Examinations for 2010 - 2011 Semester II / 2011 Semester I 2).pdf · Examinations for 2010 - 2011 Semester…

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<ul><li><p>Page 1 of 9 SBMF26 </p><p>Programme Cohort </p><p>BSc (Hons) Management BMAN/11/FT Jan </p><p>Diploma in Financial Management </p><p>with Public Finance </p><p>DFM/11/FT-Jan </p><p>Examinations for 2010 - 2011 Semester II / </p><p>2011 Semester I </p><p>MODULE: ACCOUNTING FOR DECISION MAKING </p><p>MODULE CODE: ACCF 1101 </p><p>Duration: 2 Hours Reading time: 15 Minutes </p><p> Instructions to Candidates: 1. This paper consists of Sections A and B. </p><p>2. Section A is compulsory. </p><p>3. Answer any two questions from Section B. </p><p>4. Always start a new question on a fresh page. </p><p>5. Total marks: 100. </p><p> This question paper contains 4 questions and 9 pages. </p></li><li><p>Page 2 of 9 SBMF26 </p><p>SECTION A: COMPULSORY </p><p> QUESTION 1: (40 MARKS) You have been provided with the following trial balance as at 31 May 2010 for a </p><p>limited liability company called Gasprom. </p><p> Dr Cr </p><p> $000 $000 </p><p>Bank 50 </p><p>Inventory at 1 June 2009 1,200 </p><p>General Expenses 600 </p><p>Heating and lighting 90 </p><p>Marketing and advertising expenses 248 </p><p>Wages 490 </p><p>Buildings at cost 5,000 </p><p>Motor vehicles at cost 160 </p><p>Plant and equipment at cost 700 </p><p>Accumulated profits at 1 June 2009 280 </p><p>Trade receivables 438 </p><p>Purchases 2,200 </p><p>Loan interest paid 30 </p><p>5% Loan 600 </p><p>Revenue 5,876 </p><p>Discounts received 150 </p><p>Trade payables 500 </p><p>$1 Ordinary Shares 1,500 </p><p>Accumulated depreciation at 1 June 2009 </p><p> Buildings 2,000 </p><p> Motor Vehicles 60 </p><p> Plant and Equipment 240 </p><p> 11,206 11,206 </p></li><li><p>Page 3 of 9 SBMF26 </p><p>The following notes are relevant: </p><p>1. Inventory at 31 May 2010 was valued at $800,000. </p><p>2. Marketing and advertising expenses include $6,000 paid in advance for a </p><p>marketing campaign which will begin in June 2010. Marketing and advertising </p><p>expenses should be allocated to administrative expenses. </p><p>3. There are wages outstanding of $10,000 for the year ended 31 May 2010. </p><p>4. A customer ceased trading owing the company $38,000; the debt is not </p><p>expected to be recovered. </p><p>5. An allowance for doubtful debts is to be established amounting to 5% of trade </p><p>receivables. </p><p>6. Depreciation is to be provided for as follows: </p><p>(i) Buildings at 5% per annum on their original cost, allocated 50% to cost </p><p>of sales, 20% to distribution costs and 30% to administrative expenses. </p><p>(ii) Motor vehicles at 25% per annum of their written down value, allocated </p><p>to distribution costs. </p><p>(iii) Plant and equipment at 20% per annum of their written down value, </p><p>allocated to cost of sales. </p><p>7. No dividends have been paid or declared. </p><p>8. Income tax of $250,000 is to be provided for the year. </p><p>9. The audit fee is estimated to be $20,000. </p><p>10. The expenses listed below should be apportioned as follows: </p><p>Cost of Distribution Administrative </p><p>Sales Costs Expenses </p><p>General expenses 10% 40% 50% </p><p>Heating and lighting 50% 30% 20% </p><p>Wages and salaries 60% 30% 10% </p><p>4JGIRLAA Paper 6IRL </p></li><li><p>Page 4 of 9 SBMF26 </p><p>Required: (a) Prepare the following financial statements for the year ended 31 May 2010 for </p><p>Gasprom in accordance with IAS 1 Presentation of Financial Statements: </p><p>(i) Profit and Loss Account (20 marks) </p><p>(ii) A balance sheet (15 marks) </p><p>You are advised to show workings where appropriate. (b) Briefly explain the difference between Capital and Revenue Expenditure and </p><p>illustrate each of the expenditure by two examples. (5 marks) </p></li><li><p>Page 5 of 9 SBMF26 </p><p>SECTION B: ANSWER ANY TWO QUESTIONS </p><p>QUESTION 2: (30 MARKS) PART A At 31 December 2010, the balance on the creditors control account in Tanias </p><p>nominal ledger was $80,130 and the total of the list of balances on the suppliers </p><p>personal accounts was $80,441. Investigation of the reasons for the difference </p><p>indicated the following: </p><p>(i) a credit note received from a supplier for $438 was omitted from the </p><p>accounting records; </p><p>(ii) an invoice for $385 was correctly recorded in the purchase day book, but </p><p>when posting to the suppliers personal account the value was entered </p><p>as $358; </p><p>(iii) a