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LondonExaminationsGCE
Accounting(Modular Syllabus)
AdvancedSubsidiary/Advanced
Level
Unit 1 - The AccountingSystemand Costing
Wednes
day6 June2A07- Afternoon

sourcebookletfor usewith euestions

Ita7.
Do not return the insert lvith the
questionpaper.

M257L4A
:.-., .f.{s

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'.\il 5;Jr0 J,5,1.5

qrih t_tlc\!rl

i.rn'rcd (\,p\.{h(

pulrer. C:f!};

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advancing tearning. changing tives

I
I

-,

SEC'IION A
souRCE i\IATERIAL FOR USEWITH QUESTIONl-

l.

was
Nunyell Book and LircraryClub preparesfinal accountson i0 April of cachycar.Thc Club
prices
discount
at
mcmbcrs
for
purchasc
books
to
and
readings
to undcrtakeIiterary
established
from book u'holcsalersReceiptsrnd PaymentsAccount I lr4ay2006- 30 April 3007
t

Balanceb/d
Subscriptions
Book sales
accounl
Interest- Investment

1 67 0 0
320
l-+10
3 100
r 000
600
i 000
:50
6 ,145
30 sl 5

Book purchases
lnsuranu-e
Elcctricity
l\4ortgagepa)'ments
Invcstrnentaccount
Accountinglees
Fixturespurchasc
Visiting spcakcrs
Balancecid

I 695

I r00
r 99 8 0
50

3 08 2 5
The follon'inginformationis alsoavailablc:
I l\{ay
1006

(i)

Premiscs
Fixturesand fittings
60,6Mongate ot: prenniscs
4oloInvestmcntaccount
Creditorsfor books
Creditorfor buildrngrvorks
paidin advance
Insurance
Electricityaccrued
- in arivance
Subscriptions
_ IN AITCATS

Srockof books

t00 000
r0 000
l0 000
r 000
I 750
150
540
_
t t/6u5 0

30April
3007
+

?
9 350
l 8 000
? 000
4 400
E 000
35
3s0
420
95
2 100

(ii)

The booksarethenofferedto
bookseachmonthfronr book wholesalers.
i}e Club purchases
club members.

liii)

of the premises
duringthe yearconsistedof the redecoration
The buiidineworks undertaken
costingf2 000 and an extensionto the premisescosting6 000.

iiv)

Depreciationis chargedat the rate of 2V. on premisesand l5% on fixtures and finings using
the straightline method.The policy is to chargea full year's depreciarionon all assetsheid
at the end of the vear.

(v)

The capitalrcpaymenton thd mortgage

took praceon 30 April 2007.

(vi)

Thepaymentinto theinvqstmenr
accounttook

piaceon 30 'ctober 2006.

(vii) AII subscriptionsin arrearson I

Mav ?006 were colleciedin fuil.
(viii) on I lvlay2006 the club offered
mernbersa l0 yearrnembershipar rherateof {100.
Twelve
mernbersacceptedthe ofl-eqpaying in fuIl.
rn.iuur*iptions
in advancedoesnot inciudea
'
proportionof thosepayments.
(ix) The accumurared
fund on r May 2006wast92 00u.
Required:
(a) Pi'eparc
tire:
(i) book tradingaccounrfor thc

1'earcnded30 Aprit ?007:

(ii) incomeandexpenditure
accountfor rheyearended30 Aprir 2007:
(iii) balance
sheetas at 30 April 2007.

it

( 16 )
The policy of thc-club is thatall booksheld
in stockfor morerhanthrcemonrhsarevaluedat
the
lower of costor net realisable
value.

(b) Explainthetermnet realisable

value.
(c) Explain*'hy the apprication
of the.accruars(matching)concept will
be importanr
determininghorv the redccoration
oithe premisesand thc L-xrcnsiorl
to theprcmises
rvill
treatedin tiie incomeanciexpenditurc
account.
(d) Ev'aluetethedecisionofthcclubtooffertcnycarsubscriptionsaiaredi.rcedrare.

f the qucstion papcr.

Turn over

soLRCE :\IATERIALFOR USE\\'lTH QLESTIO\ :'

produccst\\'o products:thc Rcgularartd thc Pt'cmittm.Thc lbllo$'ing
Eclipsc\,lanufacturing
infonnitionis avaiirblc{br thc 1'carcndcd30 April 2007'
(i)

u'as
Both productsuse the samerau' matcrial.On I May 2006. thc stock of rau' material
unit.
f40
value
of
at
a
I 100 units
Per

(ii)

During the year 4 200 units of rau, ntatcrialu'crc issuedto productionand the follorvine
ourchasesof rau' materialu'cre madc:
June
October
.lanuary
Marclt

000 @ r40
000 @ f4:
100 t fj-s
s00 @ fiO

upon periodicvaluation.
Stockis valuc'dusingrhe Firsrln FirsrOut (F.l.F.O.)nlethocjbasc-d
(i ii)

Oneunit of ran'materialu'ill makceitheroneunit of Rcgularor oneunit of Premium.

