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Examiner’s use only Team Leader’s use only Surname Initial(s) Signature Centre No. Candidate No. Turn over Question Leave Number Blank 1 2 3 4 5 6 7 Total This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd. Printer’s Log. No. P42221A W850/6001/57570 1/1/1/1/1/e2 *P42221A0136* Paper Reference(s) 6001/01 London Examinations GCE Accounting (Modular Syllabus) Advanced Subsidiary Unit 1: The Accounting System and Costing Tuesday 8 January 2013 – Afternoon Time: 3 hours Materials required for examination Items included with question papers Nil Source booklet Instructions to Candidates In the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. Check that you have the correct question paper. Answer FIVE questions, choosing TWO from Section A and THREE from Section B. Indicate which question you are answering by marking the box ( ). If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ). All calculations must be shown. Write your answers in the spaces provided in this question paper. Do not return the insert with the question paper. Information for Candidates The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2). There are 7 questions in this question paper. The total mark for this paper is 200. There are 36 pages in this question paper. Any blank pages are indicated. Calculators may be used. The source material for use with questions 1 to 7 is in the enclosed source booklet. Advice to Candidates Write your answers neatly and in good English. Paper Reference 6001 01

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Page 1: Paper Reference(s) London Examinations GCE - Max Papersmaxpapers.com/wp-content/uploads/2013/01/20131.pdf · the draft Statement of Comprehensive Income prepared by Xevena and from

Examiner’s use only

Team Leader’s use only

Surname Initial(s)

Signature

Centre No.

Candidate No.

Turn over

Question Leave Number Blank

1

2

3

4

5

6

7

TotalThis publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

Printer’s Log. No.

P42221AW850/6001/57570 1/1/1/1/1/e2

*P42221A0136*

Paper Reference(s)

6001/01London Examinations GCEAccounting (Modular Syllabus)Advanced SubsidiaryUnit 1: The Accounting System and

CostingTuesday 8 January 2013 – AfternoonTime: 3 hours

Materials required for examination Items included with question papersNil Source booklet

Instructions to CandidatesIn the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. Check that you have the correct question paper.Answer FIVE questions, choosing TWO from Section A and THREE from Section B.Indicate which question you are answering by marking the box ( ).If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ).All calculations must be shown.Write your answers in the spaces provided in this question paper.Do not return the insert with the question paper.

Information for CandidatesThe marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 7 questions in this question paper. The total mark for this paper is 200. There are 36 pages in this question paper. Any blank pages are indicated.Calculators may be used.The source material for use with questions 1 to 7 is in the enclosed source booklet.

Advice to CandidatesWrite your answers neatly and in good English.

Paper Reference

6 0 0 1 0 1

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SECTION A

Answer TWO questions from this section.

If you answer question 1, put a cross in this box ( ).

Source material for question 1 is on pages 2 and 3 of the source booklet.

1. (a) Prepare the:

(i) Journal entries to record the purchase of the shop premises in 5. above. Narratives are not required

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(6)

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(ii) Departmental Trading Account of Organic Farm Shop showing the profit/loss of each department for the year ended 31 December 2012

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(iii) Statement of Comprehensive Income for the business as a whole for the year ended 31 December 2012

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(iv) Statement of Financial Position at 31 December 2012.

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(b) Evaluate the owner’s decision to purchase the shop premises as an alternative to renting.

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.......................................................................................................................................(8) Q1

(Total 52 marks)

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If you answer question 2, put a cross in this box ( ).

Source material for question 2 is on pages 4 and 5 of the source booklet.

2. (a) Explain the meaning of the debit balance on the Rent receivable account on 1 January 2012.

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(b) Prepare the following accounts for the year ended 31 December 2012, including the appropriate transfer to the financial statements:

(i) Sundry expenses account

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(ii) Premises repairs account

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(iii) Rent receivable account.

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(c) State one accounting concept which:

(i) supports the change of depreciation method proposed by Arpan

(ii) does not support the change of depreciation method proposed by Arpan.

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(d) Distinguish between capital expenditure and revenue expenditure.

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(e) State, giving your reasons, whether each of the following is capital expenditure or revenue expenditure:

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(f) Calculate, showing clearly all workings, the:

(i) adjustment required to the provision for depreciation on the machines to 31 December 2011 to account for the change in depreciation method

(ii) depreciation charge on all the machines for the year ended 31 December 2012.

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(g) Prepare, for the year ended 31 December 2012, the:

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(h) Evaluate Arpan’s decision to change the basis of charging depreciation on machines from the straight line method to reducing balance method.

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(Total 52 marks)

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If you answer question 3, put a cross in this box ( ).

Source material for question 3 is on pages 6 and 7 of the source booklet.

3. (a) Explain the following accounting concepts. For each concept give one example from the draft Statement of Comprehensive Income prepared by Xevena and from the additional information given, where the concept has not been correctly applied:

(i) Realisation

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(ii) Accrual (matching)

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(iii) Going concern.

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(b) Redraft the corrected Statement of Comprehensive Income after taking into account the additional information given for the year ended 31 December 2012.

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(c) Prepare the Purchases Ledger Control Account, calculating the trade payables balance at 31 December 2012.

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(d) Prepare the Statement of Financial Position at 31 December 2012.

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(e) Evaluate the use of accounting concepts when preparing financial statements.

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TOTAL FOR SECTION A: 104 MARKS

Q3

(Total 52 marks)

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SECTION B

Answer THREE questions from this section.

If you answer question 4, put a cross in this box ( ).

Source material for question 4 is on page 8 of the source booklet.

4. (a) Explain the term profitability.

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(b) Prepare the Statement of Comprehensive Income for the year ended 31 December 2012, showing clearly the:

(i) value of the inventory at 31 December 2012

(ii) profit for the year.

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(c) Calculate the percentage return on capital employed for the year.

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(d) Prepare the Statement of Financial Position at 31 December 2012.

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(e) Calculate the:

(i) current ratio

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(ii) liquid (acid test) ratio.

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� ���� ��� ������������������� ����������������������� ���������������������

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(Total 32 marks)

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If you answer question 5, put a cross in this box ( ).

Source material for question 5 is on pages 9 and 10 of the source booklet.

5.� ���� !� �� ��"�����������#$%"���������������&#�'�����*$#*"���+

(i) total overhead cost

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� � ����� �������������������������������������#$%�

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(b) Explain the term labour productivity.

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(c) Calculate, the labour cost per unit, for the following three payment options:

(i) Current daywork payment

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................................................................................................................................(4)

(ii) Alternative Option 1

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

................................................................................................................................(2)

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(iii) Alternative Option 2.

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

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

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

................................................................................................................................(4)

� ���� -���������������������������������������������������;�� �������������

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

.......................................................................................................................................(2)

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.......................................................................................................................................(4) Q5

(Total 32 marks)

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If you answer question 6 put a cross in this box ( ).

Source material for question 6 is on page 11 of the source booklet.

6. (a) Explain:

(i) the term a schedule of debtors

(ii) how the schedule of debtors would be used to calculate the provision for doubtful debts.

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................................................................................................................................(6)

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(b) Prepare the Journal entries, including narrative, recording the bad debt recovery from Kaab.

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(c) Prepare, for the month of December, the:

(i) Bad debts account

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

................................................................................................................................(3)

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(ii) Bad debts recovered account

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................................................................................................................................(4)

(iii) Sales Ledger Control Account showing clearly the balance of debtors at 31 December 2012.

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................................................................................................................................(7)

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(iv) Provision for doubtful debts account.

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................................................................................................................................(3)

(d) Evaluate the use of a provision for doubtful debts account by Taabu.

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....................................................................................................................................... (4) Q6

(Total 32 marks)

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If you answer question 7, put a cross in this box ( ).

Source material for question 7 is on pages 12 and 13 of the source booklet.

7. (a) State two reasons why a partnership may dissolve.

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

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

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

.......................................................................................................................................(4)

(b) Explain how the provisions of the 1890 Partnership Act apply to partners’:

(i) salaries

(ii) interest on loans.

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................................................................................................................................(4)

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(c) Prepare, at 31 December 2012, the partnership:

(i) Dissolution account

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................................................................................................................................(9)

� � ����� !����� ����������������������<���

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................................................................................................................................(4)

Turn over

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(iii) Bank account.

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................................................................................................................................(7)

(d) Evaluate the need for a partnership agreement.

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.......................................................................................................................................(4)

TOTAL FOR SECTION B: 96 MARKSTOTAL FOR PAPER: 200 MARKS

END

Q7

(Total 32 marks)

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Turn overPrinter’s Log. No.

P42221A

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

W850/6001/57570 1/1/1/1/1/e2

*P42221A*

Paper Reference(s)

6001/01London Examinations GCEAccounting (Modular Syllabus)Advanced SubsidiaryUnit 1 – The Accounting System and

CostingTuesday 8 January 2013 – Afternoon

Source booklet for use with Questions 1 to 7.

Do not return the insert with the question paper.

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P42221A 2

SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Organic Farm Shop has three departments: greengrocery, bakery and The Café. The following balances were extracted from the books for the year ended 31 December 2012:

£Revenue: Greengrocery 190 000 Bakery 96 000 The Café 81 000Inventory 1 January 2012: Greengrocery 8 150 Bakery 4 700 The Café 850Purchases: Greengrocery 126 000 Bakery 60 500 The Café 40 250Wages: Greengrocery 32 000 Bakery 21 000 The Café 16 000Manager’s salary 18 350Electricity and gas 9 820General running expenses 2 750Rent (for 9 months) 8 100Refurbishment costs of The Café 15 000Non-current assets at cost: Equipment 20 000 Fixtures and fittings 10 000Provisions for depreciation: Equipment 8 000 Fixtures and fittings 2 000Trade receivables 32 000Trade payables 46 870Bank 43 000 DrCapital 60 000Drawings 16 800Provision for doubtful debts 1 400

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Additional information at 31 December 2012:

1. Inventory: Greengrocery £9 450 Bakery £3 600 The Café £1 100

2. During the year, goods were transferred to The Café from the other two departments. The value, at cost, of the transfers was: Greengrocery £5 700, Bakery £4 300.

3. General running expenses prepaid £250.

4. The refurbishment costs of The Café consisted of new fixtures and fittings £10 000 and redecoration £5 000.

5. On 1 December 2012 the owner of Organic Farm Shop purchased the shop premises from Global Property for the purchase price of £250 000. On the same day a 6% Bank loan was received from Ascot Bank for £200 000, repayable on 30 November 2022. The Bank also charged an arrangement fee of £4 250 for the loan. No entries had been made in the books to record these transactions.

6. Depreciation is to be charged on all non-current assets owned at the end of the year, on the following basis:

Shop premises No depreciation Equipment 30% per annum reducing balance method Fixtures and fittings 10% per annum straight line method

7. A debt owed to Organic Farm Shop of £800 was considered irrecoverable. A provision for doubtful debts is to be maintained at the rate of 5% on the remaining debts.

Required:

(a) Prepare the:

(i) Journal entries to record the purchase of the shop premises in 5. above. Narratives are not required

(6)

(ii) Departmental Trading Account of Organic Farm Shop showing the profit/loss of each department for the year ended 31 December 2012

(8)

(iii) Statement of Comprehensive Income for the business as a whole for the year ended 31 December 2012

(16)

(iv) Statement of Financial Position at 31 December 2012.(14)

(b) Evaluate the owner’s decision to purchase the shop premises as an alternative to renting. (8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 7 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 2

2. The following balances were in the ledger of Arpan on 1 January 2012: £ Sundry expenses 600 Dr Premises repairs 250 Dr Rent receivable 300 Dr

The following were the transactions for the year ended 31 December 2012. All payments and receipts were made by cheque:

1. Sundry expense payments: £ 14 May Paid 500 30 October Paid 900 for the six months to 31 March 2013

2. Premises repairs payments: £ 8 January Paid 450 1 April Paid 900 18 August Paid 875

On 31 December 2012 it was estimated that £340 was owing for premises repairs.

3. Rent receivable: £ 6 February Received 1 200 26 June Received 900

The rent receivable for the year was £1 600.

Required:

(a) Explain the meaning of the debit balance on the Rent receivable account on 1 January 2012.(4)

(b) Prepare the following accounts for the year ended 31 December 2012, including the appropriate transfer to the financial statements:

(i) Sundry expenses account(4)

(ii) Premises repairs account (4)

(iii) Rent receivable account.(4)

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On 1 January 2012 Arpan had the following additional balances in his ledger: £ Machine at cost 36 000 Machine – provision for depreciation ?

All machinery was purchased on 1 January 2010 and has a residual value of £2 000. Arpan has depreciated his machinery over a five-year period using the straight line method.

He has decided to change his method of depreciation to 25% per annum reducing balance, backdated to the date of machine purchase. The change and adjustment are to be recorded in the Statement of Comprehensive Income for the year ended 31 December 2012.

On 1 April 2012 a new machine was purchased: £ Cost 8 000 Installation 1 600 Staff training 2 000 Annual machine insurance 00 400 12 000

He charges a full year’s depreciation on machines in the year of purchase.

Required:

(c) State one accounting concept which:

(i) supports the change of depreciation method proposed by Arpan (ii) does not support the change of depreciation method proposed by Arpan.

(4) (d) Distinguish between capital expenditure and revenue expenditure.

(4) (e) State, giving your reasons, whether each of the following is capital expenditure or

revenue expenditure:

� � �� ���������� ����� � �� ��� ��������������

(4) (f) Calculate, showing clearly all workings, the:

(i) adjustment required to the provision for depreciation on the machines to 31 December 2011 to account for the change in depreciation method

(ii) depreciation charge on all the machines for the year ended 31 December 2012.(8)

(g) Prepare, for the year ended 31 December 2012, the: (i) Machinery account

(3) (ii) Machinery – provision for depreciation account.

(5) (h) Evaluate Arpan’s decision to change the basis of charging depreciation on machines

from the straight line method to reducing balance method.(8)

(Total 52 marks)

Answer space for question 2 is on pages 8 to 16 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Xevena commenced business on 1 January 2012 buying and selling goods on credit. She commenced business with fixtures and fittings £2 000 and bank £10 000.

She has little accounting knowledge, but has prepared a draft Statement of Comprehensive Income for the year ended 31 December 2012: £ £Revenue 110 000LessPurchases 103 500Less Purchase returns 0(2 300) 101 200Less Inventory (at selling price) (20 000) (81 200)Gross profit 28 800Plus other income:Sale of fixtures and fittings 1 200Rent receivable 31 000 31 000Less expenses:Carriage of goods 3 600Rent and rates 4 000Wages 6 000General running expenses 4 550Purchase of fixtures and fittings 2 800Purchase of motor van 009 000 (29 950)Profit for the year 001 050

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Additional information:

1. Revenue included goods with a selling price of £2 000 sent to a customer on ‘sale or return’. On 31 December 2012 the customer had not advised an intention to keep or return the goods. The transaction had been recorded as a credit sale.

2. Xevena used a 25% mark up on cost throughout the year. 3. Half of the fixtures and fittings brought into the business on 1 January 2012 were sold during

the year for £1 200. Additional fixtures and fittings were purchased during the year. 4. Part of the premises were sub-let on 1 July for a rent receivable of £1 000 per 3 months. 5. One third of the carriage related to collecting purchases and two thirds to deliveries to

customers. 6. General running expenses included £750 prepaid, but did not include £470 owing. 7. During the year Xevena paid suppliers by cheque £93 030 and received a discount of £1 870. 8. Other balances on 31 December 2012: £ Motor van (at valuation) 7 500 Fixtures and fittings (at valuation) 3 400 Trade receivables 12 870 Trade payables ? Bank overdraft 18 450 Drawings 4 800

Required:

(a) Explain the following accounting concepts. For each concept give one example from the draft Statement of Comprehensive Income prepared by Xevena and from the additional information given, where the concept has not been correctly applied:

(i) Realisation(3)

(ii) Accrual (matching)(3)

(iii) Going concern.(3)

(b) Redraft the corrected Statement of Comprehensive Income after taking into account the additional information given for the year ended 31 December 2012.

(14)

(c) Prepare the Purchases Ledger Control Account, calculating the trade payables balance at 31 December 2012.

(6)

(d) Prepare the Statement of Financial Position at 31 December 2012.(15)

(e) Evaluate the use of accounting concepts when preparing financial statements. (8)

(Total 52 marks)

Answer space for question 3 is on pages 17 to 21 of the question paper.

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SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Molara commenced business on 1 January 2012 with inventory £12 000 and bank £25 000. She also had a five-year 8% bank loan of £15 000 and trade payables of £3 000.

Her objectives for the first year of trading were to:

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The following information is available for the year ended 31 December 2012:

1. Revenue (sales) £140 000, gross profit £36 000. 2. Purchases £119 000. 3. Non-current assets purchased £15 000 with £3 000 charged as depreciation. 4. Other expenses paid including bank loan interest, £22 000, of which £2 000 was prepaid.

Other expenses accrued were £1 000. 5. Drawings £8 000. 6. Other balances at 31 December 2012: Trade receivables £7 000 Trade payables £10 000 Bank £1 000 Inventory ?

Required:

(a) Explain the term profitability.(4)

(b) Prepare the Statement of Comprehensive Income for the year ended 31 December 2012, showing clearly the:

(i) value of the inventory at 31 December 2012 (ii) profit for the year.

(6) (c) Calculate the percentage return on capital employed for the year.

(3)

(d) Prepare the Statement of Financial Position at 31 December 2012.(9)

(e) Calculate the: (i) current ratio (ii) liquid (acid test) ratio.

(6) (f) Evaluate the success of Molara in achieving her financial objectives for the year.

(4)(Total 32 marks)

Answer space for question 4 is on pages 22 to 26 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Fahl Manufacturing has a machine shop producing products for the building industry. The machine shop contains six machines, each producing a different product.

The following information relates to one of the machines, Machine 107:

� �� &������������'����������* Cost £90 000 Delivery £2 000 Installation £8 000� �� +���������������������������������!;���������������#� ��������� �� <������������������������=�����������>������!��>���������� �� @����������������������K!;�������������������K������������������������������������<��

remainder of the time is idle time� �� ��������K�����!�>������>����������>���������Q�����������������!������>� �� V ����������������#����������K���������$���

Additional machine shop information:

� �� ����������������Q��� ������Y������������ �� ������� ��Q��� ������������������� �� ������� ������Z������������ �� [��#�����������������������������Z� �� [��#������������������������\� �� <��� �� ����������������������������������������$���

Required:

(a) Calculate, for Machine 107, for the year ended 31 December 2012, the:

(i) total overhead cost(8)

(ii) overhead cost per hour of operating Machine 107.(4)

(b) Explain the term labour productivity.(4)

Machine 107 requires one machine operator who is paid on a daywork basis and works 40 hours per week for 50 weeks per year. The rate is £6 per hour and output for the year is 2 400 units.

It has been proposed that the machine operator of Machine 107 should be paid by a bonus scheme in future. The two alternatives are:

Alternative Option 1 Payment for each unit completed. The rate would be £3 per unit. Output for the year is estimated to be 4 800 units.

Alternative Option 2 A bonus consisting of an hourly payment of £3.50 per hour for all hours worked, plus £1.50 per unit produced. Output is estimated to be 3 600 units.

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Required:

(c) Calculate, the labour cost per unit, for the following three payment options:

(i) Current daywork payment(4)

(ii) Alternative Option 1(2)

(iii) Alternative Option 2.(4)

(d) Identify the most productive of the three payment options for Fahl Manufacturing.(2)

(e) Evaluate, from the perspective of Fahl Manufacturing, the use of a bonus scheme for remunerating the operator of Machine 107.

