Please write clearly in block capitals.
Centre number
Candidate number
Surname
Forename(s)
Candidate signature
AS
ACCOUNTING
Unit 2 Financial and Management Accounting
Friday 19 May 2017
Afternoon
Time allowed: 1 hour 30 minutes
Materials
For Examiner’s Use
For this paper you must have:
• A calculator.
Question
1
Instructions
•
•
•
•
•
•
Mark
Use black ink or black ball-point pen.
Fill in the boxes at the top of this page.
Answer all questions.
You must answer the questions in the spaces provided.
Do not write outside the box around each page or on blank pages.
All workings must be shown and clearly labelled; otherwise marks
for method may be lost.
Do all rough work in this book. Cross through any work you do not
want to be marked.
2
3
4
TOTAL
Information
•
•
The marks for questions are shown in brackets.
The maximum mark for this paper is 80.
Four of these marks will be awarded on your ability to:
– use good English
– organise information clearly
– use specialist vocabulary where appropriate.
*jun17accn201*
IB/G/Jun17/E4
ACCN2
Do not write
outside the
box
2
Answer all questions in the spaces provided.
1
Total for this question: 25 marks
Bergo Ltd buys and sells kitchen equipment and cookers. The assistant accountant has begun
preparing the financial statements for the year ended 31 March 2017. The incomplete draft
income statement for the year ended 31 March 2017 is shown below.
Draft income statement for the year ended 31 March 2017
Revenue
Cost of sales
Gross profit
Operating expenses*
£
1 200 000
740 000
460 000
317 500
* Operating expenses includes all the revenue expenses of the business except depreciation and
interest.
The assistant accountant has identified the following which were either not included or where he is
unsure of the correct accounting treatment.
(1)
Bergo Ltd sells goods to a customer on a sale or return basis. Goods costing £18 000, with
a selling price of £27 000, had been despatched on 27 March 2017. The invoice value of
the goods was included in the revenue figure at 31 March 2017, and as there were no goods
on the premises they were not included in the closing inventory. These goods were
returned by the customer on 15 April 2017 as they were not sold.
(2)
Included in the closing inventory were a number of cookers that had been damaged. The
cookers had been included in the closing inventory at their selling price of £30 000. The
cookers originally cost £20 000. It is estimated that it will cost £4800 to repair the cookers
and that they can then be sold for £22 500.
(3)
Below is the non-current assets section of the balance sheet at 1 April 2016.
Cost
£
Premises
Equipment
300 000
72 000
Depreciation
to date
£
120 000
24 000
Net book value
£
180 000
48 000
On 31 December 2016 the premises were revalued at £900 000.
During the year equipment with a net book value of £16 000 was sold for £16 000.
Additional equipment costing £178 000 was purchased on 1 January 2017.
The company’s depreciation policy is to charge a full year’s depreciation on all non-current
assets owned at the year end at the following rates:
Asset
Premises
Equipment
Rate
2% per annum
33 ⅓% per annum
Method
Straight-line
Reducing balance
*02*
IB/G/Jun17/ACCN2
Do not write
outside the
box
3
(4)
The shareholders had set the directors of Bergo Ltd the target of increasing the revenue for
the year and agreed that they should be paid a bonus of 5% on any increase in revenue.
The revenue for the year ended 31 March 2016 was £990 000.
(5)
In order to finance the purchase of the equipment the company took out a long-term loan of
£175 000 on the 31 December 2016. Interest is paid annually at a rate of 4% per annum.
(6)
The accountant estimates the provision for taxation for the year ended 31 March 2017 to be
£7500.
(7)
Below is the equity section of the balance sheet at 1 April 2016.
Equity
Ordinary shares of £1 each
Retained earnings
£
100 000
69 650
On 1 January 2017 the directors made a bonus issue of ordinary shares on the basis of
7 new shares for every existing share. The directors intend to maintain the reserves in their
most distributable form.
(8)
On 28 February 2017 the directors paid the dividend for the year of 5p per share on all
shares in issue at that date.
Question 1 continues on the next page
Turn over ►
*03*
IB/G/Jun17/ACCN2
Do not write
outside the
box
4
1 (a)
Prepare the income statement for Bergo Ltd for the year ended 31 March 2017 after
making any amendments necessary for items 1–8 on pages 2 and 3.