( ir') Duringthc -r'earI .100Regularunitsand I !i00 Prcrniurnunitsu'crc produced.

(.')

Manufacturingu'agesare paid on tlte basisof day-uork ratc plus bonus.Productionstaff

u,ork40 hoursper u,eekfor 50 u'ecksin the yearand arepaid at a rateof f4 per hour plus a
of tiretime sar,edin the productiol of units.
bonuspaymentof 50ori,

(vi) The standardtime to producea unit of Regularu'as l0 hours and a unit of Prcmiumu'as
l5 hours.TenproductionstaffmadeRegularunitsandtu'clvcproductionstaffmadePremtum
unlts.
bctu'ccnthe nvo productson the basis
(vii) lr{anagemenr
salariesof !66 000 areto be apponioned
of the numberof productionstaff.
( v i i i ) P r e m i s e s a n c l g e n er ur anln i n g c x p e n s e s o f l l S 0 0 0 0 a r c a p p o n i o n e d o n f l o o r a r e a - T h e a r e a
occupiedis: productionof Regular300 sq m. productionof Premium400 sq m and sales
300 sq m.
adnrinistration
(ix)

Depreciationis chargcdon machineryat the rate of 20% using th- straightline method.
chargedin proportionto
or soidduringthe I'earu'ill havedepreciation
Machinerypurchased
u'ere:
2006
I
ir''la1'
year.
on
The
balances
the
in
the monthsof ou'nership
Regularproductionline - machineryat cost
provisionfor dcpreciation
Premiumproduciionline - machineryat cost
provisionfor depreciation

fr60 000
fr00 000
t200 000

!r 00 000

(x)

on I Febru'ary
2aa7,new
machin.?,lr^Tglremiumproduction
rinewaspurchased
at a

il;';'rtou.'b.,2005
:::i::Jitffi *,:.Tiffi,1;ii;1r..rffj
was
traded
inpart
(xi)

\lork in progress:
I tutay2006
Regular
Premium

30 April 1007

f8 600
f i0 500

f9 000
fil 000

Required:
(a) Preparefor fheyear
ended30 Aprii

1007,the;

(i) llanufacturingaccount'
,tto*'in! rheproducrioncosr
of-theR.egurar
andpremium:
(ii.yPremiunr
production
line- *o.n,n"O accour.rr;
(iii) Premium
production
rine- prorisionfor depreciarion
account;
(iv) Ilachinen disposat
accounr.
ias

um

ASIS

(t 6)

(b) Explain threc

characterisricsof ov.t-.rhelci
expensr_s.
( c ) E v a l u a t et h e
bcn
usins rcduc'r* u;Jj:t

(6)
u s i n g s t r a i g h tl i n e d e p r e c i a t i o n
:t

for productionmachineryratherthan

area

({)

s:les

(Total26 marks)

uestionptper.

souRCE NIATERIAL FOR USE \\/ITH QUESTION 3.

3.

rradcrbuving and sellinc goodson crcdit. Rizan cmploYsa bookkccper$'ho

Rizan is a g,--ncral
r,ai'tdins tlrc accounts.Due to thc illrrr.ssof thc bookkccpcrthr.'dcbtorsand creditorspersonal
cndcd30 April :00?.All othcrcntrieshave
for thethrccnronths
lrarcnorbccnrnaintaincd
accounts
accountsthe
in
beenmade
ro preparchis final accountsior thc thrcc nronthscnded 30 April 2007. He has
Rizan r,,,ishcs
cxtracteda trial balancewirh the exccptionof tlie balanccsfor debtorsandcreditors.althoughhe is
a\r'arethat thereare someerrors in thc accounts.
wercavailablcat 30.{pril 2007:
The follorvingbalarrces
I

'

Totalcrcditorsat I Fcbruary'2007
Total dcbtorsat I Fcbruarl3007
Saleson credit
Cheques
Paid
Rc-turnsin*'ards
for cash
Purchases
Bad dcbt u'rincn off
Prorision for doubtfuldebts
on credit
Purchases
received
Chcques
Retumsoutn'ards
Discountreceived
Dcbtorcheouereturneddishonoured

2 53 1 0
36400
68 650
33200
900
-1200
: 100
i 600
29 470
63 000
950
850
I 450

in the books:
The follou'ingerrorshavebeendiscovered
(i)

f I :00. hadbeenrecordedin theoffice stationery

a creditpurchaseof goodsfor resale.costin*a
account:

(ii)

a credir nore for -soodsretumedto Rizan.worth f2 800. had not been enteredinto the
accounls:

(iii)

as 147 and
a chequefor f.175rcntreceivabichadbecndcbitedto the rentrcceivableacc:ount
debitedt0 the bankaccountas f75:

(iv)

discountreceivedof f20 hadbeenincorrectlyciaimedb1'Rrzan:

(v)

invoices for credit saies of f4 000. had not been entcrcd

been advised that one of these invoiccs. ior f 1 500. rciatcs
dlclared bankrunt.