(4)(Total 32 marks)

Answer space for question 5 is on pages 27 to 29 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Taabu is in business buying and selling goods on credit. The following information relates to her customers’ accounts for the month of December 2012:

1. Balances at 1 December : Trade receivables £23 500 Provision for doubtful debts £1 450

2. During December 2012: Cheques received and banked from trade receivables £32 400 Discount allowed £820 Credit sales £38 000

3. During December, Taabu was informed that one debtor, Taal, would not be able to fully pay his debt of £350. A payment of £0.40 in the pound was made on 31 December 2012, the balance of the debt being irrecoverable.

4. A debt owed by Kaab £700, which had been written off in July 2011, was received in December 2012.

5. On 31 December 2012 a schedule of debtors was prepared and the provision for doubtful debts was calculated as £1 375.

Required:

(a) Explain:

(i) the term a schedule of debtors (ii) how the schedule of debtors would be used to calculate the provision for doubtful debts.

(6)

(b) Prepare the Journal entries, including narrative, recording the bad debt recovery from Kaab. (5)

(c) Prepare, for the month of December, the:

(i) Bad debts account (3)

(ii) Bad debts recovered account(4)

(iii) Sales Ledger Control Account showing clearly the balance of debtors at 31 December 2012.(7)

(iv) Provision for doubtful debts account.(3)

(d) Evaluate the use of a provision for doubtful debts account by Taabu. (4)

(Total 32 marks)

Answer space for question 6 is on pages 30 to 33 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Martina and Naju have been in partnership for many years sharing profits and losses in the ratio 2:1. They decided to close the business on 31 December 2012. The partnership assets and liabilities at 31 December 2012 were:

£ Premises 60 000 Motor vehicles 14 000 Fixtures and fittings 9 400 Inventory 18 700 Trade receivables 12 400 Trade payables 10 000 Accrued expenses 1 100 Bank loan 10 000 Bank overdraft 400 Capital accounts: Martina 50 000 Naju 40 000 Current accounts: Martina 4 400 Cr Naju 1 400 Dr

Additional information at 31 December 2012:

1. Premises were sold to Highton & Co for £65 000. 2. The partners took the motor vehicles at valuation: Martina £4 500, Naju £7 000. 3. Fixtures and fittings and the inventory were sold for £21 000. 4. A bad debt of £400 was written off the trade receivables and 2.5% cash discount was allowed

on the remaining debts. 5. Accrued expenses were paid in full and trade payables were paid less 2% cash discount. 6. The Bank loan was repaid. 7. Dissolution expenses were £2 700. 8. A settlement cheque was paid to each of the partners from the bank account.

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Required:

(a) State two reasons why a partnership may dissolve.(4)

(b) Explain how the provisions of the 1890 Partnership Act apply to partners’:

(i) salaries (ii) interest on loans.

(4)

(c) Prepare, at 31 December 2012, the partnership:

(i) Dissolution account(9)

(ii) Capital accounts of Martina and Naju(4)

(iii) Bank account.(7)

(d) Evaluate the need for a partnership agreement.(4)

(Total 32 marks)Answer space for question 7 is on pages 34 to 36 of the question paper.

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Examiner’s use only

Team Leader’s use only

Surname Initial(s)

Signature

Centre No.

Candidate No.

Turn over

Question Leave Number Blank

1

2

3

4

5

6

7

Total

Paper Reference(s)

6002/01London Examinations GCEAccounting (Modular Syllabus)Advanced LevelUnit 2: Corporate and Management

AccountingThursday 24 January 2013 – AfternoonTime: 3 hours

Materials required for examination Items included with question papersNil Source booklet

Instructions to CandidatesIn the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. Check that you have the correct question paper.Answer FIVE questions, choosing TWO from Section A and THREE from Section B.Indicate which question you are answering by marking the box ( ).If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ).All calculations must be shown.Write your answers in the spaces provided in this question paper.Do not return the insert with the question paper.

Information for CandidatesThe marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 7 questions in this question paper. The total mark for this paper is 200. There are 32 pages in this question paper. Any blank pages are indicated.Calculators may be used.The source material for use with questions 1 to 7 is in the enclosed source booklet.

Advice to CandidatesWrite your answers neatly and in good English.

Paper Reference

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SECTION A

Answer TWO questions from this section.

If you answer question 1, put a cross in this box ( ).

Source material for question 1 is on pages 2 and 3 of the source booklet.

1. (a) Prepare the Statement of Financial Position for Channel Oil plc at 31 December 2012 in accordance with International Accounting Standard 1 (Revised).

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At a board meeting at the end of the year, the Marketing Director stated “I am concerned about the liquidity position of the company”.

(b) Evaluate the statement of the Marketing Director, concerning the liquidity position of Channel Oil plc, at 31 December 2012.

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....................................................................................................................................... (12) Q1

(Total 52 marks)

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If you answer question 2, put a cross in this box ( ).

Source material for question 2 is on page 4 of the source booklet.

2. (a) Calculate the:

(i) budgeted cost of producing one carpet

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(ii) actual cost of producing one carpet.

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(b) Calculate, stating the formula used in each case, for the month ended 31 December 2012 the:

(i) labour efficiency, labour rate, and total labour variance for one carpet

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(ii) materials usage, materials price, and total materials variance for one carpet.

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(c) Calculate the actual profit for the month of December.

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The directors of Khulnar Carpets Limited expect higher costs to apply in January 2013, but have decided not to charge these extra costs to customers, i.e. they will not increase the price of each carpet sold.

(d) Evaluate the decision not to charge the extra production costs to the customer.

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(Total 52 marks)

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If you answer question 3, put a cross in this box ( ).

Source material for question 3 is on pages 6 and 7 of the source booklet.

3. Med Isle Travel plc sells holidays. The Statement of Changes in Equity of Med Isle Travel plc for the year ended 31 December 2012 is nearing completion and is shown below.

£1 Ordinary

Share Capital

£m

Share Premium

£m

Retained Earnings

£m

General Reserve

£m

Capital Redemption

Reserve

£m

Non-current Asset

Replacement Reserve

£m

Total Equity

£m

Balance at 1 January 2012 800 200 11 75 40 50 1176

Issue of Share Capital (September)

100 150 -- -- -- -- 250

Dividends -- -- (69) -- -- -- (69)

Comprehensive Income for the Year

-- -- 37 -- -- -- 37

Transfer -- -- 75 (75) -- -- --

Transfer -- -- (50) -- -- 50 --

Balance at 31 December 2012

You are the accountant for Med Isle Travel plc.

(a) Complete the row in the Answer Booklet to show the figures for the Balance at 31 December 2012.

(6)

The published accounts were presented to the shareholders’ meeting on 6 January 2013. You are required to answer the following points raised by shareholders.

(b) (i) “Could you explain one example for which the funds in the Non-current asset replacement reserve may be used?”

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(ii) “Please explain the transfer of £75 million shown on line 6.”

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(iii) A new shareholder states “I know the Statement of Changes in Equity shows dividends paid only in the year. I did not receive an interim dividend of 3 pence per share in June, as I purchased my shares in the September issue. How much was the final dividend per share paid to ALL shareholders in December 2012?”

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(iv) “How much did the shareholders pay for each share issued before 1 January 2012?”

(4)

“How much did the shareholders pay for each share issued in September 2012?”(4)

“Can you explain the difference between the amount paid by shareholders to buy each share before 1 January 2012, and the amount to buy each share in September 2012?”

(4)

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(v) “I am unhappy about the low level of dividend paid. I can see a large figure in the Total Equity column – could we use that to pay dividends?”

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Another shareholder stated at the meeting. “I think that the company should have issued bonus shares in September instead of a rights issue. This would have been better for Med Isle Travel plc.”

(c) Evaluate this statement on behalf of Med Isle Travel plc.

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TOTAL FOR SECTION A: 104 MARKS

Q3

(Total 52 marks)

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SECTION B

Answer THREE questions from this section.

If you answer question 4, put a cross in this box ( ).

Source material for question 4 is on page 8 of the source booklet.

4. (a) Prepare a monthly Cash Budget for each of the three months February to April 2013.

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(b) Evaluate the level of drawings that Kim Seng is taking out of the business each month.

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.......................................................................................................................................(8) Q4

(Total 32 marks)

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If you answer question 5, put a cross in this box ( ).

Source material for question 5 is on page 9 of the source booklet.

5. (a) Calculate for the project the:

(i) payback period, showing your answer in years and months

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(ii) average rate of return (accounting rate of return).

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(b) Evaluate the project for Metro Clean plc, using the calculations made and considering any other relevant factors.

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.......................................................................................................................................(8) Q5

(Total 32 marks)

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If you answer question 6, put a cross in this box ( ).

Source material for question 6 is on page 10 of the source booklet.

6. Two fixed costs of the stores are given as rent and salaries.

(a) (i) State four other examples of fixed costs faced by the stores.

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(ii) Define the term semi-variable costs and give two examples.

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(b) Calculate for each store, for the year ended 31 December 2012, the:

(i) break-even point figure in the number of CDs sold

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(ii) margin of safety in the number of CDs sold

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(iii) profit or loss.

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(c) Evaluate the information and figures calculated in (b) to decide which store should stay open, and which store should close.

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.......................................................................................................................................(8) Q6

(Total 32 marks)

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If you answer question 7, put a cross in this box ( ).

Source material for question 7 is on page 11 of the source booklet.

7. (a) Show the Journal entries to close the following accounts in the books of Machine Tools Limited, before any revaluations have taken place. Narratives are not required.

(i) Land

(ii) Current Taxation payable

(iii) Ordinary Shares of £1.20.

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(b) Calculate the purchase price paid by AED Engineering plc for Machine Tools Limited.

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(c) Calculate the goodwill paid by AED Engineering plc in the purchase of Machine Tools Limited.

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(d) Evaluate the appropriateness of revaluing assets and liabilities before a takeover.

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TOTAL FOR SECTION B: 96 MARKSTOTAL FOR PAPER: 200 MARKS

END

Q7

(Total 32 marks)

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Turn overPrinter’s Log. No.

P42222A

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

W850/6002/57570 1/1/1/1/1

*P42222A*

Paper Reference(s)

6002/01London Examinations GCEAccounting (Modular Syllabus)Advanced LevelUnit 2: Corporate and Management

AccountingThursday 24 January 2013 – Afternoon

Source booklet for use with Questions 1 to 7.

Do not return the insert with the question paper.

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P42222A 2

SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Channel Oil plc drills for oil. Channel Oil plc had the following balances in the books at 31 December 2012, subject to some final adjustments.

Debit

£Credit

£Buildings 974 000Bank 114 000Bank loan 500 000Cash in hand 17 000Computer equipment 495 0008.5% Debenture (2017) 1 200 000Debenture interest payable 51 000Fittings 187 000Foreign exchange reserve 600 000Furniture 64 000General reserve 75 000Interest on bank loan payable 3 750Investment property 750 000Non-oil inventories 116 000Land 3 150 000Patents purchased 45 000Machinery 685 000Oil drilling licence purchased 2 000 000Oil drilling plant 4 550 000Oil inventories 2 320 000Oil refining plant 1 930 000Ordinary £1 share capital 13 000 000Other payables 16 500Other receivables 7 000Retained earnings 929 250Share premium account 2 500 000Taxation 460 000Trade payables 24 000Trade receivables 97 000

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Notes and final adjustments: � The bank loan is due to be repaid in March 2015 � Buildings are to be revalued upwards by 5% � Investment property is to be revalued upwards by 4% � Oil inventories are to be revalued downwards by 7% to reflect a falling oil price � Taxation due includes £198 000 to be paid within 30 days. The remainder is to be paid on

31 March 2014.

Required:

(a) Prepare the Statement of Financial Position for Channel Oil plc at 31 December 2012 in accordance with International Accounting Standard 1 (Revised).

(40)

At a board meeting at the end of the year, the Marketing Director stated “I am concerned about the liquidity position of the company”.

Required:

(b) Evaluate the statement of the Marketing Director, concerning the liquidity position of Channel Oil plc, at 31 December 2012.

(12)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 7 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Khulnar Carpets Limited produces carpets. All carpets are produced to order, with no stocks held.

For the month of December 2012, the following information is available.

Budget: � Each carpet is to use 16 sq m of material in production � Material is to be purchased from suppliers at a rate of £7.50 per sq m � Workers are to be paid £8.60 per hour, and are to produce 2 carpets per day � 12 workers are to work 8 hours per day, five days per week, for four weeks.

Actual: � 7 920 sq m of material were used for production at a total cost of £58 608 � Each carpet took 4.25 hours to produce � Workers were paid £8.50 per hour.

The budgeted sales target of 480 carpets at £299 per carpet was achieved.

Required:

(a) Calculate the:

(i) budgeted cost of producing one carpet(4)

(ii) actual cost of producing one carpet.(4)

(b) Calculate, stating the formula used in each case, for the month ended 31 December 2012 the:

(i) labour efficiency, labour rate, and total labour variance for one carpet(12)

(ii) materials usage, materials price, and total materials variance for one carpet.(14)

Fixed costs for the month totalled £12 300.

(c) Calculate the actual profit for the month of December.(6)

The directors of Khulnar Carpets Limited expect higher costs to apply in January 2013, but have decided not to charge these extra costs to customers, i.e. they will not increase the price of each carpet sold.

Required:

(d) Evaluate the decision not to charge the extra production costs to the customer.(12)

(Total 52 marks)Answer space for question 2 is on pages 8 to 12 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Med Isle Travel plc sells holidays. The Statement of Changes in Equity of Med Isle Travel plc for the year ended 31 December 2012 is nearing completion and is shown below.

£1 Ordinary

Share Capital

£m

Share Premium

£m

Retained Earnings

£m

General Reserve

£m

Capital Redemption

Reserve

£m

Non-current Asset

Replacement Reserve

£m

Total Equity

£m

Balance at 1 January 2012 800 200 11 75 40 50 1176

Issue of Share Capital (September)

100 150 -- -- -- -- 250

Dividends -- -- (69) -- -- -- (69)

Comprehensive Income for the Year

-- -- 37 -- -- -- 37

Transfer -- -- 75 (75) -- -- --

Transfer -- -- (50) -- -- 50 --

Balance at 31 December 2012

You are the accountant for Med Isle Travel plc.

Required:

(a) Complete the row in the Answer Booklet to show the figures for the Balance at 31 December 2012.

(6)

The published accounts were presented to the shareholders’ meeting on 6 January 2013. You are required to answer the following points raised by shareholders.

(b) (i) “Could you explain one example for which the funds in the Non-current asset replacement reserve may be used?”

(2)

(ii) “Please explain the transfer of £75 million shown on line 6.”(2)

(iii) A new shareholder states “I know the Statement of Changes in Equity shows dividends paid only in the year. I did not receive an interim dividend of 3 pence per share in June, as I purchased my shares in the September issue. How much was the final dividend per share paid to ALL shareholders in December 2012?”

(6)

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(iv) “How much did the shareholders pay for each share issued before 1 January 2012?”(4)

“How much did the shareholders pay for each share issued in September 2012?”(4)

“Can you explain the difference between the amount paid by shareholders to buy each share before 1 January 2012, and the amount to buy each share in September 2012?”

(4)

(v) “I am unhappy about the low level of dividend paid. I can see a large figure in the Total Equity column – could we use that to pay dividends?”

(12)

Another shareholder stated at the meeting. “I think that the company should have issued bonus shares in September instead of a rights issue. This would have been better for Med Isle Travel plc.”

(c) Evaluate this statement on behalf of Med Isle Travel plc.(12)

(Total 52 marks)

Answer space for question 3 is on pages 13 to 17 of the question paper.

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SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Kim Seng plans to go into business opening a factory on 1 February 2013, to produce cartons of soft drink. These will be sold and delivered to retail customers.

Kim Seng has £15 000 of his own money to put into the business. He also has a loan of £15 000 from his mother. The loan is to be repaid at a later date, not yet agreed.

Additional information

1. In the first week of February, Kim Seng plans to pay for the following: � machinery £12 400 � a delivery vehicle £9 500 � three months rent on the factory at £1 199 per month.

2. Production will start in Week 2 of February. The factory can produce 1 400 cartons per day.

3. Kim Seng will purchase raw materials for the drinks, at the start of each week, at a cost of £0.04 per carton. All material purchases will be paid for in cash on the day of purchase.

4. The water charge for the factory will be £640 per month, paid on the last day of every month.

5. Cartons will be delivered to retail customers on the day of production. Delivery costs are expected to be £280 per week, payable at the end of each week.

6. All output is sold on the day of production. Retail customers will pay Kim Seng £0.22 per carton. All sales will be on credit. 70% of retail customers will pay one month after the sale. The other 30% will pay two months after the sale.

7. Kim Seng will take drawings of £400 per week, starting from 1 February 2013.

8. Assume that the factory will operate five days per week and four weeks per month.

Required :

(a) Prepare a monthly Cash Budget for each of the three months February to April 2013.(24)

(b) Evaluate the level of drawings that Kim Seng is taking out of the business each month.(8)

(Total 32 marks)

Answer space for question 4 is on pages 18 to 20 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Metro Clean plc is considering bidding for a contract to dispose of household waste in the city of Valettori. The contract will last for five years, and the city authorities will pay the company to dispose of household waste.

The following information is available.

1. The initial cost of the contract to Metro Clean plc will be £1 900 000. This will include six specialist lorries costing £145 000 each. These lorries will last for five years when they will be sold for £5 000 each.

2. Running expenses, including depreciation of the lorries, for the first three years are forecast to be £850 000 per year. In year four running expenses, including depreciation, are forecast to rise by £50 000. In year five, running expenses are expected to stay at the same level as in year four.

3. The City of Valettori authorities will pay Metro Clean plc £1 200 000 for the first year. The payment for year two will rise by 5%. The payment for year three will be the same as year two. The payment for year four will increase by a further 5%. The payment for year five will be the same as year four.

4. It is Metro Clean plc policy to have a payback period of three years on investment projects.

5. It is Metro Clean plc policy only to invest in projects achieving an average rate of return of at least 10% per year.

Required:

(a) Calculate for the project the:

(i) payback period, showing your answer in years and months(14)

(ii) average rate of return (accounting rate of return).(10)

(b) Evaluate the project for Metro Clean plc, using the calculations made and considering any other relevant factors.

(8)

(Total 32 marks)

Answer space for question 5 is on pages 21 to 24 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Shajah Music Limited owns two stores in the centre of Ashman. These are at the Higher End and the Lower End of the centre. The two stores are facing competition from supermarkets and the internet. Over the last few years, the financial performance of both stores has declined. The directors of Shajah Music Limited have decided to close one store.

Information and figures for the two stores for the year ended 31 December 2012 are shown below: Higher End � The store building is owned by Shajah Music Limited. � The store has two staff members who are each paid a salary of £6 350 per year. � Other fixed costs total £12 500 per year. � Variable costs are purchasing CDs for £3 each. � The store sells the CDs for a full price of £11 each. � Last year the store sold 3 342 CDs. Lower End � This store is rented at a cost of £900 per month. � The store employs three staff: a manager whose salary is £9 500 per year, a full time

staff member whose salary is £6 500 per year, and a part time staff member whose salary is £2 500 per year.

� Other fixed costs total £11 800 per year. � Variable costs are purchasing CDs for £3 each. � The store heavily discounts the CDs and sells each CD for £6. � Last year the store sold 14 784 CDs.

When making a decision as to which store will close, the directors consider the break even point, the margin of safety, and the profit or loss of each store.

Required:

Two fixed costs of the stores are given as rent and salaries.

(a) (i) State four other examples of fixed costs faced by the stores.(2)

(ii) Define the term semi-variable costs and give two examples.(4)

(b) Calculate for each store, for the year ended 31 December 2012, the:

(i) break-even point figure in the number of CDs sold (8)

(ii) margin of safety in the number of CDs sold(4)

(iii) profit or loss.(6)

(c) Evaluate the information and figures calculated in (b) to decide which store should stay open, and which store should close.