[19 marks]
[includes 1 mark for quality of presentation]
Bergo Ltd
Income statement for the year ended 31 March 2017
£
£
*04*
IB/G/Jun17/ACCN2
Do not write
outside the
box
5
Workings
Turn over ►
*05*
IB/G/Jun17/ACCN2
Do not write
outside the
box
6
1 (b)
Prepare an extract from the statement of changes in equity for the year ended
31 March 2017 showing retained earnings only.
[6 marks]
[includes 1 mark for quality of presentation]
Extract from the statement of changes in equity for the year ended 31 March 2017
Workings
25
*06*
IB/G/Jun17/ACCN2
Do not write
outside the
box
7
Turn over for the next question
DO NOT WRITE ON THIS PAGE
ANSWER IN THE SPACES PROVIDED
Turn over ►
*07*
IB/G/Jun17/ACCN2
Do not write
outside the
box
8
2
Total for this question: 23 marks
Amr is a sole trader who owns a successful retail business. Amr has drafted the financial
statements for the year ended 30 April 2017. The summarised balance sheet is shown below.
Non-current assets
£
285 000
Current assets*
65 900
Current liabilities
42 950
Net assets
307 950
Capital
307 950
* Included in the current assets section is the bank account, which has a debit balance of £10 850.
Amr has identified some items that were not included or where he is unsure of the correct
accounting treatment.
(1)
On 30 April 2017, Amr wrote a cheque, from the business bank account, for £500 to pay the
deposit for his holiday. No entries had been made to record this transaction.
(2)
Amr rents out part of his premises to another business. The rental for the year is £12 000.
The rent received recorded in the books of account for the year ended 30 April 2017
amounted to £14 000.
(3)
A cheque was received from Ferdinand Ltd on 28 April 2017 for £1250. Ferdinand Ltd was
liquidated on 30 November 2015 and the amount owing of £2500 was written off as a bad
debt in the income statement for the year ending 30 April 2016. Amr is unsure of the
correct accounting treatment for the cheque received on 28 April 2017 and so has not
entered it in the cash book or included it in the draft financial statements.
(4)
The trade receivables of £24 600 have been included in the current assets section of the
balance sheet. On 14 April 2017 Amr received notification that one of his customers was
declared bankrupt and that he would not receive the £600 he is owed. No entries have
been made in the books of account to record this.
(5)
Amr is unsure of the treatment of the provision for doubtful debts. As the provision for
doubtful debts account shows a credit balance at 1 May 2016 of £800 Amr has included this
in the current liabilities section of the balance sheet. Amr wishes to maintain the provision
at 3% of trade receivables at 30 April 2017 but has made no entries to record this.
(6)
Amr purchased new fixtures and fittings during the year at a cost of £40 000. It is his policy
to depreciate fixtures and fittings owned at the year-end using the straight-line method at a
rate of 25% per annum. The costs of the fixtures and the depreciation for the year were
correctly accounted for. However, Amr also paid £3 000 to have the fixtures and fittings
installed. He has debited this amount to repairs.
(7)
A delivery van was sold on 28 April 2017. The van had originally cost £27 000 and had
accumulated depreciation of £15 000 when it was sold. Amr received a cheque for
£13 950 for the sale. No entries have been made in the books of account to record the sale
of the delivery van.
*08*
IB/G/Jun17/ACCN2
Do not write
outside the
box
9
2 (a)
Complete the table below showing clearly the effect the correct treatment of each
item 1–7, shown on the opposite page, would have on each section of the balance
sheet.
You should follow these instructions:
If there is no effect on a section, show this by entering a 0.
Show any negative effects by using brackets, eg (500).
Show the revised totals for each section of the balance sheet.
The first item has already been completed as an example.
Non-current
assets
£
Original totals
Item
1
Current assets
£
[22 marks]
Current
liabilities
£
Capital
£
285 000
65 900
42 950
307 950
0
(500)
0
(500)
2
3
4
5
6
7
Revised totals
Workings
Turn over ►
*09*
IB/G/Jun17/ACCN2
Do not write
outside the
box
10
2 (b)
Tick one box to show the correct definition of the going concern concept.
Definition
[1 mark]
()
Assets will be valued at market price as the business will
need to replace these assets in the future.
Assets will be valued at the lower of cost and net realisable
value.
Assets will be valued at cost as it is assumed that the
business will continue for the foreseeable future.
Assets will be valued in the same way each year.
