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Rent Arrears 2 000 Advance 4 200 P&L 114 000 Bank 111 000 Advance 1 600 Arrears 2 400 117 600 117 600 Assets are re-valued from book value therefore revaluation reserve must be credited $144 000. The debit is made to close the Accumulated depreciation (206 131 = 75) and the asset itself (69) The firm has the rights of ownership (substance of the transaction) despite not owning it until it is paid off (legal form of transaction). Vehicle Balance 2 500 Disposal 2 500 Capital 4 000 Balance 4 000 6 500 6 500 Vehicle account is debited $4000, and credited $2500 so a $1500 increase. Bank Reconciliation Balance per statement 22 650 Add unlodged deposits 3 110 Less unpresented cheques (6 290) Less bank error (650) Balance per cash book 18 820 Both errors result in overstated COGS, therefore profit = 32 500 + 2400 + 3400 = 38 300 Prime costs = Direct costs. Depreciation, factory supervisor, heat & light are all indirect therefore: Op Balance of RM 10 Purchases of RM 58 Cl balance of RM (8) Direct labour 97 Prime Cost 157 Assume interest is paid on capital and charged on drawings at 10% Capital Drawings Int on Cap Int on Draw Net (int on cap- in on draw) A 20 30 2 (3) (1) B 20 50 2 (5) (3) C 60 30 6 (3) 3 D 60 50 6 (5) 1 It does not matter what the actual interest rates are, outcome would be the same. If $30 K is Zs share of goodwill then total goodwill must equal (3 x 30) = $90 as profits (and therefore goodwill) will be shared equally. Old share New Share Change X 45 30 Cr 15 Y 45 30 Cr 15 Z 30 Dr 30 1. True, may have bar, canteen etc. 2. True, subs in arrears may not be paid. 3. False. Subs are credited to I/E account in the year they are due (not received). 4. False. Excess expenditure over income = loss not profit

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Revenue = COGS x (1+ mark-up) therefore 240 = COGS x 1.25 = 240/1.25 = 192 000. Cost of Sales Opening inventory 42 Purchases 198 Closing Inventory (48) Cost of Sales 192 (100 x 3) + (20 x 4) = 380 A. False. Dividends are usually only paid if a profit is earned. B. False. Ordinary shares do not usually receive carry over dividends. C. True. Cumulative preference shares have their dividend carried over if no dividend paid. D. False. No profit means that no dividend will be paid. The issue of debentures for cash means DR bank (current asset) and CR debentures (Non-current Liability) so net current assets increases. Interest must be paid on the debentures so profits will decrease. Factoring trade receivables provides cash so that it can pay debts. BCD would all make the situation worse. Cash discount has no effect on gross profit (not part of COGS). Reduced pilferage (stealing) by staff will increase closing stock and reduce COGS so improve gross profit. Year 1 Year 2 Gross profit margin GP/Sales 45 / 150 = 30% 70/200 = 35% ROCE = NP/ Total assets 18 / 150 = 12% 22.5 / 150 = 15% Inventory turnover = COGS / Ave Stock therefore 5 = COGS / 54 = 5 x 54 = 270. Sales = COGS + 1/3 = 270 + 90 = 360 000 Liquid ratio = Current assets Inventory : Current Liabilities Owner would want to know if the product is likely to improve profit therefore Gross Profit ratio is most useful. (Current Ratio and Trade Rec. ratio show liquidity not profit. ROCE shows overall profitability). Sunk costs are those already incurred that have no bearing on future decisions. RM (3 x 15) + DL (2 x15) + Stepped (10) = $85 000. B ignores the relevant range. C FC per unit falls as output increases. D Obviously incorrect. 1 and 2 are both direct costs. 3 and 4 are overhead costs. To breakeven the contribution must equal fixed costs. (275 + 55) 330 is 60% of forecast contribution. Therefore must make (60% x 1000) $600 000 of sales to breakeven. Absorption shows total cost of production is prudent. Marginal shows additional cost of production shows if an order is profitable. Difference in profit = $19 500 due to fixed costs. Change in stock is 3000. Therefore fixed costs are absorbed at $6.50 per unit. Job cost sheet records the costs incurred by each job so that a price can be found