M257r4A

S E C T I O NB
souRCE I\I.\TERTALFOR USE WrTt{ QUESI.ION{.
Gill and Harneedarc partncrsin a busincsssharingprofitsand losscsin the ratio 3:2 respectively.
The pannersdccidedro dissol'c rhc parrnership
on 30 April 2007.
After the preparation
of tlrc final accourrts
for thc vcarendcd30 April 1007.the followingbalances
remained:
f
F i x c da s s c t s
Prcn:iscs
Vchiclcs
Fixtures
Currcntassets
Stock
Debrors
Bank
Currentliatriliric's
Creditors

80000
35000
n 000
n7 000
36 000
:2 400
.i 300
62 700

9 700
53000

isoooo

Long term liability

Loan

Financed
hr':
Gill
Hamccd

40 000
,110000
60 000
80 000
140000

The dcrailsof tlredissoiurion

u crc:
(i)

Hamcecu'ouid rake as part of his settlementall of thc vchiclesar

an agreedvaluationof
!30 700.

(ii)

The loanrvouldbe repaidby Gill andHamccd.

(iii)

with theexceptionof the bankbalance.Gill andHameedreceir,ed

a chequefor f200 000 for
all otherassersand liabilities.

'\

Requierd:

(a) Preparefor the dissolution

of thepartnership,
the:
(i) reairsation
account;
(ii) c.rpitalaccounrsof
Cill andHameect;
(ii , bankaccount.
(8)
(b\ Explain:
(i) thetermgooCu,ili;
(ii) rvhygoodwiilw.ouldbe
enteredinrorhebooksu,hentheparrnership
is beingdissolved.
(6)
( c ) Evaluate the need
for a fonnar partnershipAgreement

rvhen trading as a partnership.

(2)
(Toral16marks)
Ansrverspacefor qucstion{
is on pagesl2 to 1.1of the questionpaper.

M257t4A

9_

souRcE MATERIAL FOR USE WITH QUESTTON5.

Jameeland Kalid arc retailerstradingin sinrilargoods.Their surnnrariscd

tradingand profit and
lossaccountsand balanceshcetsare as follorvs:
Tradingand protit and lossaccountsfor the yearendcd30 April 2007

Openingstock
Purchases
Expenses
Net profit

Jameel
f000
35
330
80
.#

Kalid
i000
25
330
100
60
515

Sales
Closingstock

Jamecl
f000
500
45

Kalid
f000
500

545

5r5

t)

Balanccsheetsasat 30 Aoril 2007

Fixedassets
Stock
Debtors

Bank

Jameel
f000
230
45
80

M257t4A

Kalid
f000
200
l5
60

Jarneel
Capital
Lon_qterm loan
Bank overdraft
Creditors

r000
r50
150

Kalid
f000
150
50

70
370

IJ

275

Reguired:

(a) Calculate
for bothJameel
andKalid the:
(i) grossprol
it to salespercenhge;
(ii) rateof
stock

turnover:

(iii) fixed assets

ro sales;
(iv) current
ratio.
(v) triquid(acid
:est)ratio.

(bJ E.rplain
rhe rcrmprotirabitig..
(t)
il

(8)

eachof (i)
and

(ii) bclo*;
i d e n t i r i , trvo
Kariorromlilr'#'Jltll;l:;]'#.nttr'v
e)
r r r . ^dirrbrences
r.o.
ber*.c-en
thebusinesses
orJameer
and
(i)

a custonrer
!.i

(ii) a credit".
",

premiscs:

;;:::":::''""'s'

(d) Evaluate
:
rheuseli.rlness
of accounting
ratiosin assessin_g
thc_successof
a business.

(1)

(2)
(Totall6 marks)

Ansn.erspacc
lbr que.stion
5 is on pagcs
I5 and l 6 o l ' t h c
qucstfon paprlr.

I|]57I4r\
!

