Accounting Paper 3 November 2018

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Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

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1. ACost is the purchase price plus the cost of getting the goods to their present condition and location; net realisable value is the expected selling price less selling costs.
2. BCost is the selling price less the normal profit margin, and net realisable value is the price a similar item would cost to buy in from another supplier now.
3. CCost is the original purchase price of the goods on its own, and net realisable value is the amount the trader hopes those goods will eventually be sold for in the market.
4. DCost is the amount at which the goods were last valued in the accounts, and net realisable value is the amount an insurer would pay to replace those goods today.

1. AIt leaves the goods at cost until they are actually sold, since only a completed sale can prove what the loss really was.
2. BIt values the goods at the higher of the two figures, so that the trader is not discouraged from carrying inventory at all.
3. CIt recognises the whole loss now, since a loss that can be foreseen is charged at once while a profit waits until it is realised.
4. DIt spreads the loss over the years in which the damaged goods are expected to be sold, so no single year carries all of it.

1. APaying a trade payable two weeks earlier than the agreed settlement date.
2. BBuying a delivery van for the business and paying for it out of the business bank account.
3. CConverting a short term bank overdraft into a long term loan repayable in five years.
4. DTaking extra drawings out of the business bank account for private use.

1. ABuying more inventory on credit than the business is able to sell in the season.
2. BRepaying part of a long term loan out of the business bank account.
3. CWriting off as irrecoverable a debt owed by a customer who has gone bankrupt.
4. DSelling surplus equipment the business no longer uses and banking the proceeds.

1. AIt uses only figures taken from the statement of profit or loss, which are more up to date.
2. BIt leaves out inventory, which must still be sold and then collected before it is cash.
3. CIt gives a larger figure than the current ratio, so it takes a safer view of the business.
4. DIt brings in the non-current assets a trader could sell if his creditors pressed him hard.

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1. AA profit of $6,336, being the shop takings of $14,336 less the shop wages of $8,000.
2. BA loss of $264, transferred to the income and expenditure account.
3. CA loss of $264, deducted from the accumulated fund in the statement of financial position.
4. DA profit of $7,736, because wages are an expense of the club as a whole and not of the shop.

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1. ACredit $10,000 to the income and expenditure account and show $4,000 as a receivable.
2. BCredit only the $6,000 received, and credit the remaining $4,000 in the following year.
3. CCredit $10,000 to the accumulated fund, since a council grant is a capital receipt of the club.
4. DCredit $6,000 to income and show the remaining $4,000 as a liability of the club.

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1. AA small recurring donation is income of the year, while a large one, or one tied to a stated purpose, is capitalised to a fund.
2. BA donation is held as a liability of the club until the committee decides how the money is going to be spent.
3. CEvery donation is credited in full to the income and expenditure account in the year in which it happens to be received.
4. DEvery donation is added straight to the accumulated fund, because a gift of money is never something the club has earned.

1. AThe company holds $21,000 of cash that has been set aside for a creditor.
2. BThe company's bank account is overdrawn by $21,000.
3. CThe company owes $21,000 of petty cash to its cashier at the year end.
4. DThe company has $21,000 of cash it expects to spend within the year.

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1. AIt is credited to the realisation account as part of the purchase consideration.
2. BIt is written off to the partners' current accounts in the profit sharing ratio.
3. CIt stays in the bank account and is used to settle the partners' capital accounts.
4. DIt is debited to the realisation account with the other assets taken over.

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1. ACharged as an administration expense in the statement of profit or loss for the year.
2. BAdded to the cost of the non-current assets the issue was raised to buy.
3. CDeducted from the ordinary share capital shown in the statement of financial position.
4. DWritten off against the share premium account arising on the issue.

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1. AIt is cheaper, since there is no prospectus, no underwriting and no advertising to the public.
2. BThe company can set any issue price it likes because existing shareholders must take up the shares.
3. CIt brings in new outside shareholders, which widens the market for the company's shares.
4. DThe money raised does not have to be shown as share capital in the statement of financial position.

1. AThe finance is secured on the company's assets, which reassures the existing shareholders.
2. BThe company avoids having to declare a dividend to its ordinary shareholders in future years.
3. CThe finance carries no fixed interest charge and no obligation to repay the money.
4. DThe shares can be issued without any entry in the share premium account being needed.

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1. AThe floor area in square metres occupied by each department.
2. BThe cost of the machinery installed in each department.
3. CThe number of orders each department draws from the stores.
4. DThe number of workers employed in each department.

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1. A$3,256 over absorbed
2. B$4,708 under absorbed
3. C$1,380 over absorbed
4. D$1,380 under absorbed

1. AOverhead spending was below the budget while the hours worked were exactly as budgeted.
2. BOverhead spending ran above the budget by more than the extra hours worked recovered.
3. CThe rate was based on the actual overheads and the actual hours, so it could not be wrong.
4. DThe department worked more hours than budgeted, so it recovered more overhead than it spent.