23
*10*
IB/G/Jun17/ACCN2
Do not write
outside the
box
11
Turn over for the next question
DO NOT WRITE ON THIS PAGE
ANSWER IN THE SPACES PROVIDED
Turn over ►
*11*
IB/G/Jun17/ACCN2
Do not write
outside the
box
12
3
Total for this question: 17 marks
Ranier Ltd is a family-owned hotel business. The company runs the Half-Way House Hotel in a
small town in the Midlands, but does not own the hotel premises.
Background information
Ranier Ltd has five ordinary shareholders who are also directors of the company. The hotel
generates a small profit for Ranier Ltd averaging £10 000 a year for the last five years. The
seasonal nature of the business means that the company experiences cash flow problems,
particularly in the off-season. As a result of these factors, the company has not paid a dividend
to its shareholders for over five years.
A major leisure company is planning to build a theme park in the area which is designed to attract
customers all year round. The directors of Ranier Ltd believe that this will make the hotel
successful as it will remove the seasonal element of the business.
Currently Ranier Ltd rent the hotel premises for £95 000 a year. The current owner of the
premises is retiring and has offered to sell the premises to Ranier Ltd for £2 000 000.
The shareholders are unable to raise the finance required for the purchase of the premises and
do not wish to issue further ordinary shares to avoid diluting the ownership of the company.
Alternatives
The directors are considering two alternatives to raise the necessary finance:
1
Issue £2 000 000 6% preference shares of £1 each.
Or
2
Issue £2 000 000 5% debentures 2027–29. The debentures would be secured on the hotel
premises.
The directors have been advised that whichever alternative is chosen, the effect on the gearing of
the company will be the same.
3
Evaluate the two alternative sources of finance and advise the directors of Ranier Ltd
which you would recommend. Justify your recommendation.
[17 marks]
[includes 2 marks for quality of written communication]
*12*
IB/G/Jun17/ACCN2
Do not write
outside the
box
13
Turn over ►
*13*
IB/G/Jun17/ACCN2
Do not write
outside the
box
14
Extra space
17
*14*
IB/G/Jun17/ACCN2
Do not write
outside the
box
15
Turn over for the next question
DO NOT WRITE ON THIS PAGE
ANSWER IN THE SPACES PROVIDED
Turn over ►
*15*
IB/G/Jun17/ACCN2
Do not write
outside the
box
16
4
Total for this question: 15 marks
Fiona owns a jewellery shop and is interested in how her business has performed in the year
ended 30 April 2017. Her bookkeeper has extracted the following balances from her books of
account.
Bank account debit balance
Cash purchases
Cash sales
Credit purchases
Credit sales
Inventory at 1 May 2016
Inventory at 30 April 2017
Loan repayable 30 June 2017
Trade payables at 30 April 2017
Trade receivables at 30 April 2017
4 (a)
£
7 250
51 000
360 000
146 000
36 500
45 000
37 000
4 500
14 000
2 000
Calculate the net current asset (current) ratio. State the formula used.
[2 marks]
Workings
*16*
IB/G/Jun17/ACCN2
Do not write
outside the
box
17
4 (b)
Calculate the liquid capital (acid test) ratio. State the formula used.
[2 marks]
Workings
4 (c)
Calculate the receivable days ratio. State the formula used.
[2 marks]
Workings
Question 4 continues on the next page
Turn over ►
*17*
IB/G/Jun17/ACCN2
Do not write
outside the
box
18
4 (d)
Calculate the payable days ratio. State the formula used.
[2 marks]
Workings
4 (e)
Calculate the rate of inventory turnover. State the formula used.
[2 marks]
Workings
*18*
IB/G/Jun17/ACCN2
Do not write
outside the
box
19
Fiona compares her ratios with the industry average. For the last seven years the liquid capital
ratio for her business has always been significantly lower than the industry average.
4 (f)
Explain two reasons why it could be good for Fiona’s business to have a liquid capital
ratio significantly lower than the industry average.
[5 marks]
Extra space
15
END OF QUESTIONS
Turn over ►
*19*
IB/G/Jun17/ACCN2
Do not write
outside the
box
20
There are no questions printed on this page
DO NOT WRITE ON THIS PAGE
ANSWER IN THE SPACES PROVIDED
Copyright information
For confidentiality purposes, from the November 2015 examination series, acknowledgements of third party copyright material will be published in a separate
booklet rather than including them on the examination paper or support materials. This booklet is published after each examination series and is available for
free download from www.aqa.org.uk after the live examination series.
Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful and
AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team, AQA, Stag Hill House,
Guildford, GU2 7XJ.
Copyright © 2017 AQA and its licensors. All rights reserved.
*20*
IB/G/Jun17/ACCN2