Mark Scheme

September 2017
Results

Pearson LCCI
Certificate in Accounting (VRQ)
(ASE20104)
Level 3
LCCI Qualifications

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© Pearson Education Ltd 2017
Publication Code: 54339_MS
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.

 Where marks are awarded for own figure answers, these marks can only be awarded
if evidence of how the candidate arrived at their values has been provided (their
workings).

 If candidate's fail to provide their workings when instructed in the paper, it may not
be possible to achieve all marks associated with the question, even if the final
answer is correct.

 For calculation questions full marks can be awarded where correct answer is seen
with no workings shown, unless question states that candidate must provide
workings.

ASE20104
September 2017
Abbreviation

of Own Figure rule

Accuracy marks can be awarded where the candidates’ answer does not match the
mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidates’ answer is correct, and in
line with the mark scheme.

ASE20104
September 2017
Question Answer AO2 (18) Mark
Number
1 Award 1 mark for each correct figure with understandable
labels as indicated.
Charlton, Law and Best
Statement of profit or loss appropriation account
for the year ended 31 August 2017
1 September 1 June 2017
2016 – 31 May – 31 August
2017 2017
$ $
Gross profit 695 250 231 750 (1for
both)
Less expenses
Wages and salaries 27 000 9 000 (1for
both)
Rent and rates 81 000 27 000
(1) (1)
Heat and light 41 850 13 950
(1) (1)
General expenses 9 000 3 000 (1for
both)
Repairs and 6 750 2 250 (1for
renewals both)
Depreciation charge 36 000 12 000 (1for
both)
Profit for the year 493 650 164 550
(1of) (1of)
Appropriations
Interest on capital
Charlton 3 000 1 000 (1for
Law 2 250 750 both)
Best 1 500
(1)
Salaries
Charlton 18 000 9 000 (1for
Law 18 000 9 000 all)
Best 18 000 -
(1)
Profit available for 432 900 144 800
distribution
Charlton 216 450 86 880 (1of)
Law 144 300 57 920 (1of)
Best 72 150 - (1of)

Additional guidance
Heat and light 54 000 (1)
Rent and rates 96 000 (1) (18)

ASE20104
September 2017
 Charlton, Law and Best
Statement of profit or loss appropriation account
for the year ended 31 August 2017
Total
$
Gross profit 927 000 (1)

Less expenses
Wages and salaries 36 000 (1)

Rent and rates 108 000 (2)

Heat and light 55 800 (2)

General expenses 12 000 (1)

Repairs and renewals 9 000 (1)

Depreciation charge 48 000 (1)

Profit for the year 658 200 (2of)

Appropriations
Interest on capital
Charlton 4 000 (1)
Law 3 000
Best 1 500 (1)
Salaries
Charlton 27 000 (1)
Law 27 000
Best 18 000 (1)
Profit available for distribution 577 700 (1)
Charlton 303 330 (1of)
Law 202 220 (1of)
Best 72 150 (1of)

Additional guidance
Heat and light 54 000 (1)
Rent and rates 96 000 (1)

Total for Question 1 = 18 marks

ASE20104
September 2017
Question Answer AO1 (1) Mark
Number
2(a) Award 1 mark for correct answer.

A company which is controlled/owned by another company (1).

More than 50% of shares are held by another company (1). (1)

Question Answer AO2 (1) Mark

Number
2(b) Award 1 mark for correct answer.

Excess of purchase consideration over the fair value of net assets

acquired (1).
Goodwill is an intangible asset (1).
Goodwill arises due to brand name/location/customer base/good
employee relations and any patents (1). (1)

Question Answer AO2 (5) Mark

Number
2 (c) Award marks as indicated.

Purchase consideration 100 000

Share capital 75 000 x 60% = 45 000 (1 for both)
Share premium 15 000 x 60% = 9 000
Retained earnings 27 905 x 60% = 16 743 (1)
Revaluation 20 000 x 60% = 12 000 (1)
Or
137 905 x 60% = 82 743 (1of)
Goodwill 17 257 (1of) (5)
Additional guidance
Correct answer only scores 5 marks.
No specific format required.
Accept combined figure for share capital and share premium 90 000 for (1) mark.

Question Answer AO2 (3) Mark

Number
2(d) Award marks as indicated.

Applejack 70 400 (1)

Honeycombs 19 800 (1)
90 200 (1of) (3)
Additional guidance
Correct answer only scores 3 marks.
No specific format required.

ASE20104
September 2017
Question Answer AO2 (3) Mark
Number
2(e) Award marks as indicated.