FORUSEWITI{ QUESTI0N6'
souRcE N{ATERIAL
tlrc |rirc o|
6. Creg is in busincssofi.cring

t\^'otypcsof scrr,icc:
a irltni cliggcrmachinc.11cpror,idcs

its ou'n'
Thc dailyhirc of thc rntnidiggcrotr

G r e g d c l i v e r s t h c d i g g c r t o c u s t o m c r s . p r oihc
v i dcnd
c - i o1-the
n s t r u day'
c t i o OR
ntortlrccustol]lcrtouscthedigger
thcridrcg collcctsthc diggerat
for rhc o'y
"nO
.Thedaill,hireofthcrrrirridiggcrlogetherrr.il.Jrcgasthcopcntor.
Gregdelir,ersthcdiggcr'operatesthcdiggcrforthedayandthcnrctrior,esthediggeratthecnd
ofthe daY'
Gregchargcsl250perdal''^fortlrclrireofthcnrinidiggcrandt350pcrdal'forthehireofthe
thc opcraior'
mlni diggertogctheru'ith Gregas
The follorvinginformationis availablc:
ln thelasttlnancialvcar:

{i)
.

its orvnfor 50 da1'sand

Greghiredout the mini diggcron

.creghircdoutthcrrrinidiggcrliithhinrselfasthcopgratorforT0da-vs
(ii)Theminidiggercost.f30000andistobedepreciatedusin']tlrc*raightlinemethodover
41'ears-wtrenlt u'ill be sold for t6 000'
(iii)\4atntenanccoftheminidi*tgercostsf3000forthcycar'
(iv)\\ihenhiringouttheminidiggeronitsorvn'cregtookaiotaiof2hourstodeliverandcollect
the rnini diggcron eachoccasion'
Greg took a total of
diggcr rvith himself as the opcrator'
tv) whcn hiring tlie rnini
8 hourson eachoccaston'

IF

ycar'
(\'i) Gregpaidhirnselff 13 100 for thc

000'
overhcrdslbr thc mini diggeru'eref6
(r'ii) Genr.-rai

tvl251l4A

J-

a\t
'+a . .

, {.'
t

._

Required:
(a) Explaineachof the
following te;

usingan .ample:

(i) fixed cost;

(ii) semi-fixedcosr.
(b) Calculatefor the
t*ear,rhedaily ct.
(i) hire thc mini dig*ucr
on

(4)
i(,:

irsorr

(ii) hirc-thc.,nrini
diggertogerhcr rr Creg
a:, .. operator.
(6)
(c) (i) comrrenton
the trvepnlqtcurrcnri'bein*q
char-qed
by Grcg.
(ii) Explainrrvc
iould changehis pricingp.tic-v
ro improveincomefrom
his mini o'**Ltili.l"r:l';:.o*'(d) Evaluatewhether
Gregshourdernproyan accountanr
to assisrhis business.

(4)

(2)
(Totall6 marks)
A n s l v e r s p : t c ef o r q u c s t i o n
6 i s o n p a g c s l 7 a n d I8
of the qucstionpapcr.

Uilt
B0cl{
f,l5i'J
llJIERilAil0[iAL
'A'
'0'

Ievel
L e v e l&
P l a yt o
l?05
f,.4arhet.
[Jhai:a
f'lrlkltet,
f.,lanii?
tul ou
: 0 I i I -416/ 16,0 r8i ' 58 l ' ti 8

souRcE MATERIAL FOR USEWITH QUESTION7.

1. T5e followinginfornrari6nis lvailatrlcliorn rhc accountsot'King Rctail for tltc'ycar cndcd

3l Marclr2007.
(i)

of debtorsuscdto maintainttic provisionfor doubtfuldebtswas raisedfrom

The percentage
4Yoto5o/oof outstandingdcbtorson 3l March 1007.
2006
Dcbtors3l N4arch
Debtors3 I March2007

(ii)
'

f28 000
f 19000

Rcnrreceivablcof i-1?5pcr quancru'asorvingto King Rctailon I April 2006.Paymcnts

wercreceivcdas follou's:
3 Apri) 2006
5 Jull' 2006
4 October1006
3 january2007

by cheqtrcf'175
Ru-ccipl
Receiptb,vchequef^175
f475
Rcceiptby chc'que
Recciptby chequef4?5

On I january300?.King Rctailraiscdthc rcnt to f500 pcr quartcr'

Thepaymentreceivedon 4 October2006hadbcencorrectlycntercdin the bankaccountbut
by journal
hadbecnentercdin thc rcntrcceivablcaccolrntas f745. This crroru'ascorrerctcd
entryon 31 N{arch1007.
(iii)

- WesternTelephonesfor the
The teiephoneaccountrccordsthe paymentsto two conrpanics
chargesandBiue Phonesfor mobilephoncchargcs.
officetelephone
During the 1,earended3l March 3007 invoices\r'ereicccir cd from WesternTelephones
totallingg2 060 for actualusasc,tt u'asestimatcdthat thc follori'ingsumswere owing to
on:
WesternTeleDhones
I April 2006
31 lr4arch2007

f 160
f3l0

Mobile phoncpaylncntsto Bluc Phonesarc by'bankinsiructionot'f500 pcr quarter.It u'as

to Bluc Phoncson:
sumsq'ercprL-paid
tlnt thc follor'.'ing
estimated
i
i April 2006
31 March1007