payment of $1,000 was made to settle a balance of $1,012, but the </p><p>discount was not recorded on the suppliers personal account; </p><p>(iv) a contra with the debtors ledger of $700 had been recorded in the </p><p>suppliers personal account, but no entry was made in the control </p><p>account; </p><p>(v) a debit balance of $63 on a suppliers personal account was treated as a </p><p>credit balance; </p><p>(vi) the purchase day book was under-cast by $900; and </p><p>(vii) a payment to a supplier for $320 was incorrectly recorded as drawings. </p><p> Required: (a) Prepare the creditors control account in the nominal ledger, including the </p><p>necessary adjusting entries and the corrected balance. (8 marks) </p><p>(b) Prepare the reconciliation of the list of balances to the corrected balance on </p><p>the creditors control account in the nominal ledger. (8 marks) </p></li><li><p>Page 6 of 9 SBMF26 </p><p> (c) For each of the adjusting entries in the creditors control account in the </p><p>nominal ledger, indicate which nominal ledger account will be used to </p><p>complete the double entry. (4 marks) </p><p> PART B Depreciation has been described as the measure of the wearing out, consumption </p><p>or other reduction in the useful economic life of a fixed asset. </p><p>(a) Give three causes of depreciation, and for each give the type of fixed asset </p><p>for which that cause is appropriate. (6 marks) </p><p>(b) What factors should be taken into account when determining the amount of </p><p>depreciation and its allocation between different accounting periods? </p><p>(4 marks) </p></li><li><p>Page 7 of 9 SBMF26 </p><p>QUESTION 3: (30 MARKS) </p><p>Your organisation, Parkside Ltd, runs a chain of small shops and you have just </p><p>received the following extracts from the audited accounts for the period ended 30 </p><p>September 2010. </p><p>Profit and loss account for the period ended 30 Sept 2010 </p><p> $000 $000 </p><p>Sales 460 </p><p>Less Cost of Sales (220) </p><p>Gross Profit 240 </p><p>Wages 50 </p><p>Other expenses 30 (80) </p><p>Net Profit 160 </p><p>Balance sheet as at 30 Sept 2010 </p><p> $000 $000 </p><p>Non Current Assets 400 </p><p>Current Assets </p><p> Stock 80 </p><p> Debtors 120 </p><p> Bank 400 </p><p> 600 </p><p>Current Liabilities </p><p> Creditors (300) 300 </p><p>Net Assets 700 </p><p>Financed by: </p><p> Share Capital 600 </p><p> Retained Earnings 100 </p><p>Shareholders Funds 700 </p></li><li><p>Page 8 of 9 SBMF26 </p><p>Notes: </p><p>1. The purchases figure included in the cost of goods sold is $ 255,000. </p><p>2. No dividend has been declared at year end. </p><p>Required: </p><p>(a) Calculate the following accounting ratios for Parkside Ltd: </p><p>(i) Current ratio </p><p>(ii) Acid test ratio </p><p>(iii) Stock turnover (in days) </p><p>(iv) Debtors turnover (in days) </p><p>(v) Creditors turnover (in days) </p><p>(vi) Return on capital employed (ROCE) </p><p>(vii) Gross profit percentage </p><p>(viii) Net profit percentage (16 marks) </p><p>(b) List three reasons why financial accounting, using traditional actual costs, </p><p>might have an effect on the validity of accounting ratios. (8 marks) </p><p>(c) Briefly explain the fundamental behind the accounting equation. </p><p> (6 marks) </p></li><li><p>Page 9 of 9 SBMF26 </p><p>QUESTION 4: (30 MARKS) </p><p>Green Ltd manufactures and sells a single product. The initial budget for the </p><p>forthcoming period is: </p><p> $ </p><p>Material 20,000 </p><p>Labour ( 1/3 Fixed) 18,000 </p><p>Variable Production Overheads 8,000 </p><p>Fixed Production Overheads 8,000 </p><p>Sales Overheads ( 50% Fixed) 4,000 </p><p>Total 58,000 </p><p>Notes: </p><p>1. The standard selling price is $90 per unit. </p><p>2. Sales for the period are budgeted to be 800 units. </p><p>3. The maximum manufacturing capacity for the period is 1,500 units. </p><p>Two proposals have been put forward by management: </p><p> Reduce the selling price to $80, which will enable 1,000 units to be sold. </p><p> Increase the selling price to $95, which will enable 750 units to be sold. </p><p>Required: </p><p>(a) Calculate, for the initial budget and each of the two proposals: </p><p>(i) Profit (6 marks) </p><p>(ii) Break-even point in units (10 marks) </p><p>(iii) The amount of sales units required in order to earn a profit of $18,000 </p><p>for the period. (Work to the nearest whole unit.) (10 marks) </p><p> (b) Advise management as to the best course of action. (4 marks) </p><p>***END OF QUESTION PAPER*** </p></li></ul>