Share capital and premium 90 000 x 40% =36 000 (1)

Retained earnings 60 905 x 40% =24 362 (1)
Revaluation 20 000 x 40% = 8 000
or
170 905 x 40% = 68 362 (1of) (3)
Additional guidance
Correct answer only scores 3 marks.
No specific format required.
To get the final (of), the revaluation figure must be present.

Question Answer AO2 (9) Mark

Number
2(f) Award 1 mark for each correct figure with understandable
label as indicated.
Applejack plc
Consolidated statement of financial position at 31 May
2017
Assets $
Non-current assets
Goodwill 17 257 (1of)
Property, plant and equipment 470 000 (1)
487 257
Current assets 103 105 (1)
Total assets 590 362
Equity and liabilities
Share capital (ordinary shares at $1 each). 300 000 (1 for
both)
Share premium 45 000
Retained earnings 90 200 (1of)
Equity attributable to the holders of parent 435 200
Non-controlling interest 68 362 (1of)
Non-current liabilities 57 000 (1)
Current liabilities 29 800 (1)
Total liabilities 86 800
Total equity & liabilities 590 362 (1of)
(9)
Additional guidance
Total equity and liabilities 1of mark must be equal to total assets.

Total for Question 2 = 22 marks

ASE20104
September 2017
Question Answer AO1 (1) Mark
Number
3(a)(i) Award 1 mark for correct answer.

It ignores cash flows after the payback period (1)

(1)

Question Answer AO1 (1) Mark

Number
3(a)(ii) Award 1 mark for correct answer.

It uses profit which may be subjective (1) (1)

Question Answer AO2 (4) Mark

Number
3(b)(i) Award marks as indicated.

Year Net cash

flows
0 (360 000) (1)
1 190 000 (1)
2 214 000 (1)
3 200 800 (1)

(4)
Additional guidance
No specific layout required.

Question Answer AO2 (2) Mark

Number
3(b)(ii) Award marks as indicated.

Year Present value

0 (360 000)
1 172 710 (1of for all 3 years,
2 176 764 based on (b)(i)).
3 150 800.8
Net present value 140 274.8 (1of)
(2)
Additional guidance
No specific layout required.
Correct answer only scores 2 marks.
To get the final (of) mark, initial investment must be deducted from the present
values.

ASE20104
September 2017
Question Answer AO1 (6) Mark
Number
3(b)(iii) Award marks as indicated.

Average profit = $244 800 W1 (3of) / 3 = $81 600 (1of)

Average Investment = $180 000 (1)

ARR = $81 600 X 100 = 45.33% (1of)

$180 000
W1
Cash inflows from (b)(i) for all three years $604 800 (1of) –
Depreciation for all three years $360 000 (1) = Total profit for all
three years $244 800 (1of) (6)
Additional guidance
Correct answer only scores 6 marks.
No specific layout required.

Question Answer AO4 (4) AO5 (1) Mark

Number
3(c) Award 1 mark for each point of comparison up to a
maximum of 4 marks.
Award 1 mark for decision.
Decision mark can only be awarded if at least 1 mark is
awarded for at least one point of comparison.

Accounting rate of return for both machines is better/higher than

the cost of capital at 10% (1).
Machine A’s accounting rate of return is better/higher than
Machine B’s accounting rate of return (1of),
Machine A’s net present value is better/higher than Machine B’s
net present value (1of).
Results for Machine A indicates a better/higher return(profit) on
the investment in Machine A (1of).
Therefore, Antonio should invest in Machine A (1). (5)
Additional guidance
Accept the reverse for Machine B.

Total for Question 3 = 19 marks

ASE20104
September 2017
Question Answer AO1 (2) Mark
Number
4(a) Award one mark for each valid point.

Financial accountants provide information for internal and external

use / management accountants only provide information for
internal use (1).

Financial accountants provide information based on historical data /

management accountants provide information for the future e.g.
budgets (1). (2)

Question Answer AO1 (1) AO3 (1) Mark

Number
4(b) Award 1 mark for identification and 1 mark for linked
justification/reasoning.

Budgeting helps to forecast income and expenditure (1) which

helps to identify potential profitability (1).
or
Budgeting aids control (1) and enables actual performance to be
compared against the budget (variances) with possible corrective
action (1).

Accept any other appropriate responses. (2)

Question Answer AO2 (4) Mark

Number
4(c) Award marks as indicated.