I{25?l4A

f480
fl50

' . 1 :_ -.

l4
I

-H-

l..A

Requircd:
(a) Prcparc
thc lirllou'inglc<Jgcr
accounts,
for rheycarcnded3l March2rJ07.
Eachaccourl
slrould
rhc rr:rnsrcrr<,rrrelp.ni ,"J"ror,
,.roun, ;;;;.";."r,
and thc bararrccs
::rj:l.
ro bc carricd
(i) Provisionfor doubtful
dcbrsaccount.
(ii) Rcnrreccivablc
account.
(iii) Tclcphonc
accounr.
(l 0)
(b) Explainu,h1,:
(i) a business
rnightr:raintain
a provisionfor doubtfurdebtsaccount:

I")

andmarcriarin,
'a' bcinconnicr
u,hcn
prcnaring

:ff il..|Tffi::;.1ff|1::,.u",,

(1)
tltc uscf.]ncss
ol'accounting
standards
in rhc nrcpararion
of rhe finaraccountsof.a
a '

tt'
;Xl[::

(2)

(Totat16 marks)
Ansr'er spaccfor qucstion
7 is on pagcsrg and 20 0f the qucstion
paper.

trEr

kc{alrc'

6002t0r

LondonExaminations
GCE,
Accounting(Modular Syllabus)
AdvancedSubsidiary/Advanced
Level
Unit 2 - Corporateand ManagementAccounting
Friday15June2007- Morninq

Sgurcebookletfor uservith Questions

1to7.
Do not return the insert rvith the
questionpaper.

Pnntcr's

Lng

rilililil
til
ililt
iltil
ilil|
iltil
ililil
ilt
iltl

Ntr

M2s7t7A
wt50/600!JtJ?0
Th6 plblom

J/515/51

Dy b. Gprldoccd 6ly r ecd.G

Ttti't:,'-.'

M25717A

rrrh Edcrql Limrri

copmghr Folr]., C:m? E&st

Limird

edexCel
.=,
aovanci^i ,:a'-

-' i-'-

SECTION A

souRCE ivr.{TERTAL
FOR USE WITH
l'

QUESTION I

I{earU plc operues

a,19!ile nhonl3elwork
and has an authorised
sharecapitarof g00 000

;il:ll ;":'li:'ti,:X,:T*?"TJ,ni:*:hi{f,
on,ep.iiiodo,
a,,he
s,a*
or,he
ordinan.sharecapital
Slu prcil,r.cncc
sharecapital
109,o
Dcbenturc2010
proilr and loss
resen,e
Ge-neral
rcserve

soJooo
g0 000
300 000
95 000
20 000
|

hasbeen
,i;i:.:H:',1ii.,:t:j'ilffi;iiarch 2007
successnrr.
andthetrading
prontrortheyear
Irr rvlarch2007,trredirectors
of Hearu prc agreedthe

(i)
;;Tii;'1.:tl1ot;lo"d

forowi'_s:

toordinary
sharehorders
or-rpencepershare.
rhedividend
waspaid

(ii) 11.,.pretcrence
sharesare cumulati

;:l:"ii,",l..;::;.'"'x#i.TJffi
?:Tln:;J[j;?::
i,1i]f
i['?i""',lHtl',::il"Tf

(iii) Trar,st'cr
f 50 000

ro thc GcneralRr.sen,e.

t i v r \ l a k c a p r o r . i s i oonf f 1 2 0
000to cr
ol)ci,tc thc nrobilcph";-";;;;;;:tJ.ilt:::.pavablc

to tht'-so\.c.r-i,lcnr,
ibr

rirctic,rncero

(r ) Ilcdc..rr"r
t 100000 ordinan.sharcs
ar par.

000arrer
"'';]::::l,J.,].|,]l,::',,:[\J,1.,"11.i?;ifo.7
rheycarcncr
srockrake,
to reprace
rhe

r . 1 2 5 t77 A

Requircd:
(a) Prcparcthejournal cntricsto
sho* ircu :l:_._ ::
HcarUplc.(Datcsandnarrarivcs
arcroi ruc-:rr,J,

. . - . : b c r c c o r d c du l l h c l r o o k s o f

(e)
(b)Prcparethesharcholdersintcrestsbctionfromrhcb:];:...cnteredinto thc books.

'

lxrvc bcen

(c) Calculate the gearing ratio for

HcarU plc on I April 2007, clca:.i :..-i _
_
( d ) Evaluate the dccision of the
directors to redeem the ordinary shares.