(8)

(Total 32 marks)Answer space for question 6 is on pages 25 to 28 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 7

7. The directors of AED Engineering plc have agreed to purchase Machine Tools Limited, on 8 January 2013. The directors of AED Engineering plc agreed to take over all of the assets except the bank balance, and to settle all of the liabilities.

The balance sheet of Machine Tools Limited at 31 December 2012 showed: All assets £22 200 000 All liabilities £14 800 000

The following revaluations took place in the books of Machine Tools Limited on 6 January 2013, before the takeover:

� Inventory was written down by £620 000 to its net realisable value � Land was increased by 5% to a current market value of £4 410 000 � Motor vehicles with a carry over (net book value) of £310 000 were written down to a

value of £185 000 � Equipment with a carry over (net book value) of £175 000 was written down by £125 000 � An exact figure for Current Taxation Payable was agreed at £40 500, down from £49 800.

Additional information concerning Machine Tools Limited: � Bank balance £123 000 � Equity share capital £6 000 000, consisting of Ordinary shares of £1.20 each � For every £1.20 share held in Machine Tools Limited, each shareholder should receive:

- one £1 share in AED Engineering plc at a premium of £0.58 (the trading price is £1.58 a share) - £0.27 cash.

Required :

(a) Show the Journal entries to close the following accounts in the books of Machine Tools Limited, before any revaluations have taken place. Narratives are not required.

(i) Land (ii) Current Taxation payable (iii) Ordinary Shares of £1.20.

(8)

(b) Calculate the purchase price paid by AED Engineering plc for Machine Tools Limited.(6)

(c) Calculate the goodwill paid by AED Engineering plc in the purchase of Machine Tools Limited.(10)

(d) Evaluate the appropriateness of revaluing assets and liabilities before a takeover.(8)

(Total 32 marks)

Answer space for question 7 is on pages 29 to 32 of the question paper.

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Examiner’s use only

Team Leader’s use only

Surname Initial(s)

Signature

Centre No.

Candidate No.

Turn over

Question Leave Number Blank

1

2

3

4

5

6

7

Total

Paper Reference(s)

6001/01London Examinations GCEAccounting (Modular Syllabus)Advanced SubsidiaryUnit 1: The Accounting System and

CostingWednesday 15 May 2013 – MorningTime: 3 hours

Materials required for examination Items included with question papersNil Source booklet

Instructions to CandidatesIn the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. Check that you have the correct question paper.Answer FIVE questions, choosing TWO from Section A and THREE from Section B.Indicate which question you are answering by marking the box ( ).If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ).All calculations must be shown.Write your answers in the spaces provided in this question paper.Do not return the insert with the question paper.

Information for CandidatesThe marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 7 questions in this question paper. The total mark for this paper is 200. There are 36 pages in this question paper. Any blank pages are indicated.Calculators may be used.The source material for use with questions 1 to 7 is in the enclosed source booklet.

Advice to CandidatesWrite your answers neatly and in good English.

Paper Reference

6 0 0 1 0 1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

Printer’s Log. No.

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SECTION A

Answer TWO questions from this section.

If you answer question 1, put a cross in this box

Source material for question 1 is on pages 2 and 3 of the source booklet.

1. (a) Calculate Avar’s:

(i) capital at 1 May 2012

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(ii) revenue (sales) for the year ended 30 April 2013

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(iii) purchases for the year ended 30 April 2013.

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(b) Prepare the Wages account for the year ended 30 April 2013.

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(c) Prepare the:

(i) Statement of Comprehensive Income for the year ended 30 April 2013

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(ii) Statement of Financial Position at 30 April 2013.

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(d) Evaluate whether a sole trader such as Avar should maintain a full set of double entry accounts.

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(Total 52 marks)

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If you answer question 2, put a cross in this box

Source material for question 2 is on pages 4 and 5 of the source booklet.

2. (a) Prepare the Manufacturing Account for the year ended 30 April 2013, clearly showing the profit or loss on manufacture.

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(b) Calculate, for the year ended 30 April 2013, the:

(i) Prime cost of producing one pack of vegetable burgers

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(ii) Production cost of producing one pack of vegetable burgers

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(c) State one reason why Giant Burgers may wish to transfer production to finished goods at an agreed transfer price.

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(d) Prepare the Statement of Comprehensive Income for the year ended 30 April 2013.

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(e) Explain why the depreciation recorded in the Statement of Comprehensive Income is an example of both the going concern and the consistency accounting concepts.

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Tulip Supermarkets has offered to double its order to 152 000 packs next year if Giant Burgers increases the trade discount on the total order to 35%.

(f) Evaluate this offer from Tulip Supermarkets.

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(Total 52 marks)

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If you answer question 3, put a cross in this box

Source material for question 3 is on pages 6 and 7 of the source booklet.

3. (a) Prepare the Journal entries to correct items (1) to (6) above. Narratives are not required.

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(b) Calculate the revised surplus/deficit for the year ended 30 April 2013.

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(c) Prepare the Statement of Financial Position at 30 April 2013.

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The Committee of Arena Sports Club has decided to offer a 10 year membership at the rate of £700 per member in the year ending 30 April 2014. The current annual membership subscription is £100 per member.

It is estimated that the offer will be accepted by 30 members, who have not yet paid their annual subscriptions for the year ending 30 April 2014.

(d) Calculate the net effect that this proposal would have upon the:

(i) subscriptions recorded in the Income and Expenditure Account for the year ending 30 April 2014

(ii) bank balance recorded in the Statement of Financial Position at 30 April 2014.

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(e) Prepare the 10 year Membership Subscription Account as it will appear for the year ending 30 April 2014.

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(f) Evaluate the Committee of Arena Sports Club’s decision to offer a 10 year membership for £700.

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TOTAL FOR SECTION A: 104 MARKS

Q3

(Total 52 marks)

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SECTION B

Answer THREE questions from this section.

If you answer question 4, put a cross in this box

Source material for question 4 is on pages 8 and 9 of the source booklet.

4. (a) Explain how a loan made by a partner, over and above the agreed capital, will be treated in the financial statements.

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(b) Prepare, for the year ended 31 March 2013, the:

(i) appropriation section of the Statement of Comprehensive Income

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(ii) Capital Account of Chung

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(iii) Current Account of Chung.

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(c) Evaluate the need for a partnership agreement.

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(Total 32 marks)

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If you answer question 5, put a cross in this box

Source material for question 5 is on pages 10 and 11 of the source booklet.

5. (a) Distinguish between inventory rotation and inventory valuation.

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(b) Calculate the value of the closing inventory at 31 March 2013.

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(c) Prepare the Statement of Comprehensive Income for the three months ended 31 March 2013.

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Home Oil has been considering changing the method of inventory valuation to Last In First Out (LIFO) perpetual inventory.

(d) (i) Calculate the value of the inventory at 31 March 2013 if the Last in First Out (LIFO) perpetual inventory method had been used.

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(ii) State the effect on the gross profit if Home Oil had used the Last In First Out (LIFO) method.

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(e) Evaluate the potential effect of the change to Last In First Out (LIFO) perpetual inventory.

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Q5

(Total 32 marks)

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If you answer question 6, put a cross in this box

Source material for question 6 is on pages 12 and 13 of the source booklet.

6. (a) Prepare for Shopalot, for the year ended 30 April 2013, the:

(i) Statement of Comprehensive Income

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(ii) summarised Bank Account.

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(b) Prepare the Statement of Financial Position extract, showing the Non-current Assets and Current Assets sections only.

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(c) Calculate the return on capital employed for Shopalot.

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(d) Evaluate the financial position of Shopalot.

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(Total 32 marks)

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If you answer question 7, put a cross in this box

Source material for question 7 is on pages 14 and 15 of the source booklet.

7. (a) Calculate the:

(i) Current ratio

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(ii) Liquid (acid test) ratio.

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(b) Comment upon the adequacy of the ratios in (a) above.

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(c) Complete the following chart in the answer booklet, showing the effect of each of these actions upon the:

(i) Current Assets (ii) Current Liabilities

Current Assets Current Liabilities

plus/minus/no effect Value (£) plus/minus/no effect Value (£)

Action 1

Action 2

Action 3

(12)

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(d) Prepare the Statement of Financial Position extract at 31 March 2013 of Adnam, showing the (i) Current Assets and (ii) Current Liabilities if all the Actions 1 to 3 were implemented.

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(e) Evaluate the financial position of Adnam after implementing Actions 1 to 3.

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TOTAL FOR SECTION B: 96 MARKSTOTAL FOR PAPER: 200 MARKS

END

Q7

(Total 32 marks)

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Paper Reference(s)

6001/01London Examinations GCEAccounting (Modular Syllabus)Advanced SubsidiaryUnit 1 – The Accounting System and

CostingWednesday 15 May 2013 – Morning

Source booklet for use with Questions 1 to 7.

Do not return the insert with the question paper.

Printer’s Log. No.

P42291A

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

W850/6001/57570 1/1/1

*P42291A*

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SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Avar is in business wholesaling high quality clothing. She does not maintain a full set of accounts but does maintain a bank account together with other memorandum records. The following information is available for the year ended 30 April 2013:

1. Bank account £ £ Cash sales banked 13 100 Balance b/d 6 000 Cheques from customers 65 300 Payments to suppliers 46 200 Sale of fixtures and fittings 600 Loan repayment 2 000 Fixtures and fittings 8 200 Wages 24 000 Rent and rates 6 600 Balance c/d 17 300 Sundry expenses 3 300 96 300 96 300 Balance b/d 17 300

2. Avar paid the following from cash sales before banking:

£ Wages 4 800 Cleaning of premises 6 000 New computer 1 800 Drawings 5 000

3. Contained within the wages recorded in the bank account were £2 500 of Avar’s drawings.

4. Other balances:

At 1 May 2012 At 30 April 2013 £ £ Inventory 17 750 20 350 5% Bank loan 10 000 8 000 Trade receivables 23 400 29 600 Trade payables 19 000 21 800 Wages prepaid 850 - Wages accrued - 1 450 Computer equipment (at valuation) 5 000 5 100 Fixtures and fittings (at valuation) 11 000 14 000

5. The 5% bank loan was taken out on 1 November 2011. Repayment is by five equal annual amounts on 1 November of each year. No interest has been paid on the outstanding loan for the year ended 30 April 2013.

6. The Bank Statement received from the bank showed an entry of £620 for bank overdraft charges. No entries for these charges had been made in Avar’s bank account.

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7. During the year a debtor who had bought goods in September 2012 was unable to pay her debt. Avar received a cheque for £800 in February 2013, being a payment of £0.25 for every £1 of debt. The balance was immediately written off as irrecoverable.

8. A 5% provision for doubtful debts is to be created on trade receivables at 30 April 2013.

Required:

(a) Calculate Avar’s:

(i) capital at 1 May 2012(3)

(ii) revenue (sales) for the year ended 30 April 2013(5)

(iii) purchases for the year ended 30 April 2013.(3)

(b) Prepare the Wages account for the year ended 30 April 2013.(6)

(c) Prepare the:

(i) Statement of Comprehensive Income for the year ended 30 April 2013(15)

(ii) Statement of Financial Position at 30 April 2013.(12)

(d) Evaluate whether a sole trader such as Avar should maintain a full set of double entry accounts.(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Giant Burgers is in business manufacturing and selling packs of vegetable burgers. The following balances were available for the year ended 30 April 2013:

£ Purchases of raw materials 62 000 Production wages 280 000 Salaries – Production management 53 000 Administration staff 84 500 Machinery and equipment repairs 28 650 Packaging 27 000 Marketing 52 900 Rent and rates 22 000 Electricity and gas 15 500 Sundry expenses – Production 18 750 Administration 26 000 Non-current assets (at cost): Machinery and equipment 125 000 Fixtures and fittings 80 000 Provisions for depreciation: Machinery and equipment 75 000 Fixtures and fittings 14 000 Inventory at 1 May 2012: Raw materials 4 500 Work in progress 6 000 Finished goods 12 000 packs of 24 000

Additional information at 30 April 2013:

1. Inventory: Raw materials £7 500 Work in progress £4 000 Finished goods 18 000 packs at transfer value

2. On 1 January 2013 packaging was purchased for £12 000. Half of this packaging remained on hand at 30 April 2013.

3. Electricity and gas of £500 is accrued. Marketing of £1 800 is prepaid.

4. Rent and rates, electricity and gas are to be apportioned 70% to production and 30% to administration.

5. Depreciation is charged as follows:

Machinery and equipment 30% per annum reducing balance method Fixtures and fittings 15% per annum straight line method.

6. During the year 288 000 packs of vegetable burgers were produced and transferred to finished goods at an agreed transfer value of £2 per pack.

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7. Giant Burgers markets vegetable burgers for £3 per pack. Sales were made to three types of customer and were as follows:

Farmers’ markets 66 000 packs at £3 per pack Sales on internet 140 000 packs at £3 per pack less 10% trade discount Tulip Supermarkets 76 000 packs at £3 per pack less 25% trade discount

Required:

(a) Prepare the Manufacturing Account for the year ended 30 April 2013, clearly showing the profit or loss on manufacture.

(14)

(b) Calculate, for the year ended 30 April 2013, the:

(i) Prime cost of producing one pack of vegetable burgers(3)

(ii) Production cost of producing one pack of vegetable burgers.(3)

(c) State one reason why Giant Burgers may wish to transfer production to finished goods at an agreed transfer price.

(2)

(d) Prepare the Statement of Comprehensive Income for the year ended 30 April 2013. (18)

(e) Explain why the depreciation recorded in the Statement of Comprehensive Income is an example of both the going concern and the consistency accounting concepts.

(4)

Tulip Supermarkets has offered to double its order to 152 000 packs next year if Giant Burgers increases the trade discount on the total order to 35%.

(f) Evaluate this offer from Tulip Supermarkets. (8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 15 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 3

3. The following balances remained in the books of Arena Sports Club after completion of the Income and Expenditure Account for the year ended 30 April 2013:

£ Accumulated fund 25 400 Surplus of income over expenditure 900 Clubhouse (at cost) 30 000 Provision for depreciation of clubhouse 4 200 Equipment (at cost) 4 500 Provision for depreciation of equipment 1 100 Subscriptions in arrears 220 Subscriptions in advance 1 400 Trade payables 8 700 Inventory of refreshments 1 700 Bank 5 100 Dr Other payables – sundry expenses 600 Suspense account 780 Dr

After completion of the Income and Expenditure Account the following were discovered:

1. A payment of £790 to a creditor, Eastern Drinks, had been correctly recorded in the Bank Account, but had been recorded as £610 in the Eastern Drinks Account.

2. An entry for cash sales of refreshments, £1 850, had been correctly entered in the Revenue (Sales) Account, but recorded as £1 250 in the Bank Account.

3. A credit purchase of equipment from ESB Sports, £1 500, had been omitted from the books. Depreciation of £300 would be chargeable at 30 April 2013 on this equipment.

4. A cheque for £100 for a subscription paid in advance had been dishonoured by the Bank.

5. An invoice from Mali Supplies for sundry expenses, £3 090, was received on 5 May 2013. The sundry expenses related to the year ended 30 April 2013.

6. A stock sheet of refreshments, £630, had been omitted from the inventory count (stock take) on 30 April 2013.

Required:

(a) Prepare the Journal entries to correct items (1) to (6) above. Narratives are not required.(14)

(b) Calculate the revised surplus/deficit for the year ended 30 April 2013.(6)

(c) Prepare the Statement of Financial Position at 30 April 2013.(15)

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The Committee of Arena Sports Club has decided to offer a 10 year membership at the rate of £700 per member in the year ending 30 April 2014. The current annual membership subscription is £100 per member.

It is estimated that the offer will be accepted by 30 members, who have not yet paid their annual subscriptions for the year ending 30 April 2014.

(d) Calculate the net effect that this proposal would have upon the:

(i) subscriptions recorded in the Income and Expenditure Account for the year ending 30 April 2014

(ii) bank balance recorded in the Statement of Financial Position at 30 April 2014.(4)

(e) Prepare the 10 year Membership Subscription Account as it will appear for the year ending 30 April 2014.

(5)

(f) Evaluate the Committee of Arena Sports Club’s decision to offer a 10 year membership for £700.

(8)

(Total 52 marks)

Answer space for question 3 is on pages 16 to 20 of the question paper.

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SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Ashraf, Bashar and Chung are in partnership. The partnership agreement states:

� Interest is charged on drawings at the rate of 4% per annum � Interest is paid on capital at the rate of 6% per annum � Chung is entitled to a salary of £16 000 per annum � The residue of profits or losses is shared in the ratio 4:2:3.

The following information is available for the year ended 31 March 2013:

1. Balances 1 April 2012:

Capital accounts Current accounts £ £ Ashraf 25 000 1 420 Cr Bashar 15 000 860 Cr Chung 50 000 200 Dr

2. Drawings (excluding salary paid) for the year:

£ Ashraf 9 000 Bashar 3 500 Chung 4 000

3. Halfway through the year, on 30 September 2012, Chung decided to reduce his involvement in the partnership. The partners agreed that:

� Chung would reduce his capital to £30 000, withdrawing £8 000 by cheque. The other £12 000 would remain in the partnership as a loan receiving 5% interest per annum

� Chung would no longer receive a salary � The new ratio for sharing profits and losses would be 2:2:1 � All partners would continue to be charged interest on drawings at the rate of 4% per annum

and receive interest on capital at 6% per annum.

4. The profit for the year was £30 140, after charging interest on the loan from Chung. The profit was generated evenly throughout the year.

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Required:

(a) Explain how a loan made by a partner, over and above the agreed capital, will be treated in the financial statements.

(4)

(b) Prepare, for the year ended 31 March 2013, the:

(i) appropriation section of the Statement of Comprehensive Income(15)

(ii) Capital Account of Chung(3)

(iii) Current Account of Chung.(6)

(c) Evaluate the need for a partnership agreement.(4)

(Total 32 marks)

Answer space for question 4 is on pages 21 to 24 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Home Oil buys and sells heating oil. The following purchases and sales of oil took place in the three months ended 31 March 2013:

1 January Balance b/d 8 000 litres @ £0.80 per litre

January Purchases 15 000 litres @ £1.00 per litre Sales 12 000 litres

February Purchases 15 000 litres @ £1.25 per litre Sales 16 000 litres

March Purchases 12 000 litres @ £1.50 per litre Sales 8 000 litres

Additional information for the three months ended 31 March 2013:

1. Home Oil marked up the cost of the heating oil to cover distribution costs and administration costs. Home Oil sold to customers at the following rates:

January £1.50 per litre February £1.75 per litre March £2.00 per litre

2. Home Oil uses the First In First Out (FIFO) perpetual inventory method of inventory valuation

3. Distribution costs were £4 750. Administration costs were £8 300.

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Required:

(a) Distinguish between inventory rotation and inventory valuation.(4)

(b) Calculate the value of the closing inventory at 31 March 2013.(6)

(c) Prepare the Statement of Comprehensive Income for the three months ended 31 March 2013.(10)

Home Oil has been considering changing the method of inventory valuation to Last In First Out (LIFO) perpetual inventory.

(d) (i) Calculate the value of the inventory at 31 March 2013 if the Last in First Out (LIFO) perpetual inventory method had been used.

(6)

(ii) State the effect on the gross profit if Home Oil had used the Last In First Out (LIFO) method.

(2)

(e) Evaluate the potential effect of the change to Last In First Out (LIFO) perpetual inventory.(4)

(Total 32 marks)

Answer space for question 5 is on pages 25 to 28 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Shopalot purchased a building which it converted into a shopping centre with ten separate shops of equal floor area. The building also has walkways and seating areas between the shops.