October November December

$ $ $
Cash sales 39 200 54 880 70 560 (1 for
row)
Credit sales
1 35 640 29 700 41 580 (1 for
row)
2 33 000 36 000 30 000 (1 for
row)
Total 107 840 120 580 142 140 (1 of
receipts for
row) (4)
Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

ASE20104
September 2017
Question Answer AO2 (7) Mark
Number
4(d) Award 1 mark for each correct figure with understandable
labels as indicated.
Trade receivables budget
Oct $ Nov $ Dec $
Opening balance 105 000 96 000 114 000
(1)
Credit sales 60 000 84 000 108 000 (1 for
row)
165 000 180 000 222 000
Receipts 68 640 65 700 71 580 (1 for
row)
Discount allowed 360 300 420
(1) (1) (1)
69 000 66 000 72 000
Closing balance 96 000 114 000 150 000 (1of
row)
(7)

Question Answer AO1 (2) Mark

Number
4(e) Award 1 mark for each correct answer up to a maximum of
2 marks.

Inventory (1)
Trade payables (1)
Sales (1) (2)
Purchases (1)
Cash (1)
Accept any other appropriate responses.

Question Answer AO1 (1) A03 (1) Mark

Number
4(f)i Award 1 mark for identification and 1 mark for linked
justification/reasoning.

Ratio – gross profit margin/ net profit margin/ return on capital

employed (1)
For the continuity of their job security/for bonuses. (1) (2)

Question Answer AO1 (1) A03 (1) Mark

Number
4(f)ii Award 1 mark for identification and 1 mark for linked
justification/reasoning.
Ratio – current ratio/ acid test ratio (1)
They want know whether the business is able to pay suppliers. (1) (2)
Additional Guidance
Accept trade payables payment period.
Total for Question 4 = 21 marks

ASE20104
September 2017
Question Answer AO2 (2) Mark
Number
5(a) Award mark for correct figure.
Allowance for doubtful debts = 1 25 300 X 3% = 3 759 (1)
Adjustment = 3 759 – 2 150 = 1 609 (1of) (2)

ASE20104
September 2017
Question Answer AO2 (11) Mark
Number
5(b) Award 1 mark for each correct figure against correct label as
indicated.
Sultan – Extended Trial balance at 30 June 2017
Trial balance Adjustment
Debit Credit Debit Credit
$ $ $ $
Allowance for doubtful 2 150 1 609
debts (1of
from
(a))
Cash and cash 6 560
equivalents
Equity at 1 July 2016 26 250
Fixtures & fittings - cost 250 000
Fixtures and fittings - 112 500 37 500
accumulated depreciation (1)
General expenses 49 410 1 000
(1)
Insurance 12 400
Inventory at 1 July 2016 145 000
Motor vehicles - cost 95 000
motor vehicles - 46 360 9 728
accumulated depreciation (1)
Purchases 330 490
Rent payable 108 000
Revenue 973 250
Trade payables control 59 750
Trade receivables control 135 800 10 500
(1)
Wages and salaries 87 600
Allowance for doubtful 1 609
debts adjustment (1of
from
(a))
Closing inventory - 160 000
statement of financial (1)
position
Closing inventory - 160 000
statement of profit or (1)
loss
Depreciation charge 47 228
(1)
Irrecoverable debts 10 500
(1)
Other receivables 1 000
(1)
1 220 260 1 220 260 220 337 220 337 (11)

ASE20104
September 2017
Question Answer AO3 (4) AO5 (1) Mark
Number
5(c) Max 4 marks for discussion of characteristics of private
and public limited companies.
Award 1 mark for decision.
Decision mark can only be awarded if at least one
characteristic of a company discussed/stated.

 Private limited companies need only one director which

helps faster decision making (1) whereas public limited
companies need a minimum two directors (1).

 Private limited companies do not need any minimum

authorised capital so are easier to set up (1)
whereas public limited companies need a minimum
authorised capital (1) and Sultan has not got enough
capital to start a public limited company (1).

 Private limited company shares are sold among family and

friends (1).
Public limited company shares are traded on stock
exchanges (1) and must follow strict rules and regulations
(1).

 Public limited companies trade on stock exchange so

provides flexibility to sell and get money back easily (1)
but a large number of shareholders can lead to a loss of
control (1).

Any supported decision (1)

Accept any other appropriate responses. (5)

Additional guidance
Do not award more than 3 marks for each type of company.
Do not accept: separate legal entity or limited liability.

Question Answer AO1 (1) AO3 (1) Mark

Number
5(d) Award 1 mark for identification and 1 mark for linked
justification/reasoning.

Statement of changes in equity (1). It shows a change in the

financial position (1).
Or
Statement of cash flows (1). It shows a change in the cash and
cash equivalents (1). (2)

Total for Question 5 = 20 marks

ASE20104
September 2017