( T o t a l2 6 m ; : ^ .
t h e q u c s t i o np a p e r .

M:5717A

Turn ovcr

\-_

souRcE I\IATERTALFC'R USE WITH QUESTTON2

Achillcsplc produces
trainingshoesat its factory.The trainingshoesarethendelivered
to Achilles
plc shops.ivltcrc tltcy arc sold to custonlcrs.At 3l March ?007,the followingwcre someof the
bahnccsin thc books.

Dcbit
L
-\dyc rtisin iI

Credit

$,

1 70 0 0

B . r r ld . - b t s

150

I
--i

C o u r n r i s s i oonn s a l c s

8 _i00

Corporetion
tax provision

100000

l 2 ' fo D c b e n t u r c2s0 l l

180000

Directlabour

270000

Dircct matcriais

195000

Dircctors'salarics
Facton'buitdings
Lesal t-ees

95000

lw-

r zl 000 000
1 40 0 0

l-

| *

N l o t o r l o r r i c st t c o s t

270000

lncomc tronl tnvestments

itkso
8l 000
-l() (rr;t)

Salcs

S t o c loi f l l n i s h c dg o o d sa t I A p r i l 1 0 0 6

, I 850 0i-t0

SOURCE MATERIAL FOR USE WITH QUESTION 3

'....'.'.'.''
3.

Fcrnne Fltrlic Limitcd,which runsa chainof beautysalons,hasdecidcdto mergewith The Looke

Linritcd rvhiciimakescosmeticproductsat its factory.The new companyis calledFeelingGood
Limited and is to haveanAuthorisedShareCapitalof t 500 000 ordinarysharesof f I each.The
new comparl\,was formedon I April 2007.
Tirc balanccshcetsof thetrvoexistingcompanies
on 3l March1007wcrcas follows:
Femme
Fataile
Limited
t000
t000

The Looke v/
Limited

f 000

I 000

Fircd Assr.ts
Builclinss

400

550

!{achinen
Fixturesani flrttings

80

90
"t2.

Vchicles

30

i5
737

510
C u r r e n tA s s c t s
S,t,r n L-

25

95

Dcbtors

AI
TT

Bank

37

Cash

l8
()0

6
J

liiJ

Currcnt Liauilities
C r ed r t o r s

,ta

l.r5

+o

Working capital

A1

Nct .\sscts

740

554

Finlnccd bl':
O r d i n a r y s h a r c so f f I c a c h
S llr r,'

n . ^ !- r r l ri u, ,r-l. l

Profit& lossrcscrve
C r p i t a l I . - m p l ocyd

300

600

50

100

204

40

55.+

740

FeelingGood Lirnitcd.is
to scttlethe purchaseconsidcrarion
b1,issuingto thc sh:rrcrrordcrs
r inrircd;;ii;;i"ok'"'Lin',i,"0
of

l:l':::::xll"
r::ili":J.rd
.

inFccring
cr.rrLir'ircrr
*rruccr
",ai,"ry,rio,,",

Lirnitcclis to takc-.r'crlhc
osscrsand

liabilitic-s:rr
[-..ok'Atuc, rvirh rirc lirlltr*i'r:

Thc buildingsrvcrercvalucd
as.follows:
FcrnmeFatalleLimircdfSOO
OOO
""
Thc Lookc Limitcd1450
0b;
The machine* of Thc Lookc
Lir,ircd ,..as'alucdat f40 000
Thc fixturesancifitrin-r.rs
or Fr'nm'rcFiraile Linritcdu,crc
varuedat f (r0 000
The vchiclesof The Lookc
Linrire,d
u,crcvalucdat f45 000
The net rcalisable
valueof the stocku,as
-' as follou,s:
FemmeFaralleLinrircdf:0
004
The Lookc LirnitcdfgO 000
i
Debtorsof r8 000 of Trre
LookeLimitcd r'ere *.ritren
off as b.ci crcbts.
Good*'it u'as'aiued at f75
000 for- -Fenrmc
-"'rrrL
Fatatc
r
dL(rrrc
Lirnircci
Llntrlcd
arrd
ir
- .
at f.lO 000 for Thc Lookc
Li'iited
The purchascpriccof Fcrrr-rcFaratcLi'ritcd was{7(r.1
000.

Required:
(a) (i) Calcuiatetlrepurchase
price of The ao:I. Linrited.

ttt'

(1)

shares
rhemcrnbe^
or'r" LookeLirnitcd
ui,
iiili,lol\'',manv

,...,r," in FeciingCood
(1)

(b) ln the booksof Femnrc

FarallcLimited.prcparerhe
accuunt.