On 30 April 2013 Shopalot completed its first year of trading. The following information is available:

1. Purchase price of the building £500 000 Conversion of the building £200 000 Purchase of computer network £150 000

2. On 1 May 2012, Shopalot invested £400 000 cash and obtained a 10 year 8% Bank loan of £550 000. Interest is charged on the loan on 30 April each year.

3. Nine of the ten shops were rented out throughout the year. The tenth shop was unoccupied throughout the year.

4. Shopalot received the following income:

� Rental of £4 000 per quarter (three months) per shop � A service charge of £1 500 per quarter (three months) per occupied shop for security and

cleaning � 2% of the revenue (sales) of each shop

5. The total revenue (sales) of the nine occupied shops for the year was £1 350 000.

6. Depreciation was charged as follows:

� Building – 2% per annum straight line method � Conversion of building – equal instalments over a 10 year period � Computer network – 30% reducing balance method

7. Other expenses paid:

£ Security 30 000 Cleaning 21 000 Administration 24 500 Electricity 9 700 Government rates 17 500

8. On 30 April 2013 the following were owing to Shopalot:

� Rent by two shops for the last quarter (three months) of the year � Service charge by two shops for the last quarter (three months) of the year

9. On 30 April 2013 the following was owed by Shopalot:

� Government rates £9 000.

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Required:

(a) Prepare for Shopalot, for the year ended 30 April 2013, the:

(i) Statement of Comprehensive Income(12)

(ii) summarised Bank Account.(8)

(b) Prepare the Statement of Financial Position extract, showing the Non-current Assets and Current Assets sections only.

(4)

(c) Calculate the return on capital employed for Shopalot.(4)

(d) Evaluate the financial position of Shopalot. (4)

(Total 32 marks)

Answer space for question 6 is on pages 29 to 32 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Adnam buys and sells goods on credit. The following balances were available at 31 March 2013:

£ Capital 35 000 Inventory 37 000 Trade payables 35 000 Trade receivables 13 000 Non-current assets 25 000 Bank overdraft 5 000

Adnam used a mark-up of 50% for the year ended 31 March 2013.

Required:

(a) Calculate the:

(i) Current ratio(3)

(ii) Liquid (acid test) ratio.(3)

(b) Comment upon the adequacy of the ratios in (a) above.(2)

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Creditors are threatening to withhold supplies of inventory unless Adnam reduces his debt to them. He proposes the following actions:

Action 1 Hold a sale of inventory by reducing his mark-up to 25%. He estimates that revenue (sales) will be £20 000, half of which will be on credit and half paid by cheque.

Action 2 Offer trade receivables at 31 March 2013 a cash discount of 10%. He estimates that trade receivables of £5 000 will accept the offer.

Action 3 Pay trade payables valued at £12 000, less 5% cash discount.

Required:

(c) Complete the following chart in the answer booklet, showing the effect of each of these actions upon the:

(i) Current Assets (ii) Current Liabilities

Current Assets Current Liabilities

plus/minus/no effect Value (£) plus/minus/no effect Value (£)

Action 1

Action 2

Action 3

(12)

(d) Prepare the Statement of Financial Position extract at 31 March 2013 of Adnam, showing the (i) Current Assets and (ii) Current Liabilities if all the Actions 1 to 3 were implemented.

(8)

(e) Evaluate the financial position of Adnam after implementing all the Actions 1 to 3.(4)

(Total 32 marks)

Answer space for question 7 is on pages 33 to 36 of the question paper.

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Examiner’s use only

Team Leader’s use only

Surname Initial(s)

Signature

Centre No.

Candidate No.

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Question Leave Number Blank

1

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7

Total

Paper Reference(s)

6002/01London Examinations GCEAccounting (Modular Syllabus)AdvancedUnit 2: Corporate and Management

AccountingWednesday 12 June 2013 – MorningTime: 3 hours

Materials required for examination Items included with question papersNil Source booklet

Instructions to CandidatesIn the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. Answer FIVE questions, choosing TWO from Section A and THREE from Section B.Indicate which question you are answering by marking the box ( ).If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ).All calculations must be shown.Write your answers in the spaces provided in this question paper.Do not return the insert with the question paper.

Information for CandidatesThe marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 7 questions in this question paper. The total mark for this paper is 200.There are 36 pages in this question paper. Any blank pages are indicated.Calculators may be used.The source material for use with questions 1 to 7 is in the enclosed source booklet.

Advice to CandidatesWrite your answers neatly and in good English.

Paper Reference

6 0 0 2 0 1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

Printer’s Log. No.

P42292AW850/6002/57570 1/1/1/1

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SECTION A

Answer TWO questions from this section.

If you answer question 1, put a cross in this box

Source material for question 1 is on pages 2 and 3 of the source booklet.

1. (a) Using only the appropriate balances and adjustments, prepare the Statement of Comprehensive Income for Hong Kong Cameras plc for the year ended 31 March 2013, using International Accounting Standard (IAS) 1.

You must show all workings clearly labelled in arriving at your figures to be entered in the Statement of Comprehensive Income.

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(b) Evaluate the usefulness of the Auditors’ Report to the users of the published accounts of Hong Kong Cameras plc.

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(Total 52 marks)

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If you answer question 2, put a cross in this box

Source material for question 2 is on pages 4 and 5 of the source booklet.

2. (a) Prepare for management, in columnar format, a Statement of Comprehensive Income for the year ended 31 March 2013, showing:

(i) marginal costing inventory valuation (ii) absorption costing inventory valuation

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In March 2013, a possible customer is interested in buying the product, but is only prepared to offer £15 per unit.

(b) Advise the management of Chandpur Sounds Limited whether this offer should be accepted.

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(c) (i) Advise the management of Chandpur Sounds Limited which Option they should accept, if output is expected to be 84 000 units for the year starting 1 April 2013.

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(7)

(ii) Which Option would be the best option for Chandpur Sounds Limited, if output were greater or less than 84 000 units for the year starting 1 April 2013?

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(d) Evaluate whether Chandpur Sounds Limited should use marginal costing or absorption costing to value inventory.

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(Total 52 marks)

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If you answer question 3, put a cross in this box

Source material for question 3 is on pages 6 and 7 of the source booklet.

3. (a) Prepare the Statement of Cash Flows for the year ended 31 March 2013 for Larnaca Distributors plc in accordance with International Accounting Standard (IAS) 7 Statement of Cash Flows.

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(b) Evaluate the current liquidity position of Larnaca Distributors plc.

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TOTAL FOR SECTION A: 104 MARKS

Q3

(Total 52 marks)

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SECTION B

Answer THREE questions from this section.

If you answer question 4, put a cross in this box

Source material for question 4 is on pages 8 and 9 of the source booklet.

4. (a) How many trays of fruit a month must Sunny Kipwat sell, in order to break even?

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(b) How much profit will Sunny Kipwat make in one month?

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Sunny Kipwat stated “I would like to make a profit of £2 000 a month. If all other costs and my selling price remain the same, how much must I pay my workers per tray of fruit, in order to make a profit of £2 000 a month?”

(c) Calculate how much Sunny Kipwat would need to pay his workers per tray of fruit, to make a profit of £2 000 per month.

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(d) Evaluate whether it would be advisable to pay direct labour a lower rate per tray, for Sunny Kipwat to achieve a profit of £2 000 per month.

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(Total 32 marks)

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If you answer question 5, put a cross in this box

Source material for question 5 is on pages 10 and 11 of the source booklet.

5. (a) Calculate the following ratios, stating the formula used in each case:

(i) Dividend per share

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(ii) Dividend yield

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(iii) Dividend cover

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(iv) Earnings per share

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(v) Price/Earnings ratio

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Jahingar, the uncle of Imran, is also interested in investing in shares and has given Imran the following advice.

“Do not buy the shares in Bengal Life plc at a market price of £2.00. You should buy the shares in Oceanic Assurance at £2.25. They have a higher share price, so they must be a better share.”

Required:

(b) Advise Imran as to the value of this statement.

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Jahingar also states “There is only one ratio that is important and worth knowing about, and that is the dividend per share”.

(c) Evaluate this statement on behalf of Imran.

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(Total 32 marks)

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If you answer question 6, put a cross in this box

Source material for question 6 is on pages 12 and 13 of the source booklet.

6. (a) Prepare, for the first three months of trading for Venture Vending Limited, the following budgets:

(For each of the three months, the budgets should show total figures for EACH month, NOT weekly figures.)

(i) A sales budget in units of vending machines sold.

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(ii) A production budget in units of vending machines produced.

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(iii) An inventory budget in units of vending machines. The budget is to show the number of units going to inventory each month, and the total number of units in inventory at the end of each month.

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(iv) A purchases budget in units.

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(v) A purchases budget in pounds (£s)

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(vi) A trade payables budget in pounds (£s) showing the trade payables figure at the end of each month.

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(vii) A trade receivables budget in pounds (£s) showing the trade receivables figure at the end of each month.

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At the end of Month 1, actual sales of vending machines have only been half (50%) of budgeted sales.

(b) Evaluate whether Venture Vending Limited should draw up a new set of budgets to replace the existing budgets for Months 2 and 3.

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(Total 32 marks)

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If you answer question 7, put a cross in this box

Source material for question 7 is on pages 14 and 15 of the source booklet.

7. (a) Calculate for the month of April 2013, total expenditure on:

(i) direct material (ii) direct labour.

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(b) Calculate for the month of April 2013 the:

(i) material usage variance (ii) material price variance (iii) total material cost variance.

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(c) Suggest one reason for each of the following variances and explain the actions Vandeloos Fencing Limited could take on the:

(i) material usage variance (ii) material price variance.

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Vandeloos Fencing Limited applied management by exception to the figures for April 2013. The cost accountant decided to ignore the labour variance, but to investigate the material variance.

(d) Evaluate the decision of the cost accountant to ignore the labour variance, but to investigate the material variance.

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TOTAL FOR SECTION B: 96 MARKSTOTAL FOR PAPER: 200 MARKS

END

Q7

(Total 32 marks)

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Paper Reference(s)

6002/01London Examinations GCEAccounting (Modular Syllabus)AdvancedUnit 2 – Corporate and

Management AccountingWednesday 12 June 2013 – Morning

Source booklet for use with Questions 1 to 7.

Do not return the insert with the question paper.

Printer’s Log. No.

P42292A

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.

W850/6002/57570 1/1/1/1

*P42292A*

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SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Hong Kong Cameras plc produces cameras at its factory. The cameras are then delivered to Hong Kong Cameras plc shops, where they are sold to customers.

At 31 March 2013, the following balances were in the books:

Debit£

Credit£

Bad debts written off 1 850

Bank 38 762

Commission on sales 52 750

Corporation tax provision 90 000

7% Debentures 2018 500 000

Direct materials 320 855

Directors’ salaries 290 000

Discount allowed 45 997

Discount received on materials 7 150

Factory buildings (at cost) 3 840 000

Factory machinery (at cost) 365 000

Factory power 48 950

Fuel for lorries 35 460

Interest on bank balance 2 836

Inventory of finished goods at 1 April 2012 134 800

Maintenance of machinery 44 780

Motor lorries (at cost) 172 000

Office stationery 3 865

Ordinary shares of £1 each 1 500 000

Promotions and advertising 65 000

Rent on shop premises 298 000

Retained earnings 369 629

Revenue (sales) 4 183 693

Running costs of motor lorries 36 880

Trade payables 21 100

Trade receivables 17 459

Wages 862 000

6 674 408 6 674 408

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Adjustments and additional information at 31 March 2013:

� Inventory of finished goods £138 400 � Inventory of office stationery £571 � Interest on bank balance has £242 outstanding � Directors’ salaries include:

Finance director £95 000

Production director £95 000

Sales director £100 000

� Factory power includes £4 000 paid in advance � Wages include

Accountancy staff £71 800

Production staff £339 100

Office staff £141 200

Shop staff £197 500

Transport staff £112 400

� Assuming a nil residual value in each case and using the straight line method:

– the factory buildings are to be depreciated over a 50 year life – factory machinery is to be depreciated over an eight year life – motor lorries are to be depreciated over a four year life.

Required:

(a) Using only the appropriate balances and adjustments, prepare the Statement of Comprehensive Income for Hong Kong Cameras plc for the year ended 31 March 2013, using International Accounting Standard (IAS) 1.

You must show all workings clearly labelled in arriving at your figures to be entered in the Statement of Comprehensive Income.

(40)

(b) Evaluate the usefulness of the Auditors’ Report to the users of the published accounts of Hong Kong Cameras plc.

(12)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 7 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Chandpur Sounds Limited produces speakers for home music systems. It has been normal practice by senior management to ask the accountant to value inventory using both the marginal costing method and the absorption costing method.

The following information is available for the year ended 31 March 2013:

Opening inventory 2 100 units Opening inventory value: Marginal costing £25 200 Absorption costing £33 600 Production 84 000 units per year Semi-Variable costs £202 800 fixed element per year plus £0.70 per unit of production Fixed overheads £12 500 per month Direct materials £6.90 per unit Direct labour 40 minutes work per unit at a wage rate of £6.90 per hour Selling price £25 per unit Closing inventory 2 450 units

Required:

(a) Prepare for management, in columnar format, a Statement of Comprehensive Income for the year ended 31 March 2013, showing:

(i) marginal costing inventory valuation (ii) absorption costing inventory valuation

(20)

In March 2013, a possible customer is interested in buying the product, but is only prepared to offer £15 per unit.

Required:

(b) Advise the management of Chandpur Sounds Limited whether this offer should be accepted. (8)

The semi-variable costs above are charged by a power company. The power company has informed Chandpur Sounds Limited that, from 1 April 2013, the charges for power will change. They have offered Chandpur Sounds Limited the choice of three options.

The three options are:

Option 1 A fixed rate of £23 000 per month Option 2 An increase in the fixed element of £202 800 per year by 5%, with the variable charge to

remain at £0.70 per unit of production. Option 3 A monthly charge of £16 200, plus a variable charge of £0.90 per unit of production.

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Required:

(c) (i) Advise the management of Chandpur Sounds Limited which Option they should accept, if output is expected to be 84 000 units for the year starting 1 April 2013.

(7)

(ii) Which Option would be the best option for Chandpur Sounds Limited, if output were greater or less than 84 000 units for the year starting 1 April 2013?

(5)

(d) Evaluate whether Chandpur Sounds Limited should use marginal costing or absorption costing to value inventory.

(12)

(Total 52 marks)

Answer space for question 2 is on pages 8 to 13 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 3

3. The Statements of Financial Position of Larnaca Distributors plc at 31 March 2012 and 31 March 2013 were as follows:

31 March 2012 31 March 2013ASSETS £ £

Non-current assets

Non-current assets at cost 800 000 720 000

Provision for depreciation (400 000) (388 000)

400 000 332 000

Current assets

Inventories 323 000 346 000

Trade and Other receivables 197 000 212 000

Cash and cash equivalents 77 000 71 000

597 000 629 000

Total Assets 997 000 961 000

EQUITY AND LIABILITIESEquity

Share capital – £1 Ordinary shares 500 000 550 000

Retained earnings 180 000 139 000

Total capital and reserves 680 000 689 000

Non-current liabilities

8% Debenture 2013 80 000 --------

Current liabilities

Trade and Other payables 219 000 270 000

Tax payable 18 000 2 000

237 000 272 000

Total Equity and Liabilities 997 000 961 000

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Additional information:

1. Motor vans bought for £140 000 were sold for £36 000 on 1 April 2012. The carry over (net book) value of these motor vans was £42 000.

2. Computers were bought for £60 000 on 1 April 2012 and are expected to last for three years, with no residual value.

3. At 15 May 2012 a final dividend of 5 pence per share was paid to shareholders.

4. An issue of 50 000 £1 Ordinary shares at par was made on 1 October 2012. All shares were purchased and have been fully paid.

5. At 30 March 2013, an interim dividend of 4 pence per share was paid to all Ordinary shareholders.

6. The £80 000 8% Debenture was repaid on 31 March 2013.

7. Operating profit before tax for the year ended 31 March 2013 was £8 000

Required:

(a) Prepare the Statement of Cash Flows for the year ended 31 March 2013 for Larnaca Distributors plc in accordance with International Accounting Standard (IAS) 7 Statements of Cash Flows.

(40)

(b) Evaluate the current liquidity position of Larnaca Distributors plc. (12)

(Total 52 marks)

Answer space for question 3 is on pages 14 to 18 of the question paper.

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SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. You are in practice as an accountant and have a meeting with a client, Sunny Kipwat, who owns a fruit-growing business.

The accounts of Sunny Kipwat show:

1. Rent of land is £1 560 per quarter (3 months)

2. Direct labour is £1.05 per tray of fruit

3. Water bill is £250 a month plus £0.06 per tray of fruit

4. Insurance for the year is £1 080

5. A motor van was purchased at a cost of £13 160. The motor van has a life of 8 years and a residual value of £200. Depreciation is to be charged on a straight-line basis.

6. Delivery costs per tray are £0.27

7. Loan interest and repayment is £270 per month

8. Selling price of a tray of fruit is £4.15

9. Sales are 283 trays per week. All production is sold.

Assume there are four weeks in a month.

Required:

(a) How many trays of fruit a month must Sunny Kipwat sell, in order to break even?(12)

(b) How much profit will Sunny Kipwat make in one month?(4)

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Sunny Kipwat stated “I would like to make a profit of £2 000 a month. If all other costs and my selling price remain the same, how much must I pay my workers per tray of fruit, in order to make a profit of £2 000 a month?”

Required:

(c) Calculate how much Sunny Kipwat would need to pay his workers per tray of fruit, to make a profit of £2 000 per month.

(8)

(d) Evaluate whether it would be advisable to pay direct labour a lower rate per tray, for Sunny Kipwat to achieve a profit of £2 000 per month.

(8)

(Total 32 marks)

Answer space for question 4 is on pages 19 to 22 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Imran Mohammad studies reports and company accounts on the internet, to decide whether to invest in shares in a company. He is considering investing in Bengal Life plc, a life assurance company. Imran has managed to find the following information from the reports and company accounts:

Authorised share capital: £80 000 000 in Ordinary shares of £2.50 each £20 000 000 in 4% Redeemable Preference shares of £1each Issued share capital: £60 000 000 in Ordinary shares of £2.50 each £20 000 000 in 4% Redeemable Preference shares of £1each

Profit for the year after tax £3 104 000 Total ordinary dividend paid £960 000 Redeemable Preference share dividend was paid in full. Market price of Ordinary shares £2.00

Imran would like further information to decide whether to invest in this company.

Required:

(a) Calculate the following ratios, stating the formula used in each case:

(i) Dividend per share(4)

(ii) Dividend yield (4)

(iii) Dividend cover (4)

(iv) Earnings per share (4)

(v) Price/Earnings ratio (4)

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P42292A 11 Turn over

Jahingar, the uncle of Imran, is also interested in investing in shares and has given Imran the following advice.

“Do not buy the shares in Bengal Life plc at a market price of £2.00. You should buy the shares in Oceanic Assurance at £2.25. They have a higher share price, so they must be a better share.”

Required:

(b) Advise Imran as to the value of this statement.(4)

Jahingar also states “There is only one ratio that is important and worth knowing about, and that is the dividend per share”.

(c) Evaluate this statement on behalf of Imran. (8)

(Total 32 marks)

Answer space for question 5 is on pages 23 to 26 of the question paper.

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P42292A 12

SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Venture Vending Limited is to start a business producing vending machines. The following information is available:

� Sales are budgeted to be 5 vending machines a week, starting Week 3 in Month 1. In Month 2, sales are budgeted to be 8 machines a week. In Month 3, sales are expected to rise to 12 machines a week. Sales are expected to stay at this level in future months. Each vending machine sells for £2 450.

