 15 120 15 750 14 580
Total Receipts for mnth 15 120       15 750         14 580
Payments
Payments 7 100 8 050 8 550
Overheads 7 100 7 500 8 240
Non-Current Assets 10 800
Drawings 1 512 1 575 1 500
Total Payments for mnth  15 712      17 125         29 090
Summary of bank account
Net cash flow (592) (1 375) (14 510)
Bank at beginning 6 860 6 268 4 893
Bank at end 6 268 4 893 (9 617)
Workings
Sales
40% in month of sale, 30% 1 month late, 30% 2 months late
July-> ((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 = £15 120
August = (6 000 - 150(6 000 x 0.025)) + 5 400 + 4 500 = £15 750
September = (4 800 - 120(4 800 x 0.025)) + 4 500 + 5 400 = £14 580
Purchases
10% in cash, 90% 1 month late
July-> 800 + 6 300 = 7 100
August-> 850 + 7 200 = 8 050
September-> 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 3
Capital will increase by 1/3
After rights issue
Ordinary shares @ 20p 1 600 000 (8 million shares)
Share premium @ 15p 300 000
Dividend of 2p per share
8 000 000 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 68 500
Directors Remuneration 240 000
Depreciation charge for the year 257 780
-------
1 138 660
---------
Operating Profit 574 940
Debenture Interest 36 000
---------
Profit for the year before tax 538 940
Less Tax 107 788
---------
Profit for the year after tax 431 152
---------
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