(-i)

Sundrysharcholders
account
(1)

(c) Preparerhe balancc

shcctof FeclingCood Lirnitcd
as at I April 2007.
to,,
;11iliil;:r",-:.i,:leholdcr

(iI
in Fcrrr,e FatalreLimited.
As srrannir.sdcccu,ranr c\aruarc
thc

t6)
(Total26 rtrarks.;
Answer spacefor o

ucstion paper.

Turn or cr

SECTIOIi B
SOURCE NTATERIALFOR USE WITH QUESTION4

4.

League.To
BlackringtonRoversFootballClub Limitedhasbeenpromotedto theNationalFootball
a
ncw stand'
in
seats
extra
5
000
adding
considiring
are
the
directors
people,
ha'e room tbr more
25 years
Thc nervstandwould cost!8 000 000 andwould be expectedto lastfor 25 years. Atier
000'
tl00
to
be
thc resiciurlvalueof tirestandis estimated
that thc ncrvstandrvouldresultin extrapcopleas tbilorvs:
it is cstimatcd.
.
.

13 noimll matchesa year,when 80% of theseatslvouldbc sold

of the seatswould be sold
i soccralilatchcs a ycar.rvhcn909/o

!i8 each
The seatpriccsfor everynormalmatchrvouldbe tl5 eachfor thenextrwo years'risingto
the next
fnr tl-reibilorvingtlrrce-vears.Seatpricesfor everyspecialmatchri'ouiCbe t20 eachfor
years'
three
risingto t2'1 eachfor the tbllowing
i\vo yei-rrs,
to be 1100000
Therunningexpcnscsof the new standfor eachof the first rwo yearsareestimated
are expectedto
p )r )/e3r,inituding dcpreciation.At the startof the third year,runningexpenses
rvill stayat this level for the foll6rvingrwo years.
in.r""r. b;- t20 000. Runninqexpenses
T6e directorsof the footballclub requirethe standto pay backrvitlr.infivc years.
Rcquired:

,
_.

(a) Calculatcthe paybackpcriodfor the new stand,shorvingyour answcrin ycarsand ntonths'

'
(12)
( b ) E r a l u e t c w h c t h c r t h c i n v c s t m c n ti n t h c n e w s t a n d i s , , i ' o r t h r i ' h i l c .

(Total 16 marks)

A n s w ' e sr p r c cf o r q u c s t i o n . il s o n p a g c s1 2 a n d l 3 o f t h c q u c s t i o np a p c r .

\ 1 1 5 7r 7 , \

SOURCI ]\IATERIAL FOR

usE\\'tTt{

QU[sTtoN

ril.':.-::_-:.:,-:t..r.trrrs:r1.f.*,hocouldcach\\_orlqlq_!our.ucck.Thcr.carcl0nrachi'cs*.'ic'

ca' c-ach
ft',ijFN-r

' -l'

"i,n. "r, or";iiit';ffi

for50rrours
a weckcacrr

Thc follorring in fr,,rnra

rion r s a r a i l a b l c f o r n c c k 2 7 :
Product
Labourhourspr-,runit
Machinclroursper unil
Maxinlumsalesunits
S e l l i n gp r i c ep e r u n i r
Variablecostspcr unit

,i h .

,.

lr
l
tin

( l.-)
u1

fl9

ftO

r50
f.9
f5

(o

L
1.5
1.5
:00
f.21
f9

'.)
I

r00
{'l 1

Required:

t"'

or machinc
hours
;,Tflil:fl:Jlilj:::.[,11"" rrtata shonasc
andnotrabour
hours
rs the
(1)

(b) calculatethe optiltlum

productiorthat

*'iil give the maximumprofit

for

week 27.
(6)

(c) Calculate thc fbrccasr

profit for u'eek 27 at
the optimunrproductionlevel
u,eek 27 are f2 500.
if fixed cosrsfor

(2t
Evaluaterhc oprio's a'ailabre
to Muritha with regardto

the direct rabourstaff.

(1)

(Total l6 nrar.lis)
Ansrverspacefor or

estionpaper.

Turn over

SOURCE MATERIAL FOR USE \\'ITH QUESTION 6

6.

bar products- Jupiter'Nepruneand

plc is a majorproducersellingthreechocolate
SoiarChocolarcs
Satum. Normal monthly salesfor thesebarsare:
Saturn ,l million
Neptune 2 million
Jupitcr 3 rnillion
Tlie fbllorvingipfonnationrelatcsto salesin cxceptionalmonths:
rnd Neptuncrvill double'
saleslbr Jupit'.-r
(i) in N,:,'"crnbcr.
(ri) il \(ivcnlbdr. slics ibr Saturnri'ill increascb,v50o'6'
four tiinesgreatcrthana normalmonth'
tiii) In Dccernbcr.salcstbr JupitcrandNeptunewill be
ri.,.)In Dcceinbr.r,salcsior Saturnrvili increascby another50')i,on thc Novcmberfigure'
Required:
\\'ilirin the total sales
(:r) Consiruct a salcs buclgct for each of tire 6 months July to Dccembcr.
bars.
Saturn
and
Neprune
Jupit,-'r.
the
fcr
budget. siroi,i tltc for.ccastsales
(4)
is nonnally canied
K c e p i ' g l i i s t o c k s t o a n i i n i m u m i s a p o l i c y o f S o l a r C h o c o l a t e sp l c . P r o d u c t i o n
in relation to the
possiblcalways
is
not
This
shops.
place
ihe
in
take
or-rti)nc n.ionih bcfbre salcs
cxccptionei months because the monthly capacity for production is:

Jupiter 6 million

Sarurn6 million

Neptune 5 rniilion

production facilities tbr onc bar cannot be used to iiroduce anotherbar. In order to mcet exceptional
bttt a minimtrnt
s a l e s i 1 N o r . c g r i l c r a n d D e c e m b e r ,p r o d u c t i o ns c h e d u l e sm a y h a l ' e t o b c a d j u s t e d ,
applrv.
mr.rst
u-iioi.i-:monih's lcad limc
,.
brts'.iili rcturn to normal

ba:s contalns
. . \ n c s s c n t i l l i n g r c c l i c n ti n a l l t h r c c b a r s i s ' c h o c o l e t e c n t m b ' . E l c h o i t i l . ' i l i ; . ' . rcquired
I g r ; r m s o f c h o c r c l a t cc r u m b . l n o r d e r t o k c c p s t o c k s t o a m i n i n t u n r . t h c c h o c o l l l c c r u n l b
'
.
h
c
p
r
o
d
u
c
t
i
o
n
.
a
s
n
l
o
n
t
h
same
is oclivcrcd in
tor chocolate

( c ) C o l s t r t i c t L r t o t a l s t o c k b g d g c t t b r . ' a c h o I t l t c ' 6 n t o n l h s J ' . 1 1t1t 'l

ci''.ttitb.

(2)

( d ) E l u l L r : i t ct h c p o l i c y o f S o l a r C h o c o l a t e sp l c o f k . ' c p i n gs t o c k t o : l l l l l n r r t t u l n '

(4)

(Tot:rl l6 nrlrks)

A n s * ' c r s p : l c 0 f o r q u c s t i o n 6 i s o n p : l g c s1 6 a n d l 7 o f t h c t l r t e s t i r t np l p c r :

\r:571i.-\

l0

souRcE J\,TATERIAL
FoR usE \\,ITH
7.

QUESTTON
7

Linrircd produccs
I:],lO:":
saris. lr use,s
a flexible
Production ngur"r. ir,.. .
s'slcnr. i
,?.:,:-;.'"0
Dudgcrarrd acrual
pt:prtrcs rtt ont lt
no^:.1*"t'1*
t-quresfor produc,i
Ir'
ol.ttd"n lor April arc
gi.,cn

d.

.-\

. vDircct
l r L L r r r,n",."in.,
rarL,'ais

-.-.-..-..---.----..--.-.-..-..--=-

5*k;

--____=i_1luoo

Fi^.d ou".h..--F
I

H:.==

Totalcosl of
- - producrio
rrvuuuuon

5-i 9(ro'

===---

-_

2o5el

2300 -i

: 300

65j 50

=--7ss6;I\4ana-ecmc-nt
*,as satisfie^
^^-- ,
isfied rh^,
that some
bud_setfigures
\\,erc rlct cxr.rl\,.
.
eacit sari u,as
bLdger..l r^ ..^_

use4rnerr
.. each
each
sarish
sari
shourd
l:::9
:"
ourd
have
d;;;"i;;
takc-n
2h";;,r;'b:ll,ffiT:lilj::*:Jl:",
andrhis*asachicr,ed
;l:,, j;11,il?:li:J::ffiill
jJ:.lH;
I

Required:

-'
I

(a) Prcparethb
flexibte
h,,.r.,^.for
r
ible budger
a producrionof
6 600 sarjs.
(b) Calculate,
clearl,vsrating
the formulaused,
the:
(i) marerialsprice
variance;

(3)

(ii) Jabourratc
varjance.

(3t

(c) Explain
thrce pcssible
causesof the
rnaterials price
v a r i a n c ec a l c r i l a t c t j

(3)
in (b)(i).

(d) Evaluare
"h-o" u . aacd c u r o t e l yt h e
management
Limited.
accountanr

G)

hasserthc buclgcr
forAprii

for Rajnbou.
(1)

(Toral I6 marks)
Answer space
for question7
is

1n p"g"r Ig and 19of the question

. . ' ,

ll

- -,''

" l ] ,

'"

t l '

paper.