� Production will start in Week 2 in Month 1. For Month 1, production will be 7 vending machines per week. In Month 2, production will be 10 machines a week. In Month 3, the number of vending machines produced each week will be equal to sales in the following week. Any vending machines produced but not sold each week will be put into inventory in the warehouse.

� Materials for production will be delivered from Week 1 in Month 1. Each week, the materials delivered are the materials needed for production in the following week. Each vending machine requires £675 of materials.

� Materials are budgeted to be paid for 2 weeks after delivery. For example, materials delivered in Week 1 in Month 1, will be paid for in Week 3 Month 1.

� Customers are budgeted to pay 3 weeks after a sale. For example, a vending machine sold in Week 3 Month 1, will be paid for in Week 2 Month 2.

� Assume 4 weeks in each month.

Required:

(a) Prepare, for the first three months of trading for Venture Vending Limited, the following budgets:

For each of the three months, the budgets should show total figures for EACH month, NOT weekly figures.

(i) A sales budget in units of vending machines sold.(3)

(ii) A production budget in units of vending machines produced.(3)

(iii) An inventory budget in units of vending machines. The budget is to show the number of units going to inventory each month, and the total number of units in inventory at the end of each month.

(6)

(iv) A purchases budget in units.(3)

(v) A purchases budget in pounds (£s).(3)

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P42292A 13 Turn over

(vi) A trade payables budget in pounds (£s) showing the trade payables figure at the end of each month.

(3)

(vii) A trade receivables budget in pounds (£s) showing the trade receivables figure at the end of each month.

(3)

At the end of Month 1, actual sales of vending machines have only been half (50%) of budgeted sales.

Required:

(b) Evaluate whether Venture Vending Limited should draw up a new set of budgets to replace the existing budgets for Months 2 and 3.

(8)

(Total 32 marks)

Answer space for question 6 is on pages 27 to 29 of the question paper.

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P42292A 14

SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Vandeloos Fencing Limited produces wooden fence panels. Vandeloos Fencing Limited uses a standard costing system and management by exception.

The budget and some actual figures for production for April 2013 were:

Budget Actual

Production (units) 1 265 1 265

Direct Materials £4 554 ?

Direct Labour £8 870 ?

� Each fence panel was budgeted to use 8 square metres of material in production but the actual usage was 8.14 square metres

� The budgeted price of material was £0.45 per square metre, but the actual price paid was £0.51 per square metre

� 11 workers were employed and each worker produced the budgeted figure of 115 fence panels per month

� To produce the output, each worker was budgeted to work 42 hours per week for each of the 4 weeks in the month. Actual hours worked were 43.5 hours for each of the 4 weeks

� The budgeted labour wage rate was £4.80 per hour, and this was achieved.

Required:

(a) Calculate for the month of April 2013, total expenditure on:

(i) direct material (ii) direct labour.

(6)

(b) Calculate for the month of April 2013 the:

(i) material usage variance (ii) material price variance (iii) total material cost variance.

(10)

(c) Suggest one reason for each of the following variances and explain the actions Vandeloos Fencing Limited could take on the:

(i) material usage variance (ii) material price variance.

(8)

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P42292A 15

Vandeloos Fencing Limited applied management by exception to the figures for April 2013. The cost accountant decided to ignore the labour variance, but to investigate the material variance.

(d) Evaluate the decision of the cost accountant to ignore the labour variance, but to investigate the material variance.

(8)

(Total 32 marks)

Answer space for question 7 is on pages 30 to 33 of the question paper.

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BLANK PAGE

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Mark Scheme (Results) January 2013 GCE Accounting (6001/01)

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Edexcel and BTEC Qualifications Edexcel and BTEC qualifications come from Pearson, the world’s leading learning company. We provide a wide range of qualifications including academic, vocational, occupational and specific programmes for employers. For further information visit our qualifications websites at www.edexcel.com or www.btec.co.uk for our BTEC qualifications. Alternatively, you can get in touch with us using the details on our contact us page at www.edexcel.com/contactus. If you have any subject specific questions about this specification that require the help of a subject specialist, you can speak directly to the subject team at Pearson. Their contact details can be found on this link: www.edexcel.com/teachingservices. You can also use our online Ask the Expert service at www.edexcel.com/ask. You will need an Edexcel username and password to access this service. Pearson: helping people progress, everywhere Our aim is to help everyone progress in their lives through education. We believe in every kind of learning, for all kinds of people, wherever they are in the world. We’ve been involved in education for over 150 years, and by working across 70 countries, in 100 languages, we have built an international reputation for our commitment to high standards and raising achievement through innovation in education. Find out more about how we can help you and your students at: www.pearson.com/uk January 2013 Publications Code UA034163 All the material in this publication is copyright © Pearson Education Ltd 2013

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General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should be used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidate’s response is not worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification may be limited.

• When examiners are in doubt regarding the application of the mark scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it with an alternative response.

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Question Number

Answer Mark

1(a)(i) Journal Dr Cr £ £ Shop premises 250 000 √ Global Property 250 000 √ Bank 200 000 √ 6% Bank loan – Ascot bank 200 000 √ Arrangement fee expenses/Bank charges 4 250 √ Bank 4 250 √

Global Property 250 000 √ Bank 250 000 √

MAX 6 x √

(6)

Question Number

Answer Mark

1(a)(ii)

Organic Farm Shop Departmental Trading Account for the year ended 31 December 2012

Green Bakery The Café Grocery

£ £ £ Revenue 190 000 96 000 81 000√ Less Opening inventory 8 150 4 700 850 Plus Purchases 126 000 60 500 40 250 Internal transfers (5 700) (4 300) 10 000√√√(√ per entry) 128 450 60 900 51 100 Closing inventory (9 450) (3 600) (1 100) Cost of sales 119 000 57 300 50 000 √√(√of) Wages 32 000 21 000 16 000 √ 151 000 78 300 66 000 Trading/Gross profit 39 000 17 700 15 000 √of(if no aliens) 190 000 96 000 81 000 Note: Transfers must be stated before Trading/Gross profit for the marks.

(8)

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Question Number

Answer Mark

1(a)(iii) Statement of Comprehensive Income for the year ended 31 December 2012 £ £

Trading profit: Greengrocery 39 000 Bakery 17 700 The Café 15 000 71 700 √of Less Expenses: Manager’s salary 18 350 √ Electricity and gas 9 820 √ General running expenses (2 750 – 250) 2 500 √ Rent (8 100 + 1 800) 9 900 √√ Refurbishment – redecoration 5 000 √√ Depreciation – Equipment 3 600 √ Fixtures and fittings 2 000 √√ Bad debt 800 √ Increase in PDD 160 √ Loan arrangement fee 4 250 √ Loan interest 1 000 √√ 57 380 Profit for the year 14 320

(16)

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Question Number

Answer Mark

1(a)(iv) Statement of Financial Position at 31 December 2012

Cost Aggregate Carry over Depreciation

£ £ £ Non-current assets Shop premises 250 000 - 250 000 √ Equipment 20 000 11 600 8 400 √of Fixtures and fittings 20 000 4 000 16 000 √of 290 000 15 600 274 400 Current assets Inventory (9 450 + 3 600 + 1 100) 14 150 √ Trade receivables (32 000 – 800) 31 200 √ Less PDD (1 560) √of 29 640 Other receivables 250 √ 44 040 318 440 £ £ Equity and Capital: Opening capital 60 000 Profit for the year 14 320 74 320 Less drawings 16 800 57 520 √of Current liabilities Trade payables 46 870 √ Other payables (1 000 √ + 1 800 √) 2 800 Bank overdraft (43 000 + 200 000 – 250 000 – 4 250) 11 250 √√(√of) 60 920 Non-current liabilities 6% Bank loan (Repayable 30 November 2022) 200 000 √ 318 440 Note: Bank can be a current asset of but not £43 000.

(14)

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Question Number

Answer Mark

1(b) Valid answers may include: Points for

• Will have ownership control of premises without having to seek landlord’s permission for renovations

• Security of tenure guaranteed • An investment for the long term future of the business as

property tends to rise in price • Savings in rent

Points against: • Major capital outlay • Converts a healthy cash balance into an overdraft • The interest on the loan is greater than the rent • Capital employed increases and return decreases • Responsible for maintenance of the premises • More depreciation • More bank interest • Burden of a bank loan

√√ per valid point x 4 points. MAX 2 points for and MAX two points against. Note: do NOT accept

• More non-current assets • Increased profit • More payment for utilities

(8)

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Question Number

Answer Mark

2(a) Accrued income √√. A debit balance on the Rent Receivable Account means that Arpen is owed rent √√ by a tenant who is therefore a debtor of the business.√√ MAX 4 x √

(4)

Question Number

Answer Mark

2(b) (i) Sundry Expenses Account £ £ 1 January Balance b/d 600 31 December Income Statement √ 1 550 √ 14 May Bank 500 √ Balance c/d 450 30 October Bank 900 2 000 2 000 1 January Balance b/d 450 √of (if on debit)

(4)

Question Number

Answer Mark

2(b)(ii) Premises Repairs Account £ £

1 January Balance b/d 250 31 December Income Statement 2 815 √ 8 January Bank 450 1 April Bank 900 √ 18 August Bank 875 31 December Balance c/d 340 √ 2 815 2 815 1 January Balance b/d 340 √of (if on credit)

(4)

Question Number

Answer Mark

2(b)(iii) Rent Receivable Account £ £ 1 January Balance b/d 300 6 February Bank/cash 1 200 √ 31 December Income Statement 1 600 √ 26 June Bank/cash 900 Balance c/d 200 √ 2 100 2 100 1 January Balance b/d 200 √of (if on credit)

(4)

Question Number

Answer Mark

2(c) (i) Prudence –√√ losses should be charged as soon as they are identified. The depreciation on machinery will be high in the early years not evenly spread over the life of the asset.

(ii) Consistency –√√ when a method of depreciation is chosen for a non-current asset this should be consistently applied over the life of the asset to ensure that the accounts are not distorted.

(4)

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Question Number

Answer Mark

2(d)

Capital expenditure –purchase or enhancement of non-current assets. √√ Revenue expenditure –day to day expenses which will be used within an accounting year. √√

(4)

Question Number

Answer Mark

2(e) Machine installation – Capital expenditure √√ Annual machine insurance – Revenue expenditure √√

(4)

Question Number

Answer Mark

2(f)(i) 2(f)(ii)

£ Depreciation charged (straight line) – 2010 6 800 √ 2011 6 800 13 600 √ Depreciation (reducing balance) – 2010 (36 000-0) x 25% 9 000 √ 2011 (36 000 -9 000) x 25% 6 750 √ 15 750 √ Adjustment Increase in provision 2 150 √ Depreciation charge 2012 7 463 √ √ (√of) Working 2012 charge – (36 000 + 9 600- 15 750) x 25% = £7 463 Note: if adjustment £2 150 stated award 6 x √ without reviewing workings.

(8)

Question Number

Answer Mark

2(g)(i) Machinery Account £ £

Balance b/d 36 000 Balance c/d 45 600 Bank (of if £12 000 or less) 9 600 √√(√of) 45 600 45 600 Balance b/d 45 600 √of (if on debit)

(3)

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Question Number

Answer Mark

2(g)(ii) Machinery – Provision for Depreciation account £ £

Balance b/d 13 600 √of Income Statement- Adjustment 2 150 √of Balance c/d 23 213 2012 charge 7 463 √√ 23 213 23 213 Balance b/d 23 213 √of (if on credit) Note: If Balance b/d stated as £15 750 award √√ (£13 600 + £2 150) If charge to income statement £9 613 award √√√ (£2 150 + £7 463)

(5)

Question Number

Answer Mark

2(h)

Valid answers may include: Points for

• Greater depreciation will be charged in the early years which reflects the situation with machinery

• Carry over value will be closer to market value resulting in more accurate financial statement value.

• Evens out total cost of ownership when repair costs are added to depreciation.

• Provides a more realistic book value Points against:

• Distorts profit calculation • Not consistent with previous practice. • Not appropriate if machine used equally from year to year

√√ per valid point x 4 points. MAX 2 points for and MAX two points against. NOT

• Difficult to calculate • Time consuming • Costly

(8)

Question Number

Answer Mark

3(a)(i) Realisation – Profit is regarded as having been earned when the goods are passed to the customer and he incurs liability for them.√√ Breach- The sale or return has not realised the profit as the customer has not incurred liability for them.√

(3)

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Question Number

Answer Mark

3(a)(ii) Accrual (matching)-Net profit is the difference between income and expenditure rather than cash receipts and cash expenditure. Revenues matched with expenses for a period. √√

Breach-Adjustments for general expenses.√

(3)

Question Number

Answer Mark

3(a)(iii) Going concern-Unless it is known to the contrary, it is assumed that the business will exist and operate for an indefinitely long period of time.√√

Breach- Charging the full cost of non-current assets to a single accounting period.√

(3)

Question Number

Answer Mark

3(b) Xevana – Statement of Comprehensive Income for the year ended 31 December 2012

£ £ Revenue (110 000 – 2 000) 108 000 √ Less Purchases 103 500 Less Purchase returns (2 300) 101 200 Carriage inwards 1 200 √ 102 400 Less Closing inventory (16 000 + 1 600)(17 600) √√(√of other than 20 000) Cost of sales (84 800) Gross profit 23 200 Plus other income: Profit on sale of fixtures and fittings 200 √ Rent receivable (1 000 + 1 000) 2 000 √ Discount received 1 870 √ 27 270 Less expenses: Carriage outwards 2 400 √ Rent and rates 4 000 √ Wages 6 000 √ General expenses (4 550 + 470 √ – 750 √) 4 270 Depreciation: Fixtures and fittings 400 √ Motor vehicles 1 500 √

(18 570) Profit for the year 8 700

If discount received is deducted from purchases (103 500 – 1 870) = 101 630 √

(14)

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Question Number

Answer Mark

3(c) Purchases Ledger Control Account £ £

Purchase returns 2 300 √ Balance b/d - Payments to trade creditors 93 030 √ Purchases 103 500 √ Discount received 1 870 √ Balance c/d 6 300 √ 103 500 103 500

Balance b/d 6300 √of

If purchases reduced by discount received (103 500 – 1 870) = 101 630 √√

(6)

Question Number

Answer Mark

3(d)

Statement of financial position at 31 December 2012 √ Cost Aggregate Carry over Depreciation £ £ £ Non-current assets Motor vehicles 9 000 1 500 7 500 √ Fixtures and fittings 3 800 400 3 400 √ 12 800 1 900 10 900 √ Current assets Inventory 17 600 √of (other than 20 000) Trade receivables (12 870 √– 2 000 √) 10 870 Rent receivables owing 1 000 √ General expenses prepaid 750 √ 30 220 41 120 £ £ Equity and Capital: Opening capital 12 000 √ Plus Profit for the year 8 700 20 700 Drawings (4 800)√ 15 900 Current liabilities Trade payables 6 300 √√(√of) General expenses accrued 470 √ Bank overdraft 18 450 √

25 220 41 120

(15)

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Question Number

Answer Mark

3(e) Valid answers may include: Points for

• Provides a framework of consistency in preparing all financial statements

• Provides assurance to users about the preparation of the accounts

• Can be used internationally to compare business • True and fair view • Meets legal requirements • Profit can be relied upon

Points against: • Concepts can be contradictory • Many non-financial aspects of a business are not considered

by accounting concepts • Open to wide interpretation

√√ per valid point x 4 points. MAX 2 points for and MAX two points against. Do NOT accept

• Costly • Time consuming

(8)

Question Number

Answer Mark

4(a) Profitability is the difference between the income and expenditure√√ for a period of time. The profit is compared with a common yardstick such as revenue or capital employed.√√

(4)

Question Number

Answer Mark

4(b)(i) Molara – Statement of Comprehensive Income for the year ended 31 December 2012

£ £ Revenue 140 000 Less Opening inventory 12 000 Purchases 119 000

131 000 Closing inventory (27 000) √√ Cost of sales (104 000) Gross profit 36 000

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Question Number

Answer Mark

4(b)(ii)

£ £ Gross profit 36 000 Depreciation 3 000 √√ Other expenses (22 000 -2 000 √+1 000 √) 21 000 (24 000) Profit for the year 12 000

(6)

Question Number

Answer Mark

4(c) Profit for the year before Interest x 100 = 12 000 OF + 1 200 √ x 100 = 38.8% √of Capital + Long term liabilities 19 000 + 15 000 √

(3)

Question Number

Answer Mark

4(d)

Statement of Financial Position at 31 December 2012 Cost Aggregate Carry Depreciation over £ £ £ Non-current assets 15 000 3 000 12 000 √ Current assets Inventory 27 000 √OF Trade receivables 7 000 √ Prepaid 2 000 √ Bank 1 000 √ 37 000 49 000 £ £ Capital 19 000 √ Profit for the year 12 000 31 000 Less drawings ( 8 000) 23 000 Non-current liabilities 5 Year bank loan 15 000 √ Current liabilities Trade payables 10 000 √ Accruals 1 000 √ 11 000 49 000

(9)

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Question Number

Answer Mark

4(e)(i) 4(e)(ii)

Current ratio; Current assets 37 000 √ = 3.4:1 √of Current liabilities 11 000 √ Liquid (acid test) ratio 37 000 – 27 000 =10 000 √ = 0.91:1 √of 11 000 11 000 √ Note: For of must state :1.

(6)

Question Number

Answer Mark

4(f) Valid answers may include: Points for

• The percentage gross profit to sales was achieved • The current ratio is very good

Points against: • She failed to meet her overall profit total • Most of the current assets are in stock

√√ per valid point x 2 points. MAX 1 point for and MAX 1 point against.

(4)

Question Number

Answer Mark

5(a)(i) £ Depreciation (100 000-25 000) x 25% 18 750 √√ Power (2 000 x 75%) x 5 x £0.50 3 750 √ Managers salary (18 000/9) 2 000 √ Cleaners salary (12 000/6) 2 000 √ Heat & light (6 000 x 200/1 000) 1 200 √ Total overhead cost 27 700 √√(√of)

(8)

Question Number

Answer Mark

5(a)(ii) Total overhead cost = 27 700 √of = £18.46 per hour √of Productive hours 1 500 √√

(4)

Question Number

Answer Mark

5(b) Labour productivity is the relationship between the input and the outputs. √√ The measurement is usually the number of units produced per hour. √√ Production made in a specified period √√ Do NOT accept : Output produced.

(4)

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Question Number

Answer Mark

5(c)(i) Daywork 2 000hrs x £6 = £12 000 √ = £5 per unit √√ 2 400 units √

(4)

Question Number

Answer Mark

5(c)(ii) Alternative Option 1 = £3 per unit √√

(2)

Question Number

Answer Mark

5(c)(iii) Alternative Option 2 2 000 hrs x £3.5 = 7 000 £1.50 x 3 600 units = 5 400 12 400 √ Divided by 3 600 √ = £3.44 per unit√√

(4)

Question Number

Answer Mark

5(d) The most productive is Alternative Option 1 √√of (2) Question Number

Answer Mark

5(e) Valid answers may include: Points for

• Greater production • Lower unit costs than at present

Points against: • Quality issues • Potential accidents

√√ per valid point x 2 points. MAX 1 point for and MAX 1 point against.

(4)

Question Number

Answer Mark

6(a)(i) 6(a)(ii)

A schedule of debtors is a summary of all the debtors sums grouped by age of debt.√√ It is presumed that the older the debt the less likely it is to be paid √√ A projected percentage of non-payment for each age category is applied and a total provision estimated√√

(6)

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Question Number

Answer Mark

6(b) Journal Dr Cr £ £ Bank 700 √ Kaab 700 √ Kaab 700 √ Bad debts recovered 700 √ Bad debts recovered 700 √ Income statement 700 √ Being recovery of bad debt from Kaab written off in July 2011 √ MAX 5 x √

(5)

Question Number

Answer Mark

6(c)(i) Bad Debts Account £ £

Taal 210 √ Income statement √ 210 √ 210 210

(3)

Question Number

Answer Mark

6(c)(ii) Bad Debts Recovered Account £ £

Income statement √ 700 √ Bank (Kaab) √ 700 √ 700 700

(4)

Question Number

Answer Mark

6(c)(iii) Sales Ledger Control Account £ £

Balance b/d 23 500√ Bank 32 400 √ Sales 38 000√ Discount allowed 820 √

Bad debts 210 √ Balance c/d 28 070 √

61 500 61 500 Balance b/d 28 070 √of (if on debit)

(7)

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Question Number

Answer Mark

6(c)(iv)

Provision for Doubtful Debts Account £ £

Income statement 75 √Balance b/d 1 450 √ Balance c/d 1 375

1 450 1 450 Balance b/d 1 375 √of(if on credit)

(3)

Question Number

Answer Mark

6(d) Valid answers may include: Points for

• Ensures that profit is not overstated • Complies with the prudence concept

Points against: • Only an estimate based upon historical experience • Actual bad debts may be significantly different from the

estimate

√√ per valid point x 2 points. MAX 1 point for and MAX 1 point against. Do NOT accept:

• Time consuming

(4)

Question Number

Answer Mark

7(a) Valid answers may include: • Decision to cease trading • Introduction of new partner(s) • Retirement • Death • Action of the courts • To become a limited company • No prospect of profit

2 points x √√

(4)

Question Number

Answer Mark

7(b) Provisions of 1890 Partnership Act • Salaries- unless otherwise agreed between the partners no

salaries are payable √√ • Interest on loans- 5% interest is paid to partners on loans

over and above agreed capital √√

(4)

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Question Number

Answer Mark

7(c)(i) Dissolution Account £ £ Premises 60 000 √ Trade payables 10 000 √ Motor vehicles 14 000 √ Premises Highton & Co 65 000 √ Fixtures & fittings 9 400 √ Motor vehicle-Martina 4 500 √ Inventory 18 700 √ Naju 7 000 √ Trade receivables 12 400 √ Fixtures and inventory 21 000 √ Trade payables 9 800 √ Trade receivables 11 700 √

Dissolution expenses 2 700 √ Loss on dissolution-Martina 5 200 √of Naju 2 600 √of 127 000 127 000 MAX 9 x √

(9)

Question Number

Answer Mark

7(c)(ii) Capital Accounts Martina Naju Martina Naju £ £ £ £ Current a/c 1 400 √Balances b/d 50 000 40 000 Motor vehicles 4 500 7 000 √Current a/c 4 400 Loss on dissolution 5 200 2 600 √of Bank 44 700 29 000 √of 54 400 40 000 54 400 40 000

(4)

Question Number

Answer Mark

7(c)(iii) Bank Account £ £ Highton & Co 65 000 √ Balances b/d 400 Fixtures and inventory 21 000 Bank loan 10 000 √ Trade receivables 11 700 √ Accrued expenses 1 100 √ Dissolution expenses 2 700 √ Trade payables 9 800 √ Capital – Martina 44 700 √of Naju 29 000 97 700 97 700

(7)

Question Number

Answer Mark

7(d) Valid answers may include: Points for

• Formalises agreement • Terms are clear to all partners which avoids argument • States responsibilities • Profits and losses can be divided in desired ratios.

Points against: • Cost and time • Changes more difficult to implement

√√ per valid point x 2 points. MAX 1 point for and MAX 1 point against.

(4)

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ASSESSMENT GRID Syllabus AO1 AO2 AO3 AO4 TOTAL

Q1 (a) 3 15 15 14 44 (b) 3 8 8

Q2

(a) 1 4 4 (b) 1 2 8 2 12 (c) 1 4 4 (d) 1 1 2 1 4 (e) 1 4 4 (f) 1 4 4 8 (g) 1 2 4 2 8 (h) 1 8 8

Q3 (a) 1 9 9 (b) 3 4 8 2 14 (c) 2 1 4 1 6 (d) 3 3 9 3 15 (e) 3 8 8

Q4 (a) 5 4 4 (b) 5 5 4 9 (c) 3 3 4 2 9 (d) 5 3 3 6 (e) 5 4 4

Q5 (a) 4 6 6 12 (b) 4 4 4 (c) 4 5 5 10 (d) 4 2 2 (e) 4 4 4

Q6 (a) 1 6 6 (b) 1 2 2 1 5 (c) 1/2 6 9 2 17 (d) 1 4 4

Q7 (a) 3 4 4 (b) 3 4 4 (c) 3 9 9 2 20 (d) 3 4 4

Marks 91 97 56 40 284

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Further copies of this publication are available from

Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN

Telephone 01623 467467

Fax 01623 450481 Email [email protected]

Order Code UA034163 January 2013

For more information on Edexcel qualifications, please visit our website www.edexcel.com

Pearson Education Limited. Registered company number 872828 with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE

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Mark Scheme (Results) January 2013 GCE Accounting (6002/01)

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Edexcel and BTEC Qualifications Edexcel and BTEC qualifications come from Pearson, the world’s leading learning company. We provide a wide range of qualifications including academic, vocational, occupational and specific programmes for employers. For further information visit our qualifications websites at www.edexcel.com or www.btec.co.uk for our BTEC qualifications. Alternatively, you can get in touch with us using the details on our contact us page at www.edexcel.com/contactus. If you have any subject specific questions about this specification that require the help of a subject specialist, you can speak directly to the subject team at Pearson. Their contact details can be found on this link: www.edexcel.com/teachingservices. You can also use our online Ask the Expert service at www.edexcel.com/ask. You will need an Edexcel username and password to access this service. Pearson: helping people progress, everywhere Our aim is to help everyone progress in their lives through education. We believe in every kind of learning, for all kinds of people, wherever they are in the world. We’ve been involved in education for over 150 years, and by working across 70 countries, in 100 languages, we have built an international reputation for our commitment to high standards and raising achievement through innovation in education. Find out more about how we can help you and your students at: www.pearson.com/uk January 2013 Publications Code UA034166 All the material in this publication is copyright © Pearson Education Ltd 2013

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General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should be used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidate’s response is not worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification may be limited.

• When examiners are in doubt regarding the application of the mark scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it with an alternative response.

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Question Number

Answer Mark

1(a) Statement of Financial Position of Channel Oil Plc as at 31 December 2012 √

ASSETS Non-current assets √ Property, Plant & Equipment √ Land 3 150 000 Buildings 1 022 700 √ Oil Drilling Plant 4 550 000 Oil Refining Plant 1 930 000 Fittings 187 000 √ Any 4 Machinery 685 000 Furniture 64 000 Computer Equipment 495 000 √ Next 3 12 083 700 Investment property √ Investment property 780 000 √ 780 000 Intangible Assets √ Oil drilling licence 2 000 000 Patents 45 000 √ Both 2 045 000 14 908 700 √o/f Current Assets Inventories √ Oil inventories 2 157 600 √ Non-oil inventories 116 000 √ 2 273 600 Trade and Other Receivables √ Trade receivables 97 000 Other receivables 7 000 √ Both 104000 Cash and Cash Equivalents √ Bank 114 000 Cash 17 000 √ Both 131 000 2 508 600 Total Assets √ 17 417300 √o/f EQUITY AND LIABILITIES √ Equity Share Capital Ordinary shares of £1 13000000 √ Other Reserves Share Premium 2 500 000 Revaluation Reserve √ (48700)√ +(30000) √

78 700 √

General Reserve 75 000 Foreign Exchange reserve 600 000 √ All 3 3 253 700 Retained Earnings (-929 250) √ + (- 162 400) √ -1 091650 √√ 15 162 050√ o/f Non-Current Liabilities √ Long Term Borrowings Debenture 8.5% 2017 1 200 000 Bank loan 500 000 √ Both Taxation 262 000 √ 1 962 000

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Question Number

Answer Mark

Current Liabilities Trade and other Payables √ Trade Payables 24 000 Other payables 16 500 Debenture Interest 51 000 Loan Interest 3 750 √ All 4 95 250 Current Tax Payable Income Tax Payable 198 000 √ 293 250

Total Equity and Liabilities 17 417 300 √C√

o/f

(40)

Question Number

Answer Mark

1(b) FOR statement Current ratio is 2 508 600 : 293 250 √ which is 8.56 : 1 √ O/F This is way above / too high √ ideal ratio of 1.5/2 : 1. √ Too much working capital √ is tied up in stocks of oil √ Acid ratio is (2 508 600 – 2 273 600) : 293 250 √ which is 0.80 : 1 √ O/F This is below/ too low √ the ideal ratio of 1:1 √ A tax bill of £198 000 must be paid in 30 days √ but there is only £131 000 Cash and cash equivalents √ AGAINST statement A current ratio of above 2:1 is better than below 2:1. √ If the business can sell stocks quickly, then liquidity problem can be avoided. √ The nature of the industry √ may mean that it is normal for large stocks of oil to be carried. √ Working capital is £2 215 350 √ which is a healthy figure. √ Bank balance is positive at £114 000 √ which can be used to pay debenture and loan interest √ and settle trade and other payables √ Conclusion (two √’s) Channel Oil plc has a liquidity problem √√ Maximum of 8 √’s for arguing one side.

(12)

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Question Number

Answer Mark

2(a)(i) Budgeted cost of one carpet : Materials = (16 x £7.50) √ = £120 Labour = (8 x £8.60) √ = £34.40 √ (both) 2 £154.40 √ O/F

(4)

Question Number

Answer Mark

2(b)(i) Labour Efficiency Variance = (Actual Hours - Standard Hours) x Standard Rate √ = (4.25 - 4) √ x £8.60 √ = £2.15 Adverse √ Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hours √ = (£8.50 - £8.60) √ x 4.25 √ = £0.425 Favourable √ Total Labour Variance = (Actual Hours x Actual Rate) - (Standard Hours x Standard Rate) √ = (4.25 x £8.50) √ - (4 x £8.60) √ = £36.125 - £34.40 = £1.725 Adverse √

(12)

Question Number

Answer Mark

2(a)(ii) Actual cost of one carpet : Materials = £58 608 √ = £122.10 480 Labour = (4.25 x £8.50) √ = £36.125 √ (both) £158.225 √ O/F

(4)

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Question Number

Answer Mark

2(b)(ii) Materials Price Variance = (Actual Price - Standard Price) x Actual Usage √ = (58 608 √ - £7.50 √ ) x 7 920 √ 7 920 480 √ = £1.65 Favourable √ Material Usage Variance = (Actual Usage - Standard Usage) x Standard Price √ = (7 920 - 16) √ x £7.50 √ 480 = £3.75 Adverse √ Material Cost Variance = (Actual Usage x Actual Price) - (Standard Usage x Standard Price) √ = (16.5 x 7.40) √ - (16 x 7.50) √ = £122.10 - £120 = £2.10 Adverse √

(14)

Question Number

Answer Mark

2(c) Sales = £299 x 480 = £143 520 √ Variable costs = (£158.225 o/f x 480) = (£75 948) √√ Fixed costs = (£12 300) √ £55 272 √C √o/f

(6)

Question Number

Answer Mark

2(d) Answers may include : AGAINST Passing on the increase in production cost Could absorb rising costs √ by increasing efficiency. √ Customer could be unhappy and not buy √ and go to a rival supplier. √ New price could make firm’s price higher than rivals. √ Present price of £299 is psychological √ and an increase will take them through the £300 barrier. √ FOR Passing on the increase in production cost Need to maintain profit margin, √ this (or mark up) could be fixed √ otherwise business makes losses / goes bankrupt √ Cannot keep same selling price for ever √ will have to increase price some day √ Customers may be quite willing to pay the higher price√ if they still think they get good value √ New price may still be below that of rival firms.√ CONCLUSION (√√) Should relate to above eg passing on increased costs is wrong/right √√ Maximum of 8 √ if only one side of argument.

(12)

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Question Number

Answer Mark

3(a) Figures are in £ millions

Ordinary Share £1 Capital

Share Premium

Retained Earnings

General Reserve

Capital Redemption Reserve

Non-current Asset Replacement Reserve

Total Equity

Balance at December 31st 2012

900 √

350 √

4 √

0 √

40

100 √

1394 √

(6)

Question Number

Answer Mark

3(b)(i) To replace worn out airplanes. √ which have a finite life √ OR To upgrade computer system √ to ensure compatibility etc √

(2)

Question Number

Answer Mark

3(b)(iii) Interim dividend is 800 x 3 pence = 24 √ so, Final dividend must be (69 – 24) √ = 45 √ Per share 45 √ = £0.05 = 5 pence per share √ 900 √

(6)

Question Number

Answer Mark

3(b)(iv) Original issue Premium was 200 √ = £0.25 √ so issue price was £0.25 + £1 = £1.25 √ 800 √ September issue Premium was 150 √ = £1.50 √ so issue price was £1.50 + £1 = £2.50 √ 100 √ The share issue price was higher in September √ because the market price of the shares was higher then, compared to when the original shares were issued. √√ The share premium reflects the market price. √

(12)

Question Number

Answer Mark

3(b)(ii) An amount was transferred from General Reserve √ to Retained earnings √ (2)

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Question Number

Answer Mark

3(b)(v) Share Capital, Share Premium, and CRR √ are capital reserves √ and cannot be used to pay dividends. √ Total of 1290 cannot be used for dividends. √ Retained earnings, General, and Asset Replacement √ are revenue reserves √ and can be used to pay dividends. √ Total of 104 can be used for dividends. √ However, Retained earnings has very little left, √ and General reserve has nothing. √ It is only the fact that the General reserve has been transferred back, √ that has enabled the present dividend to be paid. √ Asset Replacement could be transferred back to Retained earnings and used for dividends. √ However, as more has been transferred into Asset Replacement, √ it is likely an asset needs replacing soon. √

(12)

Question Number

Answer Mark

3(c) For statement Company will not have pay cash dividends, √ which is beneficial if a liquidity problem √ Bonus shares makes the Statement of Financial Position look like that of a larger company √ which may help to raise finance etc √ Original shareholders would have been kept happy √ and therefore quiet √ as they would have received free shares√ and these shares are eligible for dividends. √ Quicker/cheaper to issue bonus shares √ Against statement Bonus shares bring in no cash for the company √√ but a rights issue does bring in cash √ which is used to run the business/ pay bills √ or expand the business √ or strengthen the company Statement of Financial Position √ Issue of bonus shares sees share price fall √ more than the possible fall if a rights issue √ Bonus shares will result in more shares eligible for dividends√ so dividend per share likely to fall. √ Maximum of 8 √ for arguing one side. Conclusion Bonus issue would not be better for company √√

(12)

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Qst No Answer Mark 4(a)

Cash Budget for 3 months February to April February March April INCOME Capital 15 000 Loan 15 000√ both Sales 0 3234√√ 5698√√√ Total 30 000 3234 5698 EXPENDITURE Machinery 12400 Delivery Truck 9500√ both Rent 3597√ Materials 840√√ 1120 1120√ both Water 640 640 640√ all Drawings 1600 1600 1600√ all Delivery Costs 840√ 1120 1120√ both Total Expenditure 29417√ o/f 4480√ o/f 4480√ o/f Monthly Balance 583√ o/f -1246√ o/f 1218√ o/f Opening Balance 0 583 -663 Closing Balance 583√ o/f -663√ o/f 555√ o/f Workings Sales March = (3 weeks x 5 days x 1400 x 0.22p x 0.70%) = £3 234 (or √√) Any 3 = first √ April = (3 weeks x 5 days x 1400 x 0.22p x 0.30%) = £1 386 √ (4 weeks x 5 days x 1400 x 0.22p x 0.70% = £4 312 √ £5 698 √ o/f Materials February = (3 weeks x 5 days x 1400 x 0.04p) = £840 (or √√) (Any three items = first √)

(24)

Question Number

Answer Mark

4(b) O/F rule applies FOR correct drawings April balance is £1 218 but needs to have monthly rent of £1199 deducted, √ leaving a “balance” of £19, √ so Kim cannot draw out any more. √ May will be the first month of “normal” sales revenue √ of £6 160 √ which leaves a “balance” of £481. √ This will be needed for irregular payments eg truck service, √ as a precaution, √ and to pay back the loan eventually. √ AGAINST correct drawings £481 per month is not enough to meet irregular payments/bills√ as a precaution, √ and pay back the loan. √ The drawings should be smaller. √ With these drawings, March has a negative balance. √ Maximum for arguing only one side of the argument 4 marks CONCLUSION Should relate to points made above ie Drawings are at correct/incorrect level. √√

(8)

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Question Number

Answer Mark

5(a)(i) Payback Period

Year Cash Inflow Cash Outflow Net Cash Flow Cumulative0 -1,900,000√ -1,900,000 1 1,200,000 682,000√√ 518,000√O/F -1,382,0002 1,260,000√ 682,000 578,000√ O/F -804,0003 1,260,000 682,000 578,000 -226,0004 1,323,000√ 732,000√√ 591,000√ O/F 365,0005 1,353,000 732,000 621,000 986,000

Pay back is after 3 and 226 x 12 years = 3 years 4.59 months 591 √√ O/F √√ O/F

(14)

Question Number

Answer Mark

5(a)(ii) Average Rate of Return Total Surplus of Project = £ 6 396 000 - £ 5 410 000 = £ 986 000 √ o/f √ o/f √ o/f Average Annual return = £ 986 000 o/f √ = £197 200 per year o/f √ 5 years √ Accounting rate of return = £ 197 200 o/f √ x 100 = 10.38% √o/f √C £ 1 900 000 √ Other formulae are acceptable

(10)

Question Number

Answer Mark

5(b) Evaluation – own figure rule applies. Answers may include : Against Investment Payback method says do not invest √ as project not within 3 year payback period √ May be better investment projects available? √ For Investment ARR states invest √ as meets % return figure of 10% √ Project is profitable overall √ having total cash inflow £986 000 o/f √ It is possible to dispute 3 year payback period √, perhaps longer is better. √ What happens after 5 years? – renewal of contract?√ Any other/further business? √ Customer is in the public sector √ so little chance of bad debts. √ Other Relevant Points : Accuracy of predictions? √ Objectives/strategy of company? √ Both methods ignore time value of money √ unlike NPV √ Could use other methods of appraisal √ Total of 4 marks for arguing one side only. Conclusion : √√ Must relate to points made above

(8)

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Question Number

Answer Mark

6(a)(i) Answers may include : Depreciation, business rates, √ loan interest, insurance, √

(2)

Question Number

Answer Mark

6(a)(ii) Semi variable costs are costs that may have a fixed element √ plus a variable element. √ OR For example there may be a standing charge √ and an element that varies with usage. √ OR A semi variable costs increases as output increases, √ but not in direct proportion to output. √ Possible examples gas, √ electricity, √ telephone √ water supply. √

(4)

Question Number

Answer Mark

6(b)

(i) Higher Lower Fixed Costs £25,200√ £41,100√ Contribution £8√ £3√ Break even point 3150√ o/f √ C 13700√ o/f √ C (ii) and (iii) Sales units 3342 14784 Break even point 3150√ o/f (both) 13700√ o/f (both) Margin of safety 192√ o/f 1084√ o/f Contribution £8 √ o/f £3√ o/f Profit £1,536√ o/f √ C £3,252√ o/f √ C

(8) (4) (6)

Question Number

Answer Mark

6(c) Own figure rule applies Case for Higher End staying open Lower break even point √ by 10 550 units. √ Lower level of fixed costs √ by £15 900 √ if stays open, no need to pay rent on other store. √ Higher contribution per unit √ by £5 per unit √ Case for Lower End staying open Higher profit √ by £1 716 √ Greater margin of safety √ by 892 units. √ Higher level of sales √ by 11 442 units √ If other store closes, building could be sold, √ and maybe this stores building purchased. √ Maximum of 4 √ for arguing one side only. Conclusion √√ Should CLOSE Higher end store as lower profit made . √√

(8)

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Question Number

Answer Mark

7(a)(i) –(iii)

Jan 6 Realisation a/c √ 4 200 000 √√ Land a/c √ 4 200 000 Jan 6 Current Taxation a/c 49 800 √ Realisation a/c 49 800 √ Jan 6 Ordinary Shares of £1.20 a/c 6 000 000 √ Sundry Shareholders a/c 6 000 000 √

(8)

Question Number

Answer Mark

7(b)

Purchase Price No. of Ordinary shares in Machine Tools Limited 6 000 000√ 5 000 000√

1.20√

Shareholders receive/ Purchase Price £1.00

£0.58

£0.27√ (all 3)

5 000 000 £1.85√ £9 250 000 √

(6)

Question Number

Answer Mark

7(c) Calculation of Goodwill Purchase Price 9 250 000 √ o/f Original Book value of Machine Tools Limited (22 2 √ - 14.8 √ = 7.4 ) (7 400 000) Or √√ Adjustments - Stock 620 000 √ - Land (210 000) √ - Motor vehicles 125 000 √ - Equipment 125 000 √ - Current taxation (9 300) √ Excluding Bank 123 000 √ Goodwill 2 623 700 √ o/f

(10)

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Question Number

Answer Mark

7(d) AGAINST Revaluations The larger party may be in a position of strength and abuse this position √ to revalue assets to their own advantage √ ie lower value than true market value √ Revaluing assets and liabilities a pointless waste of time and money √ because the buyer can agree to pay whatever goodwill they feel is appropriate. √ Professional valuers may be required √ and these may charge considerable fees √ FOR Revaluations Even if one party is in a position of strength, the other party does not have to agree to a sale √ if they do not like the value put on assets. √ It is only fair √ that assets and liabilities are sold for their correct market value, √ not some historical book value √ that may not reflect market value. √ Maximum of 4 marks per side of argument. Conclusion 2 marks available It is appropriate for revaluations. √√

(8)

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Further copies of this publication are available from

Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN

Telephone 01623 467467

Fax 01623 450481 Email [email protected]

Order Code UA034166 January 2013

For more information on Edexcel qualifications, please visit our website www.edexcel.com

Pearson Education Limited. Registered company number 872828 with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE

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Mark Scheme (Results) Summer 2013 GCE Accounting (6001/01)

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Edexcel and BTEC Qualifications Edexcel and BTEC qualifications come from Pearson, the world’s leading learning company. We provide a wide range of qualifications including academic, vocational, occupational and specific programmes for employers. For further information, please visit our website at www.edexcel.com. Our website subject pages hold useful resources, support material and live feeds from our subject advisors giving you access to a portal of information. If you have any subject specific questions about this specification that require the help of a subject specialist, you may find our Ask The Expert email service helpful. www.edexcel.com/contactus Pearson: helping people progress, everywhere Our aim is to help everyone progress in their lives through education. We believe in every kind of learning, for all kinds of people, wherever they are in the world. We’ve been involved in education for over 150 years, and by working across 70 countries, in 100 languages, we have built an international reputation for our commitment to high standards and raising achievement through innovation in education. Find out more about how we can help you and your students at: www.pearson.com/uk Summer 2013 Publications Code UA035278 All the material in this publication is copyright © Pearson Education Ltd 2013

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General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should be used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidate’s response is not worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification may be limited.

• When examiners are in doubt regarding the application of the mark scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it with an alternative response.

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Question Number

Answer Mark

1(a)(i) Capital – 1 May 2012 Assets £

Inventory 17 750

Trade receivables 23 400

Wages prepaid 850

Computer equipment 5 000

Fixtures and fittings 11 000

58 000 √

Liabilities

Bank 6 000

5% Bank loan 10 000

Trade payables 19 000

(35 000)√ Capital 23 000 √of

(3)

Question Number

Answer Mark

1(a)(ii) Revenue (sales) £

Cash sales banked 13 100 √ Cheques from debtors 65 300 √ Bad debt 2 400 √ Wages 4 800 √all 4 items Cleaning of premises 6 000 New computer 1 800 Drawings 5 000

98 400 Trade receivables 30 April 2013 29 600 128 000 Trade receivables 1 May 2012 (23 400) √ Revenue sales 104 600

(5)

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Question Number

Answer Mark

1(a)(iii) £

Purchases Payments to suppliers 46 200 √

Trade payables 30 April 21 800

68 000

Trade payables 1 May (19 000)√

Purchases 49 000  

(3)

Question Number

Answer Mark

1(b) Wages Account

£ £

Balance b/d 850 √ Drawings 2 500 √

Bank 24 000 √ Income statement 28 600 √of

Cash 4 800 √

Balance c/d 1 450

31 100 31 100

Balance b/d 1 450 √ of 

(6)

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Question Number

Answer Mark

1(c)(i) Avar- Statement of Comprehensive Income for the year ended 30 April 2013

£ £

Sales revenue 104 600 √of

Less

Opening inventory 17 750

Purchases 49 000 of

66 750

Closing inventory 20 350

Cost of sales 46 400 √of+w

Gross profit 58 200

Less expenses:

Wages 28 600 √of

Rent and rates 6 600 √

Sundry expenses 3 300 √

Cleaning of premises 6 000 √

Loan interest 450 √√(√of)

Bank charges 620 √

Bad debt 2 400 √

Provision for doubtful debts 1 480 √

Depreciation – computers 1 700 √√

fixtures 4 600 √√

55 750

Profit for the year 2 450 

(15)

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Question Number

Answer Mark

1(c)(ii) Statement of Financial Position at 30 April 2013

£ £

Non-current assets

Computer equipment (valuation 5 100 √ Both

Fixtures and fittings (valuation) 14 000

19 100

Current assets

Inventory 20 350 √

Trade receivables 29 600

Less PDD 1 480 √ Both

28 120

48 470

67 570

Equity and capital:

Opening capital 23 000

Profit for the year 2 450

25 450

Drawings (5 000 + 2 500) 7 500 √

17 950 √of

Non-current liabilities

5% Bank loan 6 000 √ (8 000 √)

Current liabilities

5% Bank loan 2 000 √

Trade payables 21 800 √

Other payables (450 √ + 1 450 √) 1 900

Bank overdraft (17 300 √+ 620 √) 17 920

43 620

67 570

(12)

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Question Number

Answer Mark

1(d) Valid points may include:

Points for • Time saved • Cost saving of professional accountant • Less time consuming • Can provide total of trade receivables/trade payables • Check liquidity • Can compare performance • Can calculate profit • Errors can be identified • Less cost of professional accountant/ of paperwork • More accurate

Points against • Unable to accurately keep track of trade payables and trade

receivables • Lack of information to prepare financial statements • Lack of information for decision making

NOT

• Gain more profit

• Difficult to prepare

• Less errors

√√ per valid point x Max two point in favour and two points against

(8)

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Question Number

Answer Mark

2(a) Giant Burgers

Manufacturing Account for the year ended 30 April 2013

£ £

Opening inventory 4 500

Purchases of raw materials 62 000

66 500

Closing inventory 7 500

Cost of raw materials consumed 59 000 √

Production wages 280 000 √

Packaging (27 000 – 6 000) 21 000 √

PRIME COST 360 000 √w+f

Plus

Production overheads:

Production management salaries 53 000 √

Machine repairs 28 650 √

Rent and rates (22 000 x 70%) 15 400 √

Electricity and gas (15 500 + 500 x 70%) 11 200 √

Sundry expenses 18 750 √

Depreciation – machinery and equipment 15 000 √

142 000

502 000

Work in progress:

At 1 May 2012 6 000

At 30 April 2013 (4 000) √

PRODUCTION COST (288 000 packs) 504 000 √w+of

Profit on production 72 000 √of TRANSFER TO FINISHED GOODS (288 000 packs) 576 000 √w+f

(14)

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Question Number

Answer Mark

2(b)(i) Prime cost £360 000 √of = £1.25 per pack √of

Packs produced 288 000 √

(3)

Question Number

Answer Mark

2(b)(ii) Production cost £504 000 √of =£1.75 per pack √of

Packs produced 288 000 √

(3)

Question Number

Answer Mark

2(c) Reasons:

• Measure efficiency of production and selling activities.

• A notional profit can be generated in the production department

• Can compare cost of manufacture with purchasing the product

√√ x one point

(2)

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Question Number

Answer Mark

2(d)

Statement of Comprehensive Income for the year ended 30 April 2013

Packs £ £

Sales revenue:

Farmers markets 66 000 198 000 √√

Sales on line 140 000 378 000 √√

Tulip Supermarkets 76 000 171 000 √√

282 000 747 000

less

Opening inventory of finished goods 12 000 24 000 √

Transfer from production 288 000 576 000 √

300 000 600 000

Closing inventory of finished goods 18 000 (36 000) √

Cost of sales 282 000 564 000 √w+of

Gross profit 183 000

Less

Administrative salaries 84 500 √

Marketing (52 900- 1 800) 51 100 √

Rent and rates (22 000 x 30%) 6 600 √

Electricity and gas (15 500 + 500 x 30%) 4 800 √

Depreciation – fixtures and fittings 12 000 √

Sundry expenses 26 000 √

(185 000)

Loss (2 000)

Add Profit from production 72 000 √of Profit for the year √ 70 000

(18)

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Question Number

Answer Mark

2(e) Going concern – Assumes, unless the contrary is known, that the business will have a life of unlimited duration.√√

Consistency – that a consistent method of depreciating the non-current asset should be used throughout its life.√√ 

(4)

Question Number

Answer Mark

2(f)

Valid points may include:

Points for • Increased market share/sales • Fixed costs can be shared over a larger number of units of

production/sales • Economies of sale • Expansion with a known and reliable customer • Gives a positive contribution on extra output

Points against • Profit on extra packs sold to Tulip Supermarkets would be very low • Profit on existing packs sold to Tulip supermarkets would be lowered • Very small profit margin per pack of burgers sold to Tulip

Supermarkets • Probably higher fixed costs • Other customers may request same discounts

NOT • Increased wastage

• Lower quality

√√ per valid point x Max two point in favour and two points against

(8)

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Question Number

Answer Mark

3(a) Journal

Dr Cr

£ £

Eastern Drinks 180 √

Suspense 180 √

Bank 600 √

Suspense 600 √

Equipment 1 500 √

ESB Sports 1 500 √

Income and expenditure 300 √

Provision for depreciation – equipment/ 300 √

Depreciation

Subscriptions 100 √

Bank 100 √

Income and expenditure/Sundry expenses 3 090 √

Mali Supplies 3 090 √

Inventory / Refreshments 630 √

Income and expenditure account/ 630 √

Trading account

(14)

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Question Number

Answer Mark

3(b) Corrected surplus/(deficit)

£ £ £

Increase Decrease

Original surplus 900 √

Depreciation 300 √

Sundry expenses 3 090 √

Inventory 630 √

630 (3 390)

Corrected deficit (1 860)√√ (√of)

(6)

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Question Number

Answer Mark

3(c)

Arena Sports Club

Statement of Financial Position at 30 April 2013

Cost Aggregate Carry

Depreciation Over

Non-current assets £ £ £

Clubhouse 30 000 4 200 25 800 √

Equipment 6 000 1 400 4 600 √

36 000 5 600 30 400

Current assets

Inventory (1 700 √+ 630 √) 2 330

Subs in arrears 220 √

Bank (5100 +600 √ – 100 √) 5 600

8 150

38 550

£ £

Accumulated fund 25 400

Less Deficit (1 860)

23 540 √of

Current liabilities

Trade payables ( 8 700√ -180√ +1 500√ +3 090√)

13 110

Other payables 600 √

Subs in advance(1 400 √ – 100 √) 1 300

15 010

38 550

(15)

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Question Number

Answer Mark

3(d)(i) 3(d)(ii)

(i)The subscriptions total will be (30 x £30) less.√ Income / surplus will be £900 lower √

(ii) Bank will increase by (30 x £700 √ – 30 x £100√) £18 000 greater

(4)

Question Number

Answer Mark

3(e) 10 Year Subscriptions account £ £ Income and expenditure √ 2 100√ Bank (30 x £700) 21 000 √

Balance c/d 18 900√ _____ 21 000 21 000

Balance b/d 18 900 √of

(5)

Question Number

Answer Mark

3(f) Valid points may include:

Points for

• Cash flow up front • Ties members to the club for a long period • Reduce bad debts • Attract more members

Points against • Loweroverall subscriptions over the years affecting surplus • Services must be provided for ten years whatever the level of future

costs √√ per valid point x Max two point in favour and two points against

(8)

Question Number

Answer Mark

4(a) The partner’s loan is paid at 5% interest unless otherwise agreed

The interest is charged to the main body of the income statement

In the financial position statement it will appear as a creditor due in less than or over one year

√√ x 2 points

(4)

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Question Number

Answer Mark

4(b)(i) Appropriation Account

£ £ Profit for the year 30 140 √ Plus Interest on drawings:

Ashraf 360 √ Bashar 140 √ Chung 160 √

660

30 800

Less Interest on capital:

Ashraf 1 500 √√ Bashar 900 √√ Chung (1 500 + 900) 2 400 √√

4 800

Salary: Chung 8 000 √ Share of residue:

Ashraf (4 000 + 3 600) 7 600 √of Bashar(2 000 + 3 600) 5 600 √of Chung (3 000 + 1 800) 4 800 √of

18 000

30 800

(15)

Question Number

Answer Mark

4(b)(ii)

Capital Account of Chung

£ £

Bank 8 000 √ Balance b/d 50 000 Loan 12 000 √ Balance c/d 30 000 50 000 50 000

Balance b/d 30 000 √of 

(3)

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Question Number

Answer Mark

4(b)(iii) Current Account of Chung

£ £ Balance b/d 200 Interest on capital 2 400 √ of Int on drawings 160 Salary 8 000 Drawings 4 000 √ Loan interest 300 √ Salary paid 8 000 √ Share of profit 4 800 √of Balance c/d 3 140

15 500 15 500 Balance b/d 3 140 √of

(6)

Question Number

Answer Mark

4(c) Valid points may include: Points for

• Clarity upon the distribution of profit • Avoids disputes at a later date

Points against • Formality of creating the agreement • Cost of preparation

NOT • Cover for absence/holidays

• Wide expertise available

• Time consuming

√√ per valid point x Max one point in favour and one point against

(4)

Question Number

Answer Mark

5(a) Inventory rotation refers to the physical movement of inventory through the stores. The oldest stock will normally be sold first to avoid deterioration. √√ Inventory valuation refers to the theoretical value of the inventory that is sold or issued to production. √√ This may be influenced by the need to charge the customer the most recent prices paid.

(4)

a

Question Number

Answer Mark

5(b)

FIFO Receipts Sales Balance Balance 8 000 @ £0.80 January 15 000 @ £1 12 000 11 000 @ £1 √√ February 15 000 @ £1.25 16 000 10 000 @ £1.25 √√ March 12 000 @ £1.50 8 000 2 000 @ £1.25 √√ 12 000 @ £1.50 £20 500

(6)

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Question Number

Answer Mark

5(c) Home Oil Statement of comprehensive income for the three months ended 31 March

2013

£ £ Revenue 62 000 √ Less Opening inventory 6 400 √√ Purchases 51 750 √√ 58 150 Closing inventory 20 500 √of Cost of sales 37 650 Gross profit 24 350 Distribution costs 4 750 √ Administrative costs 8 300 √

13 050 Profit for the three months 11 300 √√ (√of)

(10)

Question Number

Answer Mark

5(d)(i)

LIFO

Receipts Issues Balance Balance 8 000 @ £0.80 January 15 000 @ £1 12 000 8 000 @ £0.80 √√

3 000 @ £1 February 15 000 @ £1.25 16 000 8 000 @ £0.80 √√

2 000 @ £1 March 12 000 @ £1.50 8 000 8 000 @ £0.80 √√ 2 000 @ £1 4 000 @ £1.50 £14 400

(6)

Question Number

Answer Mark

5(d)(ii) The closing inventory will be £14 400 compared to the present £20 500. Therefore profit will be lower √√ by £6 100

(2)

Question Number

Answer Mark

5(e) Valid points may include: Points for

• Profit will be more prudently lower • Issues to customers more accurately reflect replacement value

Points against • Not approved by the tax authorities • Inventory does not reflect market replacement value • Does not reflect rotation

√√ per valid point x Max one point in favour and one point against

(4)

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Question Number

Answer Mark

6(a)(i) Shopalot Statement of Comprehensive Income for the year ended 30 April 2013

£ £ Revenue – Rent (£4 000 x 4 x 9) 144 000 √ Service charge(£1 500 x 4 x 9) 54 000 √

2% in income 27 000 √ 225 000 Less Security 30 000 √ Cleaning 21 000 √ Administration 24 500 √ Electricity 9 700 √ Government rates 26 500 √ Depreciation – Building 10 000 √

Conversion 20 000 √ Computers 45 000 √

Loan interest 44 000 √ 230 700

Loss for the year (5 700)

(12)

Question Number

Answer Mark

6(a)(ii) Bank Account

£ £ Investment 400 000 Non-current assets purchased 850 000√ Loan 550 000 √ Security 30 000√ Rent (144 000-8 000) 136 000 √ Cleaning 21 000√ Service charge Administration 24 500 (54 000 – 3 000) 51 000 √ Electricity and power 9 700 Income 2% 27 000 Government rates 17 500 √ Bank interest 44 000 √ Balance c/d 167 300 1 164 000 1 164 000 Balance b/d 167 300

(8)

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Question Number

Answer Mark

6(b) Shopalot Statement of Financial Position extract at 30 April 2013

Non-current assets Cost Aggregate Carry depreciation over £ £ £ Buildings 700 000 30 000 670 000 √ Computer network 150 000 45 000 105 000 √ 850 000 75 000 775 000 Current assets Trade receivables (4 000 x 2 + 1 500 x 2) 11 000 √ Bank 167 300 √of 178 300

(4)

Question Number

Answer Mark

6(c) ROCE Profit for the year before interest = (5 700)of + 44 000of√= 4%√√of Capital + Non-current liabilities 400 000 + 550 000√

(4)

Question Number

Answer Mark

6(d) Valid points may include: Points for

• A very strong cash position (of) • Further income and profit if tenth shop can be rented

Points against • Loss for the year (of) • Building not fully occupied

NOT • Total assets higher

√√ per valid point x Max one point in favour and one point against

(4)

Question Number

Answer Mark

7(a)(i) Current ratio 50 000 √= 1.25:1√ 40 000 √

(3)

Question Number

Answer Mark

7(a)(ii) Liquid acid test ratio 13 000 √ = 0.325:1 √ 40 000 √

(3)

Question Number

Answer Mark

7(b) Both ratios are low √

There appears to be excess inventory √

(2)

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Question Number

Answer Mark

7(c) Current Assets Current Liabilities

Plus, minus ,no effect

Value (£) Plus, minus ,no effect

Value (£)

Action 1 Minus√ 1 000 √ Minus √ £5 000 √

Action 2 Minus √ 5 000 √ Minus √ £4 500 √

Action 3 No effect √ £0 √ Minus √ £600 √

(12)

Question Number

Answer Mark

7(d) Adnam Statement Financial Position at 30 March 2013

£ Current Assets Inventory (37 000 √ – 16 000 √) 21 000 Trade receivables (13 000+10 000 √-5 000√) 18 000 Current Liabilities Trade payables (35 000 – 12 000) 23 000 √ Bank overdraft (-5 000 + 10 000 √+ 4 500 √– 11 400√) 1 900

(8)

Question Number

Answer Mark

7(e) Valid points may include: Points for

• Inventory is reduced • Trade payables reduced • Liquidity has improved

Points against • Still no funds in the bank (of) • Trade receivables increased and need to recover debts

√√ per valid point x Max one point in favour and one point against

(4)

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Further copies of this publication are available from Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN Telephone 01623 467467 Fax 01623 450481 Email [email protected] Order Code UA035278 Summer 2013 For more information on Edexcel qualifications, please visit our website www.edexcel.com Pearson Education Limited. Registered company number 872828 with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE

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Mark Scheme (Results) Summer 2013 GCE Accounting (6002/01)

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Edexcel and BTEC Qualifications Edexcel and BTEC qualifications come from Pearson, the world’s leading learning company. We provide a wide range of qualifications including academic, vocational, occupational and specific programmes for employers. For further information, please visit our website at www.edexcel.com. Our website subject pages hold useful resources, support material and live feeds from our subject advisors giving you access to a portal of information. If you have any subject specific questions about this specification that require the help of a subject specialist, you may find our Ask The Expert email service helpful. www.edexcel.com/contactus Pearson: helping people progress, everywhere Our aim is to help everyone progress in their lives through education. We believe in every kind of learning, for all kinds of people, wherever they are in the world. We’ve been involved in education for over 150 years, and by working across 70 countries, in 100 languages, we have built an international reputation for our commitment to high standards and raising achievement through innovation in education. Find out more about how we can help you and your students at: www.pearson.com/uk Summer 2013 Publications Code UA035280 All the material in this publication is copyright © Pearson Education Ltd 2013

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General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should be used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidate’s response is not worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification may be limited.

• When examiners are in doubt regarding the application of the mark scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it with an alternative response.

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Question Number

Answer Mark

1(b) FOR Importance Auditors are independent √ scrutineers of the accounts. √ who report that the accounts have been prepared “correctly” √ in accordance with International Accounting Standards √ or rather, give a True and Fair view. √ or do not √ . Auditors are reporting on how Directors have used the funds √ invested by shareholders. √. The auditors duty is to the shareholders. √ Auditors may give tax authorities √ more confidence that the tax computation is correct. √

Question Number

Answer Mark

1(a) Q1a Mark Scheme W1 Cost of Sales Direct Materials 320 855 √ Statement of Comprehensive Income for Less Discount Received -7 150 √ Hong Kong Cameras plc Factory Depreciation 76 800 √ for Y/e 31st March 2013 √ Machinery Depreciation 45 625 √ Revenue 4 183 693 √ Factory Power 44 950 √ 10 x √ Machinery maintenance 44 780 √ Cost of sales (956 360) √ o/f Production staff 339 100 √ Production Director 9 5000 √ Gross profit 3 227 333 √ o/f Inventory Adjustment Finished Goods -3 600 √√ 956 360 Other Income 3 078 √ o/f W2 Distribution Costs Distribution costs (940 990) √ o/f Commission on sales 52 750 √ Sales director 100 000 √ Administrative expenses (359 141) √ o/f Fuel 35 460 √ Motor lorries depreciation 43 000 √ Financial cost (35 000) √ o/f Promotions and advertising 65 000 √ Rent on shop premises 298 000 √ 9 x √ Profit on ordinary activities before tax 1 895 280 √ o/f Running cost of lorries 368 80 √ Shop staff wages 197 500 √ Corporation tax (90 000) √ Transport staff wages 112 400 √ 940 990 Profit on ordinary activities after tax 1 805 280 √o/f√C W3Administrative Expenses Bad Debts Written Off 1 850 √ 12 x √ Finance director 95 000 √ Discount allowed 45 997 √ W5 Financial cost Office stationery 3 294 √ Interest on debenture 35 000 √√ Accountancy staff wages 71 800 √ 6 x √ 2 x √ Office staff wages 14 1200 √ 359 141 W4 Other Income TOTAL 40 marks Interest on bank balance 3 078 √ 1 x √ Note: Discount allowed accepted as a Distribution cost

(40)

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Professional supervisory bodies √ exist to give guidelines to auditors √ , eg Audit and Assurances Council. √ Auditors should be professionally qualified √ eg Chartered Accountants.√ Report is required by the Companies Act/legislation √ If Auditors are unhappy with the accounts √ the Auditors Report will be qualified √ The report may help users make a decision √ eg buy or sell shares in the company √ AGAINST Importance Auditors may not be very independent, √ going along with the wishes of clients, √ i.e. conflict of interest √ in order to keep their custom/earn fee√ which may include non-audit work. √ Auditors could be misled √ by the directors √ and provide an inaccurate report. √ Auditors do not guarantee √ that material fraud has not occurred. √ Maximum of 8 marks for argument on one side CONCLUSION - 2 marks Should relate to points made above. Eg Auditors’ Report is important and of value. √√

(12)

Question Number

Answer Mark

2(a)(i) (a) Statement of Comprehensive Income

Opening stock Production Closing Price Revenue

Calculation of sales 2 100 + 84 000 √ - 2450√= 83650 x25√ 2091250 √

Marginal Absorption

Revenue 2 091 250 2 091 250

Less

Direct Materials 579 600 579 600 √ both

Direct Labour 386 400 √ 386 400 √

Semi-variable costs 261 600 √ 261 600 √

Fixed Overheads 150 000 150 000 √ both

1 377 600 1 377 600

Opening Inventory 25 200 √ 33 600 √

Closing Inventory 29 890 40 180

Profit 718 340 √ o/f 720 230 √ o/f

Calculation of closing inventory

Marginal (6.90+4.60+0.70)√ x 2450 = 29890 √

Absorption 1377600 √ o/f = £16.40 x2450√= 40180 √ o/f

84000 √

(20)

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Question Number

Answer Mark

2(b) Answers could include Marginal costing says the order should be accepted √ on the grounds that £15 is greater √ than the marginal cost √ of £12.20 o/f √ ie a positive contribution √ of £2.80 o/f √ (Maximum of 4 ticks) New customer may result in more orders in the future, √ perhaps at a higher price. √ However in the long term, √ selling at £15 would result in a Net Loss / not all costs are covered. √ (loss of £1.40 √o/f) Absorption costing says do not accept offer √ Existing customers would be unhappy √ to hear of this low price on offer / will ask for lower prices. √

(8)

Question Number

Answer Mark

2(c)(i) Option (i) - £23 000 x 12 = £276 000 √ Option (ii) - £202 800 x 1.05 = £212 940 √ + (£0.70 x 84 000) = £212 940 + £58 800 √ = £271 740 √ Option (iii) - £16 200 x 12 = £194 400 + (£0.90 x 84 000) = £194 400 + £75 600 √ = £270 000 √ Option (iii) is the best, √ if output remains at 84 000 units per year.

(7)

Question Number

Answer Mark

2(c)(ii) Development of answers could include : If output increases, other options may be the best. √ For example, if output rises by 6667, √ option (iii) is more expensive than option (i) √ If output rises by 6086 units, √ option (ii) is more expensive than option (i) √ If output is less than 84 000, option (iii) remains the best. √√

(5)

Question Number

Answer Mark

2(d) Answers could include: Maximum of 8 marks for argument of one side. Case for Marginal Costing Could be said to help decision making √ in the short term √ when deciding whether to accept an offer price √ or make or buy √ or discontinue a product/profit centre. √ or a limiting factor problem √ Sees costs allocated to a time period, √ so it may be argued that profit for that time period is more accurate.√ External accounts √ are drawn up on the basis of a time period. √ Follows prudence concept √ as closing stock and profit figures are lower.

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Case for Absorption Costing Sees costs allocated to products. √ Could be useful for management √ when fixing prices √ or reviewing if a product/project has been profitable.√ in the long term √ Recommended √ by SSAP 9. √ Gives a realistic figure for profit √ Follows matching concept √ as revenues for the product are matched against costs. √ Other Points If figures in the future are similar, choice of stock valuation will not have very much effect on the profit. √√ Conclusion Max 2 marks available. Should use absorption costing as per accounting standards.

(12)

Question Number

Answer Mark

3(a) Statement of Cash Flow for Larnaca plc for y/e 31 March 2013√ 1

Cash Flows from operating activities√

Profit from operations (8000√ + 6400√) 14400 √√

Add Depreciation (66000√√√√ + 20000√√) 86000 √√√√√√

Add Loss on Sale of Fixed Asset 6000 √

Operating cash flow before working capital changes√ 106400 √ Increase in inventories -23000 √ Increase in trade receivables -15000 √ 19 Increase in trade payables 51000 √

Cash generated from operations 119400 √ o/f Less Interest Paid: Debenture -6400 √ Less Tax Paid -18000 √

Net Cash from Operating Activities 95000 √ o/f

Cash Flow from Investing Activities√

Payments to acquire tangible fixed assets -60000 √

Proceeds from sale of tangible fixed assets 36000 √ 5

Net Cash Used in Investing Activities√ -24000 √ o/f

Cash Flow from Financing Activities√

Issue of Ordinary shares 50000 √

Repayment of Debenture -80000 √

Dividends Paid : Final 2012 -25000 √√ 9

Interim 2013 -22000 √√

Net Cash Used in Financing Activities√ -77000 √ o/f

Net decrease in cash and cash equivalents√ -6000 √o/f√C 3

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Cash and cash equivalents at the beginning of the year 77000 √

Cash and cash equivalents at the end of the year 71000 √ 3

Net decrease in cash and cash equivalents -6000 √

TOTAL √ x 40 40 Marks

(40)

Question Number

Answer Mark

3(b) Answers could include: Liquidity position good Firm has healthy level of cash and cash equivalents √ Current Ratio now stands at 2.31: 1 √√ which is good. √ Acid ratio now stands at 1.04 :1 √√ which is ideal √ Liquidity has been improved by issue of ordinary shares√ Working capital is £629 000 - £272 000 = £357 000 √ which is healthy/ means current liabilities can be paid. √ Liquidity position worsening/problems Net cash outflow of £6 000 √ Inventories are a large figure and rising √ is there a problem with unsold inventories/ is it perishable? √ Trade Receivables rose by 15 000 √ Credit control/ chasing up debtors needs to be carried out immediately as figure is very high. √ Big increase in Trade Payables to very large sum √ Is firm paying on time and obtaining cash discounts etc √ Cash and Cash Equivalents of £71 000 are unable to pay √ Current Liabilities of £272 000 √ Dividend policy needs to be reviewed. √ Ordinary shareholders have been paid an interim dividend for 2013 of £22 000 on a profit before tax of £8000 √ which is very high. √ Debenture has been redeemed which uses liquid funds √ but helps future liquidity as no more interest has to be paid. √ Maximum 8 marks for arguing one side. Conclusion on current liquidity position max 2 marks ie Liquidity position is good √√

(12)

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Question Number

Answer Mark

4(a) Fixed Costs Variable costs per unit (1.05 + 0.06 + 0.27) √ Rent £520 per month Total £ 1.38 per unit √ Water £250 per month √ both Depreciation £135 per month √√ Insurance £90 per month Contribution per unit Loan £270 per month √ both (£ 4.15 - £ 1.38) √ = £2.77 √ Total FC £1 265 per month √ Break Even Point = £1 265 o/f √ = 456.67 / 457 trays o/f √ £2.77 o/f √

(12)

Question Number

Answer Mark

4(b) Profit for month Contribution (2.77 x 1132) = £3 135.64 o/f √ Less FC = £1 265 √ o/f Profit = £1 870.64 √o/f √C

(4)

Question Number

Answer Mark

4(d) Case for lower labour rate. Business has profit target √ and has to take action to achieve these targets. √ May not possible to decrease other costs, √ especially if fixed eg loan repayment, rent etc √ May not be possible to increase selling price to increase profit, √ as will result in reduced sales √ Case against lower labour rate. Workers will be demotivated √ and workforce morale will be low. √ It may not be possible for workers to pick extra fruit, √ to maintain overall wage level. √ Could try to reduce other costs instead √ eg shop around for lower insurance. √ Maximum of 4 ticks for arguing one side Conclusion - Two √√ It is a good/bad idea to lower labour rate.

(8)

Question Number

Answer Mark

4(c) Contribution for month = (£2 000 + £1 265 o/f) √ = £3 265 √ o/f If 1132 trays produced, contribution for one tray = £3 265 o/f √ = £2.88√ o/f 1132 So variable costs for one tray must be (£4.15 - £2.88 o/f) √ = £1.27 √ o/f So labour costs must be = £1.27 o/f - (£0.06 + 0.27) √ = £0.94 √ o/f

(8)

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Question Number

Answer Mark

5(a)(i) Dividend paid per share = Total ordinary dividend √ Issued ordinary shares = £960 000 √ = 4 pence per share √ 24 000 000 √

(4)

Question Number

Answer Mark

5(a)(ii) Dividend yield = Dividend per share x100 √ Market price of share = 4 p o/f √ x 100 = 2 % o/f √ 200p √

(4)

Question Number

Answer Mark

5(a)(iii) Dividend cover = Net profit after interest and tax and preference dividend √ Total ordinary dividend = £2 304 000 √ = 2.4 times √ £960 000 √

(4)

Question Number

Answer Mark

5(a)(iv) Earnings per ordinary share = Net profit after interest and tax and preference dividend √ Issued ordinary shares = £2 304 000 √ = 9.6 pence per share √ 24 000 000 √

(4)

Question Number

Answer Mark

5(a)(v) Price/earnings ratio = Market price of share √ Earnings per share = 200 p √ = 20.83 times o/f √ 9.6p o/f √

(4)

Question Number

Answer Mark

5(b) Answers could include: A higher share price does not mean a “better” share. √ The nominal or face value of the share needs to be considered. √ Also the total number of shares in the company. √ Also important is the movement in the value of the share √ – is it moving up or down? √ Very important is the demand and/or future/confidence of the market in the share √ – if Imran buys now, will he make a profit or a loss on the share. √ Many factors both inside the company √ and outside the company can affect the price of a share. √

(4)

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Question Number

Answer Mark

5(c) Answers could include For the statement Investors are usually interested only in the return on their investment, √ which is shown in the dividend per share, which is used to calculate how much the investor receives. √ Investors are more concerned with what they actually receive, √ than how easily the company can afford to pay the dividend, √ as shown by the dividend cover. √ Against the statement Investors also have a capital gain when the share price rises, √ which is partly shown in the Price/Earnings ratio. √ Dividend yield shows the return for every pound invested, √ which is more important than dividend per share. √ Earnings per share is an important ratio, as it shows how much profit is being generated for each share invested. √ These profits are then used to pay dividends. √ Other ratios concerning profitability and liquidity etc are important, √ as they show how well the firm is doing. √ Maximum of 4 marks for arguing one side Conclusion 2 marks Dividend per share is not the only important ratio worth knowing about. √√

(8)

Question Number

Answer Mark

6(a)(i) Sales Budget - Units

MONTH 1 MONTH 2 MONTH 3 10 √ 32 √ 48 √

(3)

Question Number

Answer Mark

6(a)(ii) Production Budget - Units

MONTH 1 MONTH 2 MONTH 3 21 √ 40 √ 48 √

(3)

Question Number

Answer Mark

6(a)(iii) Inventory Budget - Units MONTH 1 MONTH 2 MONTH 3 To Inventory each month

11 √ 8√ 0 √

Total in Inventory

11 √ 19 √ 19 √

(6)

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Question Number

Answer Mark

6(a)(iv) Purchases Budget – Units

MONTH 1 MONTH 2 MONTH 3 31 √ 42 √ 48 √

(3)

Question Number

Answer Mark

6(a)(v)

Purchases Budget (£)

MONTH 1 MONTH 2 MONTH 3 £20 925√ £28 350 √ £32 400√

(3)

Question Number

Answer Mark

6(a)(vi) Creditors Budget (£)

MONTH 1 MONTH 2 MONTH 3 £11 475 √ £14 850√ £16 200 √

(3)

Question Number

Answer Mark

6(a)(vii) Debtors Budget

MONTH 1 MONTH 2 MONTH 3 £24 500√ £58 800 √ £88 200 √

(3)

Question Number

Answer Mark

6(b) For Decision to draw up new budgets. Existing budgets are not likely to be accurate √ so there is little point in sticking with them. √ Good budgeting should be flexible, √ so changes should be made to this ongoing process√ with regular reviews taking place. √ A new business should not draw up a three month budget, √ as it is likely to be unsure of the predicted figures, √ not having any past figures to rely on √ A new budget would help planning / changes √ eg reduce the purchases for each month √ New budgets may have targets staff can reach √ which will increase motivation √ Against Decision to draw up new budgets Will take time √ and money to draw up new budgets. √ Variance analysis could be carried out √ and actions taken to meet original budgeted figures.√ The new budget will only be estimates anyway, so may not be accurate √ The only budget directly affected by a lower sales level is trade receivables√ so there maybe a need just to draw up trade receivables √ This is a new business, and sales may pick up √ to meet month 2 an3 figures in the original budget, making it accurate. √

(8)

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Maximum of 4 marks for arguing one side only Evaluation 2 marks available for overall conclusion, should relate to points made above.

Question Number

Answer Mark

7(a) Actual Direct Materials 1265 x 8.14 √ x 0.51 √ = £5 251.52 √ 1st tick any two Actual Direct Labour 11 x 43.5√ x 4 x £4.80√ = £9 187.20 √ 1st tick any two

(6)

Question Number

Answer Mark

7(b)

Material Usage Variance (8.14 – 8.00) √ x (0.45 √ x 1265 √) = £79.70 Adv√ Material Price Variance (0.51 – 0.45) √ x (8.14 √ x 1265 √) = £617.83 Adv √ or add downwards Total Material Cost Variance £5 251.52 - £4 554 √ = £697.52 Adv √ o/f

(10)

Question Number

Answer Mark

7(c) One mark for reason given, up to three marks maximum for actions taken. Material Usage variance Could be caused by poor quality materials resulting in a lot of wastage. √ Action to solve the problem could be to change supplier √ or insist on a certain level of quality. √ Perhaps insert penalty clauses √ into supplier’s contracts for quality. √ Or wastage caused by poor quality labour. √ So train labour better, √ or hire better quality labour, √ or raise wage rates to attract better quality labour√ or improve quality control√ Material Price variance Could be caused by suppliers charging a high price. √ Action could be Purchasing department must negotiate a lower price. √ Or change to supplier with lower price.√ or buy lower quality materials √ Or achieve discount by bulk buying √ or prompt payment.√

(8)

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Question Number

Answer Mark

7(d) For the decision Material variance is larger / labour variance is smaller √ Labour variance is £317.20 adverse, √ which is £380.32 less than the adverse material variance √ of £697. Maybe the policy is to investigate variances over a particular limit √ eg £500. √ The labour variance is only 3.56%, √ whereas the materials variance is 15.3%√ which is much bigger. √ Management by exception tries to make the management time cost effective, √ so no time is wasted investigating small variances. √ Against the decision It is possible that all costs, including labour could be reduced √ so the adverse variance should be investigated. √ If you ignore an adverse variance below a certain limit, √ the cost could “creep up” each year without any action being taken. √ It is possible that any reduction in costs after investigation is cost effective√ ie could be greater than management time spent investigating. √ Maximum of 4 marks for argument of one side. Conclusion Should relate to above points eg decision was correct/incorrect √ √

(8)

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Further copies of this publication are available from Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN Telephone 01623 467467 Fax 01623 450481 Email [email protected] Order Code UA035280 Summer 2013 For more information on Edexcel qualifications, please visit our website www.edexcel.com Pearson Education Limited. Registered company number 872828 with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE


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